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UBS Asset Management’s global real estate business has raised £241 mln (€324 mln) in the final close of its UK debt vehicle, Participating Real Estate Mortgage Fund (UBS-PREMF).

The capital was raised from nine international institutional investors from Germany, the UK, the Netherlands and Japan, including Mitsubishi Corporation, and UBS which is Swiss. Both Mitsubishi Corporation and UBS are acting as co-general partners for the fund.

UBS-PREMF is a closed-ended UK fund which was established in December 2013, originally to take advantage of the debt financing gap arising from banks reining in their commercial real estate lending. The fund offers an alternative approach to lending by combining senior and mezzanine debt into a single lending package.

‘Our continued focus this year is on growing our core European funds, including our closed-end UK debt fund-family, PREMF,’ Richard Johnson, global head of business development, global real estate at UBS, based in Zurich, told PropertyEU. ‘We’d like to expand our UK debt business, potentially into continental Europe at a later stage. Additionally, we are also looking at some niche opportunities, which could include single sector funds,’ he added.

Total IRR target of 8-10%
UBS currently has 27 funds with €19.4 bn of assets under management in Europe. Around 75% of its investors are institutional investors and pension funds. Family offices account for a further 5% and the rest comes from SWFs and other investors, Johnson said.

PREMF is targeting an annual total IRR of between 8% and 10%, with total returns driven by interest from the loan portfolio, as well as a share of both rent and capital appreciation from the underlying property assets.

Since it was launched in 2013, it has underwritten nine loans totalling £123 mln across 25 UK assets. The fund typically lends against assets valued at up to £40 mln and offers LTVs of up to 75%. It will lend across all sectors, particularly offices and alternative assets, including senior living and student accommodation. PREMF is structured as a limited partnership with a target lifespan of up to 10 years.

UBS Asset Management’s global real estate business invested €1.3 bn in European real estate last year, including the UK, up from around €1 bn in 2014, according to Johnson. ‘The key thing is to remain disciplined,’ he said. ‘I would imagine we’d do around €2 bn in investment in Europe this year but it depends on the opportunities. We still like the UK, France and Germany. We also remain a significant player in Switzerland, although the market is driven more by domestic demand. That said, international investors do like the long-term security of the Swiss market and its liquidity.’