UPDATE 2-F&C signs property tie-up with REIT, eyes global growth

(Updates following conference call)

By Sinead Cruise and Mark Potter

LONDON, July 22 (Reuters) - F&C Asset Management (FCAM.L) has merged its property operations with one of Britain's largest private property investors in a deal that raises its exposure to European real estate and marks its entry into the Indian property market.

The fund manager, majority owned by British insurer Friends Provident FP.L, said on Tuesday it had teamed up with REIT Asset Management, an international property investment boutique owned by entrepreneurs Leo Noe and Ivor Smith.

The resulting company -- F&C REIT -- will be 70 percent owned by F&C and 30 percent owned by REIT and will have around 8.5 billion pounds ($17 billion) of property assets under management.

F&C Chief Executive Alain Grisay said the deal was in line with a three-year strategic plan which specifically identified real estate as a key growth initiative.

"This is not about making a short-term call on the property market," Grisay said in a conference call, referring to the ongoing UK property price correction which has wiped almost a fifth off the value of commercial real estate in just over a year.

"The transaction brings scale...and entrepreneurial management to a very important component of our clients' long-term portfolio," he said.

One of the UK's most intrepid private property investors, REIT Asset Management has offices in Tel Aviv, Istanbul and Mumbai as well as Munich, Stockholm and London.

Set up in 1996, the firm specialises in the creation and management of property investment vehicles for institutional and private clients.

Grisay said REIT's broad international reach would help F&C further diversify its portfolio of property assets outside of the UK and Ireland, and "into markets with huge potential, such as India", where REIT has been active in residential development since 2005.

DEAL TERMS

Under terms of the deal, F&C will pay 25 million pounds in cash and 35 million pounds in loan notes to REIT.

Subject to F&C REIT meeting earnings performance targets, REIT's ownership could rise to up to 40 percent by the end of 2014.

Leo Noe will be executive chairman of F&C REIT, while Nick Criticos of F&C will be chief executive and Ivor Smith will be an executive.

F&C said the deal would be earnings accretive in the first full year following completion and create opportunities to launch new funds and harness additional performance fees across a larger, more diversified client base.

REIT's largest client, Trafalgar Overseas, has endorsed the tie-up and agreed to pay a minimum 14 million pounds performance fee per annum to F&C REIT for the five years following completion of the deal.

(Reporting by Sinead Cruise and Mark Potter; Editing by Jason Neely)

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)