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Brandeaux pulls Liberty Living IPO

Investors in the gated Brandeaux Student Accommodation Fund still have no idea how they will get their money back
July 2, 2014

Liberty Living has pulled its flotation. Irish fund manager Brandeaux last month laid out plans to take its £1.1bn open-ended student accommodation fund public under the Liberty Living brand, and thus providing a way to release value for disgruntled investors. But, citing “adverse market conditions”, the company has shelved the plans.

The fund, which has been closed to redemptions for the past year, will “continue to consider all options for creating liquidity for its shareholders”, said the company in a brief update. The simplest of these is to sell properties, as Brandeaux has done to meet similar redemption requests at its Ground Rent Income fund. The market for purpose-built student accommodation is reasonably new – the asset class was only born in the 1990s. But the sale of the overleveraged £1bn Opal portfolio last year, to major institutional investors from the US and Australia, suggests it is nonetheless healthy.

Brandeaux has so far been reluctant to sell student-housing assets, stoking suspicions they are overvalued on its books. According to one individual close to the IPO plan, the property valuations had – unusually – included a portfolio premium, reflecting an assumption they were worth more together than individually. The valuers, Savills (SVS), have since concluded this premium was inappropriate. That partly explains why the IPO plan would have involved an 11 per cent write-down on the fund’s book value (fees and the purchase of the management company were other factors).

Liberty Living is not the only company to have pulled a flotation in recent weeks – budget airline Wizz Air and retailer Fat Face have made similar u-turns. But overall IPO volumes remain strong, suggesting these are isolated cases. And companies continue to post 'intention to float' documents. The latest is from Urban Exposure, a shell that wants to raise £500m to lend to housing developers in London and the South East.