A trio of long-time London property investors plan to raise up to £200m in a stock market listing to cash in on their expectations of a crash in the UK commercial property market.
London & Stamford Property, a Guernsey-based investment vehicle founded by Raymond Mould, Patrick Vaughn, and Humphrey Price, kicked off a roadshow yesterday to drum up interest among City investors for the float.
The executive team founded and sold Pillar Property to British Land for £811m in 2005. Before that they ran Arlington Securities.
Mr Mould, the company's chairman, said the proposed listing was timed to give it a pool of capital on which to draw for properties that were "on the threshold of a correction in values." The expected downturn will create "excellent opportunities" to swoop on distressed assets or forced sellers, he added.
The offering, to be handled by KBC Peel Hunt, will be anchored by an £18m investment from the General Electric Pension Trust. None of the founders will sell stock.
Companies including British Land and Savills have warned recently that UK commercial property, already hit by a drop in rental income yields, were further dented by the meltdown in the credit markets.
Mark Dampier, investment director at the stockbroker Hargreaves Landsown, said it was a good time to raise such a fund. "The commercial property market has generated fantastic returns for the last three of four years, of 18 to 20 per cent per annum. A return to normality would mean a drop of up to 10 per cent," he said.
"The momentum has gone out of it. A lot of [high returns] were driven by cheap credit. But after the credit crunch, why would anybody borrow money at 6.5 or 7 per cent to buy a property that yields 4 per cent? The numbers don't add up."
The industry researcher IPD said that "the UK commercial property cycle is in its hangover phase" as it revealed a drop in September commercial property returns of 1.2 per cent.
London & Stamford said it would not restrict its activity the UK. "The board believes that rising cost of capital and low property yields will bring about a marked correction in values to return to a more normal yield/capital cost relationship.... All sectors of the UK commercial property market and overseas will be considered."Reuse content