The boards of Custodian Property Income REIT (CREI) and abrdn Property Income Trust (API) have agreed the terms of an all-share merger, which will see CREI acquire the entire issued and to be issued share capital of API.
The merger will create a REIT with a combined portfolio value in excess of £1bn. Following completion of the merger, existing CREI shareholders will hold approximately 59.7% of the new entity and API shareholders will hold approximately 40.3%.
Custodian Capital will provide investment management, administrative and advisory services to the combined group and will waive its management fee in relation to the net asset value attributable to API for the first nine months following completion of the merger. There will also be a reduction in the management fees payable by CREI to Custodian Capital for the next two years.
Following completion of the merger, it is expected the CREI board will comprise eight directors, with the addition of two of the existing API directors, Jill May and Sarah Slater.
David MacLellan, chairman of CREI, said: “The board is pleased to announce the merger of CREI and API which it firmly believes will benefit both our existing and new shareholders. This transaction creates a well-positioned REIT of significant scale, giving the combined group’s shareholders the opportunity to participate in the returns from the complementary API and CREI portfolios, with a fully covered and sustainable dividend and a focus on ESG.
“In the current interest rate environment, security and resilience of cash flows, scale and liquidity, supported by a clear and compelling strategic direction are the defining characteristics of a successful REIT. The challenges the wider listed property sector has faced over the last 18 months highlight the merits of CREI’s differentiated approach and operational robustness, which contribute to CREI’s strong rating relative to its peers.
“The income and income growth characteristics of the API portfolio should enable the merged entity to optimise earnings and maintain CREI’s progressive dividend policy. Shareholders in the combined group will benefit from material cost savings and efficiencies along with benefitting from significant future growth opportunities to enhance shareholder returns.”
James Clifton-Brown, chair of API, added: “API has always sought to focus on delivering attractive, income-driven returns for shareholders. Over the years, API’s manager, abrdn Fund Managers, has assembled an attractive portfolio on the company’s behalf, with a weighting to more favoured areas of the market, a diversified tenant base and a focus on ESG. The board of API would like to thank the management team for the important role they have played in assembling and managing the portfolio.
“The merger will enable API shareholders to retain exposure to the portfolio and its growth prospects at a significant premium to API’s share price, with the prospect of superior share liquidity and an enhanced and fully covered dividend. The API board believes that, with increased scale and an enhanced capital structure, the combined group will be well positioned for the future. The API board is therefore pleased to recommend the merger to API shareholders.”
