Aviva Investors has formally announced its intention to float a £200m long-lease vehicle.
Aviva Investors Secure Income REIT is the latest in a long string of long-lease IPOs this year looking to provide bond-like income. Others include AEW UK Long Lease REIT, LXI, Supermarket Income REIT and Warehouse REIT.
The company has four assets totalling £85m under exclusivity or in advanced negotiations. It is committing just under 20% of the gross issue proceeds.
It will buy assets typically with a minimum lease length of 10 years and will have a target unexpired lease length of 15 years at a portfolio level. It is looking to provide a 5% dividend yield pa and a 7% total return with a quarterly dividend.
Aviva Investors’ board is led by chairman Andrew Cunningham, the former chief executive of Grainger, as well as Suzanne Avery, formerly Royal Bank of Scotland’s managing director; Steffan Francis, previously of M&G Real Estate; and Marlene Wood, previously of Miller Developments.
The result of the IPO and admission is to be published early next month.
Renos Booth, head of real estate long income at Aviva Investors, said: “The current environment of low interest rates and rising inflation is favourable for long-income real estate investments. Our strategy aims to provide a compelling risk-return profile that offers secure income as well as lower volatility and lower capital value risk compared with traditional real estate investments, which we have a strong track record of delivering through investing in secure and long-income real estate.
“Tenant credit quality is essential to providing security of income in a long lease strategy. Our focus will be to acquire high-quality buildings leased to predominantly investment-grade tenants, because sub investment-grade tenants have a higher probability of defaulting on their rental obligations, and properties let to them exhibit greater capital value volatility over time.
“Furthermore, we will pursue leases typically with inflation-protected rent reviews with a view to achieving our aim of delivering stable and predictable cash flows for investors over the long term.”
Jefferies and Scott Harris are advising on the IPO.
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