UK Residential Reit looks to raise £150m in stock market float
The UK Residential Reit today unveiled plans for an initial public offering on the London Stock Exchange as it looks to cash in on the UK’s housing shortage.
The real estate investment trust, which was set up to invest in privately rented residential properties outside London, is targeting total proceeds of £150m plus an issue of up to 50m consideration shares linked to buying seed assets.
Expected total market capitalisation following the acquisition of seed assets is £200m.
UK Residential Reit plans to acquire a £145m seed portfolio of 28 properties, consisting of 1,214 residential units.
It said the properties, which are located in cities including Manchester, Liverpool and Bristol, will generate income immediately.
The company said it has also identified a £440m pipeline of further investment opportunities and expects the balance of net proceeds to be invested within a year of listing.
The property group is targeting a dividend yield of 5.5 per cent per year from 1 July 2022 and a net total shareholder return of 10 per cent.
UK Residential Reit said it was looking to capitalise on sustained growth in the private rented sector, which it said was supported by tightened lending requirements since the financial crisis and a structural under-supply of housing in the UK.
It added that further population and market growth, coupled with the ongoing conditions of affordability and under-supply, meant the sector was primed for further growth over the next five years.
“The UK faces a critical shortage of good quality homes for rent, in particular those that are both affordable for the majority of the working population, and which are in well-connected regional city locations that are forecast to see population increases in the future,” said Richard Grainger, non-executive chairman of UK Residential Reit.
“The rate of new build stock will never keep pace with this demand, which offers an opportunity for professional investors to take the lead by creating a good quality mass market product and delivering a solution to one of the most urgent issues facing society today.”
The listed company will be managed by L1 Capital UK Property Advisors.
Kee Gan, chief investment officer at L1 Capital, told Morning Wire the company’s seed portfolio presented an “attractive value proposition” due to its mid-market positioning and locations outside London.
While rental values in the capital have declined due to a decline in international workers and travel, as well as the increased shift to home working, other parts of the UK have proved more resilient.
Gan added that demand for city centre properties had started to return since the release of the government’s lockdown exit roadmap.
Panmure Gordon is sponsor for the IPO and Panmure Gordon together with RBC Capital Markets are acting as joint bookrunners.