UK Balanced Property Trust Ltd(The)
15 February 2007
THE UK BALANCED PROPERTY TRUST LIMITED
(Registered in Guernsey - Number 39171)
C/o BUTTERFIELD FUND SERVICES (GUERNSEY) LIMITED
P.O. BOX 211, REGENCY COURT, GLATEGNY ESPLANADE, ST. PETER PORT,
GUERNSEY, GY1 3NQ, CHANNEL ISLANDS.
TELEPHONE: + 44 1481 720321
FACSIMILE: + 44 1481 716117
15 February 2007
THE UK BALANCED PROPERTY TRUST LIMITED (the 'Company')
Change of investment manager and increase in dividend
Following a number of recent changes to the personnel at Scottish Widows
Investment Partnership Limited ('SWIP') involved in the management of the
Company's assets, in particular the resignation of Michael Cunningham, the Board
announced on 20 November 2006 that it was undertaking a review of the ongoing
management arrangements of the Company.
As a result of this review, the Company has served notice on SWIP terminating
the existing investment management agreement between them with effect from 1 May
The Board is delighted to be able to announce that it has retained the services
of the former management team of the Company through the proposed appointment of
Cordatus Partners Limited ('Cordatus'). Accordingly, the Company will benefit
from continuity in the successful management of the Company's assets.
New Investment Manager
Cordatus is a newly established property fund management business including the
former management team of the Company. The team at Cordatus comprises Tom
Laidlaw (chief executive), Michael Channing, Michael Cunningham, Alex Porte
(finance director) and Peter Arthur (non-executive chairman).
The Cordatus team collectively have over 60 years of property management
experience and, until recently, Tom Laidlaw oversaw the management of the £7
billion of property assets under management at SWIP. It is intended that
Michael Cunningham will remain the lead fund manager for the Company. Since
Michael became the lead fund manager of the Company in June 2003, the net asset
value total return (including dividends) has been 18.7% per annum compared with
a total return of 17.6% per annum over the same period for the IPD Monthly
It is anticipated that the Cordatus team will hold 75% of the equity of Cordatus
and that the Company will acquire 25% of the equity. There will be no third
party investors in Cordatus. It is expected that the Cordatus team will be able
to increase their equity stake to 80% on the achievement of certain performance
targets. The Company will benefit from typical institutional investor
protections as a shareholder in Cordatus and will be entitled to appoint a
director to the board of Cordatus.
Investment management agreement
Cordatus will enter into an investment management agreement with the Company on
the same terms and with the same duties as exist with SWIP, subject to the
a) The management fee, which is currently 1.15% per annum on gross assets up
to £250 million and 1.0% per annum thereafter (giving a blended rate of 1.09%
per annum) will be reduced to 0.75% per annum on gross assets. This fee will
exclude certain managing agents' costs, which are currently included in the SWIP
fee, that amount to approximately 7.5 basis points per annum and will be borne
by the Company. Cordatus has agreed to cap these costs at 10 basis points per
b) The current additional administration fee of £45,000 per annum will not be
charged by Cordatus.
c) The notice period for termination of the agreement will remain at 12 months
but there will be an initial two year notice period.
d) A key man clause will be introduced that will provide that the Company can
terminate the agreement without notice if any two of Tom Laidlaw, Michael
Channing and Michael Cunningham leave Cordatus.
The Board has entered into legally binding heads of terms for the appointment of
Cordatus as the new investment manager of the Company on the basis described
It is expected that the appointment of SWIP will be terminated on 30 April 2007
and Cordatus will be formally appointed as the new investment manager on 1 May
2007. Cordatus will commence the transition of the management of the Company
immediately in order to ensure a smooth handover.
The Company has already served protective notice on SWIP. Cordatus has agreed
to meet the compensation that will be payable to SWIP under the terms of the
existing investment management agreement in respect of the remaining period of
Each party will bear its own costs in negotiating the terms of the new
investment management agreement and the investment by the Company in Cordatus.
The Company's equity stake will cost approximately £100,000.
The reduction in the management fees will result in an annual costs saving to
the Company of approximately £1.14 million.
Increase in dividend
It is the Board's intention that this significant reduction in costs, together
with the confidence that the Board has in the management team's performance and
strategy, will allow the Company to increase the dividends payable to
shareholders. Accordingly, in the absence of unforeseen circumstances, the
Board expects to increase the dividend in respect of the financial year
commencing on 1 April 2007 to 7.5p per share, payable in four equal instalments,
with the first increased dividend being payable in July 2007 (this is not a
profit forecast). This is an increase of 5.3% over the current dividend of
7.125p per share.
The Board believes that the structure to be put in place at Cordatus will
incentivise the team to maintain the strong performance of the Company and also
offers the Company a significant equity stake in a new property investment
management business that it expects will grow significantly. The Board was also
impressed by the commitment of the team at Cordatus to the Company and its
shareholders and their faith in the investment strategy of the Company.
The Board is also strongly of the view that maintaining the continuity of the
management of the Company's assets will strengthen the prospects for the
continued performance of the Company. The significant reduction in the costs of
managing the Company also enhances the capacity for the Board to continue to
offer a high dividend yield to shareholders.
Chairman, The UK Balanced Property Trust Limited
Dickson Minto W.S.
0207 628 4455/0131 225 4455
This information is provided by RNS
The company news service from the London Stock Exchange