Starwood Capital is planning an IPO in the fourth quarter for its European debt investment platform, seeking to raise between £250m and £300m in the first initial capital raising in order to underwrite senior and mezzanine loans across the capital stack.
Dexion Capital and Jefferies are co-advisers and bookrunners for the Starwood European Real Estate Finance Ltd (SEREF), according to Real Estate Capital which broke the story this lunchtime.
Starwood Capital’s preference to raise capital through a listed vehicle for the expansion of its European debt strategy will broaden the universe of potential underlying investors from the pool of insurers, pension funds, endowment funds and high net worth individuals which the majority of senior debt funds, currently capital raising, are targeting.
Fund managers, with pools of capital which can invest in listed vehicles, increase the potential pool of investors.
SEREF will invest across the debt capital stack, including senior, mezzanine or whole loans at average loan to value ratios of 25%-70% and is targeting an 8%-9% net total return, with a 7% dividend yield, reported Real Estate Capital.
Starwood will seek to arrange larger club deals and invest from prime down to distressed real estate principally throughout the major Western European markets, including the UK, Germany, France and the Nordic countries. By sector, Starwood will seek to finance across offices, retail, logistics, residential and hospitality assets.
The IPO is an extension of the plans first envisaged more than six months ago when Starwood hired Peter Denton from BNP Paribas, as partner and head of European debt.
Starwood’s lending appetite, at the time, was defined as flexible across duration and type of finance, with a focus on primary origination up to traditional mezzanine levels, at circa 75% LTV, across acquisition finance, refinancings as well as loan-on-loan financing secured by loan portfolios sold by deleveraging banks.
SEREF will be structured as a Channel Islands closed-end investment company, listed on the London Stock Exchange.
Starwood Capital declined to comment.
Separately, Starwood Capital announced today the formation of Starwood European Finance Company (StarFin), a European real estate finance platform, with Cushman & Wakefield Investors (CWI) as its partner and investor.
CWI will help source financing opportunities and provide market intelligence and research.
StarFin will be Starwood Capital’s third major debt platform and follows its two debt platforms in the United States which have lent over $10bn. StarFin is Starwood’s manager for its entire European debt strategies, including externally managing SEREF, when it launches.
Jeff Dishner, senior managing director, and Peter Denton, head of European debt, will lead StarFin.
Denton said: “Starwood was established in 1991 in the depths of that real estate downturn. In good times and bad we’ve built a track record in real estate financing via large debt platforms. We’re looking forward to expanding our presence in the European financing market.
“Coming together with Cushman & Wakefield Investors gives us a full house of experience in Europe at a time when a debt maturity bubble is looming, banks are severely constrained from lending and new property activities need funding.”
Carlo Barel di Sant’Albano, CEO of Cushman & Wakefield EMEA said: “The debt funding gap is undeniable and offers striking opportunities. This partnership means we’ll combine our market intelligence and extensive European platform with Starwood Capital’s expertise and experience in the real estate debt market.”
Two weeks ago, Starwood Capital won the bid to buy LNR Property, the largest commercial real estate loan servicer in the US, for more than $1bn, beating competition from underbidders Rialto Capital Management and BGC Partners, a Cantor Fitzgerald affiliate. Starwood is expected to close the LNR Property acquisition by the end of the year.
By the end of the year, Starwood Capital is also expected to close almost $3bn in equity for its ninth global private equity real estate fund, hitting the top end of its $2bn to $3bn capital ambitions at a time when opportunistic capital raising has become fiercely competitive.