US investor NorthStar Realty is raising a $300m warchest for its European subsidiary which it plans to float later this year.
NorthStar Realty Europe, has launched the $300m private offering of senior stock-settlable notes, a kind of convertible bond.
Subject to the spin-off of the European vehicle as a new REIT, NorthStar Realty Europe may elect to settle all or part of the value of the notes in stock rather than cash.
NRE intends to use the funds make more European real estate acquisitions and to repay all or part of a revolving credit facility with a 3.68% interest rate which is due in August 2017.
NorthStar recently bought a €1.1bn pan-European office portfolio from SEB Asset Management in a deal funded by Aareal. It also bought the €450m Project Trias portfolio of 38 office, retail and industrial assets and one hotel across Germany, France, Italy and Belgium.
And the company acquired a 15% stake in European real estate fund manager Aerium to support its expansion.
NorthStar Asset Management Group will manage NRE, which will have target leverage of 40-50% and is expected to initially hold up to €1.8bn of European assets.
Announcing the plan to spin off the European business earlier this year, NorthStar chairman and CEO David Hamaoto said the European REIT would be “one of the only high-quality pan-European commercial real estate portfolios available in the market.
“We expect NorthStar Realty Europe to create significant shareholder value by capitalising on internal and external growth prospects at a critical inflection point in the European real estate cycle which has lagged the US recovery and currently exhibits a historically wide spread between cap rates and interest rates.”