Financial services company Legal & General (L&G) and property investment trust Federated Hermes Property Unit Trust (FHPUT) have announced the merger of their UK property funds. This strategic move results in a combined portfolio valued at approximately £4.7 billion ($6.37 billion), strengthening their market position.
The commercial property sector has faced considerable challenges since the onset of the COVID-19 pandemic. Factors such as rising borrowing costs, increased vacancy rates, and shifts in working patterns—where remote work has become more prevalent—have profoundly impacted the profitability and attractiveness of commercial real estate investments.
Against this backdrop, the merger is a response to the challenging trading conditions that have compelled various UK property funds to either close their operations or merge over the past few years.
As part of the merger, a substantial portion of the investments held by FHPUT’s unitholders will be transferred to L&G’s Managed Property Fund (MPF). This fund will assume ownership of FHPUT’s extensive real estate portfolio, comprising a diverse range of commercial properties across the UK. The consolidation is expected to enhance operational efficiencies and create a more resilient investment vehicle for unitholders going forward.
KEY QUOTES:
“Bringing together two of the UK’s most established property funds is a significant step in our strategy to strengthen our market position. It reinforces the collaborative approach that underpins L&G’s private market platform growth, our credibility as a partner of choice for consolidation opportunities and our abilities to execute innovative solutions.”
“Through combining deep sector expertise with strong partnerships, we will continue to seek resilient, long-term value for investors. The overwhelming support from FHPUT unitholders is a clear vote of confidence – both in our strategy and in our partnership with Federated Hermes.”
Michael Barrie, Head of Real Estate, UK & Europe, L&G
“We are proud to be able to announce today the successful merger of FHPUT with the L&G Managed Property Fund. It is also with a sense of pride, and some nostalgia, that we bring our 24-year association with FHPUT, a consistent strong performer, to a close. As the market has evolved, the needs of our clients have likewise changed and, we therefore sought this merger to provide the best options possible for them.
“This outcome follows months of detailed and thoughtful planning, undertaken in close consultation with FHPUT’s unitholders. Our goal throughout has been to deliver a solution for our investors that offers continued market exposure to the majority, where feasible, while enhancing both stability and liquidity over the long term.”
“We are confident that the L&G Managed Property Fund – managed by a like-minded and highly experienced team – will continue to serve our clients with the same excellence and integrity they have come to expect. We are grateful to the L&G team for their collaborative and constructive approach throughout this process.”
Mark Russell, Chief Investment Officer for Federated Hermes Real Estate
“The MPF has been very acquisitive over the last 18 months, and this merger will continue to expand and strengthen our property portfolio. The assets complement existing holdings, and we expect the combined portfolios to drive strong returns for all investors. It has been a pleasure to collaborate with Federated Hermes through this process, to deliver a compelling solution for the FHPUT unitholders who we look forward to welcoming into the MPF.”
Rob Codling, Head of Commercial Funds – Real Estate Equity, L&G
