THE Bank of Scotland and property consultants Montagu Evans have linked up with Ann Gloag and Brian Souter of Stagecoach in a £54 million deal to acquire the pension fund manager Hermes’ retail portfolio.
The partnership’s new venture, Highfield Properties (Holdings), will hold a portfolio of high street retail properties in UK towns. Bank of Scotland Corporate banking and Ann Gloag/Brian Souter will each invest an equity share of 48 per cent with Montagu Evans investing the rest.
Montagu said its research showed that historic retail rental growth in secondary towns with specific demographic and economic conditions has, in many cases, outstripped rental growth in prime retail property in city locations. Consequently, Montagu Evans has identified this portfolio with the objective of capitalising on higher-than-average yields for the sector.
Montagu Evans will perform a detailed initial review of each property in the portfolio before drawing up a strategy for maximising the investment returns for assets.
The new company, which has been set up for five years, will be managed by the Scottish offices of Montagu Evans.
Pauline Bradley, the head of joint ventures at the Bank of Scotland, said: “This deal demonstrates how our partnering approach of forming strategic alliances with proven management teams in specific asset-backed sectors can add value to our relationships. We are delighted to be participating in this innovative deal both as debt and equity providers, and are confident we will deliver real value to all parties concerned."
Bank of Scotland Corporate Banking has established a strong portfolio of about 2.5 billion across almost 40 joint venture investments.
Bill O’Hara, the managing partner of Montagu Evans in Scotland, said: "We are delighted to be co-investing with Ann Gloag and Brian Souter and the Bank of Scotland in a sector which we believe has strong potential for a positive yield shift and rental growth."
In connection with the deal, Montagu Evans has added further weight to its property investment profile with two key appointments.
David Robb joins from Morley Fund Managers, while Alan Harris has been added from Grant Samuel, the Australian investment bank.
Robb will take responsibility for the asset management of Fusion Securities, UK Retail Portfolio 1 and the new company which Montagu Evans has formed to acquire further retail property with HBOS and Ms Gloag. The Scottish entrepreneurs Tom Hunter and John Boyle are investors in Fusion Securities and UK Retail Portfolio 1 respectively.
Alan Harris also has been appointed to assist with the formation of syndication vehicles and with corporate structures.