LONDON-ING Real Estate Investment Management has become the latest in a string of fund managers to announce an initial public offering of a UK offshore property trust. The IPO will take place next month and comprise a mixed portfolio of commercial properties in Britain.
The portfolio, valued at about euro 727 million ($883.3 million) will comprise 40% offices, 30% retail and retail warehouses, 22% industrial and 8% leisure. The new company will have a target gross annualized dividend yield of 6.25%, according to an ING REIM statement.
"The launch of the company represents a significant strategic step for ING REIM UK," states Robert Houston, chairman and chief executive of ING REIM, "and will realize our long-standing ambition to create an income-focused real estate investment vehicle open to all investors." Dutch financial services giant ING has euro 37 billion ($45 billion) in property assets under management and is the world's second largest property fund manager after Deutsche Bank.
The IPO will swell the UK offshore quoted property trust sector to about euro 5.2 billion ($6.2 billion), and it joins a stream of recent listings including those by Teesland , F&C and Insight. The tax-efficient offshore status of trusts means they can tap into property's strong income yield from rents and deliver relatively high dividends to investors averaging between 5.4% to 6.3% compared to the average 2.3% yield of the UK's conventional property companies.
The offshore vehicles are being seen as a precursor to the introduction of REITs in the UK. Onshore REITs could be introduced into Britain in 2006 and are forecast to at least double the size of the quoted property sector over the next five years.
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