ICG builds German strength with €50m mezzanine push

Intermediate Capital Group (ICG) is allocating €50m to German real estate investments, and has built up a new real estate team there.

“After establishing a track record and a decent deal pipeline, the plan is to start  raising a fund next,” said Guido Lobpreis, head of the new team.

The move is part of the international group’s expansion into pan-European real estate debt, following its 51% acquisition of Longbow in 2010. ICG-Longbow focuses on the UK commercial property debt markets.

German real estate head Lobpreis joined last year from RBS in Germany, where he had headed the German real estate equity and leasing team and was involved in CMBS work-outs, in combination with mezzanine pieces in structured deals.

ICG structures real estate investments through mezzanine and co-equity. “Our sweet spot is the loan-to-value range between 60% and 85%,” said Lobpreis. ICG can provide up to one third of remaining equity, or 5% of total investment costs as co-equity.

“Sponsors can leverage deals and increase their returns significantly,” Lobpreis said. ICG’s typical deal size is between €30m and €100m, with the lender’s stake ranging between €10m and €30m.

It is mainly seeking value-added, opportunistic and distressed deals in all asset classes and favours two-to six-year facilities, with a focus on project business plans managed by experienced sponsors that have excellent track records.

ICG’s model doesn’t rely on second lien mortgage charges for security, which can sometimes be a regulatory hurdle for senior lenders in Germany.

Financing is provided via a joint venture with the sponsor, to optimise the security structure and avoid second-ranked land charges.

This financing structure works for banks in a similar way to equity and improves their deal rating in most cases. In relation to the sponsor, ICG would be preferred in the repayment order.

Working with Lobpreis is René Faber, a director of real estate in Germany, who also worked at RBS. The team also receives support from ICG-Longbow.

ICG is a specialist asset manager that has invested in mezzanine, leveraged credit and partnership equity for private companies for 25 years and has €12.1bn of assets under management.