Kennedy Wilson Europe Real Estate (KWE) has raised £910m in its initial public offering (IPO) with a diversified mandate across direct real estate acquisition, loan purchases and origination as well as securitisations of loan pools throughout the UK, Ireland and Spain.
Kennedy-Wilson Holdings has itself subscribed to the 91 million of shares, excluding stabilising manager Deutsche Bank’s over-allotment entitlement of up to an addition 10%, taking £122.0m of ordinary shares in the initial public offering.
In addition, senior management and executive officers at Kennedy Wilson have invested a further £3.0m. The ordinary shares acquired will represent approximately 13.4% of KWE’s total share capital immediately following admission on the London Stock Exchange.
In its prospectus published this morning, KWE said it will seek to generate a 15% total return per annum through building a diversified portfolio of commercial real estate.
In addition, KWE will invest in real estate loans and will to originate floating or fixed rate real estate loans and may also securitise pools of real estate loans, according to KWE’s prospectus.
KWE may also invest in securities traded on a public exchange and in other public or private real estate investment funds.
Across the entire portfolio, Kennedy Wilson Europe – KWE’s investment manager – will not exceed a 50% leverage threshold, but individual transactions can be leveraged up to 65% at the time of borrowing.
On which leverage basis, KWE could build a property portfolio with a value of up to £1.7bn on the basis of gross proceed raised in the IPO.
KPMG has been appointed as KWE’s auditor.
In its prospectus, KWE stated: “The directors believe that the level of real estate loan sales will rise, instigated by regulatory requirements, retrenching of banks back to their core markets, increased liquidity in the loan sale market and improved economic data allowing financial institutions the flexibility to make the necessary write-downs.
The directors believe that this will provide the Company with a significant opportunity for investments. The investment manager intends to source investment opportunities for the Company through the strong relationships that the KW Europe Group has with many of the major financial institutions which are active in the UK, Ireland and Spain.”
The investment manager will target real estate assets (directly or indirectly through loans) that may include one or more of the following general features:
• Prime high quality properties in good locations;
• Scope for short and medium-term rental and capital growth through active asset management;
• Properties which are undermanaged and undercapitalised, where there are immediate opportunities to add value; and/or
• Properties in locations that the investment manager expects to benefit from on-going foreign direct investment in Europe.
Charlotte Valeur, chairperson of Kennedy Wilson Europe Real Estate plc said: “We are delighted with the strong, positive response from a broad range of investors. The interest shown by institutional and cornerstone investors is a strong endorsement of both the investment proposition and investors’ confidence in the experience, strengths and track record of Kennedy Wilson.”
Mary Ricks, president and CEO of KW Europe, added: “The level of funds raised will allow Kennedy Wilson Europe Real Estate Plc to take advantage of our pipeline and create a real estate portfolio of scale and quality. We are fully focused on delivering the strategy we outlined, and look forward to building a portfolio of assets to deliver strong capital returns and sustainable earnings for our new investors.”
KWE’s cornerstone investors comprise: 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.