LondonMetric agrees £200m takeover of CT Property Trust

LondonMetric has reached an agreement for a £198.6m all-share offer for CT Property Trust. Under the deal, which has been recommended by both boards, CTPT shareholders will receive 0.455 LondonMetric shares for each CTPT share. This values each CTPT share at 85.5p, based on last night’s LondonMetric closing price of 188p. The deal represents a premium of 34.3% to CTPT’s last closing price of 63.7p per share and a premium of 33.2% to the three-month volume weighted average price per CTPT share of 64.2p. Following completion of the acquisition, existing LondonMetric shareholders will hold approximately 90.3% and CTPT shareholders will hold approximately 9.7% of the enlarged issued share capital of LondonMetric. The deal will create a combined group with gross property assets of approximately £3.3bn, and a combined property portfolio of 313 properties – 71.5% of which will be distribution and industrial assets – drawing in rent of £163.4m per annum. LondonMetric said that, by combining the two complementary property portfolios, it anticipates unlocking operational synergies and asset management opportunities. CTPT was formed by the merger of IRP Property Investments and ISIS Property Trust in April 2013, although back then it was called F&C UK Real Estate Investments. As of 31 March, CTPT owned 34 properties valued at a total of £288.3m. Some 56% is industrial, logistics and distribution assets, with 21.9% retail warehousing, 15.7% offices and 6.4% high street retail. It also has around £30m of cash in the bank. CTPT shares have traded at an average discount to NTA of 25.3% in the last five years. CTPT chair Davina Walter said: “Our manager, Columbia Threadneedle, has built an attractive UK commercial property portfolio and pivoted the balance of the portfolio in recent years to a high industrials weighting, reflecting our conviction in the ongoing strong occupier demand in the sector.” But she added: “Despite the progress made in pivoting the portfolio, excellent long-term portfolio performance and regular dividend payments, CTPT has traded at a double-digit discount to NAV for a number of years. We believe this is reflective of our small size and external market conditions. “[The deal with LondonMetric] allows our shareholders to benefit from being exposed to an enlarged UK-REIT with an approximately £3bn property portfolio, continuously growing dividends and an outstanding track record of shareholder value creation. The acquisition also represents a compelling premium to the CTPT share price. We therefore recommend the acquisition to shareholders.” LondonMetric chair Patrick Vaughan added: “We believe the acquisition is compelling for both CTPT and LondonMetric shareholders. The CTPT management team has assembled a high-quality platform of complementary assets, diversified by tenant base and geography and with significant reversionary potential. “The acquisition grows the combined group’s exposure to the winning sectors of urban logistics and long income, underpinned by evolving consumer demand and delivering strong rental growth. “In the current interest rate environment, we believe resilient cash flows, scale and liquidity will be the defining characteristics that differentiate the winners and the losers. The income and income growth characteristics of the CTPT portfolio, combined with select asset management opportunities, should enhance our total return focus, whilst enabling us to drive earnings optimisation and maintain our progressive dividend policy.” LondonMetric this morning also announced its annual results, showing an improvement in rents but a fall in capital values. Net rental income was up from £133.1m to £146.8m. EPRA earnings were up 8.1% to £101.1m, but IFRS profit sank to a £506.3m loss, down from a profit of £734.5m last year. This was due to a revaluation loss of £587.5m As a result, the portfolio’s value also shrank back to £3bn from last year’s £3.6bn. The REIT has also exchanged contracts on the sale of a DHL logistics warehouse in Solihull for £20.5m. The sale, to clients of Atlas Real Estate, reflects a NIY of 4.15% with a rent review due later this year. The sale was at a small premium to the 31 March 2023 book value. LondonMetric bought the 142,000 sq ft warehouse in 2017 as part of a portfolio. The allocated purchase price was £15.7m with a WAULT of two years. LondonMetric regeared the property in 2018, extending the lease to 10 years with a break after five years. Following removal of the break recently, six years remain on the lease. The sale crystallises an ungeared IRR of 9%. LondonMetric chief executive Andrew Jones said: “With the recent strengthening in the investment market, we have reacted to an opportunistic off-market approach to sell this warehouse. The proceeds of the disposal will be used to further reduce our floating rate debt and LTV.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews