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- The UK Residential REIT – Intention to float targeting private rented assets outside Central London
The UK Residential REIT (URES) has announced its intention to float with the aim of raising £150m to be invested in a diversified portfolio of affordable, privately rented residential real estate assets in attractive locations outside of prime central London (the announcement mentions Manchester, Sheffield, Leeds, Liverpool and Bristol). The company intends to use the net IPO proceeds to acquire a £145m seed portfolio of 28 properties, comprising 1,214 residential units.
In doing so, the company would be income-generating immediately upon the acquisition of the seed assets and will have no material development risk, minimising cash drag in the process. Beyond this, URES has identified a £440m pipeline of further investment opportunities, while adding that it expects the balance of the net proceeds to be invested within twelve months of its listing on the premium listing segment of the London Stock Exchange.
URES is targeting a dividend yield of 5.5% per year from 1 July 2022 once fully invested and a net total shareholder return of 10% per year. Dividends will be supported from rental income from the properties, which it notes have been proven to be resilient in past economic downturns. The company also aims to target properties that provide scope for capital appreciation through active asset management initiatives including refurbishments and asset repositioning.
URES will be managed by L1 Capital UK Property Advisors (L1). The L1 management team and their affiliates will have an investment of no less than £5m in the ordinary shares in aggregate. URES adds that in addition to targeting gross issue proceeds of £150m, it intends to issue up to 50m consideration shares in connection with the acquisition of seed assets. The expected market capitalisation following the completion of the acquisition of the seed assets will be £200m.
The announcement went on to list the following as key highlights around the potential opportunity set.
Investing in the structurally supported high growth UK Private Rented Sector (PRS) market:
Defensive strategy focused on affordable, day one income-generating PRS properties, which have the benefit of a track record of historical occupancy providing predictability and security for the future net rental income, let at mid-market rental prices, in attractive regional city locations:
Acquisition of immediately income-producing Seed Portfolio (“portfolio”), which has performed well during the Covid-19 downturn with 96% rent collection in 2020 and 95% average occupancy in past two years:
URES: The UK Residential REIT – Intention to float targeting private rented assets outside Central London
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Hello. I look forward to the date of the IPO launch. Thanks.