Viva Energy REIT, the owner of a near $1.7 billion portfolio of petrol stations, will list on the stock exchange next month at $2.20 per share after local fund managers flocked to a cornerstone process, reinforcing the demand for defensive stocks in the wake of the Australian election deadlock and the shock Brexit vote.

As reported by this newspaper’s BusinessNow blog yesterday, large-scale investors in the freshly formed landlord committed to allocations at the peak of the valuation range, in a show of support that removes most of the risk behind a $900m-odd institutional bookbuild at the end of July.

Bank of America Merrill Lynch and Deutsche, the joint lead managers to the IPO, began a cornerstone process over the weekend and finalised the valuation yesterday evening.

The list of committed stakeholders spans large-scale domestic institutions, including BT Investment Management, AMP, Perpetual and Colonial First State, according to sources.

While Viva’s portfolio of 425 Coles-branded petrol stations was widely viewed as an attractive investment, the keen appetite from local investors underscores the demand for ‘‘safe harbour’’ assets amid the tumult unleashed by Britain’s unexpected vote to leave the European Union along with the renewed political limbo gripping the nation.

But the listed real estate sector’s fortunes have also been buoyed by a prolonged period of low borrowing costs, with relatively weak economic growth fuelling a surge in asset prices.

The comparatively strong yield on real estate, an asset viewed as relatively safe, has helped drive the sector to new highs recently and Viva’s offering has fed into that trend.

Deutsche analysts last week valued the new A-REIT — the biggest to join the ASX since the global financial crisis struck — at $1.5 billion to $1.7bn, reflecting a yield of 5.8 per cent to 5.2 per cent. It also equated to a price of 1.12-times to 1.25-times the net tangible asset value.

BAML’s analysts by contrast valued the landlord at a slightly lower $1.3bn to $1.7bn.

Extracted in full from The Australian.

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