By Adam Lewis Aberdeen has launched yet another split cap investment trust, this time a £804m por...
By Adam Lewis
Aberdeen has launched yet another split cap investment trust, this time a £804m portfolio buying into the UK and Irish property markets.
The Real Estate Opportunities trust will consist of £111m in an existing property portfolio run by Jermyn Investment Properties and invested in the UK. It will also have £283m in Castle Market Holdings, which is invested in the Irish market. In addition Aberdeen is seeking to raise a further £84m from institutions to put into property investments and aims to put up to £326m from the placing and bank debt in a portfolio of high yield bonds and securities.
The structure of the portfolio will be between £275m and £300m in ordinary shares. Of these Aberdeen is looking to raise up to £140m from the placing with the remainder going to shareholders in Jermyn and Castle Market.
In addition the trust will have some £75m in zero dividend preference shares, all of which is being raised in the placing, and £100m-£125m in 7.5% convertible unsecured loan stock. After 10 years this can all be turned into ordinary shares. Of this up to £38m will be raised via the placing.
The portfolio will also have up to £347m in bank debt, equivalent to a gearing level of 42%.
Piers Currie, investment trust marketing director at Aberdeen, said the overall portfolio yield will be 6.8%, equivalent to a yield on the ordinary shares, which includes gearing, of 8.8%. The hurdle rate on the ordinaries is 4.2%pa.
The overall asset allocation of the vehicle will be 40.6% in corporate and high yield bonds, with 35.2% in Irish property, 13.8% in the existing Jermyn UK property portfolio and a further 10.4% in new property investments. Currie said the Irish property market in particular had shown strong returns with the Irish property index averaging 28.2%pa growth since 1994 with Castle Market Holdings making a return on equity of 74.1%pa over the same period.
Real Estate Opportunities, a closed end company incorporated in Jersey, will have an initial life of 10 years. Aberdeen will run the Jermyn portfolio and all new properties acquired by the trust while Treasury Holdings, which has so far managed the Castle Market portfolio, will continue to run the Irish investments. Chris Fishwick and Paul Reed from Aberdeen will be in charge of the high yield bond element of the trust.
Currie said the trust gave property investors exposure to split cap paper while offering institutional investors seeking income through splits a chance to diversify their exposure into property. He added the zeroes could prove attractive to intermediaries, who should contact UBS Warburg for more information.
The initial front-end load for the trust will be 2.25%, with an annual management fee of 1.5%. There will also be a performance fee, the structure of which has not yet been decided.
Investment Week also understands that BC Asset Management is looking at launching a property split-cap, and Jupiter is planning a split-cap aimed at the institutional market. The move into the property market follows that of the First Housing Trust, managed by the Solitaire group, that closes for placement on 18 May 2001. The trust, brokered by Williams de Broe, is still presenting to institutions, having to raise £32.6m, with £22m going into income shares and £10.6m in capital shares.
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