Fund manager giants buy into property IPO

Highly-regarded UK fund managers Mark Lyttleton, Tony Nutt and Martin Gray have taken a stake in new property vehicle LXB Retail Properties.

Admitted to the stock exchange on 23 October, the Jersey incorporated closed-ended real estate raised £110m at the IPO stage and plans to invest in ‘out-of-town' retail property assets.

Lyttleton's BlackRock UK Absolute Alpha fund has 8.41% of the company's issued share capital. The manager has similar positions in property ventures Hansteen Holdings and Max Property.

"I bought a lot of the larger property groups during the refinancing in February and March, but as they have got re-rated I have moved out to some degree in the smaller companies," Lyttleton says.

"To invest in these kinds of things, you have to be confident in the skill set of the managers to identify the properties and deal with issues such as development and re-lettings.

"The managers of these vehicles have been around for a long time and have experience in distressed property markets and working through the cycle."

LXB founder Tim Walton is the CEO of the new group, which will be chaired by Phil Wrigley.

Walton has a strong background in the space, selling his first LXB portfolio for £360m to Land Securities in 2005 and a year later offloading £425m of assets to Hammerson.

Jupiter's Tony Nutt, a manager who had a major influence in the property market in the past, has bought 9.1% of the company. LXB is currently the only property investment in his £2.96bn Jupiter Income fund.

Meanwhile, Martin Gray has allocated about 2% of his £308m CF Miton Special Situations portfolio to the company.

"I have not bought any new property positions since March, and have been keeping my eyes open for opportunities such as this," he says.

"The people in charge are very experienced and have been very successful in the past."

Other external investors in LXB Retail Properties include Morgan Stanley Investment Management, Lloyds Banking Group and Brown Brothers Harriman.

LXB Retail Properties intends to have 10 to 15 property assets when fully invested and could use co-investment structures or joint venture partners for large-scale opportunities.

The managers are targeting the food-led multi-sector retailers, where businesses are not generally burdened by onerous legacy leases, providing significant competitive advantage.

LXB Retail Properties plc is likely to have a maximum loan to value of 75% of the gross asset value, but it is the directors' current intention to have no more than 50%-60% LTV in the current economic environment.