London residential property fund K&C Reit floats on AIM with special purposes in mind

K&C REIT, the first residential real estate investment trust focused on Central London, began trading on AIM on Friday after a £3.6m fundraising.

The company, which is chaired by former Sportingbet boss Nigel Payne, has simultaneously agreed the acquisition a block of 10 studio apartments in Chelsea for a consideration of £3.6m.

K&C's stated objective is to build a substantial residential property portfolio within a "favourable tax structure".

K&C's chief executive Tim James, co-founder director of AIM-listed activist investor Albany Capital and of property company Gander Holdings that was sold in 1999, explained: "Our intention is to provide investors with an opportunity to gain exposure to the Central London residential property market, one of the most resilient sectors of the UK housing market over the past few decades and, to that end, we have identified, and have letters of intent in place, for properties worth in excess of £40 million. We know that the opportunity is there."

The REIT's experienced board of directors have their eyes on potential acquisitions of several tax-efficient residential property special purpose vehicles (SPVs) that offer inherent capital gains and, they think, will add value to the portfolio post-acquisition.

According to the company's admission document, management believe that they will be able to unlock value from an SPV "by negotiating an attractive acquisition price through sharing with a vendor in economic terms the additional value that a REIT Group may derive by virtue of its status as a REIT. The resultant lower entry cost will enhance the initial yield when compared
with an acquisition of an SPV by a non-REIT."

K&C has identified suitable acquisition targets and has non-binding letters of intent are in place for opportunities of over £40m in total.

"As a REIT, we will have the ability to purchase properties at a discount to market value and will look to increase value through active asset management, aiming to generate growth in capital values and rental yields," James said.

He added that K&C would be attractive for SPV property owners by providing an exit strategy and for investors by offering attractive yields.