£400M UK REIT Bought At A Discount

A consortium led by LondonMetric Property and Schroder Real Estate Investment Trust has reached agreement in principle on a proposed £403M takeover of Picton Property Income.

LondonMetric and Schroder will pay for Picton in shares. Based on the companies’ closing share prices on 11 May, the offer values Picton at 78.2 pence per share, representing a 7% premium on Picton’s closing share price and a 24% discount to its last published net asset value. 

The consortium said the proposed transaction would leave Picton shareholders owning approximately 4% of the enlarged LondonMetric and 48.2% of the enlarged SREIT business following completion.

Picton owns a UK-only portfolio valued at £699M, including debt. Of that portfolio, 67% is in industrial assets, 21% in offices and 12% in retail and leisure.  

The move comes after Picton launched a formal sale process earlier this year, citing ongoing challenges faced by smaller listed property companies, including persistent discounts to net asset value and limited scale in public markets.

In a regulatory statement announcing the deal, the consortium said the offer would “retain Picton’s good quality portfolio in the UK-listed arena and continued exposure to such assets for Picton shareholders, while addressing the challenges facing Picton as an independent, listed company.”

The consortium added that the transaction would give investors “the opportunity to crystallise a premium to the share price” while reinvesting into “two enlarged, UK-listed REITs that will enjoy the various benefits of enhanced scale.”

The proposed split would see LondonMetric acquire around 46% of Picton’s gross asset value, with SREIT taking the remaining 54%, based on Picton’s portfolio valuation at the end of 2025.

According to the companies, the sector weightings of both LondonMetric and SREIT are expected to remain “largely unaffected” following completion.

For SREIT, the deal is also intended to strengthen the balance sheet. The consortium said the acquisition is expected to reduce SREIT’s loan-to-value ratio into its target range of 25% to 35%, while also allowing it to inherit below-market debt costs.

The companies also said the deal is expected to be earnings accretive for both LondonMetric and SREIT and that the enlarged SREIT business is expected to continue under the leadership of existing fund managers Nick Montgomery and Bradley Biggins. The company said it would review opportunities to retain Picton employees as part of the integration process.

Picton’s board said it would be “minded unanimously to recommend” the offer to shareholders if a formal bid is made, subject to due diligence, agreement on final terms and definitive transaction documentation.

The consortium has also secured support from TR Property Investment Trust, which holds approximately 11.4% of Picton’s voting rights and has indicated it intends to vote in favour of the deal.

The proposed transaction remains subject to due diligence, lender approvals and final board sign-offs. The companies cautioned there is “no certainty” that a firm offer will ultimately be made.