Starwood Capital Group, the global private equity real estate firm, has raised £228.5m through an initial public offering for its inaugural European real estate debt listed vehicle, as Cheyne Capital Management’s rival debt fund IPO is postponed until the first quarter of next year.
ICG-Longbow, the UK property debt investor, is also targeting a capital raise of around £100m with an IPO provisionally scheduled for this December. The final timing of the ICG-Longbow IPO remained unknown at the time of publishing.
Dexion Capital and Jefferies International, which acted as joint sponsors, joint financial advisers and joint bookrunners, closed the order book for the Starwood European Real Estate Finance Limited (SEREFL) at 2:45pm today.
SEREFL’s IPO is the second largest main market listing of the year, with the company seeking to take advantage of the decline of bank finance, due to legacy real estate lending, increased incoming regulatory capital reserve requirements and rising bank funding costs.
Starwood’s SEREFL is seeking to establish itself as an alternative real estate lender, providing stretched senior and mezzanine lending as well as whole loans secured by the UK and Northern Europe commercial real estate, at LTVs typically between 60% and 80% and an absolute maximum of 85%.
The blended LTV for SEREFL loans will be no higher than 75%, while the company will seek a net total return for shareholders of 8% to 9%, as well as paying quarterly dividends.
Stephen Smith, the current chief investment officer of British Land and chairman of SEREFL said: “We are very pleased to have received such broad demand for the IPO which is the largest investment company launch and the second largest IPO fundraising on the premium segment of the UK Official List this year.”
Smith stands downs from the British Land board next March and leaves the REIT next June.
Jeffrey Dishner, president of Starwood Capital Europe, said: “The property sector has a well-recognised and large debt funding gap that will be only fully addressed through the development of alternative sources of capital other than the traditional banking sector.
“Working with the wider Starwood Capital Group and Starwood Property Trust the Company will now seek to exploit this strategic change by finding and funding compelling investment opportunities in real estate financing in Europe.”
Peter Denton, head of debt at Starwood Capital Europe, added: “The company is very much looking forward to providing senior, whole loan and mezzanine financing to the property sector across Europe.”
CoStar News understands Cheyne is near closing new capital commitments for both pooled and segregated capital to add to its $1.2bn European real estate debt desk which has been amassed since 2009, and separate to its planned debt IPO, which is now likely to be postponed until sometime in the first quarter of next year.
Cheyne was seeking between £125m and £200m for its IPO for the company called Secured Real Estate Finance Limited, with an investment strategy to originate in the stretch senior and mezzanine commercial real estate loans secured by collateral in the UK and Germany.
According to its prospectus, SEREFL estimates that it will be able to invest as much as 50% of the capital raised within the first six months and be substantially fully invested within nine to 12 months, following the company’s admission to the UK main market on 17 December.
At least 75% of all SEREFL loan terms will be seven years or less, with the company’s capital deployed approximately 40-50% in whole loans and subordinated and mezzanine loans, respectively, with the balance of between zero and 20% in bridge loans, loan-on-loan financings and other debt instruments.
SEREFL will have an expected geographic bias of approximately 50% towards the UK, with the balance of the mature Northern European markets, including Germany, France, Scandinavia, Netherlands, Belgium, Poland and Switzerland.
While SEREFL stipulated that it will not lend against commercial real estate in Portugal, Spain, Italy or Greece, the company has included Ireland for potential lending.
SEREFL shares will trade under the code “SWEF” from admission.
Starwood Capital had approximately US$21bn of assets under management, as at the end of June, and has undertaken US$11.5bn of predominantly US-focused property lending since 1998, through publicly listed Starwood Property Trust and iStar Financial, as well as numerous private funds.