K&C REIT hopes for transformation – tiny K&C REIT has big ambitions. It plans to consolidate its shares on a 10×1 basis and issue up to £150m shares at 100p to fund the acquisition of portfolios of residential property. It hopes to top up the £150m equity issue with £100m of debt. Duncan Walker, previously investment director at Helical Plc, will be appointed as an additional non-executive director of the company when the new shares are admitted to trading. In due course, the company intends to apply for the admission of its ordinary shares to the premium segment of the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange. They also plan to change their name to KCR Residential REIT plc
The net proceeds of the offer, alongside its proposed debt facilities, will be used to fund the acquisition of portfolios of residential property in the private rented sector, to repay all existing debt of GBP4.075 million plus accrued interest and to provide working capital.
They set out the rationale for this move: “UK private rented sector now comprises 18 per cent. of the housing stock with a market value of GBP1.3 trillion, having grown significantly over the last 20 years. However, at present only two per cent. of this market is professionally owned and managed with the majority of growth having come from private “buy-to-let” investors. Various initiatives have been made in recent years to encourage professional investors to acquire private rented sector assets and the Directors and Proposed Director believe that the UK is currently witnessing the beginning of the institutionalisation of the sector.
The Company’s management team has a track record of successfully sourcing, financing, improving, letting and managing properties to create sizeable rented property portfolios with attractive, sustainable and growing cash-flows. The Group aims to take advantage of growth in the private rented sector to build its portfolio, enhancing yield and increasing net asset value through active asset management. The Directors and Proposed Director believe that this will allow the Company to provide Shareholders with an attractive level of dividend income. Based on their analysis of the REIT sector, The Directors and Proposed Director believe there are currently no other REITs prioritising the acquisition of property-holding SPVs in the UK private rented sector.
The Company will target SPVs with unrealised capital gains where REIT status can confer a commercial advantage to the Company. A capital gain which accrues to a REIT in respect of a property that is used for a Qualifying Property Rental Business, including gains already accrued at the point of acquisition of that property, is exempt from corporation tax. Therefore, a REIT can acquire a rental property and on the subsequent disposal of that property, there will not be a liability to corporation tax on any gain realised on that disposal.”
KCR : K&C REIT hopes for transformation