Green light for London REIT merger
The Competition and Markets Authority (CMA) has cleared plans for a merger between two of London’s biggest real estate investment trusts (REITs), which would see the creation of a combined portfolio worth around £5bn.
The boards of Shaftesbury and Capital & Counties (Capco) announced in July 2022 that they had reached an agreement on the terms of an all-share merger, which would see the creation of a combined group, called Shaftesbury Capital.
On December 23 2022, the Competition and Markets Authority announced the launch of its phase one review into the merger, which following today’s approval, is expected to be completed on March 2.
In a joint statement, Shaftesbury and Capco said they welcomed the CMA’s decision.
The two firms estimated the deal would see an annualised gross rental income of around £166m and an estimated rental value of approximately £218m (as of March 2022).
Under the terms of the proposed merger, Shaftesbury’s shareholders would control approximately 53% of the combined business, while Capco’s shareholders would control the remaining 47%.
Shaftesbury focuses on retail, hospitality and leisure in London’s West End, while Capco’s portfolio is based mainly in the Capital’s centre, and includes a 1 million+ sq ft estate in Covent Garden. The two firms hope the merger will benefit from a combination of these two portfolios.
Other reasons given for the merger include increased opportunities for asset management and value-creation opportunities, benefitting from a combined management team, and providing increased income for shareholders. The two firms also said they shared a commitment to positive environmental and social outcomes.
In May 2020, Capco agreed to purchase a shareholding in Shaftesbury worth some £436m, an investment representing around a quarter of Shaftesbury’s share capital.
In January, Shaftesbury revealed a strong period of occupier turnover in the run-up to Christmas, as footfall in London’s West End appeared buoyed.