A US hedge fund has acted as the cornerstone investor in a listed fund offering exposure to residential development finance in the UK.
EJF Capital has committed £75m to the initial public offering (IPO) of Urban Exposure Real Estate.
Housing development lender Urban Exposure Group is seeking to raise £500m for a newly created investment company.
The Virginia-based hedge fund EJF, which has previously invested in MetLife, Apollo Commercial Real Estate Finance, Bank of America, BNY Mellon, Carlyle, Morgan Stanley and RBS, agrred to buy £75m of shares in the new closed-end company upon flotation.
Urban Exposure is targeting gross returns of 14% for the fund. The company has been lending to the real estate sector since 2009, having started as a developer in 2002.
The lender has previously partnered Starwood Capital, LaSalle Investment Management, Topland Group, LetterOne, Revcap, Barclays and RBS.
The company said it had committed £476m of development finance on residential-led real estate projects in the UK In the past 12 months, primarily in the London and southeast. It has a current pipeline in residential lending opportunities of £3bn, of which £858m is under negotiation.
Urban Exposure Real Estate chairman Malcolm Le May said the firm would look to take advantage of the lack of funding in the market for residential real estate developers.