Dealing in 170m pounds Pillar to begin next month

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PILLAR Property Investments, the property group set up by the former directors of Arlington, Raymond Mould and Patrick Vaughan, is coming to the market at 150p a share, representing a discount to net asset value of 5.5 per cent and valuing the company at pounds 170m, writes John Willcock.

Pillar says institutions have over-subscribed the issue, and it is confident that there will be public interest in the 25 per cent clawback of shares available.

The company has a portfolio of 26 investment properties across Britain and recently agreed to buy a development property in Glasgow. The portfolio is valued at pounds 352m, with a net initial yield of 7 per cent.

The offer closes at 10 am on 5 August, dealings start on 15 August.

The portfolio is split between office blocks and retail developments. The average unexpired lease length is about 22 years. Pillar says rental income would exceed interest and administration costs until 2010 even if there were no rental growth and tenants left at the earliest opportunity.

Pillar wants to shift to longer- term borrowing. Its debt now matures at an average of 6.5 years, with the average cost of borrowing 8.2 per cent.

The company recently announced a joint venture to invest up to pounds 240m in shopping centres with refurbishment potential. It has also agreed to buy a 5.2 acre (2.1ha) development site in Glasgow's business district with 900,000sq ft (83,610sq m)for mainly office development.

Pillar has also bought the Bloomfield Centre in Bangor, County Down, Northern Ireland, which includes a branch of Marks and Spencer and 39 other shops.