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ICG Real Estate to focus on green loans with next debt fund

The London-based firm plans to introduce a new real estate lending strategy that will target Europe with a keener focus on sustainability.

Covid-19 may have made the fundraising process more difficult due to travel bans and barriers to in-person meetings, but specialist asset manager Intermediate Capital Group has announced the imminent launch of a new debt fund by its property division, ICG Real Estate.

During a 17 November presentation of its six-month results to the end of September, ICG said it has accelerated its fundraising timetable after an “exceptional” first half of 2020. During the period, it raised €2.6 billion, bringing its assets under management to €46.1 billion. It expects fundraising of €6 billion for the full year.

The new real estate debt fund is part of this accelerated fundraising strategy. ICG Real Estate’s Real Estate Debt Fund VI will originate a range of debt facilities secured against commercial property across Europe. With the fund, the group will prioritise lending against sustainable assets – a strategy it has already undertaken across other parts of its business.

“We are about to launch our third sustainable investment strategy, a real estate debt fund, which will promote a more sustainable built environment through the issuance of green loans,” said ICG’s chief executive Benoît Durteste, during a webcast on the company’s half-year results.

The company declined to reveal the fund’s target size.

Real estate debt fund managers are increasingly focusing on sustainability in their fundraising strategies. For example, in September, Stockholm-based asset manager Brunswick Real Estate raised €1.2 billion to deploy in sustainable real estate loans in Sweden.

ICG Real Estate’s previous fund in the series closed in November 2019 on £928 million (€1 billion). At the time, Martin Wheeler, co-head of ICG Real Estate, told Real Estate Capital the vehicle’s deployment strategy would be “defensive”. The fund was focused on asset classes that were expected to benefit from demographic or structural tailwinds and that were weakly correlated to the economic cycle.

Unlike its predecessor, which originated predominantly whole loans, mezzanine debt, preferred equity and development loans secured against UK commercial property, the new fund will have a pan-European focus. This geographical expansion is in line with two strategic appointments ICG Real Estate made in June when it hired Philippe Deloffre from BNP Paribas Asset Management and Aisling McCarthy from fintech platform Coimmvest, to spearhead its growth in continental European markets. Previously, ICG Real Estate’s focus had been on its home market of the UK.

By the end of Q3 2020, ICG Real Estate had lent €357 million against real estate commercial properties and had a loan book of €4 billion.

In its parent group’s result, Durteste said the company will remain cautious about the outlook for the remainder of this financial year, but was confident it can continue to grow.

“The sustained growth of our fund management company’s profits demonstrates the strength of our business model in these challenging times, as we continue to see investor demand for a broad range of our funds, including a number of new strategies,” he said.