​UK REITs Custodian Property and Abrdn Property Income agree merger

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Custodian Property Income REIT (CREI) is merging with Abrdn Property Income Trust (API) to create a larger UK real estate investment trust (REIT) with a £1bn (€1.2bn) portfolio of around 200 assets.

CREI, which has a market capitalisation of £339m, is buying London-listed peer API in a recommended all-share merger deal that values the latter at £237m or 62.1p a share, a 29.4% premium to the share’s last closing price.

The merger will create an enlarged company, giving existing CREI shareholders a 59.7% stake in the combined group alongside API shareholders owning a 40.3% interest.

UK REIT CREI, established in 2014, holds a portfolio of smaller, regional, core/core-plus properties valued at £602m as of 31 December 2023.

Established in 2003, API invests in a diversified portfolio of UK commercial properties like industrial, office and retail, a portfolio valued at £439m as at 31 December 2023.

David MacLellan, chairman of CREI said: “In the current interest rate environment, security and resilience of cash flows, scale and liquidity, supported by a clear and compelling strategic direction are the defining characteristics of a successful REIT. The challenges the wider listed property sector has faced over the last 18 months highlight the merits of CREI’s differentiated approach and operational robustness, which contribute to CREI’s strong rating relative to its peers.

“The income and income growth characteristics of the API portfolio should enable the merged entity to optimise earnings and maintain CREI’s progressive dividend policy. Shareholders in the combined group will benefit from material cost savings and efficiencies along with benefitting from significant future growth opportunities to enhance shareholder returns.”

James Clifton-Brown, chair of API said: “The merger will enable API shareholders to retain exposure to the portfolio and its growth prospects at a significant premium to API’s share price, with the prospect of superior share liquidity and an enhanced and fully covered dividend.

”The API board believes that, with increased scale and an enhanced capital structure, the combined group will be well positioned for the future.”

To read the latest IPE Real Assets magazine click here.