SWIP Airport Industrial fund lands £113m of fresh equity

Scottish Widows Investment Partnership has raised £113.5m of equity for the Airport Industrial Property Unit Trust at a small premium to net asset value. It is the second large capital raising for an existing specialist fund in the past two months, following Unite’s £167m capital raising for the Unite UK Student Accommodation Fund. SWIP investment director Nick Ireland said the Airport Industrial PUT issue was 30% oversubscribed.

Thirteen of the fund’s existing 25 investors subscribed, plus 20 new investors, taking the vehicle’s total number of investors to 45. Ireland said the unit price to investors was a “decent single figure” premium. At the end of last year £75m of the money was drawn down and will be used to pay debt in the short term. The undrawn £38.5m has been earmarked for acquisitions this year. The payment will cut the fund’s gearing to about 35%,comfortably within the 30%- 50% target level.

Like many funds, Airport Industrial PUT increased its gearing sharply in 2008 and the first half of 2009, which had an adverse impact on performance. In early 2009 the fund agreed with its lender Lloyds Banking Group to raise its LTV covenant to 70% when its gearing neared the previous 60% limit.

Investors agreed to suspend distributions for three quarters to allow them to be reinvested to cut gearing. Distributions restarted in Q4. “The gearing was coming back into line as values started to improve,” Ireland said. “The equity raising speeded up the process and give us firepower.”

The fund invests in property within five miles of major airports and over 90% of its portfolio is around Heathrow. Following the equity raising and a big jump in values in Q4, Airport Industrial PUT’s net asset value rose from £140m in September to £240m in December. Its gross asset value is £340m.

“We were very pleased to be able to do a capital raising in Q4 2009,” Ireland said. “Not many people were raising for positive reasons then.” Jones Lang LaSalle Corporate Finance advised SWIP.