Urban renewal, sometimes referred to as urban regeneration or revitalisation, usually refers to the process of land redevelopment in areas of high-density urban land use. The upcoming IPO of URB Investments offers investors the opportunity to invest in assets that are exposed to this trend.
URB Investments aims to raise up to $300 million and intends to build a portfolio consisting of equity and direct property assets, with the equity portfolio to make up at least 50 per cent of the entire portfolio. The investment management portfolio will be managed by Contact Asset Management, manager of BKI Investment Company (BKI), the LIC linked with Tom Milner.
One of Australia’s oldest and most respected investment firms, Washington H. Soul Pattinson, has entered into a co-investment agreement to invest in direct property assets on an equal basis alongside URB. In addition, Soul Pattinson has committed to subscribe to at least 10 per cent of the offer. The fund is backed by experienced players in the industry and shareholders of both BKI and WHSP will receive a priority allocation. URB’s investment portfolio manager, Contact Asset, has a strong track record of income distribution and long-term value creation. URB targets the distribution of fully franked dividends with a payout ratio of 50-70 per cent of net operating profits.
Primary risks include general equity and property market trends as well as a concentration risk of the fund. In addition, the fund launches at a time that could represent a cyclical peak for equity and property markets and a downturn may affect the value of the investment portfolio and the company’s ability to distribute dividends.
URB offers an attractive mix of capital growth and income for investors seeking exposure to the equities and property market outside the banking and mining sectors. Risks should not be overlooked, but Contact Asset Management has previously demonstrated its ability to deliver long-term shareholder value throughout various stages of the investment cycle.
Simon Herrmann is an analyst at wise-owl.com.
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