Legal & General Property’s Industrial Property Investment Fund (IPIF) has merged with the Falcon Property Unit Trust, having successfully entered into an amalgamation agreement.
Completion of the transaction is anticipated by the end of Q3 2013. The amalgamated fund will be called IPIF and will continue to be managed by Legal & General Property.
With a GAV of just over GBP100m, Falcon comprises 36 multi-let estates and over 280 units. As at 31 June 2013, IPIF had a GAV of GBP794m, holding over 13.6 million sq ft of space, let to almost 1,600 tenants, across 121 estates. The enlarged IPIF will therefore have approaching GBP900m industrial assets, making it the largest UK industrial specialist fund.
With complementary investment strategies and portfolios, the amalgamation offers IPIF with an attractive range of tenants and estates which will benefit from scale and intensive asset management, thereby enhancing its returns going forward. Furthermore the ungeared fund provides IPIF with an enlarged and therefore diversified investor base. The proposal to amalgamate IPIF and Falcon received 99.9 per cent approval from both vehicles’ investors and has been structured to be cost neutral for IPIF.
Launched in 1997, IPIF was one of the first indirect specialist real estate funds and has become a leader in its sector, having outperformed its benchmark, the IPD Quarterly Industrial Benchmark, over three, five, 10 and 15 years. The lowly geared fund is one of the most liquid closed-ended funds in Europe, benefiting from a strong secondary market with approximately five per cent of its units traded each quarter.
Its strategy remains focussed on investing in good quality, higher yielding, predominantly multi-let industrial estate assets, with a high weighting towards London and the South East, but ultimately will be opportunity led. Supported by Jones Lang LaSalle, it is managed by a team of 40 professionals across both firms. Much of IPIF’s success lies in the hands-on, efficient management of its tenant relationships and a continuing programme of new lettings, lease renewals and rent reviews.
Jonathan Holland, fund manager of IPIF at Legal & General Property, says: “Falcon has built up a strong portfolio of multi-let industrial estates which we believe will significantly benefit from the scale, resources and efficiencies of IPIF’s management intensive structure, whilst increasing IPIF’s already large added value pipeline at an opportune point in the market cycle. Furthermore, with a strong and proven track record, IPIF has outperformed the market every year since it was established and continues to drive returns through its sector specialist, hands-on approach to managing tenant relationships.”
Robert Farnes, chairman of Falcon, says: "Although Falcon had been performing well, consistently providing unit holders with a distribution yield in excess of six per cent, the trust had become dominated by a small number of advisors and, with a GAV of just over GBP100m, a merger was considered the most attractive solution. The level of support for the amalgamation terms is a clear endorsement of board's policy to provide a solution that gave all of its unit holders the long term option of remaining in a high performing industrial property unit trust or taking cash.”
IPIF recently extended its life to 2020, whilst also adding redemption provisions and introducing a number of initiatives enabling it to be more flexible in terms of raising further equity and responding to market conditions.