BTPS seeks equity partner to inject fresh funds into MEPC

Fund may cut its holding in business park operator by half in long term

An adviser is to be appointed to help find an equity partner for MEPC owner BT Pension  Services (BTPS), which is  advised by Hermes. BTPS could aim to reduce its ownership in the business park operator by up to half, but a deal is still a few months away. MEPC chief executive Rick  de Blaby said: “BTPS is in no hurry to dilute and will remain a cornerstone investor, because it believes that MEPC has a strong future and can sustain its high dividend yield.”

He added: “The likely preference is for a club deal that enables BTPS to achieve dilution and raise additional equity for the MEPC business, so it can grow its portfolio.” North American pension funds or global sovereign wealth funds are tipped as likely buyers. De Blaby said a co-investor would share BTPS’s long-term outlook, “desire for robust and diverse income and the attraction of low gearing under the management of a proven team”.

MEPC, which plans to convert to a REIT in three to five years’ time, hopes to bring in £50m –  £100m of fresh equity, to be spent not just on business parks  but on industrial estates, science parks, urban quarters and large single buildings. Meanwhile, some of the debt granted to MEPC as part of a £470m CMBS refinancing ahead of its 2012 maturity is in the process of being syndicated.

MEPC financed the prepayments with £320m of new debt on five – and seven-year terms. The new debt was supplied by Eurohypo, which issued two loans, one for £62m and one for £53.6m; Deutsche Hypo  and Santander, which together issued another £59.4m loan; and Deutsche Bank, which issued a fourth, £145m loan. At 175bps, the banks’ margins were similar to those on the CMBS debt. Property sales generated a further £150m. Eurohypo arranged the original Opera Finance (MEPC) CMBS in 2005, secured against four UK business parks.