In a deal that will see the creation of the UK’s 6th biggest publicly listed Property company, the UK Commercial Property Trust (UKCPT) successfully staked a takeover of F&C Commercial Property Trust (FCTP) in a deal worth £1.6 billion. This acquisition by UKCPT comes in the wake of its April sale of its 16.5% FCPT stake to Phoenix Group, the parent company of its manager, Ignis Asset Management Limited from key FTCP shareholder, Friends Provident.
Friends Provident and FTCP have a combined 50.3% stake in FCPT and agreed on the sale that is subject to confirmation after approval from the two trusts’ shareholders. UKCPT plans to offer new shares for every FCPT share in order for the investors to get the same net asset value (NAV) per share, having designed this new investment acquisition as a booster for investor pulling power to help the UK prevent another property slump.
However, a cash alternative of 91% is available per FCPT share, and would subsequently value the company at around £620 million, said a statement detailing the deal, written by FCPT. As at this announcement yesterday, FTCP shares were trading at a high of 1.1% at 92 pence, around 1040 GMT whereas shares in UKCPT were up 1.9% to trade at 78.35 pence by 0930 GMT.
Ignis Asset Management Limited has been appointed to manage the now enlarged trust. According to Ignis investment director (Property), Mr. Gary Hutcheson, the trust’s portfolios are an excellent strategic fit, with both bringing something to the party. Whereas UKCPT boasts longer lease lengths and a better income coupled with a covenant profile, FCPT on the other hand brings better London and South Eastern exposure coupled with enhanced potential for short term performance, said Hutcheson.
With this increased market capitalization, both trusts have been ushered into new territory with regard to investor and broker perception, and it also offers the enlarged trust an opportunity to tap bigger and more strategic assets in the market to build out the portfolio. This investment gives the combined portfolio a 60.5% weighting to London and the South East, and 27% of assets located in London’s West End business district.
As per sector basis, 51% would be weighted for retail, 36% for offices and 14% to industrial real estate, a close reflection of the weightings in the Investment Property Databank Benchmark Index. The increased market capitalization is expected to improve liquidity for investors and as well improve the enlarged trust’s access to debt, courtesy of UKCPT’s higher cash reserves.
June 12, 2010.