Out-Law / Your Daily Need-To-Know

New Mitsubishi-UBS commercial property fund aims to raise £500m for UK investments

09 Jan 2014, 9:57 am

A new real estate debt fund set up by Japanese conglomerate Mitsubishi and UBS aims to raise £500 million for investment in UK commercial property, the companies have said.

The fund was set up using £50m seed capital from Mitsubishi, is the company's first asset management venture focused on non-Japanese real estate. The first round of investment into the fund raised £140m, and Mitsubishi and UBS said that they were hoping to attract investors from around the world.

"The fund is a closed ended debt fund seeking to take advantage of the debt financing gap in commercial real estate in the UK," Mitsubishi said in a statement. "It will target a wide range of potential borrowers including those needing to refinance their maturing loans and new borrowers seeking to invest in the UK commercial property market."

It added that UK had a "lender-friendly" legal system and a commercial property market with an "established reputation" for transparency and liquidity.

Mitsubishi and UBS set up MC-UBS Realty Management, a Japanese property management company, in 2000. The company now manages the second largest real estate investment trust (REIT) in Japan.

"Debt funds are increasingly part of the landscape for UK commercial property," said Gerry Mulholland, a commercial property expert at Pinsent Masons, the law firm behind Out-Law.com. "They fit into the capital stack where there is a need for mezzanine finance because clearing/mainstream senior lenders remain keen to keep loan to value ratios manageable or where borrowers look to refinance out of a position where the incumbent senior has a strategy to drive its book down or to focus on core clients."

"The need for IRR is a challenge however as the London & South East markets are, increasingly, competitive and some debt funds are chasing returns in the regions which is starting to drive activity in a limited number of markets.