ICG-Longbow’s senior UK debt fund has reported profits after tax of £7.6m for the year ended 31 January 2015, up from £1.4m the previous year.
ICG-Longbow Senior Secured UK Property Debt Investments has invested in 11 loans totalling £104m. Last year it loaned £8m on Ramada Gateshead and £10m on Lanos (York Hotel), completing its initial investment programme.
The portfolio’s weighted average coupon was 7.40%, and the weighted average gross investment IRR, 8.49%.
Chairman Jack Perry said: “At the prime end of the market, especially for large assets, we are seeing intense competition amongst UK and international lenders, resulting in margins as low as 140bps but typically in the range 150-175bps. With five year GBP interest swap rates of circa 1.25%, total interest costs are in the range 2.75% to 4.0% – historically cheap, even at the less prime end of the spectrum.”
“The mezzanine and whole loan markets were also seeing polarisation. Typical ‘market-bid’ mezzanine debt can be found in the range 7-9% total IRR, especially for larger assets with whole loan financing, such as in support of loan buy-backs, priced in low double digit IRR returns (10-12%) with, typically, a 9% pa coupon.”
The fund was launched in February 2013 targeting a dividend of 6% and an underlying portfolio IRR of 8%. It paid a total dividend of 6p per share for the year.