REIT pulls IPO after falling short of fundraising target

The internally managed REIT announced on Wednesday that despite “strong” investor demand, it failed to meet the £250 million minimum fundraising required for the public listing to proceed

Special Opportunities REIT has withdrawn its IPO after falling short of its minimum fundraising target, scuppering the first stock market listing of a UK real estate investment trust (REIT) in three years.

The internally managed REIT announced on Wednesday that despite “strong” investor demand, it failed to meet the £250 million minimum fundraising required for the public listing to proceed.

It said that management would now implement its strategy in the private markets instead.

Having considered their options, the board didn’t believe it would be in the best interests of investors to reduce the minimum fundraise below £250 million given the nature of the market opportunity and pipeline, it added.

Special Opportunities REIT, which was incorporated in January, said two weeks ago that it was targeting a fundraise of £500 million. This figure would have made it by far the biggest London IPO of the year.

Three cornerstone investors had made commitments totalling between £104 million and £119 million. The management team and non-executive directors had also pledged to invest £4 million in the initial public offering (IPO) to show their commitment.

The REIT said it would focus on high-quality but under-managed UK commercial property assets such as student accommodation, retail parks and budget hotels.

It had targeted a minimum return of between 12% and 15% every year, adding that it had the potential to deliver over 20% per year.

The appetite for investment trusts has fallen to the lowest level in more than a decade, leading to a lack of new initial public offerings on the market.

The only trusts to float last year were the Onward Opportunities Trust and Ashoka Whiteoak Emerging Markets, which is currently attempting to merge with the much larger Asia Dragon trust.

A survey conducted by investment trust specialist Winterflood in February found that only 5% of its clients were “very likely” to support investment trust IPOs and secondary placings this year.