Aviva Investors plans to raise £200m (€227m) by floating a long-income real estate fund on the London Stock Exchange.
The investment manager, which manages £4bn in long-lease real estate strategies, said it will launch an initial public offering next month for Aviva Investors Secure Income REIT.
Insurer and parent company Aviva will make a direct investment to own 19.99% of shares placed.
Aviva Investors already manages the Lime Property Fund, a £2bn unlisted long-lease fund, which last week acquired a portfolio of care homes for £71m.
Renos Booth, head of real estate long income at Aviva Investors, said: “The current environment of low-interest rates and rising inflation is particularly favourable for long-income real estate investments.
“Our strategy aims to provide a compelling risk-return profile that offers secure income as well as lower volatility and lower capital value risk compared to traditional real estate investments, which we have a strong track record of delivering through investing in secure and long income real estate.”
Aviva Investors UK Fund Services will act as the company’s alternative investment fund manager. The investment manager will delegate portfolio management to Aviva Investors Global Services.
The company said it will invest in a diversified portfolio of high quality, long-lease commercial real estate assets located within the UK and leased to predominantly investment-grade tenants, typically with a minimum lease length of 10 years and will target a weighted-average lease length of 15 years.
Tenant credit quality is essential to providing security of income in a long lease strategy, Booth said, adding that “our focus will be to acquire high quality buildings leased to predominantly investment-grade tenants, because sub-investment-grade tenants have a higher probability of defaulting on their rental obligations and properties let to them exhibit greater capital value volatility over time.”
“Furthermore, we will pursue leases typically with inflation-protected rent reviews with a view to achieving our aim of delivering stable and predictable cash flows for investors over the long term.”
Aviva Investors is the largest manager of UK commercial real estate with £24bn under management as at 30 September.