Plans for the first real estate investment trust listing on the London market in three years have been dropped after the minimum fundraising target was missed.
Special Opportunities REIT had been targeting a fundraise of £500 million, comprising an initial placing, an offer for subscription and cornerstone subscriptions of ordinary shares of 1 penny each in the capital at an issue price of 100 pence per ordinary share. It would have been the largest in a decade.
Last month, it said commitments had been received from three investors –GoldenTree Asset Management, TR Property Investment Trust and other Columbia Threadneedle investments funds, and the Bhavnani family office – to subscribe for between 104 million and 119 million ordinary shares, or £104 million to £119 million, on the basis of the target initial issue.
The internally managed REIT has now announced that despite “strong” investor demand, it failed to meet the £250 million minimum fundraising required for the public listing to proceed. It added that management would now execute its strategy in the private markets instead.
It said: "Further to the announcement made on 29 May 2024, the directors of Special Opportunities REIT are pleased to have received a number of orders from multiple high-quality institutions in addition to the cornerstone investor commitments for the company's IPO. Investors have shown significant support for the company's structure, alignment of interest and recognition of the market opportunity.
"Although investor demand has been strong, it fell short of the £250 million minimum fundraise required for the IPO to proceed. Having considered their options, the Board did not believe it would be in the best interests of investors to reduce the minimum fundraise below £250 million given the nature of the market opportunity and pipeline.
"The management team will now acquire assets from the pipeline using private capital in line with the company's proposed strategy. The board and management team would like to thank all investors who have been very engaged throughout the process."
The management team comprises former LXi REIT Advisors colleagues Simon Lee, Freddie Brooks, John White and Rob Ward. The board has well-known non-executive directors Primary Health Properties founder Harry Hyman as chair and former Workspace chief executive Jamie Hopkins as senior independent director. A proposed £4 million would have been invested by the management team and non-executive directors at IPO.
The team has been aiming to appeal to investors because it says the market is characterised by structural oversupply, driven largely from defined-benefit pension funds exiting their property holdings both through open-ended funds and insurer "buy-outs", following a surge in DB schemes reaching surplus as the gilt rate rose significantly over the last 18 months.
Special Opportunities REIT would have been the first property trust to join the London market since October 2021 and the £350 million AIM listing of Life Science REIT.
There have been no launches since leading UK real estate stocks took a hit in the wake of the Liz Truss government's mini Budget in 2022, with the familiar story of company share prices trading at steep discounts to net asset values continuing. Independent Living REIT's planned listing was shelved immediately after the mini Budget, while GCP Co-Living REIT, a closed-ended investment company, paused its marketing of a proposed £300 million initial public offering in February 2022 "in light of the events in Ukraine".
The group said the REIT would have an advantage over existing ones in a recovering market because of its lack of legacy assets.