Investment firm AEW has announced plans to float a new UK real estate investment trust (REIT) on the London stock exchange, which will target a 5.5 per cent income.
According to a release published by the firm today (11 May), AEW UK Long Lease REIT’s investment objective is to ‘generate a secure an predictable income return,’ by targeting properties in ‘non-traditional sectors’ such as healthcare, education, hotels, student accommodation and supported living accommodation. AEW will offer shares at £1 each, with the aim to raise £150 million.
AEW will target unexpired leases that are over 18 years in length, with a big emphasis on rent reviews linked to inflation (RPI or CPI) at the time of investment.
The company plans to declare dividends in January, April, July and October of each year, with the first interim dividend to be declared in October 2017. AEW expects the REIT to be admitted to the stock exchange by early June.
Retail investors will be able to buy shares ahead of the floatation, via participating brokers, providing a minimum of £1,000 is invested.
With over €60 billion in assets under management, AEW is one of the largest real estate investment managers in the world. In May 2015 they listed another REIT, AEW UK REIT plc, on the stock exchange, which has so far invested over £133 million in 29 properties.
The closed-ended structure is viewed as more suitable for specialist trusts holding assets that cannot be easily or swiftly bought and sold (such as property, private equity or very small companies). This is because managers don't have to sell their holdings in order to release money back to investors looking to liquidate their investments when markets dip.
This played out last year when commercial property was hit hard by the Brexit vote.
Investors rushed to cash in their chips amid concerns the Brexit vote would have a negative impact on both commercial and residential property prices, particularly in London. In response various open-ended commercial property funds moved to suspend trading.
Property-focused investment trusts, on the other hand, remained open.
A couple of months later fund suspensions were in the majority of cases lifted, as fears of a hard landing receded.