The UK’s biggest developer of purpose-built student accommodation and two specialist real estate investment trusts are set to reap the benefits of moving up into new FTSE indices on the London Stock Exchange when they are revised later this month.
Unite Group, which owns a £5.3bn student housing portfolio, will move to the FTSE 100 index from the FTSE 250 on 20 June. Target Healthcare REIT and Supermarket Income REIT will enter the FTSE 250. Index reshuffles take place quarterly and are based on the market capitalisation of companies.
Kenneth MacKenzie, chief executive of Target Fund Managers, told EG: “Target has always been on a steady course of adding purpose-built care homes that give great facilities for our seniors – joining the FTSE 250 is the result of this slow but steady growth strategy.
“Target wants to create stable long income and if being part of the FTSE 250 also allows us to educate more people about what we are doing and why, that would be an additional benefit.”
Steven Noble, chief investment officer at Atrato Group, investment adviser to Supermarket Income REIT, said: “Inclusion in the FTSE 250 and FTSE EPRA/NAREIT indices means that [Supermarket Income] will be visible to a deeper pool of investors. [The company’s] shares will now be accessible to the funds and investors who track the performance of these indices.”
Russ Mould, investment director at AJ Bell, said there are theoretical benefits for listed businesses of rising up the indices, although whether all companies will see prolonged advantages is open to debate.
“By gaining access to a major stock index, the argument goes that this can create a wave of buying for the shares, as substantial amounts of passively run, index-tracking cash is obliged to purchase the stock so the tracker funds can continue to deliver the index’s returns to their investors,” Mould said.
“The company also potentially opens up a new shareholder base and deeper pools of capital, should it need to tap them for any reason.
“However, it not clear whether index inclusion will create a sustained wave of share buying. For every buyer there has to be a seller, after all.”
Mould added: “Ultimately, it is the fundamentals of profits, cash flow and valuation which will determine the long-term valuation and share price trajectory of the stock.”
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