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IPO watch: UK Residential REIT set to list in London

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·4-min read
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STOKE, ENGLAND - MAY 20:  Placards from various estates agents advertising properties To Let are left on housing properties on May 20, 2021 in Stoke, England . (Photo by Nathan Stirk/Getty Images)
The real estate investment trust is targeting a dividend yield of 5.5% per year from 1 July 2022 and a net total shareholder return of 10%. Photo: Nathan Stirk/Getty Images

The UK Residential REIT (real estate investment trust) has announced plans to list on the London Stock Exchange (LSEG.L), with the aim of raising £150m ($212m) in an initial public offering (IPO), capitalising on the housing market boom.

It plans to use the funds to invest in a diversified portfolio of affordable, privately rented residential real estate assets in Britain. 

The properties, which are located in cities such as Manchester, Sheffield, Leeds, Liverpool and Bristol, will generate income immediately, the company said.

In addition to targeting gross issue proceeds of £150m, the firm intends to issue up to 50 million consideration shares linked to buying seed assets. 

The expected market capitalisation following the completion of the acquisition of the seed assets will be £200m and aims to reach a market capitalisation of £500m within a few years.

Read more: IPO watch: From DarkTrace to Deliveroo, the winners and losers of London listings

The company is targeting a dividend yield of 5.5% per year from 1 July 2022 and a net total shareholder return of 10%.

It has also identified a £440m pipeline of further investment opportunities. It said it expects the balance of the net proceeds to be invested within 12 months of its listing. 

The listed company will be managed by Australian investment manager L1 Capital UK Property Advisers, while bankers at Panmure Gordon and RBC Capital Markets have been appointed to handle the float. 

Residential REITs — launched in the UK in 2007 — own and manage various residences and rent space in those properties to tenants and include firms specialising in apartment buildings and student housing among other things. 

UK Residential REIT was set up to invest in privately rented residential properties outside of London and owns over 30 blocks of flats in several UK cities including Bristol, Sheffield and Leeds.

Watch: What are SPACs?

The news comes after recent reports about the UK's stampede to buy homes before the end of the stamp duty holiday — a discount brought in by chancellor Rishi Sunak to support the market under strain from the coronavirus pandemic.

Britain's housing market, boosted by the stamp duty tax break and the 95% mortgage guarantee scheme for first-time buyers, has surged to record highs. 

UK house prices rose at the fastest pace in nearly 14 years in March after Sunak announced the extension of the stamp duty holiday. Property prices increased 10.2% in the year to March 2021, up from 9.2% in February this year. This was the highest annual growth rate the UK has seen since August 2007, according to official figures.

Read more: UK house price growth hits 10% in hottest month in seven years

It is the latest company to announce listing in the capital, which has become home to a number of IPOs this year as the City seeks to attract more businesses following Brexit. 

There are also a number of other companies planning to come to London over the coming months alongside URES after a robust first quarter which saw listing rise to 15-year highs.

Online furniture retailer Made.com confirmed plans to list on the LSE last week after benefiting from a shift to online shopping during the COVID crisis. The company, which has lined up JPMorgan (JPM), Morgan Stanley (MS) and Liberum to handle the listing, is valued at £1bn.

A blockbuster IPO is on the cards for British retailer EG Group, which values at around £10bn. Despite EG Group’s revenue declining to £20.7bn in 2020, compared with £22.4bn in 2019 due to lower fuel demand, it had an EBITDA increase of 48%.

Fintech firm, Wise (formerly TransferWise), is expected to list in the second quarter of this year, the company could be valued between £4.4bn and £5.1bn.

Oxford Nanopore Technologies — a spin-off of the University of Oxford — has raised over £250m in investment funds. Oxford Nanopore Technologies, which is valued at £2.3bn ahead of its London IPO, was founded in 2005 and develops products that are used to analyse DNA, RNA, proteins and small molecules. The company also produces products that track COVID-19 variants.

Meanwhile, craft beer and pub chain business BrewDog is believed to list in the capital this year. The company, which announced its IPO plans in 2018, is valued at about £1.5bn and has raised roughly £73m over six fundraising rounds, with the last round ending in April 2020.

Firms hoping to cash in on strong trading amid COVID raised £8.7bn from listings since the start of this year alone, compared to $15bn (£10.6bn) in 2020 according a Tech Nation report, as firms including Deliveroo (ROO.L), Trustpilot (TRST.L) and DarkTrace (DARK.L) launched on the public markets.

Watch: EQT CEO Says London IPO Changes Are 'Innovative'