JSE-listed and UK headquartered Capital & Counties Properties (Capco) and property firm Shaftesbury have agreed to a merger, giving the new real estate investment trust (REIT) company a R98 billion portfolio in London's West End.
When the merger goes through, the combined group will be called Shaftesbury Capital, and have 2.9 million square feet (around 270 000m2) of lettable space across approximately 2 000 commercial and residential units.
"The combined group's portfolio is located in a number of vibrant, high-profile and high-footfall destinations across London's West End, including Covent Garden, Carnaby, Chinatown and Soho, close to its major cultural and entertainment attractions, employment locations and transport hubs," Capco said in a market update.
"Their popularity provides a seven-days-a-week trading environment and exposure to an extensive and diverse local, domestic and international customer base which has proven to be resilient throughout economic cycles."
The combined group's portfolio would be valued at approximately GBP5 billion (around R98 billion), with annualised income of approximately GBP165.5 million and an estimated rental value of about GBP218.0 million as at 31 March.
Capco already holds a 25.2% stake in Shaftesbury. Under the terms of the merger scheme shareholders will be entitled to 3.356 new Capco shares for every Shaftesbury share. After the merger Shaftesbury shareholders (other than those with existing Capco shareholding) will own 53% of the combined group and Capco shareholders will own 47%.
The new group will be required to distribute a minimum of 90% of rental profits, calculated by reference to tax rather than accounting rules, as a Property Income Distribution (PID).
"Notwithstanding this, the combined group will adopt a progressive dividend policy with the intention to deliver long-term sustainable total returns to shareholders," the market update said.
"Dividend payments will be determined having regard to, inter alia, growth trends in both underlying and cash earnings, which are expected to be delivered through income growth and cost discipline. To the extent that dividends exceed the amount available to distribute as a PID, the balance will be paid as ordinary dividends."
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