Property Companies Flock to Britain in Record Year

More real estate companies listed their shares for trading in the U.K. during 2005 than in the previous seven years combined as they raised almost 2 billion pounds ($3.5 billion) to take advantage of investor appetite for property.

At least 20 real estate companies went public on the London Stock Exchange or the Alternative Investment Market, compared with 19 between 1998 and 2004, according to Bloomberg data. The Ottoman Fund (OTM) Ltd. closed 6.5 percent higher at 106.5 pence in its London debut today, after raising 150 million pounds from institutional investors to invest in Turkish residential property.

Britain is Europe's largest commercial property investment market and the London exchange is the easiest for new companies to raise money. Fourteen of the 20 new companies don't do business in the U.K., half operate in former communist Europe, and seven are from Bulgaria, where talks on European Union membership in 2007 have helped fuel house prices. None is covered by analysts.

``The danger of these stocks is that if you are trading in the dark the pricing won't be perfect,'' JPMorgan Chase & Co. London-based analyst Harm Meijer, who doesn't cover any of the new real estate companies, said in an interview. ``I am surprised how much money they have managed to get into their hands this year.''

Shares of all but two of the new real estate companies have climbed since their initial public offerings. The best performer has been Property Recycling Group Plc, based in Norwich, eastern England, which regenerates previously used sites. Its stock has gained 31 percent since the shares were sold to investors in June.

AIM

Property Recycling was among 318 companies that listed on AIM this year through Dec. 16 and raised 5.2 billion pounds in share sales, according to a statement from the London Stock Exchange last week. Fourteen real estate companies accounted for a quarter of the total raised, according to Bloomberg data.

The property-related figures exclude 166 million pounds raised since then by Ottoman and China Real Estate Opportunities Ltd.

Ely Property Group Plc, a Dublin-based business that owns student accommodation, was the only company that didn't raise new capital when its shares became publicly traded for the first time.

On the main market, 77 companies raised 9.7 billion pounds in IPOs, the exchange said. Three property-related companies and closed end funds raised 454 million pounds.

There are 91 real estate companies and closed end funds listed in London, with 24 joining the two markets in the last two years.

`Irrational Exuberance'

None of the companies listing for the first time this year initially offered shares to individual investors, preferring to place stock with institutions, such as pension funds and insurers. Some investors are still concerned that the companies aren't covered by analysts and the stocks don't trade frequently enough.

Standard Life Investments, Scotland's largest money manager, has only bought shares in Hansteen Plc, which invests in industrial property in Europe. The stock has risen 23 percent since it started trading Nov. 29.

``We have been cautious for quite a few months on quoted property companies and we have been wrong,'' said Harry Nimmo, who oversees about 1 billion pounds as head of smaller companies at Edinburgh-based Standard Life. ``It has not quite got to the bubble stage, but there are definitely signs of irrational exuberance.''

To contact the reporter for this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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