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Warehouse owner Tritax Big Box has agreed a takeover deal for a smaller rival to create the UK’s fourth-largest listed landlord, in the latest example of consolidation among real estate investment trusts.
Tritax Big Box and UK Commercial Property Reit (UKCM) on Monday said they had agreed key terms of a more than £900mn all-share merger.
The deal follows an agreement last month by rival warehouse owner LondonMetric to take over LXI, a landlord focused on property income.
Smaller Reits have been under pressure to merge to boost the liquidity of their shares and make themselves more attractive to investors.
The companies said the deal would offer “improved liquidity for all shareholders” in a deal that offers an 11 per cent premium to UKCM’s Friday closing share price.
Shares in UKCM rose 5 per cent to 67.10p, while those of Tritax dropped 3 per cent to 155.60p by mid-morning on Monday.
Warehouses have held up better than other large commercial property sectors, such as office and retail, as the market suffers a brutal downturn caused by rising debt costs.
Although the boom in warehouse demand from ecommerce vendors such as Amazon has slowed in recent years, landlords say there is still a lack of supply.
UKCM, managed under contact by asset manager Abrdn, has been marketed as a “diversified” property investment, but 60 per cent of its portfolio is warehousing.
Tritax Management, a specialist fund manager backed by Abrdn, would take over the running of the combined group, which would have a market capitalisation of £3.9bn and a portfolio of £6.3bn, the companies said.
The combined company would still be smaller than Segro, the leading warehouse Reit in the UK, which manages assets worth £21bn.
The companies said UKCM’s board was “minded to recommend” the deal to shareholders “excluding” chair Peter Pereira Gray, a former head of the investment division for the Wellcome Trust, who is not backing the deal.
Two of UKCM’s largest shareholders, insurer Phoenix and wealth manager Investec, who together own 56 per cent of the company, have given non-binding support for the deal, the company said.
Rob Virdee, analyst at Green Street, in a note on Sunday said the “strategic rationale” for combining Tritax with UKCM’s “eclectic portfolio . . . is questionable”.
Although UKCM’s warehouses would be a good fit with Tritax’s portfolio, its other assets — including student housing, hotels and offices — would be “a distinct pivot away from [Tritax’s] historically coherent logistics strategy”, Virdee said.
The agreement follows an abortive takeover bid for UKCM by Picton Property Income, which pulled out after Phoenix said it would not support the deal.
React News first reported the deal on Friday.
