ICG-Longbow, the UK commercial property debt investor, announced plans to raise £250m through an initial public offering on Friday, taking the tally of current debt IPOs in the market to three as the new guard of debt providers seek to attract different pools of capital.
The ICG-Longbow’s listed debt fund – called Senior Secured UK Property Debt Investments Limited – joins Starwood Capital Group, which is seeking to raise between £250m and £300m a similar debt fund IPO, while Cheyne Capital Management, the European alternative asset manager and securities investor, is also looking to raise up to £200m.
Starwood and Cheyne’s IPOs will invest in both senior and mezzanine loans, unlike Longbow’s which is a pure senior debt listed fund, which will seek a premium listing by the UK Listing Authority to be traded on the main market of the London Stock Exchange.
ICG-Longbow will externally manage the Guernsey-incorporated closed-ended investment company.
The flurry of real estate debt IPO activity in the coming months reflects a returning confidence in public markets, while also a tacit recognition that private capital raising for UK and European debt funds is proving incredibly slow and competitive.
Investec Bank is adviser and bookrunner for ICG-Longbow’s Senior Secured UK Property Debt Investments Limited.
ICG-Longbow investment objective for the listed fund will be to construct a portfolio of good quality, defensive senior debt investments secured by first ranking fixed charges against UK commercial property investments, providing dividends of circa 6% per annum, paid quarterly achieved from a target portfolio IRR of 8% per annum.
Some exposure to UK investment residential property will also be permitted as part of the fund’s potential investment universe, with individual loans at between £10m and £40m at durations of four to six years. The portfolio will target a 6.5% to 7.5% per annum loan coupon.
The company will aim to be fully invested within six to nine months with a target year-one dividend of 4 to 5%.
The fund’s underlying security pool will offer first-ranking security over the underlying property collateral and each loan will have an exposure no greater than 65% LTV.
“As senior lenders continue to withdraw from the commercial real estate debt market, ICG-Longbow’s investment team will be able to access strong deal flow of attractive senior debt financing opportunities through its long standing network of borrowers and advisors,” ICG-Longbow said in a statement.
David Hunter, chairman of ICG-Longbow said: “We are very pleased to announce this intention to float ICG-Longbow SSUP on the London market.
“This new vehicle will aim to provide investors with predictable and attractive target returns with minimal risk of income or capital loss. The team at ICG-Longbow has many years’ experience of investing in the UK commercial property debt market and we are excited at the opportunity to open up this expertise to a wider audience.”
Cheyne’s listed debt fund will seek senior and mezzanine investment opportunities in Northern Europe, mirroring its geographic strategy for existing real estate debt strategy, revealed by CoStar News two months ago.
Starwood Capital fourth quarter IPO to raise between £250m and £300m for its European debt investment platform, will invest in similar markets to Cheyne’s, in a public listing managed by Dexion Capital and Jefferies.
Starwood’s listed fund – the Starwood European Real Estate Finance Ltd (SEREF) – will also 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.
SEREF will be managed by Starwood European Finance Company (StarFin), a European real estate finance platform, launched last week alongside partners and co-investor Cushman & Wakefield Investors (CWI).
StarFin is Starwood’s manager for its entire European debt strategies, and will be Starwood Capital’s third major debt platform and follows its two debt platforms in the United States which have lent over $10bn.
Cheyne Capital Management and Starwood Capital declined to comment.