FINANCE: Specialist residential lender Urban Exposure is planning to raise £500m through an initial public offering on the London Stock Exchange.
Urban Exposure Real Estate has announced it will issue ordinary shares priced at £10 to raise the funds that it will invest in secured residential-led real estate development project loans – often with a profit share agreement – focusing on London and the South East.
The firm has received a binding commitment from cornerstone investor EJF Capital to invest £75m and plans to raise the balance from a global placing and a subscription for shares by the investment manager, Urban Exposure Investment Management, part of the UE Group.
UERE, which will be the exclusive investment vehicle for the UE Group, said the group had a pipeline of £3bn of opportunities and anticipated that the net proceeds should be substantially fully committed within 12 months of admission to the LSE later this month.
It is aiming to generate a gross internal blended rate of return across the portfolio of 14% and will seek to achieve a blended portfolio loan to estimated gross development value ratio of approximately 60%.
Urban Exposure has been behind a number of high-profile London residential deals including jointly funding Wainbridge’s purchase and redevelopment of 11-15 Grosvenor Crescent, SW1, and HadleyMace’s £130m Greenwich Square scheme.
The group said that in the past 12 months it had committed £476m of development finance on its and its joint venture partners’ behalf. The partners include Starwood Capital, LaSalle Investment Management, Topland Group, LetterOne, Revcap, Barclays and RBS.
The proposed IPO will be the second-largest real estate share placing since Kennedy Wilson raised £910m in February to spend on direct real estate and debt throughout the UK, Ireland and Spain.
However, it comes at a time when the markets are showing signs of weakening. Brandeaux-owned Liberty Living on Friday scrapping its plans for an IPO and fellow student housing provider Empiric last week fell short of its £150m fundraising target, raising £85m.
Urban Exposure Real Estate chairman Malcolm Le May said: “Urban Exposure Real Estate will provide investors with a unique and attractive opportunity to access the growing non-banking residential real estate development lending market in the UK.
“With the expertise and extensive track record of the Urban Exposure group, we are well placed to take advantage of the financing void for real estate developers to raise funds. This financing gap in the UK is estimated to be at least £20bn over the next three to five years.”
Randeesh Sandhu, chief executive of UE Group, reflecting the view of the investment manager, added: “UK banks have been reducing their balance sheet exposure to residential property lending, resulting in a contraction in the overall loan book in every year since 2008.
“The UE Group has been providing property developers with an alternative source of funding since 2009 and in the past 12 months alone have committed £476m of development finance on our and our joint venture partners’ behalf to residential-led real estate projects in the UK.
“Going forward, the UE Group has a current pipeline of over £3bn of residential development finance opportunities, which provides us with a strong platform for growth.”
Deutsche Bank is acting as sole sponsor, global coordinator and bookrunner; Ernst and Young is acting as independent financial adviser to the company.
