Brandeaux Student Accommodation Fund – Initial Public Offering

Property fund provider Brandeaux have just confirmed that they will seek to list the suspended £1.1bn Brandeaux Student Accommodation fund on the London Stock exchange to raise liquidity to repay investors wishing to exit. To read some further background on this story please see our previous posts from July 2013 and January 2014.

An announcement to the London Stock Exchange states that the fund will go through an initial public offering (IPO) and be acquired by Liberty Living, who are owned by Brandeaux.

The statement reads that “the global offer will allow the fund, which is currently an open-ended investment company, to create liquidity for its shareholders who want to redeem their investment and provide a structure to facilitate future redemptions.”

The investment will be restructured as a Real Estate Investment Trust (REIT) which should be more suited to the holding of illiquid underlying assets than the current open-ended fund structure being used. Shares in a REIT are bought and sold through the stock exchange and will look to match buyers with sellers, rather than aiming to create liquidity by holding large amounts of cash or selling underlying assets.

Liberty Living and Scape Sydney are currently in charge of the ongoing day-to-day management of the Brandeaux student accommodation portfolio. The acquisition of the fund through the IPO will give Liberty Living ownership of the portfolio of 16,827 rooms for the 2013/14 academic year, spread across 42 residences in 17 UK towns and cities.

Liberty Living executive chairman Roger Boyland was quoted as saying that “Liberty Living offers investors access to an established and proven income-oriented student accommodation business. It operates in a market which benefits from attractive fundamentals, including an ongoing supply and demand imbalance, and limited correlation with economic cycles.”

As we have focused on before there is always a risk of holding illiquid property assets within an open-ended fund structure and this, coupled with the restrictions implemented by PS13/03 on the promotion and sale of UCIS to ordinary retail investors, led to the liquidity issues seen with the fund.

This should hopefully be a positive step forward for the fund and lead to a satisfactory end to the fiasco for investors.

All the best,

Luke