Two long-established open-ended UK property funds managed by Columbia Threadneedle Investments and Patrizia have merged to create a £1.5bn (€1.75bn) vehicle aimed at improving liquidity and driving active asset management, in the latest sign of ongoing consolidation across the UK property funds market.
The Patrizia 50-year-old Hanover Property Unit Trust (PATH) has been merged with Columbia Threadneedle Real Estate’s Threadneedle Property Unit Trust (TPUT).
Domiciled in Jersey since 2002 and originally established in 1967, TPUT holds around 100 assets. Its net asset value crossed the £1bn mark in April last year following Columbia Threadneedle Real Estate’s acquisition and integration of the UK Property Fund, which was launched in 1994.
Patrizia, which took over the PATH vehicle via its its acquisition of Rockspring in 2018, holds around 10 assets within the fund, representing a net asset value of £523m.
The latest transaction reflects ongoing consolidation across the UK property funds market. Notably, last year L&G’s Managed Property Fund and the Federated Hermes Property Unit Trust, dating back to the 1960s and 1970s, merged to create a £4.7bn vehicle, a move one consultant said highlighted a stark “evolution or extinction” reality facing UK institutional property funds, driven by structural shifts in the UK pensions industry.
Real estate managers have traditionally relied on capital from defined benefit (DB) pension schemes. However, the accelerated decline of DB capital has not been matched by the growth of defined contribution pension funds, making platform consolidation almost inevitable.
Despite the clear market pressures, pulling off these mergers remains immensely difficult. As Mark Russell, CIO of Federated Hermes Real Estate, mentioned at the time of their deal, such landmark transactions are rare, telling IPE Real Assets that “there have been others that have been attempted and have not succeeded for various reasons”.
Patrizia and Columbia Threadneedle said the merger delivers significant benefits to all investors, “improving liquidity and asset/tenant diversification, including lot size diversification and supporting improved long-term resilience”.
James Coke, executive director and fund manager, UK Real Estate at Columbia Threadneedle, said: “This transaction reflects our disciplined approach to managing TPUT, which is fast developing a reputation for dynamism alongside its traditional focus on strong client outcomes.
The PATH portfolio is highly complementary and strengthens TPUT’s diversification and long-term positioning for existing and incoming investors. The team has delivered an innovative transaction solution for clients and we are delighted to provide a long-term home for real estate capital in a rapidly evolving market.”
Ker Gilchrist, head of investment management UK at Patrizia, said: “PATH has been a long-established UK real estate fund with a proven track record of sustained outperformance against its benchmark, and we are exceptionally proud that PATH has consistently ranked at or among the top-performing funds in its peer group.
“The strategic review was undertaken to ensure that the fund continued to meet the evolving needs of its investors over the long term. We selected Columbia Threadneedle as the preferred long-term partner based on the strength of its platform, the scale and composition of TPUT, and its experience in managing and integrating UK real estate portfolios.”
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