Property group to seek pounds 170m flotation

Tom Stevenson
Sunday 03 July 1994 23:02

TWO of the most successful investors in the Eighties property boom are returning to the stock market with a pounds 170m flotation.

Raymond Mould and Patrick Vaughan, founders of Arlington Securities, the property company sold to British Aerospace at the top of the last property cycle, will today announce the flotation of Pillar, a company they set up in 1991.

With net assets of pounds 130m, and plans to raise up to pounds 50m of new money, Pillar will be one of the largest property flotations this year. Pricing of the issue is expected at the end of July with first dealings pencilled in for 15 August.

Having acquired all its properties since the onset of the slump, Pillar is in the unusual position of having few properties rented at more than the market rate.

One of its best acquisitions was the Tower Ramparts shopping centre in Ipswich, built by the Church Commissioners at a cost of pounds 35m but bought by Pillar for pounds 16m. The low cost of money at the time of the acquisitions and their high yields have given Pillar strong cash flow.

The founders claim that the possibility of rental growth, together with Pillar's financial strength, make the company stand out from the flood of other property investments the market has had to absorb so far this year.

Rising bond yields and the realisation that rental growth for the market as a whole would return more slowly than previously expected have held the property sector back and caused the withdrawal of at least one flotation.

Arlington, which with Electra and GE Capital was one of Pillar's initial shareholders, was founded in 1976 by Mr Vaughan and Mr Mould. They brought it to the stock market in 1986 with a market value of pounds 50m before selling out three years later to BAe for pounds 278m.

The timing of the deal was to prove an embarrassemnt to BAe. In 1990, Arlington lost almost pounds 19m following a decision not to sell its properties into the by then depressed market and BAe was forced to pump a further pounds 75m into the company.

The hope that they will be able to repeat that success with Pillar has already encouraged a Canadian property investor, Societe Immobiliere Trans-Quebec, to invest pounds 30m in a joint venture with the company which plans to spend pounds 250m on shopping centres.

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