Kennedy Wilson has launched an initial public offering (IPO) to raise an additional £65m to supplement £685m already secured from 12 cornerstone investors for the a newly-incorporated closed-ended collective investment fund.
Binding commitments from the following investors has been secured: ACK Asset Management; Elkhorn Partners; Fairfax Financial Holdings; funds advised or sub-advised by Fidelity Management & Research Company; Franklin Advisers; Janus Capital Management; LeFrak Merchant Capital; Marketfield Asset Management; Moore Capital Management; Quantum Partners; Seawolf Capital; and Wellington Management Company.
Kennedy Wilson has committed to invest £120m in the newly-incorporated listed company in two tranches.
Kennedy Wilson Europe Real Estate will primarily invest in real estate – directly and in loans – in Europe, initially throughout the UK, Ireland and Spain, and thereafter other European countries on an opportunistic basis.
The company will be seeded by 40-strong office, industrial and retail property portfolio, purchased as two separate portfolios for a combined value of £223m.
The two portfolios comprise the 26-strong Artemis portfolio acquired for £153m from SWIP and the 14-strong Tiger portfolio, a pool of secondary quality assets spun-off from the Glanmore Property Fund, for which £70m was paid.
Kennedy Wilson Europe Real Estate has appointed Kennedy Wilson Investment Management (KWIM), a wholly-owned subsidiary of Kennedy Wilson, as investment manager.
Kennedy Wilson first reported that it was considering an IPO on 6 January in a Form 8-K filing with the SEC, in which the investment manager reported: “We are currently considering potential capital-raising opportunities in Europe, which may include transactions through a publicly listed vehicle, private funds or separate accounts.
“We may invest approximately $100m to $150m of our own funds in any such vehicle (which may include the contribution of assets), and we may receive asset management fees from such vehicle.
“Any such vehicle could also potentially be given priority access to deals sourced by us in Europe, which could limit our ability to make future investments in Europe other than through such vehicle.”
KWIM will target investments that are expected to generate a total return of 15%, inclusive of leverage, through income and capital gains. The company said it aims to substantially invest the net proceeds of the issue within 12 to 18 months following admission.
Kennedy Wilson Europe Real Estate said it will be “well positioned to take advantage of the significant number of opportunities over the medium term to acquire high quality real estate assets from distressed sellers and financial institutions seeking to delever by divesting such assets, and thereby benefit from the improving market sentiment of the European real estate sector”.
A main market listing on the London Stock Exchange will be sought, with trading expected to begin trading before the end of February.
Deutsche Bank and BofA Merrill Lynch are acting as joint global co-ordinators and joint book runners, J&E Davy is acting as joint book runner, and Bank of Ireland is acting as lead manager, in each case in relation to the Issue.
Kennedy Wilson Europe Real Estate has granted Deutsche Bank’s London Branch the option to over-allot up to 10% of ordinary shares, or £75m, which if exercised would take the gross proceeds to £825m.
Charlotte Valeur – who is the chairperson of Brevan Howard Credit Catalyst as well as holding several non-executive directorships and is managing director of GFG Ltd, a governance consultancy company, has been appointed chairperson.
William McMorrow, chairman and CEO of Kennedy Wilson, and Mary Ricks, president and CEO of KW Europe, will both sit on the board.
In a statement confirming the IPO, Charlotte Valeur, chairperson of Kennedy Wilson Europe Real Estate plc said: “The establishment of Kennedy Wilson Europe Real Estate plc provides a unique opportunity for public market investors to access the highly attractive real estate markets of the UK, Ireland and Spain.
“We are fortunate to have the backing of Kennedy Wilson, with a depth of experience, strong sourcing capabilities and a proven track record. Kennedy Wilson has already sourced two portfolios to seed the Company, which provides us with a strong platform for growth.”
Mary Ricks, president and CEO of KW Europe added: “The European real estate market is mostly at or past the trough of the cycle and currently offers great investment opportunities to capable investors.
“Kennedy Wilson Europe Real Estate plc has the right platform to benefit from the next phase of the cycle. It is a unique vehicle in terms of investment mandate flexibility, and sourcing and asset management ability that differentiate it from other companies.”
Kennedy Wilson launched his European operations through Kennedy Wilson Europe in June 2011 and has acquired assets directly from 11 financial institutions across the UK and Ireland in 14 transactions, and as at 31 December 2013, it had £2.5bn in assets under management in Europe.