Grainger Trust plc has announced that Grainger Retirement Housing Limited ('GRHL'), a wholly owned subsidiary of Grainger, is making an offer to shareholders of The Capital Appreciation Trust (Isle of Man) plc ('CAT'), an offshore open ended investment company, for the acquisition of CAT.
The offer is conditional, amongst other things, upon completion of a share purchase agreement between GRHL and Close Investments Limited relating to two other companies, Close Property Management (Isle of Man) Limited and Close Property Management (Guernsey) Limited, which currently undertake property management and related activities for CAT and hold the title to many of the properties beneficially owned by CAT.
The offer price is 145.86 pence per share payable in cash, valuing CAT at approximately €99.4 million (£71.6m). The first closing date of the offer is 12 noon on 28 December 2006.
CAT contains a portfolio of some 912 retirement properties, which are subject to lifetime leases or are currently vacant. The majority of the properties, which consist largely of one bedroom flats in complexes of retirement units, are located within McCarthy & Stone developments. The greatest concentrations of properties are in the South East (53.6%), the South West (31.2%) and East Anglia (10%). The remaining 5% of the portfolio is spread across England and Wales.
The properties have an investment value of approximately €102.2 million (£73.65m) and certain net liabilities have been retained within CAT, amounting to some €2 million (£1.5m). The existing Isle of Man resident directors of CAT will continue to work for the business.
The transaction is expected to be earnings enhancing as revaluation gains on the portfolio will be recognised under IFRS in the Income Statement.
JPMorgan Cazenove is acting as sole financial adviser and corporate broker to Grainger.
Commenting on the offer, Rupert Dickinson, Chief Executive of Grainger, said: "This will be our first major acquisition in the increasingly important retirement home sector and fits well with our existing home reversion business. We see good opportunities to use our existing skills and franchise in both residential property and equity release to grow this portfolio. We also want to investigate ways of introducing more flexible tenure into the retirement home sector through a range of options, from rental, lifetime lease, through to shared equity. We think it is now becoming as important to offer elderly homeowners flexibility in stepping off the housing ladder as it has become for first time buyers to get that first step up."
Peter Couch, Director of Equity Release, added: "This is a great opportunity to significantly increase our portfolio of residential properties occupied by elderly tenants. As with our existing home reversion business, the key business drivers will be house price inflation and life expectancy of our tenants."
Source: Grainger Trust