The UK Residential REIT, a proposed closed-ended real estate investment trust established to invest in a diversified portfolio of affordable, privately rented residential real estate assets in attractive locations outside of London, today announces its intention to proceed with an initial public offering of new Ordinary Shares and to apply for the admission of its Ordinary Shares to the premium listing segment of the Official List of the FCA and to trading on the Main Market for listed securities of the London Stock Exchange.

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The UK Residential REIT will invest in a diversified portfolio of affordable, residential properties in strong UK rental markets outside of prime central London. With the IPO net proceeds, the Company intends to acquire a £145m seed portfolio of 28 properties, comprising 1,214 residential units. This means that the Company will be income generating immediately upon the acquisition of the Seed Assets and will have no material development risk, minimising cash drag. The Company has identified a £440 million pipeline of further investment opportunities and expects the balance of the net proceeds to be invested within twelve months of Admission.

The Company is targeting a dividend yield of 5.5 per cent per annum from 1 July 2022 once fully invested and a net total Shareholder return of 10 per cent per annum. The net total Shareholder return will be divided between income (payable by way of dividends) and potential growth in NAV. Dividends will be supported from rental income from the properties, which has 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 Limited. The L1 management team and their affiliates will have an investment of no less than £5 million in Ordinary Shares in aggregate.

URES is targeting Gross Issue Proceeds of  £150 million, before expenses by means of a placing, offer for subscription and intermediaries offer of 150 million Ordinary Shares (the “Issue”) plus an Issue of up to 50 million Consideration Shares in connection with the acquisition of Seed Assets at an issue price of £1.00 per Ordinary Share. Expected market capitalisation following the completion of the acquisition of Seed Assets of £200 million.

Panmure Gordon (UK) Limited is sponsor and Panmure Gordon (UK) Limited together with RBC Capital Markets are acting as Joint Bookrunners.

Richard Grainger, Non-Executive Chairman of The UK Residential REIT, said:

“The UK faces a critical shortage of good quality homes for rent, in particular those that are both affordable for the majority of the working population, and which are in well-connected regional city locations that are forecast to see population increases in the future. The rate of new build stock will never keep pace with this demand, which offers an opportunity for professional investors to take the lead by creating a good quality mass market product and delivering a solution to one of the most urgent issues facing society today. L1 Capital has a highly experienced management team who have delivered both rental and capital growth from the seed portfolio, providing evidence of the returns that can be achieved from investing in this segment of the residential market.”

Kee Gan, Chief Investment Officer, L1 Capital UK Property Advisors Limited, the Investment Adviser to The UK Residential REIT, added:

“URES offers shareholders an opportunity to access what is a nascent yet fast growing asset class. Our conviction in the sector is underpinned by the performance of the seed portfolio since inception, with the resilience displayed during the COVID-19 pandemic reinforcing our belief in its long-term attractiveness. We have significant ambitions to scale the strategy, with a growing pipeline of attractive acquisition opportunities underpinning this confidence. This is a compelling proposition that offers shareholders an attractive dividend with scope for rental and capital growth over time through asset management strategies and yield compression.”

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