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  • Writer's pictureRealFacts Editorial Team

Special Opportunities REIT Moves Forward with Landmark London Listing


London

According to Paul Norman of CoStar, plans for the first real estate investment trust (REIT) listing on the London market in three years—and the largest in a decade—are progressing with the publication of the initial public offering (IPO) prospectus. The IPO has secured commitments from three cornerstone investors.


Special Opportunities REIT aims to raise £500 million through an initial placing, a subscription offer, and cornerstone subscriptions. Shares will be priced at 100 pence each. Significant commitments have been received from GoldenTree Asset Management, TR Property Investment Trust, Columbia Threadneedle Investments, and the Bhavnani family office. These investors have agreed to subscribe for between £104 million and £119 million in shares.


The REIT plans to leverage the cyclical nature of the UK real estate market by investing in high-quality commercial properties sold by distressed sellers at depressed values. The management team, composed of Simon Lee, Freddie Brooks, John White, and Rob Ward (formerly of LXi REIT Advisors), has identified a pipeline of deals for rapid deployment of IPO proceeds.


The REIT will focus on sectors with expected rental growth, including student accommodation, industrial properties, data centers, retail parks, and budget hotels. It targets a minimum annual internal rate of return (IRR) of 12% to 15%, with the potential to exceed 20%.


Special Opportunities REIT promises a minimum dividend of 3 pence per share for the period ending June 30, 2025, and 6 pence per share for the year ending June 30, 2026. The management team and non-executive directors will invest £4 million at the IPO. The REIT aims to maintain a net loan-to-value ratio of 25%, with a maximum of 35%.

 

The REIT aims to exploit current market conditions, characterized by an oversupply of properties due to defined-benefit pension funds exiting their holdings. Additionally, major lenders have shown a lack of appetite for refinancing loans with unsustainable loan-to-value ratios, creating opportunities for acquisitions.


Harry Hyman, chair of Special Opportunities REIT, stated that the REIT's strategy is designed to take advantage of current market dislocations. He emphasized the alignment of interests between the management team and shareholders, with a performance-based remuneration structure.


Special Opportunities REIT will be the first property trust to list in London since Life Science REIT's £350 million AIM listing in October 2021. It represents the largest REIT flotation in over a decade, entering a market that has seen significant challenges since the Liz Truss government's mini Budget in 2022, which led to steep discounts in real estate stock prices.

The REIT's lack of legacy assets is seen as an advantage in a recovering market. Existing REITs have faced difficulties, including shelved listings and paused IPOs due to market volatility and geopolitical events.

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