ICG-Longbow’s new senior debt fund will lend on UK regional property, charging all-in rates of 6.5-7.5%. The debt and property specialist is promising investors in Senior Secured UK Property Debt Investments (SSUP) a 6% income return and an 8% internal rate of return when fully invested.
It plans to raise between £100m and £250m of equity via an initial public offering in the next few weeks. Quoted ICG is co-investing £10m. SSUP will have a simple strategy, making four – to six-year bilateral loans at loan-to-value ratios up to 65%, non-syndicated, with no subordinated debt.
It expects to lend on industrial portfolios, shopping centres and other multi-let property with robust income. ICG-Longbow chairman David Hunter said: “Our starting point was the property market and yields and how we could capitalise on those and ensure that the equity makes money.
“Obviously you need a property yield to be above a lending yield, but yields for the bulk of UK property are high and accommodate higher debt pricing. Most property outside London yields 7.5-8% and if you can borrow at 7% at a 65% LTV, the economics works.”
The Longbow team, including founders Kevin Cooper and Martin Wheeler, and Graham Emmett, NAMA’s former head of lending and corporate finance, will also continue to manage and invest separate private capital in UK mezzanine loans.
Its last mezzanine fund, UK Real Estate Debt Investments 2, raised £242m by November 2011 and is close to fully invested. ICG-Longbow is raising capital for a third fund, using placement agent Threadmark.
Hunter declined to comment on capital raising for fund 3 but said: “For the past 12 months we’ve been investing mezzanine and when you’re out lending money and talking to borrowers you can develop an idea of where the demand is.” Adviser and bookrunner Investec is marketing SSUP to small institutions and wealth managers.