A new REIT dedicated to affordable private rental housing has revealed plans to list on the London stock exchange and invest £585m into the sector over the next year.
UK Residential REIT will target affordable assets outside of London. It intends to raise £150m in its IPO, with a further £50m to support acquisitions of its seed assets.
The company will be managed by Australian fund L1 Capital UK Property Advisors. L1 Capital currently manages £230m in the UK. The L1 team and their affiliates will have at least £5m invested in the REIT.
UK Residential REIT will acquire a seed portfolio of 28 properties comprising 1,214 flats in Manchester, Sheffield, Leeds, Liverpool and Bristol for £145m. The buildings are operational and income-generating, with no development risk.
The REIT will also target properties that provide scope for capital appreciation through refurbishment and asset management. It has identified a £440m pipeline of further investment opportunities to be invested within 12 months of admission. The REIT said it has identified and screened over £3bn in opportunities since 2017.
It is targeting a dividend yield of 5.5% from July 2022 and a net total shareholder return of 10% per annum.
Richard Grainger, non-executive chairman of UK Residential REIT, said: “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.
“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.”
Kee Gan, chief investment officer at L1 Capital UK Property Advisors, said:“Our conviction in the sector is underpinned by the performance of the seed portfolio since inception, with the resilience displayed during the Covid-19 pandemic reinforcing our belief in its long-term attractiveness.
“We have significant ambitions to scale the strategy, with a growing pipeline of attractive acquisition opportunities underpinning this confidence.”
The listing comes as investment into the sector continues to rise. According to EG Radius there was £4.7bn invested in the 12 months to the end of March, more than double the same period a year earlier.
Panmure Gordon is the sponsor and Panmure Gordon and RBC Capital Markets are joint bookrunners.
To send feedback, e-mail emma.rosser@eg.co.uk or tweet @EmmaARosser or @EGPropertyNews
