Regional REIT Glenstone Property has doubled its size by acquiring London & Surrey Property Holdings.
The combined entity will have a market value of £132m, while the REIT’s annual rent roll will rise to £9.3m from £4.5m.
Glenstone has been seeking to expand its portfolio of investment properties by buying privately owned UK companies. In such an arrangement, potential tax liabilities can be negated under the REIT rules.
Managing director Duncan Kennedy said that along with tax efficiencies, the deal will lead to more critical mass for the company, potentially bigger deals, and also diversify risk in the property portfolio.
Under the deal, Glenstone’s high street exposure will fall from 91% to 46%.
Buying a corporate structure, rather than a portfolio, offers the advantage of not having to raise extra finance.
“This way we can double our size without doubling our leverage,” said Kennedy.
The acquisition was funded with a combination of shares and cash. Owing to the differing specialisations of the two companies, all staff will be retained.
Adam Smith, managing director of London & Surrey, said: “The shareholders of the L&S group were keen to take advantage of the REIT status, plc structure and an attractive income distribution.”
Listed on the Channel Islands Stock Exchange, Glenstone was borne out of retail shoe chain Hiltons, retaining shop freeholds when it listed on the stock market in the 1970s.
Since then it has expanded its portfolio of predominantly high street retail assets to include industrial properties and offices in market towns, a strategy that Kennedy says will continue.
Established in 1983, London & Surrey owns a portfolio of prime London residential properties, South East leisure properties, and more than 50,000 sq ft of commercial space.
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