Overview

News

11 April 1987

The last occasion when a trading company independently floated its property assets was back in the early 1970s, when Burton offered shares in MBPI, Montague Burton Property Investments. Unfortunately, the issue coincided with the collapse of the property market, and eventually the shares were repurchased by the parent company.

Since then, a number of companies have looked seriously at plans to float their property assets, including the supermarket chain, J Sainsbury. For one reason or another, all have rejected the idea, opting instead for more coventional forms of property-based finance such as sale and leaseback.

Elders, the Australian-based company, which picked up Courage from Hanson Trust following Hanson’s successful acquisition of Imperial Group, Courage’s former parent, is uninhibited by the former Burton flop.

Courage has a chain of more than 5,000 pubs, and various schemes to unlock the capital tied up in them have been considered. One scheme was to sell the pubs to their tenants or managers; another was to offer them in a package of mortgage-backed securities.

In the end, Elders’ John Elliott is going for a revolutionary flotation package.

A complicated new company will have an equity capital base of about £300m. Elders will retain some £150m in deferred shares, a similar amount in convertible stock and around £400m raised on a debenture.

The issue is being sponsored by Hoare Govett and Credit Suisse First Boston, and flotation could be ready to take place within a few months.

News of the proposal “leaked” this week, leading to the distinct impression that the idea was still in the “sounding-out” stage rather than solid.

But it was pointed out by the sponsors that the company could generate £70m of rentals and provide not only an investment in property but also a stake in the licensed trade. Elders would retain management control of the premises and supply the beer.

If the scheme comes through to successful fruition, it will send other trading companies with major property assets along to their merchant bankers to ask if they could do the same thing.

For accounting reasons, many trading companies charge rents to their operating subsidiaries, and it is only a short step from there to putting the properties into a different corporate pocket.

There is nothing like it on the Stock Exchange, but Elders IXL is planning to launch a new £1bn property company later this year. In effect, Elders is planning to recoup two-thirds of the amount it paid out for Courage, the brewery chain, by floating a new property company which will own the Courage pubs. The last occasion when a trading company independently floated its property assets was back in the early 1970s, when Burton offered shares in MBPI, Montague Burton Property Investments. Unfortunately, the issue coincided with the collapse of the property market, and eventually the shares were repurchased by the parent company. Since then, a number of companies have looked seriously at plans to float their property assets, including the supermarket chain, J Sainsbury. For one reason or another, all have rejected the idea, opting instead for more coventional forms of property-based finance such as sale and leaseback. Elders, the Australian-based company, which picked up Courage from Hanson Trust following Hanson’s successful acquisition of Imperial Group, Courage’s former parent, is uninhibited by the former Burton flop. Courage has a chain of more than 5,000 pubs, and various schemes to unlock the capital tied up in them have been considered. One scheme was to sell the pubs to their tenants or managers; another was to offer them in a package of mortgage-backed securities. In the end, Elders’ John Elliott is going for a revolutionary flotation package. A complicated new company will have an equity capital base of about £300m. Elders will retain some £150m in deferred shares, a similar amount in convertible stock and around £400m raised on a debenture. The issue is being sponsored by Hoare Govett and Credit Suisse First Boston, and flotation could be ready to take place within a few months. News of the proposal “leaked” this week, leading to the distinct impression that the idea was still in the “sounding-out” stage rather than solid. But it was pointed out by the sponsors that the company could generate £70m of rentals and provide not only an investment in property but also a stake in the licensed trade. Elders would retain management control of the premises and supply the beer. If the scheme comes through to successful fruition, it will send other trading companies with major property assets along to their merchant bankers to ask if they could do the same thing. For accounting reasons, many trading companies charge rents to their operating subsidiaries, and it is only a short step from there to putting the properties into a different corporate pocket.