High-Yielding Investment Property for the Holidays

by / Friday, 28 December 2012 / Published in Featured Posts, General, iCORE

Private investors can for the first time access the high yields available in the commercial mortgage market after the flotation of a £228m fund.

Starwood European Real Estate Finance started trading shares on the London Stock Exchange’s main market yesterday.

They will deliver a 7 per cent dividend yield by lending money against commercial property in the UK and Northern Europe.

Head of European debt at the US real estate specialist, Starwood Capital, Peter Denton states that institutional multi-asset managers and wealth managers have been the biggest investors in the new fund.

Starwood, which provided 5 per cent of the equity, is the largest of three asset managers that have been trying to raise money for real-estate debt funds.

ICG-Longbow and Cheyne Capital have also been courting wealth managers and other institutional investors, but so far with less success.

Both have now delayed the closure of their books until after Christmas.

The market opportunity that the three asset managers spotted was caused by the contraction of bank lending to property companies.

Banks used to provide roughly 95 per cent of the debt used for European commercial real-estate purchases. But regulators are now pressuring them to increase the capital they hold against property loans, leaving the sector in desperate need of alternative sources of funding.