259: HBOS to pioneer residential REITs
Navigation trail: / latestnews / archive / 259 - published: 15-01-07
BANKING giant HBOS is expected to play a pioneering role in the launch of the first UK listed residential real estate investment trust (REIT) through its majority stake in Invista, the property fund management business.
Invista, which was spun off by the Edinburgh-based group last year, is understood to be preparing to float a portfolio of about 2,000 residential houses and flats on the main London market this year.
It is understood the value of this collection of properties, which are mainly in London and the south-east of England, will be about £500 million - on the back of the boom in prices that has been enjoyed over the past five years.
The news comes two weeks after legislation came into force making it easier for investors to put their money into both residential and commercial property in Britain.
A string of listed companies that are primarily involved in the booming commercial property sector, including Land Securities and Slough Estates, have already converted to REIT status - but Invista will be the first residential offering to be launched.
A spokesman for HBOS declined to comment, while no-one was available at Invista, but according to weekend reports, the idea is to give investors access to real estate returns from residential property, with the transparency and liquidity they are used to in other asset classes, such as equities and bonds.
Invista has a total of just under £9 billion of assets under management. The business, which manages both commercial and residential property across the UK and continental Europe, currently looks after 16 funds. Last month it listed the first pan-European REIT on the London market and its senior executives are understood to be convinced that now is the time to launch a UK residential product.
However, a string of leading financial advisers raised a number of concerns about the plan last night and warned that only a select group of people would find such a product suitable for their investment needs.
Darius McDermott, managing director of Chelsea Financial Services, believes investors need to understand exactly what they are buying - and points out that many people already have exposure to the residential market as homeowners. "We don't want everyone thinking that REITs are the best things since sliced bread and investing all of their money into the asset class," he said. "They need to make sure the portfolio is balanced and that each investment suits their particular requirements."
Unlike commercial property, where a lot of the yield will come from rental income, observers say a residential REIT will be more reliant on house prices rising strongly over the coming years.
Mandy Bradley, director of Propertyforecasts.co.uk, which uses a Land Registry data and economic factors to predict house price movements, believes average values will continue to rise in 2007 but warns the increases will not be anywhere near the 30 per cent seen at the height of the property boom a few years ago. "We are still forecasting average house price growth of between 6 and 7 per cent for the coming year," she said.
Source:
Scotsman.com