Recently in M&A Category

For companies that are supposed to be boring vehicles that provide tax-free access to property income, listed property income trusts have thrown up some great arguments over the past few years.

In 2007 Tom Laidlaw, head of property at Scottish Widows Investment Partners, left the fund managers to start his own company, Cordatus Partners, and an almighty row broke out when the board of the SWIP-managed UK Balanced Property Trust decided to switch the trust's management to Laidlaw's new firm. Homes were entered by the Scottish Court, computers were seized, and the bust up looked to be heading for court until GE stepped in and bought the trust's portfolio.

As you will no doubt have seen, Nathan Kirsh's 50p a-share takeover bid for Minerva lapsed today, meaning that the company remains independent, for now.

But a nice little story reaches me from the City about some serendipitous events relating to this deal and the City office occupational market.

Now, as you will have also seen, BlackRock and Canary Wharf today announced that terms have been signed for the investment manager to take up the whole of the 270,000sq ft office tower Canary Wharf has just completed in a joint vnture with Exemplar Properties, at a price of 50/sq ft.

Apparently, BlackRock was one of the bigger buyers of Minerva shares once Kirsh's takeover offer was announced. Why is this important?

Weak prospects for commercial property occupier demand and rental values won't change much after figures show merger and acquisition (M&A) activity among UK companies remained very low in the third quarter.
UK companies were involved in just £5bn of M&A deals in Q3, according to figures from National Statistics.
That was higher than the figure of £4bn in Q2, but it was still down by 57%y/y and less than 25% of the quarterly average since 1987 of £22bn.
Research firm Capital Economics says while M&A activity may rise in coming quarters, it won't be meaningful enough to change the prospects for occupier demand and rental growth.

It was a gloomy day for SEGRO's shares yesterday, falling 3.9%, after broker Evolution Securities downgraded its recommendation to Reduce.
Evolution said it believed the company's share price had now factored in much of the potential good news after outperforming the UK real estate sector by 24% since the bid for Brixton was announced.
"Our Reduce recommendation reflects our opinion that the shares may underperform the wider market, but we are not advocating selling out of the name entirely," said Evolution.
"The shares' likely entry into the FTSE-100 index post the quarterly review on 9 September could provide a useful opportunity to lighten holdings."
The broker added it can see some "tough negotiations" in the next few years as tenants who are paying fairly high rents in Brixton's buildings demand reductions.
However, Evolution said SEGRO management's more "pragmatic" approach to letting vacant space should help to reduce void levels.

Some investors I spoke to worried that Segro might be 'doing a Lloyds TSB' in its takeover of rival Brixton; that is, destabilising its own balance sheet, which had recently been sured up by a rights issue, by taking on the debt of a rival that was a lot more highly leveraged.

But a quick look at Segro's interim results shows that Ian Coull and his board have played it to perfection. 

It was a green day for some listed UK property stocks yesterday with renewed takeover talk among traders.
Hammerson outperformed its peers, jumping 2%, amid speculation it could receive a takeover approach.
But the day's biggest surprise was Minerva, which saw its share price skyrocket 41% to 28.5p on rumours the company had secured a tenant for its Walbrook development currently under construction in the City.
The company has seen similar surges earlier this month on talk of a bid approach from Limitless and hopes of a debt agreement.
But, despite all the talk, traders are apparently sceptical, saying it's hard to read much into the rise as Minerva is an illiquid stock with one shareholder controlling 30% of the company.

The past week we have seen the release of two key property indices - the CBRE Monthly Index and the IPD UK Monthly Index.

CBRE's data for July reported a capital value increase of 0.2% - the first positive move since the start of the downturn in June 2007.

IPD's index produced a very slight capital value fall of -0.1%, compared with -0.9% in June.

The data from both firms shows the continued easing in the pace of decline and that we have possibly turned a corner.

  The sun is shining for the last time this summer, and sap in the City is running high, with bid rumours circulating that a supergroup comprising Lakshmi Mittal and the Abu Dhabi royal family is preparing to take down British Land for £10bn.

Shares in the company are up 4.5% to 515p (well short of the mooted 600p offer), dragging the rest of the sector higher. Likelihood of of a bid materialising, and ultimately proving successful? JP Morgan think its a bit of a silly-season special:

We are not going to say that takeovers are 100% ruled out, but this looks odd to us. The FT mentions a potential takeover bid of 600p per share for British Land, which would imply an implied net yield of 5.5%, dividend yield of 4.3% and premium to latest NAV of 51%. Not exactly a knockdown price. But also just think about it: do these companies really want to be taken over after this downturn, recent equity raisings and long history?

Ratings agency Moody's spent the end of last week combing through the various commercial mortgage-backed securities debt packages, if the glut of e-mails on potential downgrades I received this morning is anything to go by.

Most interesting were a couple potential downgrades of class A bonds secured against shopping centres owned by Liberty International, including £628m of debt secured against the flagship Lakeside shopping centre in Essex.

US mall giant Simon Property Group reported second quarter results on Tuesday that included a $141m charge due to the fall in value of its 6.5% stake in UK shopping centre REIT Liberty International.

Not really unexpected, seeing how UK property shares have performed this year. Of more interest are the comments made by chief executive David Simon in the post-results analyst conference, which made their way back to the UK via JP Morgan Property analyst Harm Meijer. Simon hints that a tie-up between the companies is likely, even it is not the straight takeover deal that the market anticipated last year.

"We're not giving up hope. ... We're just going to see how that evolves," he said, adding that he believes that there are elements where Simon might be able to add to what Liberty does. The worst thing for it would be to try to recoup its investment in a "not-so-intelligent way."