The article originally appeared in Australian Financial Review.
Property fund manager Real Asset Management is pitching for $356.9 million at $1 a security for its maiden real estate investment trust float.
RAM’s brokers have confidentially kicked off cornerstone meetings this week, telling potential investors the new RAM Essential Services Property Fund would own 33 properties on listing and pay a 5.7 per cent distribution yield based on FY22 forecasts.
The property portfolio, which would include sites leased to private hospitals group Healthecare and supermarket chains Woolworths and Coles, would be worth $706.3 million, according to an independent valuation as at the end of August.
The portfolio would have a 7.1 year weighted average lease expiry, 99.1 per cent occupancy and 5.85 per cent weighted average capitalisation rate, according to details in front of potential investors.
Investors are likely to compare it to the already listed HealthCo and HomeCo Daily Needs REIT, which are trading on about 3.9 per cent and 4.8 per cent yields, respectively, and own similar sorts of properties.
Funds raised from RAM’s IPO would be used to repay some existing investors ($150.2 million), acquire additional properties ($122 million), pay transaction costs ($24.5 million) and repay existing bank debt ($60.2 million).
Credit Suisse and UBS are expected to underwrite the offer. The prospectus is expected to be lodged with the corporate regulator at the end of this month. Ord Minnett and E&P Corporate Advisory are joint lead managers.
If successful, the fund would trade on the ASX from October 25. It would be managed by RAM Property Funds Management Ltd.
The fund would have a $521.1 million market capitalisation at the offer price. It would be overseen by proposed independent chairman Greg Miles, the former chief operating officer at Scentre Group, and managed by RAM’s Scott Wehl, Scott Kelly, William Gray and others.
The new listed fund’s expected to be backed by a new $250 million syndicated debt facility.