Property buyouts continue apace

In the latest UK public-to-private property transaction to take place this year, Granchester Holdings has been acquired by management in a £167m deal.

Grantchester Holdings, the UK-listed property investor, is set to become the latest quoted real estate manager to be taken private following the announcement this morning of a recommended cash offer from management backed by Bank of Scotland and UK private equity firm West Coast Capital.

Dundonald, a holding company set up by the Grantchester management team, has offered to pay £167.6m to take the property company private in a deal backed by the Grantchester board.

The 218 pence per share offer represents a premium of 6.3 per cent to the adjusted net asset value per share of 205 pence as at 31 March 2002 and a premium of 4.8 per cent to the average closing middle market price of approximately 208 pence per Grantchester Share in the three months preceding the date of the offer.

In addition to Grantchester directors Nick Hewson, Tim Walton and Nick Alford, the consortium comprises TBH Investments (a wholly owned subsidiary of UK private equity firm West Coast Capital) and Uberior Investments (a division of HBOS plc and part of Bank of Scotland Corporate Banking).

Bank of Scotlang have contributed £16m of equity to the transaction, with a further £130m provided as debt. Management and West Coast Capital have between them taken a £30m equity stake.

BoS and West Coast Capital have teamed up on previous occasions to effect property deals. Earlier this year, the two acquired a £129.3m retail portfolio from Coal Pension Properties in a joint venture with Catalyst Capital LLP.

Last year, Grantchester Holdings and West Coast Capital agreed a new five year committed revolving facility of £70m to fund acquisitions for Westchester, a £200m property development fund set up by the two firms in 2001. Bank of Scotland Corporate Banking and Royal Bank of Scotland between them contributed £70m to Westchester.

The deal bucks the trend for property PTP transactions in the UK, which have usually been completed at net asset value or below. Jim McMahon, a director of Dundonald described it as ‘the highest premium paid’ to triple net asset value in the last three years in the UK listed property sector.

Listed property businesses have suffered from a lack of investor appetite over the past three years. Prior to its own PTP, Irish property firm Green Property traded some way below its E11.62 NAV at E9.18 per share. The same applied to Saville Gordon Estates, which until its £500m acquisition in May by Merrill Lynch traded at 30 per cent below the offer price of 121.3 pence, a premium of two per cent to net asset value.