UK – Investors have derailed plans by UK hotel group Vector Hospitality to become Europe’s first hotel real estate investment trust (REIT).
Vector was forced to abandon a planned flotation on the London Stock Exchange (LSE) last Thursday because of lacklustre demand among investors.
The cancellation occurred even though hours before Vector’s investment bankers had lowered the price range for the shares to between 875p and 900p from a previous 1115p to 900p.
Based on the latter range, Vector’s flotation would have raised between £2.02bn and £2.26bn, making it one of the biggest IPOs on the LSE this year, as well as enjoying tax-privileged REIT status once floated.
In a statement, Vector blamed the cancellation on "market conditions" but did not indicate whether it would reconsider a listing at a later date.
Vector owns 71 hotels of almost 11,000 rooms across the UK and includes major brands such as Marriott, Hilton, Thistle, Hotel du Vin and Malmaison.
News reports cited banking sources in London as saying that four asset managers – including Standard Life, Morely and Henderson – chose not to participate in the IPO because of concerns about Vector’s management structure.
Concerns are said to have centred on Vector chief executive Richard Balfour-Lynn’s position as head of an affiliate named Cameron Investment Management, which was set up to act as Vector’s external asset manager.
But a Vector spokesman dismissed the concerns and said the firm had put in place systems to deal with conflicts of interest.
"The Vector prospectus showed that we had implemented procedures which, in our view, mitigated or eliminated the effects of any potential conflicts," he said.
"These included the establishment of a conflicts committee on the Vector board as well as extensive processes within the investment management agreement," he added.
Despite this latest setback, Brian Lee, chief executive of Ogier Corporate Administration, a provider of offshore financial services, believes the prospects for a vibrant UK REIT market are good.
"Diversification away from traditional asset classes will continue and the overall benefit of investing in REITs, namely capital security and good dividend yields, will continue to play a role in the pension fund industry," said Lee.