Boost for housebuilders and real estate firms
Help to Buy extended and two opportunities to back property investors’ plans
The real estate space is grabbing investors’ attention once again. Shares in housebuilders are marching higher on the promise of further state support for the sector and two real estate investment trusts (REITs) have announced substantial fundraising plans.
Among the key early takeaways from the Conservatives’ annual conference in Manchester was a £10bn extension to the ‘Help to Buy’ programme as the party looks to win over younger voters who are increasingly gravitating towards Labour.
FAVOURED HOUSEBUILDER IS A BIG WINNER We wrote about affordable homes specialist MJ Gleeson (GLE) in last week’s issue of Shares (28 Sep 2017), noting two thirds of its customer base made use of Help to Buy. It is seen to be one of the biggest beneficiaries of the scheme extension.
Social housing investor Civitas Social Housing (CSH) has announced plans (28 Sep) to raise £350m to help it take advantage of an identified £500m investment pipeline in its space.
The investment trust is focused on providing accommodation for individuals with specific needs, such as those with disabilities or which are coming out of prison. This is Civitas’ first fundraise since a £350m oversubscribed IPO (initial public offering) last November.
To avoid the value of its existing portfolio being diluted the investment trust is raising the money through the issue of C shares which will receive a fixed quarterly dividend of 3% a year. The C shares will convert to ordinary shares after a year or when 90% of the proceeds have been invested. A prospectus for the new issue is expected in mid-October.
A more modest sum is being raised by real estate investment trust AEW UK REIT (AEWU) which has already published a prospectus on its £40m-to-£60m issue (28 Sep).
The REIT invests in a range of commercial properties from industrial units to offices and shops. The focus is on properties in areas with good supply and demand dynamics, typically with tenants on shorter than average leases. Portfolio manager Alex Short says there is a ‘big pipeline of potential assets’. She adds more limited direct competition in this part of the market means it is not too difficult to find opportunities offering sufficiently generous yields to underpin a promised yield from the REIT of 8%. (TS)