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London & Stamford, the property company run by industry veterans Raymond Mould and Patrick Vaughan, is launching a £200m fund to cash in on demand for rented property in London.
The fund, which London & Stamford will jointly own with Green Park, its Middle Eastern partner, and an unnamed third party, is expected to form the basis for a residential Real Estate Investment Trust (Reit).
London & Stamford, which already owns 266 flats in Highbury, Battersea and Oval, 96 per cent of which are fully let, is one of a number of property companies lobbying the government to adapt legislation to facilitate the creation of residential Reits.
The company said it would not target the prime residential market – the top 5 per cent by value – which has attracted interest from a raft of funds during the past year.
“We are not targeting all the foreign wealth coming into London, but ordinary people who have not got money for a deposit to buy a home but need to be in the capital,” said Patrick Vaughan, London & Stamford’s chief executive.
Mr Vaughan also confirmed the company, which has a £900m gross cash, was likely to complete £300m worth of commercial property acquisitions during the next three weeks.
For the 12 months to March 31, the company posted a slight decline in net asset value, falling from 122.5p a year earlier to 119.1p. London & Stamford paid a final dividend of 3.5p, taking the total for the year to 7p, an 11 per cent increase on last year.
Shares in the company rose 1.45p to 107.15p in.
● FT Comment
Messrs Mould and Vaughan’s property-buying credentials are unimpeachable. Both have established a reputation for making canny investments in a sector that punishes harshly those who buy badly. This track record of making good deals coupled with a large amount of financial firepower looks exciting. However, investors are in little mood for excitement. The market is hesitant to put money behind anything which is going into unfamiliar territory, such as an institutional residential rental portfolio. Instead, most investors choose to play it safe by backing the larger Reits, whose risk-averse outlook mirrors their own. As a consequence shares in London & Stamford have endured a tough year, down 21 per cent and lagging the sector by 9 per cent. Even factoring in the relative risk, this looks too cheap.