DEAL OF THE WEEK – HERCULES UNIT TRUST

Linklaters wins HUT deal as Gouldens is conflicted out

Linklaters was brought in to advise the Hercules Unit Trust (HUT) on acquisitions worth more than £360m, after usual adviser Gouldens was conflicted out as it was already involved in the transaction.
Linklaters and Gouldens both played key roles in the negotiations and intricate contract structures for a series of deals which will make HUT the UK's largest property unit trust, with gross assets of £1.45bn.
The Jersey-based vehicle was set up in September 2000. Managed by Schroder Property Managers (Jersey), a subsidiary of Schroders, and advised by Pillar Property, it now has an asset base to rival some of the UK's largest property companies. The aim is to give investors indirect property access to big-ticket items, such as shopping centres, in units that are easily tradable and do not incur stamp duty.
Gouldens property partner David Roberts said: “Historically, people bought and sold shares in property companies. Pillar is aiming to set up a secondary market in units.”
Roberts advised longstanding Gouldens client Pillar on the sale of retail parks at Chester and Preston to the trust. Subject to Pillar shareholder approval of the contracts, the assets will be bought for a consideration made up of cash, the issue of new units in HUT and the assumption of Pillar debt.
Shepherd & Wedderburn advised Pillar on the sale of a fourth retail park at Kinnaird, while McGrigor Donald advised the trust. Pillar sold the three parks for £444m, including debt.
Pillar was already an investor in HUT, holding 47 per cent, as well as being property adviser to the trust. Gouldens is a regular adviser to both HUT and Pillar. However, because Pillar was selling its own properties to the trust, Gouldens was conflicted out of acting for HUT on the property aspects of these deals.
The conflict helped give Linklaters the chance of a role in the transaction. Real estate partners Kirsty Corkum and Julian Innes-Taylor led the Linklaters team. They are also advising the trust on the acquisition of Fosse Park, Leicester, from the Retail Property Unit Trust (RPUT), by a transfer of units from that trust. RPUT is also managed and advised by Schroders and Pillar.
Corkum said: “Some parts of the retail parks were only recently completed and let. The challenge was to ensure that HUT was put into the position of buying a fully income-producing investment.”
Gouldens advised HUT on acquisition finance, with head of banking Tom Budd leading the team with partner Liz Saxton. Allen & Overy advised HypoVereinsbank on acquisition finance.
It is understood that Gouldens will continue to act for both Pillar and HUT. The acquisitions by the trust from Pillar are part of a larger transaction, including retail parks owned by Equitable Life and Merrill Lynch Property Fund. Gouldens has been able to take up its usual role for the trust on these acquisitions.