Aviva has become the latest firm to back London's post-Brexit property market, announcing it will float a new investment company focusing on UK commercial real estate.
The real estate investment trust (Reit) from Aviva Investors, the alternative investment branch of insurance firm Aviva and the largest manager of UK commercial property, with £24bn under management, is aiming to raise £200m in the stock market listing.
It is already in advanced or exclusive negotiations to grab four commercial property assets, with a near-term target portfolio of £85m and an identified acquisition pipeline of £400m. Aviva Investors predicts the £200m raised in the IPO will be spent in just nine months.
“The current environment of low interest rates and rising inflation is particularly favourable for long income real estate investments,” said Renos Booth, head of real estate long income at Aviva Investors.
“Our strategy aims to provide a compelling risk return profile that offers secure income as well as lower volatility and lower capital value risk compared to traditional real estate investments.”
The Aviva Investors Secure Income Reit is aiming to return a dividend yield of five per cent each year when fully invested, and a total return of seven per cent each year over the medium term.
It will invest in long-lease commercial property leased mostly to investment grade tenants, brushing aside fears many companies might look to ditch UK property to move abroad as Brexit approaches.
Aviva will take a stake of 19.99 per cent in the Reit on admission, acting as a cornerstone investor. Jefferies is acting as sole sponsor, global coordinator, bookrunner and financial adviser on the deal.