Invista Foundation Property Trust has entered into a heads of agreement to appoint Schroder Property Investment Management from the beginning of October.
In March, the board gave notice to Invista Real Estate Investment Management (IREIM) of the termination of its investment management agreement and began interviewing candidates to take over management of the trust.
As revealed by Estates Gazette, Schroders had been the frontrunner to take over the management of the fund’s £371m assets.
Invista Foundation Property Trust originally intended to announce the new management in July, following the yearly results. However, following an approach by Picton Property Income about a possible merger, it decided to delay the announcement. According to Schroders, discussions with Picton are ongoing and a non-binding indicative offer was received by the board on 29 July, which is subject to due diligence and other conditions.
Picton said it believes the merger would have a number of benefits for both companies, such as a significant enhancement in the liquidity of the enlarged group’s shares over that of either Invista or Picton currently and
greater economies of scale resulting in a lower total expense ratio, given a reduction in central corporate and investment management costs.
Between now and October Invista will be working with Schroders and the board to plan a smooth transition. The company is also in negotiations with IREIM in relation to the termination fee payable in respect of the unexpired notice period to March 2012.
Under the heads of agreement with Schroders, it is proposed that Schroders will be paid a management fee of 1.1% per annum of the company’s net asset value, and will provide both management and accounting services under the terms of the contract. The contract will not be subject to a notice period or termination fee in the event the merger proceeds. If the merger does not proceed, the contract with Schroders will be subject to a notice period of nine months, except in certain circumstances, such as a change of control of the company, in which case the notice period will be 12 months.
According to Invista, the new fee basis will result in annual cost savings for the company of approximately £1.8m.
Under the heads of agreement, Schroders states it also intends to recruit certain senior executives from IREIM who have been directly involved with the management of the company’s portfolio.
james.a.kenny@estatesgazette.com
