Highlights
- Total commitments £242 million
- Cash coupon paid during life 9.5% (average)
- Gross IRR 17.1% per annum,1.6x investment multiple
- 18 Investments
- Landmark deal, 120 Holborn- £33 million mezzanine loan
ICG-Longbow, Intermediate Capital Group’s (ICG’s) specialist real estate asset management division announces the full realisation of its 2011 vintage Fund II and provides a market update.
Fund Overview
Fund II achieved its final close in September 2011 with commitments of £242 million with an initial five year fund life. The primary focus was to take advantage of the market opportunities created by the global financial crisis by lending on a coupon and performance participation basis.
When fully invested in June 2013, the Fund’s investments comprised 70% first mortgage whole loans and 30% mezzanine loans, with a London exposure of 39%. The average deal size of £16 million across 18 investments was underpinned by retail, industrial, office and student mid-market investment assets across the UK.
Fund II was the first of ICG-Longbow’s partnership capital series which has now raised a further £1.7 billion of capital through two successor funds and to date has deployed £1.8 billion across all three funds.
120 Holborn
The largest underlying property transaction was the 2012 refinancing of 120 Holborn, a prime located 349,000 sq ft central London freehold. Fund II provided the lead £33m participation in a £45m mezzanine loan, alongside £90m of senior debt. The property was sold to Singaporean investor UOL last November 2016 for £222 million, following the refurbishment and leasing of the office and ancillary retail and leisure accommodation by the Fund’s borrower over the prior three years. The Fund’s investment was realised in November 2016 following the sale, generating a circa 20% IRR.
Commenting on the outcome of Fund II, Kevin Cooper, co-head of ICG-Longbow said:
“We are delighted to have delivered such strong returns from a portfolio that was dominated by first mortgages. Whilst cycle timing played a part, the fund clearly benefited from the asset selection and asset management of our partners and borrowers.
The underlying real estate performance is best demonstrated by the fact that our funds outperformed direct real estate. As measured by MSCI all property total returns over the period January 2011 to December 2016, by 17% to 11% and that in the majority of the underlying transactions the equity returns enjoyed by our borrower partners exceeded a 2x multiple and many surpassed a 3x multiple.”
Commenting on the Market Outlook Martin Wheeler co-head of ICG-Longbow said:
“In response to the uncertain political environment, many investors are avoiding properties that are perceived to be high risk, favouring core properties with secure income streams. However, against the backdrop of economic growth and continuing occupational demand, we believe this may lead to interesting buying opportunities for value-add or less stabilised properties for our partners, which we expect will generate attractive risk adjusted returns”.
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