Property giants in £1.6bn merger

City A.M. Reporter
THE F&C Commercial Property Trust and UK Commercial Property Trust have agreed to merge, creating Britain's sixth largest listed property company worth around £1.6bn.

The tie-up, designed to boost investor pulling power as Britain fights to ward off a second property slump, will be effected by a solvent liquidation of FCPT, the issue of new ordinary shares by UKCPT and the offer of a cash alternative of 91 pence for each FCPT share.

Ignis, the manager of the UKCPT, has been appointed to manage the enlarged trust.

Gary Hutcheson, investment director at Ignis, said the trust's property portfolios were an "excellent strategic fit."

"They both bring something to the party. UKCPT has longer lease lengths and a better income and covenant profile, while FCPT brings better London and South Eastern exposure and better potential for short-term performance," he said.

"The increased market capitalisation brings both trusts into new territory in terms of investor and broker perception, and it gives the enlarged trust the opportunity to tap bigger and more strategic assets in the market to build out the portfolio."

The deal is also expected to reduce the total expense ratio – the costs borne by investors as a percentage of their investment – to 0.7 per cent, from 0.9 per cent in the UKCPT and 1.1 per cent in FCPT, largely due to reduced management fees.

The increase in market capitalisation is also seen to enhance liquidity for investors and improve the enlarged trust's access to debt thanks to UKCPT's higher cash reserves.

Ignis is a wholly-owned asset management subsidiary of Ignis Asset Management Limited and is part of the Phoenix Group. Ignis has around £69bn of assets under management, of which around £3bn are commercial property assets.