Some of this will come in dividends of 3p per share in its first year, rising to 6p in year two.
“When the real estate market comes back, it can come back quite quickly,” Mr Lee predicted.
The glut of commercial properties being sold on attractive average 8pc yields is a consequence of the chaotic Liz Truss premiership in 2022.
Then-chancellor Kwasi Kwarteng’s uncosted tax cuts became notorious for hurting pension schemes that borrowed money against UK government bonds or gilts.
However, the plunge in gilt prices following his September “mini-Budget” helped other “defined benefit” or final salary schemes by lowering the cost of their financial commitments to current and future pensioners.
As their assets began to exceed liabilities, these pension plans moved into surplus, enabling companies to get them off their books and sell them to insurers.
Around £50bn of scheme assets have been sold in such “buyouts” in the past two years, a number that pension consultant Lane, Clark and Peacock forecasts will soar to £360bn in the next five years.
While happy to take on the pension liabilities, insurers are less keen on the commercial properties that make up to 10pc of scheme assets.
Regulations require them to put aside 40pc of their value in reserves. To avoid this, they are selling properties or stakes in real estate funds, thus providing Mr Lee with a £2.8bn pipeline of potential investments that leaves him confident of deploying shareholders’ money in six months.
Most Reits are unable to exploit this because they can’t raise money issuing new shares while they stand on wide discounts.
Mr Lee’s “sweet spot” lies in £150m to £300m portfolios of properties covering warehouses, student accommodation, budget hotels and retail parks, where tenant demand and rental growth is strong as the UK exits a shallow recession.
If all goes to plan, Mr Lee, his team and biggest investors should make a lot of money, taking 20pc of all annual returns above 10pc.
The important point for prospective shareholders is these gains only crystallise once the trust reaches the end of its intended seven-year term and they have been paid out.
TR Property fund manager Marcus Phayre-Mudge said: “We too often see external managers taking fees based on fictitiously high, historic asset values.
“Special Opportunities’ structure is the antithesis of this. The pay of its managers is instead bound to the cash returns they generate for shareholders.
“We need to see more of these ‘skin in the game’ structures in which managers suffer alongside shareholders when companies trade at deep discounts to asset values.”
In addition, the Reit aims to keep annual running costs low, use a sensible 25pc level of borrowing, while its board, led by experienced property investors Harry Hyman and Jamie Hopkins, is committed to buying back shares if they fall to a discount.
This is a well-timed and well-structured fund.
Questor says: buy
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Gavin Lumsden is editor of Citywire’s Investment Trust Insider website.
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