GE agrees £417m deal for controversial trust

In a s tock e xchange announcement this morning, the board of the UK Balanced Property trust revealed that it had come to an agreement with GE to buy its entire property portfolio and wind the company up.

The deal equates to approximately 169.5p a share, a premium to net asset value of 5.7% a share according to the company’s last valuation at 30 June. A quarterly dividend of 1.875p will continue to be paid.

Shareholders will have the choice of exiting the trust at 169.5p a share or rolling their investment over into a new vehicle, managed by F&C Commercial Property Trust.

The sale will go through if it receives shareholder approval at an EGM to be held on 17 August, but it is also dependent on shareholders rejecting a proposal put forward by majority shareholder Scottish Widows Unit Funds at an EGM on 31 July.

The trust has been at the centre of a bitter row since July last year. The trust was formerly managed by Scottish Widows Investment Partnership, but its top property men, Tom Laidlaw and Mike Channing, left to start their own fund management company, Cordatus.

Cordatus won the UK Balanced mandate in February this year, and in April SWIP raised a petition for breach of contract with the Scottish Court that saw Laidlaw and Channing’s homes and offices raided. Further hearings are expected in September.

In May SWUF put forward a proposal that the trust’s current board be sacked and replaced with another of SWUF's choosing, and that shareholders accept its offer of a cash exit from the trust at NAV, or roll over its investment into a SWIP-managed fund. Shareholders will need to reject this proposal before the sale to GE can go ahead.

Laidlaw’s Cordatus has been heavily involved in the sale of the portfolio, and worked in conjunction with the Edinburgh office of Savills. If the sale becomes unconditional, Cordatus will receive an incentive fee of £2.3m. If the sale is not approved by shareholders it will receive a £500,000 abort fee.

Earlier this year, it paid £1.35m termination fee to SWIP, and replaced it as fund manager in May. It will continue to manage the portfolio until the trust is wopund up, anticipated to be in October.

The combined fee to Savills and Cordatus, including the £2.3m incentive fee, is 1% of the sale price.