StarFin in £147m mezz debt debut

The European real estate debt platform listed last month by Starwood Capital has opened its books with a £19m bridge portion in the refinancing of three of the capital city’s best known hotels.

Starwood European Real Estate Finance (StarFin), the European real estate debt platform listed on the London Stock Exchange by private equity real estate firm Starwood Capital Partners last month, has announced its first investment.

StarFin is one of three partners behind a £147 million (€180 million; $239 million) mezzanine portion of the £547 million refinancing of the Maybourne Hotel Group, a London-based hotel company which owns landmark hotels Claridge’s, the Connaught and the Berkeley.

The loan, which runs for five years, is connected to a £400 million senior loan from lenders reportedly including Bank of America.

StarFin has put up £19 million and Starwood’s longer running debt business, the New York-listed Starwood Property Trust has committed £30 million.

“[StarFin's] investment has been undertaken on an attractive loan to value in the low fifties percent and the company expects to make a double-digit yield in line with its investment criteria as outline in its prospectus,” the firm said.

StarFin was listed on the London Stock Exchange last month in a £228 million initial public offering, the second largest IPO fundraising on the premium segment of the UK Official List last year.

Jeff Dishner, a senior managing director at Starwood, said at the time of the IPO the platform had been created to capitalise on a large debt funding gap currently in the region and borrowers’ increasing appetite to borrow from non-banking sources.

He said: “The property sector has a well-recognised and large debt funding gap that will be only fully addressed through the development of alternative sources of capital other than the traditional banking sector. Working with the wider Starwood Capital Group and Starwood Property Trust the Company will now seek to exploit this strategic change by finding and funding compelling investment opportunities in real estate financing in Europe”.

StarFin will be used to focus on the UK and northern parts of Europe and will have the scope to buy debt as well as originate loans for direct borrowers. It will lend senior, whole, subordinated, bridge and development loans, typically of between €40 million (for whole loans) and €20 million (for subordinated loans). Its maximum loan to value prerequisite is 75 percent.

Through its investments, StarFin hopes to generate returns of 8 percent to 9 percent.