21.08.09

By Deirdre Hipwell

The Royal Bank of Scotland and Eurohypo commit to Strategic Fund IV the royal bank of scotland is providing a £65m debt facility to a new Threadneedle property fund, which will invest in the UK.

In a very rare facility made by RBS, which has been ravaged by the recession, Threadneedle Property Investment has secured a total of £130m from RBS and Eurohypo for its Strategic Fund IV.

It is thought that the five-year debt facility has been arranged as a 50:50 split – as first revealed by Property Week (29.05.09) – that can be drawn down as required.

Threadneedle’s Strategic Fund IV is the fund manager’s third fund launched during the past 12 months. The Strategic Fund IV was set up in conjunction with Barclays Wealth. It aims to raise £350m of equity with a cap of £400m.

It is targeting a net return of 15% and will focus on purchasing income-producing properties across the UK.

The total equity committed at the fund’s first closing in July was £107.4m. In a further closing last week with Barclays Wealth, which has an exclusive distribution arrangement for its clients, it raised £14.5m. This takes the fund’s total equity raised so far to about £122m.

It is also in talks with investors in its previous funds.

Once the equity has been raised and combined with the £130m debt facility, the fund will have nearly £500m to invest in the UK.

Securing debt at present is difficult, but some lenders such as German banks Eurohypo, West Immo and Deka are more active than others.

Eurohypo, which acted as agent and co-underwriter for the loan, is particularly busy. It is backing Max Property’s bid to buy the Industrious portfolio. In June it provided a new €100m facility to ProLogis European Properties.

Dan Smith, director at Eurohypo, said: ‘This financing reflects Eurohypo’s continuing appetite for new lending in the UK.’

Securing a fresh loan from RBS is testament to Threadneedle’s status as a ‘key client’ of the part-nationalised bank, which has heavy exposure to the commercial property market. It is RBS’s third loan to Threadneedle.

Banking sources say RBS is prepared to agree new loans to its tried-and-trusted clients, such as Threadneedle, despite stating it will shrink its balance sheet and reduce its UK property loan book.

The Strategic Fund IV has already completed three purchases that total £60m: a retail park in Exeter, an office property in Ealing, west London, and an office property at Oxford Business Park.

It bought the properties with equity and debt, and is close to completing the purchase of two other assets for a total of £45m. RBS declined to comment.

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