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Impact Reit pulls £150m share issue as Brexit toll mounts

30 November 2018

The Brexit uncertainty plaguing real estate investment trusts (Reit) underlined by decision of care home investor Impact Healthcare to postpone £150 million fund raise.

The Brexit uncertainty plaguing the real estate investment trust (Reit) market was underlined today with Impact Healthcare Reit (IHR ) postponing a £150 million share issue.

Volatile stock markets and doubts over real estate valuations have already de-railed the flotation plans of a number of specialist property funds, most recently Multi-Family Housing Reit, which shelved its initial public share offer (IPO) last month.

However, this is thought to be the first time a Reit has delayed a fund raise, a setback for a £17 billion listed UK property fund sector that has grown rapidly in the low interest rate era of the past 10 years.

Impact, one of the alternative real estate newbies, last month announced it had deployed nearly all the £240 million of equity and debt raised since coming to market in March last year.

It said it wanted to raise a further £150 million to buy a portfolio of UK care homes with over 2,500 beds to boost its total to 5,851 and increase its annual rent roll by around £12 million to £28 million.

Today it said it had decided not to exchange contracts on the acquisition in 2018 and would not proceed with the share issue.

‘The company remains in discussions with the vendors of the target portfolio and of other attractive investment opportunities and expects to raise equity capital in 2019,’ it stated.

‘The company and its investment adviser will continue to exercise robust capital discipline to deliver value at the point of acquisition or investment,’ it added.

The announcement came amid further falls in UK markets in part due to the political turmoil over prime minister Theresa May's Brexit deal with Brussels. The FTSE 100 traded 52 points or 0.75% down at 6,986 and the pound was 0.25% softer against the dollar at $1.2761.

Intu Properties (INTUP), the shopping centre owner which yesterday shocked investors with plans to cut its dividend after the collapse of takeover talks with a consortium, slipped another 1% on top of its 38% plunge on Thursday.

Sam Murphy, investment trust analyst at Numis Securities, said he was not surprised to see Impact delay the issue given its shares closed at 102.5p yesterday, only fractionally above its last official net asset value (NAV) per share of 102.3p on 30 September.

Investors only like trusts to issue shares when their share price stands at a meaningful premium over NAV to ensure the new equity boosts, rather than dilutes, the value of their holdings.

Bearing this out Impact shares added half a penny to 103p after the announcement.

The postponement will be frustrating for Impact as rival Target Healthcare Reit (THRL) raised £50 million in an over-subscribed share placing last month. It originally sought £40 million to help fund a £79 million pipeline of new investments.

The wider closed-end fund sector - still marvelling at last month's record £822 million launch by Smithson (SSON) investment trust - continues to raise money, however, albeit in more modest amounts.

Yesterday BB Healthcare (BBH) announced it had raised £45.4 million after expenses in a fund-raising aimed at exploiting buying opportunities thrown up by the sharp falls in smaller healthcare stocks in last month’s ‘Red October’. The £490 million trust, which launched in December 2016, had targeted £131 million.

Similarly, TwentyFour Income Fund (TFIF) raised £23 million in the share placing it opened on Monday to exploit what the £462 million company said were mis-pricings in the high-yielding asset-backed bonds it buys.

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