ABERDEEN Asset Management yesterday braved the weakening commercial property sector, making a £130 million acquisition which put it among the ten largest property management companies in the world.
Announcing interim results yesterday, AAM revealed it is paying an initial £89m cash for Goodman Property Investors. It will pay up to an additional £40.9m based on the value of Goodman's assets when the sale is completed over the next two years.
AAM placed 65 million new shares in the market yesterday to help fund the acquisition, raising £97.65m before costs.
Once the deal is completed, the company will manage property assets worth more than £24 billion, second in the UK sector only to Morley Fund Managers among the top ten property managers in the world.
The move comes at a time when most commentators are issuing warnings of a potential significant fall in UK commercial property values.
Last week, the Bank of England warned the UK's major commercial banks could lose almost a fifth of their annual profits if conditions in the sector continue to decline.
However, AAM finance director Bill Rattray said yesterday that while the company believed there was potential for the value of UK commercial property to fall in the short term, Goodman provided them with a strong long-term platform.
He commented: "We would subscribe to the view that there may still be some downside in UK commercial property (in the short term] but in the longer term this gives us a good platform to build on."
AAM already managed property assets worth £17.2bn but this portfolio was almost exclusively based in continental Europe. The company had been seeking an acquisition to boosts its UK assets.
Goodman, one of the UK's largest specialist property fund managers, has 93 per cent of its more than £7bn in assets under management invested in the UK.
Rattray said the deal, which is expected to enhance earnings next year, filled "an obvious gap" in its portfolio."
Goodman has 160 staff, mainly in the UK, including an office in Glasgow.
The deal was announced as Aberdeen reported a pre-tax profit of £47.3m for the six months to 31 March, an increase of 8.4 per cent on the same period a year ago, but at the lower end of forecasts.
Helped by acquisitions, total assets under management rose by a third to £107.3bn, well ahead of market forecasts of around £100bn.
Shares fell 4.25p to 145p, but the shares placed in the market by Aberdeen were bought at 150p a share.
