This year has been notable for the absence of investment trusts IPOs, which makes the announcement of two on one day rather interesting.
First out of the blocks is the Sustainable Farmland Trust, which is seeking to raise £200m and invest in US agricultural land, followed by the Independent Living Reit, which is targeting £150m to address the shortage of supported housing in the UK. Both have their eyes on the London Stock Exchange’s main market.
The news comes weeks after Portfolio Adviser looked into the dearth of trust IPOs in 2022, as existing strategies struggle against hefty NAV discounts. Market conditions are not exactly conducive for companies to list with much fanfare.
At the time, Fairview Investing’s Ben Yearsley said: “It feels like it’s virtually impossible to launch a generalist trust – it feels like the generalist trust IPO market has been broken for many years with no fix in sight.”
That these two trusts invest in niche sectors could be why they have chosen to brave the challenging market. Their reception by investors, however, will be the true proof of the pudding.
Focus on agriculture
The Sustainable Farmland Trust’s investment manager has been named as US-based Intl Farming Investment Management, or IFC. Formed in 2009, it is entirely dedicated to agricultural asset management and holds over $2.2bn in AUM.
The trust will predominately invest in a portfolio of US farmland assets held in the IFC Core Farmland Fund, which is an existing private fund managed by IFC’s management team.
Its initial offer with be 200 million ordinary shares priced at £1 each. Once fully invested, the company is aiming for a net initial yield of 4.5% and a NAV total return of 7% to 9% per annum.
IFC expects the trust to benefit from four key transitional trends: ageing farmers, pressured farmer economics, industry consolidation and agronomic and technology improvements.
The company has been categorised as an Article 8 “light green” fund for the purposes of SFDR.
Andy Crossley, chair of The Sustainable Farmland Trust, commented: “We are delighted to be launching the first farmland-focused investment company listed on the London Stock Exchange. We believe that the company is perfectly positioned for the current inflationary environment, with outstanding risk-adjusted economic returns while also providing a sustainable and appropriately managed food source.
“We believe this unique and highly scalable asset class has enormous potential to provide long-term returns from a combination of both income and capital growth that historically outperform further in an inflationary environment.”
Charlie McNairy, CIO of IFC, added: “We are proud of our deep agricultural heritage and the track record we have built at IFC managing over 420,000 acres, with a technology-focused approach yielding both income and capital growth. Our proven track record of success has perfectly positioned us to launch The Sustainable Farmland Trust today at a highly opportune time in the sector.
“We believe that the long-term secular trends, rapidly changing farmer demographics and inflationary economic environment make this a particularly attractive asset class for investors seeking inflation protection and portfolio diversification.”
A spokesperson confirmed to Portfolio Adviser that there is no timetable yet for the publication of the prospectus or listing date.
Homeless and specialist supported accommodation
The Independent Living Reit, meanwhile, is to publish its prospectus today and expects admission to the LSE by 4 October. Although those dates are subject to change.
Atrato Partners is acting as investment adviser to the company, with RBC Europe the sole sponsor, broker and bookrunner.
The trust is targeting a dividend of 5p per share for the first two financial years following admission, and an annual total return of 7% to 10% over the medium term.
With the proceeds, it is seeking to address the shortage of high-quality supported housing. It will invest in a “diversified portfolio of fit-for-purpose supported housing assets which are let to compliant tenants”.
The three key housing subsectors it will target are specialist supported housing, extra care and homeless accommodation.
Fiona Miller Smith, chair of Independent Living Reit, said: “The number of vulnerable people relying on supported housing is set to significantly increase over the coming years, whilst the structural undersupply of appropriate accommodation remains. We aim to address this rising demand and limited supply by leasing affordable, dedicated housing to housing associations via a well-governed and compliant model.
“We have specifically designed Independent Living Reit following extensive dialogue with the regulator of social housing. Our model delivers a long-term, financially sustainable approach that benefits local authorities, residents and investors. By delivering safe housing for vulnerable members of the community, we will provide a clear and measurable impact to society.
“The company has a very strong management team backed by the successful Atrato Group platform and I am delighted to represent the company as chair.”
David Blakeborough, managing director of Atrato Partners, added: “Well-designed and appropriately priced supported housing delivers capital growth and inflation-linked income returns for investors, savings for the UK taxpayer, and improved outcomes for residents.
“Following our discussions with the regulator, we are excited to have built a model that will help address the significant shortage of high-quality supported housing in the United Kingdom.”