Special Opportunities REIT is targeting a fundraise of £500m when it lists on the London Stock Exchange next month having already received commitments from three cornerstone investors.
The REIT, which is “seeking to capitalise on the recent dislocation in UK real estate capital markets to deliver highly attractive total returns”, said GoldenTree Asset Management, TR Property Investment Trust and other Columbia Threadneedle investment funds, and the Bhavnani family office, had agreed to subscribe for between 104 million and 119 million ordinary shares – equivalent to £104m to £119m.
In its prospectus, the REIT said the £500m fundraise would comprise an initial placing, an offer for subscription and cornerstone subscriptions of ordinary shares of 1p each in the capital of the company at an issue price of 100p per ordinary share. It will close applications in respect of the initial public offering (IPO) on 11 June 2024.
The company said it had “a significant pipeline of portfolio and single asset deals against which it expects to rapidly deploy and gear the IPO proceeds”.
The REIT will focus on “high-quality, but under-managed”, UK commercial property assets with low and reversionary rents and structurally supported sub-sectors, including student accommodation, industrial, data centres, retail parks and budget hotels, where rental growth is expected to outperform.
The management team of Special Opportunities REIT comprises Simon Lee, Freddie Brooks, John White and Rob Ward – all formerly of LXi REIT Advisors – with Harry Hyman (pictured) serving as chair and Jamie Hopkins as senior independent director.
Hyman said: “I am delighted to announce the proposed IPO of Special Opportunities REIT, which has been designed to generate returns for shareholders through what we believe to be our best in class strategy, structure and team. With current property market conditions closely mirroring those in other cycles that have signalled the bottom of the market, we expect to capitalise on the recent dislocation in UK real estate capital markets.
“The new internally-managed REIT will opportunistically acquire and actively manage high-quality, but under-managed, and materially discounted UK commercial property assets with low and reversionary rents and in structurally supported sub-sectors. These include sectors such as student accommodation, industrial, data centres, retail parks and budget hotels, where rental growth is expected to outperform.
“We have a strong and highly experienced internal management and independent board, who are materially co-investing, and a fully aligned performance-based management remuneration structure and low cost base that provide strong shareholder alignment. This ensures that the management team is highly incentivised to deliver the minimum realised 12%-15% annual internal rate of return for shareholders which we are targeting, with the potential to deliver an IRR in excess of 20% per annum, both comprising income and capital growth, and an attractive regular income return.”
Simon Lee, CEO of Special Opportunities REIT, added: “We are really excited at the prospect of admitting Special Opportunities REIT to the London Stock Exchange. We expect to deliver attractive crystallised returns to shareholders through investing, at what we believe is the bottom of the UK real estate market cycle and with a unique set of circumstances, in very high-quality properties being sold by distressed or highly motivated sellers, often at prices less than their already depressed current market values.
“We have used our extensive industry relationships to establish an attractive and deep short-term pipeline of high-quality portfolio and single asset deals against which we expect to deploy the net IPO proceeds within six months.
“We expect to deliver significant value growth following the highly selective acquisition of these properties, by leveraging the current structural oversupply of UK commercial real estate, driven by a number of time limited factors. We also expect to drive enhanced value from our portfolio, through rental income growth and by leveraging our long-term relationships with tenant operators to enhance the capital value and liquidity of its assets to the benefit of our shareholders.”
