Debt specialist ICG Real Estate is planning to launch its first pan-European whole loan and mezzanine debt fund later this year.
The ICG ‘partnership capital’ fund series, which invests in whole loans, mezzanine and preferred equity, has invested in the UK up until now. But Martin Wheeler, co-head of ICG Real Estate, revealed to PropertyEU that the next successor fund will cover both continental Europe and the UK.
It is understood that the next fund could be at least as large, if not larger than the current vehicle, UK Real Estate Debt Investments V, which held a final close late last year on £928 mln and is expected to be fully invested by the end of 2020.
Wheeler said: ‘Our business model is to launch a successor fund in each of our strategies when we get to the point of full investment. We expect our current partnership capital fund to be invested by the end of this year.’
ICG Real Estate announced this week that it has appointed Philippe Deloffre and Aisling McCarthy as managing directors. Their role is to build up a debt business in continental Europe to complement ICG’s £4.3 bn mainly UK real estate assets under management.
Deloffre is based in parent Intermediate Capital Group’s long-established Paris office while McCarthy will work from London, advising UK, North American and Irish sponsors on European debt deals in markets including France, Benelux, Germany and Ireland. The initial focus will be on ICG Real Estate’s real estate partnership capital strategy - with senior lending to follow in due course.
Deloffre and McCarthy are already working on deals and before the pan-European partnership capital fund launch, these will be invested in by ICG Real Estate third-party LP clients.
McCarthy said that one of the first is a €20 mln-plus loan for six alternative asset class properties in Germany for an existing London-based client which plans to make this deal the foundation for a larger portfolio. ‘It is a portfolio accumulation play to build up to at least 25 assets,’ she said.
Filling funding gaps
Wheeler said ICG has been researching the European opportunities since 2014-2015. ‘We were aware there were interesting deals in Europe and by filling funding gaps we could provide investors with attractive risk-adjusted returns.
‘With Philippe based in Paris that gives us unique access to the French market plus adjoining jurisdictions, typically targeting local operators...That coincides with where we believe the funding gaps are.’
Deloffre added: ‘The French market is a very senior-debt driven market in terms of financing with an established French and German bank presence. Large banks don’t provide a lot of lending to smaller, local operators and that is an attractive target for us.”
Additionally, the team expects the coronavirus pandemic to throw up business and the German deal is one where the original debt provider had to pull out of its position. ‘Most of the European banks have paused their production of new business. There are opportunities out there because the equity markets are still active,’ Deloffre explained.
Wheeler said the team was also seeing ‘prime assets with some value add going on which ordinarily would have been filled by an aggressive senior package or senior combined with, for example, a global insurer from Korea. But those investors are not there’.
Deloffre was previously at BNP Paribas Asset Management and before that at ACOFI Gestion. McCarthy joined from Coimmvest, a technology CRE lending business and also worked for a number of years at UBS in real estate finance.
Wheeler said there was no reason the continental debt business couldn’t be as big in three to five years time as the UK, which will remain ‘the anchor of the partnership capital series’.
