Multifamily Housing REIT planning GBP175m London Stock Exchange IPO
The Multifamily Housing REIT, a closed-ended real estate investment trust established to invest in existing built, regional UK private rented sector homes, is looking to raise gross proceeds of GBP175 million from an initial public offering on the London Stock Exchange.
The company is to apply for the admission of its Ordinary Shares to the premium listing segment of the Official List of the FCA, and for trading on the Main Market for listed securities of the London Stock Exchange (Admission).
The issue of 175 million Ordinary Shares at an issue price of GBP1.00 per Ordinary Share will be available to institutional investors in qualifying jurisdictions pursuant to an institutional placing, to participating intermediaries who will facilitate the participation of their retail investor clients in the UK, the Channel Islands and the Isle of Man, and direct to retail investors in the UK, the Channel Islands and the Isle of Man.
The Issue will also include the subscription at the Issue Price for 19,528,639 Ordinary Shares by certain sellers of the Seed Portfolio and 250,000 Ordinary Shares by directors of the Company.
The Company’s investment objective is to seek to provide investors with an attractive and stabilised level of income return together with the prospect of income and capital growth through investing in, and growing a portfolio of, UK existing built private market rented residential units (PRS Homes). It is intended the portfolio will primarily comprise assets which are already built, located largely in England, outside of Greater London and let to private tenants at mid-market rents, which, in the Company’s view, is an undersupplied part of the UK housing market.
The Company’s wholly-owned subsidiary, Multifamily Asset 1 Limited, has entered into share sale and purchase agreements which, conditional on Admission, will result in the acquisition by it of 658 PRS Homes and five commercial units across 22 properties (the Seed Portfolio) for the aggregate purchase price of GBP70.26 million (including the repayment of shareholder and third party debt), which represents the aggregate market value of the properties with the exception of Paper Mill Yard, Norwich, where a premium of GBP390,000 to market value is to be paid to reflect the difference between the market and break-up value of the property.
The 22 properties comprising the Seed Portfolio have been independently valued with an aggregate market value of GBP69.87 million and the 658 PRS Homes and five commercial units have been independently valued with an aggregate market value of GBP78.249 million. The aggregate market rental value of the individual PRS Homes and the five commercial units in the Seed Portfolio is GBP4.856 million per annum and the valuation of the Seed Portfolio delivers a gross yield of 7 per cent per annum. The Seed Portfolio is located across regional England with properties in Bristol, the West Midlands, East Anglia, Manchester and Leeds, amongst others. These locations form the basis of a bespoke management model with concentrations of properties located in close geographical proximity permitting operational efficiencies (the Hubs). The Hubs are in the Midlands, the South West, the East and the North and North West of England. Locations have been chosen based on fundamentals providing tenant demand and opportunity for rental growth.
Subject to market conditions and the level of the Company’s net income, the Company anticipates paying dividends equating to approximately 4 per cent. annualised for the period from Admission to 31 March 2019. For the year ending 31 March 2020, the Company will target equal quarterly dividends equivalent to a yield of 5 per cent per annum and thereafter will adopt a progressive dividend policy in line with the anticipated growth in adjusted earnings and will target a dividend yield in excess of 5 per cent per annum. The Company is targeting a net total Shareholder return of at least 10 per cent per annum divided between income (payable by way of the dividends mentioned above) and growth in net asset value (NAV).
The Seed Portfolio has been assembled and is currently managed by Harwood Real Estate Limited (HRE), a real estate management platform formed in 2009. Operating almost exclusively outside of London, HRE has managed investments of over 2,450 PRS Homes over the last three and a half years, transacting on approximately GBP490 million of residential assets.