NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR INTO OR FROM
ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION IN PARTICULAR THE UNITED STATES,
CANADA, AUSTRALIA AND JAPAN
This announcement
is for information purposes only and shall not constitute an offer
to sell or issue or the solicitation of an offer to buy, subscribe
for or otherwise acquire any ordinary shares of Standard Life
Investments Property Income Trust Limited in any jurisdiction in
which any such offer or solicitation would be unlawful.
13 November 2015
RECOMMENDED
PROPOSALS IN RELATION TO THE ACQUISITION OF THE NEW PORTFOLIO AND
THE INITIAL PLACING AND OFFER FOR SUBSCRIPTION
| Introduction |
The Board announces
that the Company has entered into the conditional Acquisition
Agreement in relation to the acquisition of a new portfolio of 22
UK commercial real estate assets. The Acquisition is to be
effected by the Company and the Property Subsidiary acquiring all
of the units in the JPUT and the entire issued share capital of the
General Partner which holds, through the Limited Partnership, the
New Portfolio. The JPUT and the Limited Partnership were
established in September 2013 with the principal purpose of
investing in and holding the New Portfolio. The New Portfolio
comprises 22 UK commercial properties and is complementary to the
Company's Property Portfolio (for a detailed analysis of the
existing Property Portfolio, the New Portfolio and the Combined
Portfolio, please see Appendix I).
In order to complete this Acquisition, the Board is proposing to
raise up to £100 million by issuing New Shares pursuant to an
Initial Placing and Offer for Subscription at an Issue Price of
82.0 pence per New Share representing a 2.84 per cent. premium to
the NAV per Share as at 30 September 2015 once the accrued
dividends for the period ending 30 September 2015 have been
deducted. The Board will also need to utilise the New Bank
Facility which will allow the Group to borrow up to approximately
£70.6 million (in addition to the existing Bank Facility) and its
existing, available cash reserves of approximately £22 million
to complete the Acquisition. |
| The Acquisition is considered to be
a significant transaction under the Listing Rules and, as a
consequence, it requires Shareholder approval. The Listing Rules
also provide that the Company must seek Shareholder approval prior
to issuing its Shares on a non pre-emptive basis. The Company
will shortly publish a Prospectus and Circular which will provide
Shareholders with further details of the Acquisition and the
Initial Placing and Offer. The Circular will also provide
Shareholders with notice of the General Meeting of the Company at
which Shareholders will be asked to consider and, if thought fit,
pass the Resolutions to approve the Acquisition and issue of New
Shares pursuant to the Initial Placing and Offer on a non
pre-emptive basis. |
| Reasons for and Benefits of the
Acquisition and the Initial Placing and Offer for
Subscription |
| The Board believes that the
Proposals offer significant benefits for all Shareholders as noted
below: |
The Board believes that
if the Proposals are successful, the Company's existing
Shareholders will, in particular, benefit from the reduced ongoing
charge, the favourable terms of the New Bank Facility Agreement and
the lower costs of investing the Company's existing cash reserves
in the New Portfolio through the acquisition of the JPUT as opposed
to the direct acquisition of UK commercial real estate
assets. For these reasons and the reasons set out above, the
Board is recommending that Shareholders vote in favour of the
Proposals at the General Meeting.
Standard Life Investments Pooled Pensions Property Fund has
indicated that it intends to subscribe for approximately 7.3
million New Shares for an aggregate price of £6 million under the
Initial Placing and Offer. |
| The property portfolios |
| The Company's existing Property
Portfolio |
| As at 30 September 2015, the
Property Portfolio comprised 42 UK commercial properties with an
aggregate market value of approximately £308.8 million. The
Property Portfolio generates a current net annual rent of
approximately £19.2 million (being an Income Return of 5.9 per
cent.) and an aggregate estimated net annual rent of approximately
£22 million (giving an equivalent yield of 6.7 per cent.). |
According to the Dun
and Bradsheet failure score 74.8 per cent. of the Company's income
is from tenants rated as having a negligible or low risk of failure
score. The average unexpired lease term to earliest termination of
the occupational leases of these Properties (weighted by current
gross annual rent) is approximately 7 years and 1 month and all of
the rent review provisions in the occupational leases of the
Properties are upwards only or subject to fixed/indexed
increases.
The Company announced on 9 November 2015 that it had completed the
sale of the Maple Cross Property for a consideration of £14.75
million. |
| The New Portfolio |
| The Company and its Property
Subsidiary have entered into the conditional Acquisition
Agreement to acquire all of the units in the JPUT and the
entire issued share capital of the General Partner. The JPUT holds,
indirectly through its interest as the sole limited partner in the
Limited Partnership, the New Portfolio. The New Portfolio is
diversified by sector, tenant and region and is complementary to
the Property Portfolio. The New Portfolio comprises 22 properties
UK commercial properties with an aggregate market value of
approximately £165 million as at 19 October 2015. The New
Portfolio generates a current net annual rent of approximately
£10.8 million (being a net initial yield of 5.96 per cent.). |
| According to the Dun and Broadsheet
failure score 82 per cent. of the New Portfolio's income is from
tenants rated as having a negligible or low risk of failure score.
The average unexpired lease term of the occupational leases of the
New Properties (weighted by current gross annual rent) is
approximately 4 years and 2 months and all of the rent review
provisions in occupational leases of the New Properties are upwards
only or have fixed/indexed increases. |
| The Combined Portfolio |
| In the event that the Resolutions
are approved by Shareholders and the Acquisition is completed, the
Combined Portfolio will comprise 63 properties with an aggregate
market value of £460 million (on the basis of the valuations of the
Property Portfolio as at 30 September 2015 and the New Portfolio as
at 19 October 2015). The Combined Portfolio would generate a
current net annual rent of approximately £29 million (being a net
initial yield of 5.97 per cent.). |
| The average unexpired lease term of
the occupational leases of these properties (weighted by current
gross annual rent) is approximately 6 years and 2 months, compared
to the equivalent figure for an average commercial property
portfolio, as represented by the independent IPD IRIS (excluding
leases over 35 years), of 7 years and 4 months. |
| The Directors believe that the
Combined Portfolio will be accretive to the level of dividend cover
and will provide a number of asset management opportunities which
should enhance the income profile and the capital value of the
assets. |
| Details of the terms of the
Proposals |
The Initial Placing
and Offer
In order to complete this Acquisition, the Company is proposing to
issue up to 121,951,220 New Shares under the Initial Placing
and Offer (representing up to approximately 42.3 per cent. of the
Company's current issued share capital) to raise up to
approximately £100 million. The Issue Price is 82.0 pence
representing a premium of 2.84 per cent. to the NAV per Share as at
30 September 2015 once the accrued dividends for the period ending
30 September 2015 have been deducted. The net proceeds of the
Initial Placing and Offer will be used to fund the Acquisition
together with the New Bank Facility and the Company's existing cash
resources. If the Initial Placing and Offer does not proceed and
Admission does not occur, the Acquisition will not proceed and no
funds will be drawn down under the New Bank Facility.
The Initial Placing and Offer is conditional on:
(i)
the Placing Agreement becoming wholly unconditional (save as to
Admission) and not having been terminated in accordance with its
terms prior to Admission;
(ii) the
Admission Condition being satisfied prior to 8.00 a.m. on 15
December 2015 (or such later time and/or date, not being later than
8.00 a.m. on 18 December 2015 as the Board may determine);
(iii) Shareholder
approval being granted in respect of the issue of New Shares, on a
non pre-emptive basis, in relation to the Initial Placing and Offer
and the Acquisition at the General Meeting; and
(iv) the gross
proceeds of the Initial Placing and Offer being the equivalent of
at least £80 million (the "Minimum Issue Proceeds").
The maximum number of New Shares to be issued pursuant to the
Initial Placing and Offer will be 121,951,220. In the event that
the number of New Shares applied for under the Initial Placing and
Offer at the Issue Price results in the Company receiving gross
proceeds which are significantly in excess of the size of the
Initial Placing and Offer then it would be necessary to scale back
such applications. In such event New Shares will be allocated, as
far as reasonably possible, so that applications from existing
Shareholders are given priority over other applicants, and, where
applicable, with a view to ensuring that existing Shareholders are
allocated such percentage of New Shares as is as close as possible
to their existing percentage holding of Ordinary Shares.
The actual number of New Shares issued under the Initial Placing
and Offer will be determined by the Company and the Placing Agent,
after taking into account demand for the New Shares, prevailing
market conditions and the acquisition costs of the New Portfolio.
The final results of the Initial Placing and Offer and any scaling
back will be announced via a Regulatory Information Service.
In the event that Admission does not occur, the Acquisition of the
New Portfolio will not complete and any monies raised under the
Initial Placing and Offer will be returned to investors. |
The
Acquisition
The Company and the Property Subsidiary have entered into the
conditional Acquisition Agreement with the Vendors dated
12 November 2015. Under this Acquisition Agreement the
Company and the Property Subsidiary have agreed to purchase the New
Portfolio by way of acquiring all of the units in the JPUT (the
sole limited partner in the Limited Partnership) and the entire
issued share capital in the General Partner (the general partner of
the Limited Partnership). The JPUT was established on 11
September 2013 and its principal activity is to invest in the
Limited Partnership which holds the New Portfolio. The JPUT has not
taken out any debt. It's income is derived solely through its
investment in the New Portfolio, by way of it being the sole
limited partner of the Limited Partnership, and its expenditure
relates only to administration and advisory expenses and property
expenses.
Pursuant to the Acquisition Agreement, the aggregate consideration
payable for all of the units in the JPUT, shares in the General
Partner and the New Portfolio will be approximately £165 million
adjusted to take into account any accruals and contingencies of the
JPUT and the Limited Partnership on the date of completion of the
Acquisition. The Company will need to use the net proceeds of
the Initial Placing and Offer, the New Bank Facility and its
existing cash reserves to fund the Acquisition. The New
Properties have been externally valued by Knight Frank with a
market value as at 19 October 2015 of approximately £165
million.
In addition to the conditions to the Initial Placing and Offer (as
set out above) including the condition that the Minimum Issue
Proceeds require to be raised under the Initial Placing and Offer,
the Acquisition Agreement provides that the Acquisition is
conditional on: (i) at least £80 million (or such lower
amount as the Company shall, in its discretion, consider is
sufficient to enable it to proceed to completion of the
Acquisition) being raised pursuant to the Initial Placing and
offer; and (ii) JFSC consent being granted in relation to the
change in investment manager of the JPUT on completion.
The Acquisition is also conditional upon Shareholder approval being
granted in favour of the resolutions at the General Meeting and the
satisfaction of all of the conditions precedent in the New Bank
Facility Agreement (which are customary for a facility of this
nature and include that sufficient funds must be raised under the
Initial Placing and Offer to satisfy the Minimum Issue
Proceeds). Therefore if the Minimum Issue Proceeds are not
raised under the Initial Placing and Offer, the Acquisition will
not complete and no new funds will be able to be drawn down under
the New Bank Facility.
The Acquisition Agreement contains warranties, indemnities and
representations customary to agreements of this nature. The
liability of the Vendor in relation to these warranties,
indemnities and representation has been capped to a nominal
value. Therefore warranty and indemnity insurance has been
taken out on behalf of the Company and the Property Subsidiary.
Completion of the Acquisition is expected to occur on 15 December
2015 immediately after Admission. The parties are entitled to
rescind the Acquisition Agreement in the event that the conditions
thereto are not satisfied by 18 December 2015.
The current intention of the Group is to undertake a restructuring,
immediately post Acquisition, involving the New Properties and the
subsequent liquidation of the JPUT. |
|
| Gearing and borrowings |
| The Company has the power under the
Articles to borrow an amount up to 65 per cent. of the Group's
gross assets. It is the present intention of the Directors that the
Company's loan to value ratio (calculated as borrowings less all
cash as a proportion of the Property Portfolio valuation) will not
exceed 45 per cent. and the Investment Manager is currently
instructed to target a LTV between 25 per cent. to 35 per
cent. |
| The Group's current
borrowings |
| The Group currently has a fully
drawn down debt facility of £84,432,692 with the Bank which is
repayable on 16 December 2018. As at 30 September 2015, the Group's
LTV was approximately 22 per cent. |
| Interest on the Bank Facility is
payable at a rate equal to the aggregate of three month LIBOR, and
a margin of 1.65 per cent. per annum (below 40 per cent. LTV) or
1.75 per cent. per annum (40 to 60 per cent. LTV inclusive) or 1.95
per cent. (above 60 per cent. LTV). The current applicable margin
is 1.65 per cent. per annum. |
| The Group has two interest rate swap
agreements with the Bank for a notional principal amount of
£84,432,692 in aggregate which results, based upon current LTV, in
the all-in margin in respect of the Group's borrowing being fixed
until 16 December 2018 at 3.66 per cent. per annum. If the existing
Bank Facility is repaid prior to 16 December 2018 such swaps will
require to be broken and the associated termination costs will
require to be paid. |
| The Group's proposed additional
borrowings on completion of the Acquisition |
The Property Subsidiary
and the Company have entered into the New Bank Facility
Agreement with the Bank conditional on, inter alia, the
completion of the Acquisition and the satisfaction of the
conditions precedent (which are customary for a facility of this
nature). The New Bank Facility is in addition to the existing
Bank Facility and consists of the New Term Loan of £40,567,308 and
the Revolving Credit Facility of £30,000,000 which amounts to, in
aggregate, £70,567,308.
The Facility Agreement will therefore be amended, subject to the
completion of the Acquisition, pursuant to an amendment and
restatement agreement (the New Bank Facility Agreement) in order to
effect the new terms of the existing Bank Facility and the New Bank
Facility. The New Bank Facility Agreement has a term of 18
months. Therefore, as a result of these new arrangements the
repayment date, in relation to the existing Bank Facility (as well
as the New Bank Facility) has been brought forward from 16 December
2018 to 17 June 2017. Interest will be payable in relation to
the existing Bank Facility at the all-in rate of 3.26 per cent. per
annum pursuant to the swaps that are already in place (further
details on the swaps are set out above) and in relation to the New
Bank Facility at a rate equal to the aggregate of the applicable
LIBOR rate and a margin of 1.25 per cent. per annum.
For illustrative purposes and on the assumption that the maximum
amount under the New Bank Facility is required to be drawn down,
the Group's maximum level of borrowings (the existing Bank Facility
plus the New Bank Facility) will be £155 million, and the maximum
LTV, once the New Portfolio has been acquired, would be
approximately 32 per cent. The structure and
terms of the New Bank Facility Agreement provide the Company with
the flexibility to make repayments prior to the repayment date of
17 June 2017. Thereby it could reduce the LTV shortly
after the completion of the Acquisition with the proceeds of any
disposals of New Properties (or existing Properties). In the event
the Revolving Credit Facility is repaid in full with the proceeds
of any disposals, the Group's maximum LTV (assuming the maximum
amount under the New Term Loan is drawn down) could reduce to
approximately 28 per cent. The Property
Subsidiary will only draw down funds under the New Bank Facility
once Admission has occurred on the completion of the
Acquisition. |
| The Property Subsidiary does
not currently intend to hedge the New Bank Facility. In the light
of the current low interest rate environment it is likely that the
Group would look to refinance all of their debt (the existing Bank
Facility as well as the New Bank Facility) in the near term. As
part of the refinancing the Group would have to break the existing
interest rate swaps and it would, at that time, consider entering
into the new arrangements to mitigate interest rate risk in respect
of any new debt incurred. |
| Dividends |
| Dividend policy |
| It is the Board's policy that in
paying dividends it should target aggregate annual dividends which
are fully covered by the Group's net income. Dividends on the
Ordinary Shares are expected to be paid in equal instalments
quarterly in respect of each financial year in March, May, August
and November. All dividends are paid as interim dividends. |
| Payment of dividends |
The Company has
declared a dividend of 1.161 pence per Share for the quarter ending
30 September 2015 which will be paid on 27 November 2015 to
existing Shareholders.
The Company expects that its final interim dividend of 1.161 pence
per Share in respect of the period to 31 December 2015 will be
split into: (i) a fourth interim dividend for the period between 1
October 2015 and 14 December 2015 (the date immediately prior to
Admission and the completion of the Acquisition); and (ii) a fifth
interim dividend for the period between 15 December 2015 and 31
December 2015. The Company's existing Shareholders will qualify for
the fourth and fifth interim dividends in respect of their existing
holdings of Ordinary Shares which together equal the equivalent of
1.161 pence for the quarter per Share. New Shares issued
pursuant to the Initial Placing and Offer will only qualify for the
fifth interim dividend. |
| Save as referred to above, New
Shares will rank pari passu with the Ordinary Shares in
respect of dividends. |
| In the event that the Acquisition
completes, the Board believes that the dividend cover would be
enhanced. Accordingly if the Acquisition completes it is the
Board's intention to increase the quarterly dividend by 2.5 per
cent. to 1.19 pence per Share commencing with the quarter ending 31
March 2016. If Admission does not occur and the Acquisition does
not proceed, the Board does not intend to increase the dividend in
the near term but will continue to keep the Company's dividend
policy under review. |
| Costs and expenses of the
Proposals |
| The costs and expenses of the
Proposals (including the consideration for the purchase price of
the JPUT and the New Portfolio, the commission payable to the
Placing Agent and the costs in relation to the publication of the
Prospectus and the Circular) are expected to be approximately
£171 million. The New Shares will be issued at a
premium of 2.84 per cent. to the NAV per Share as at 30 September
2015 once the accrued dividends for the period ending 30 September
2015 have been deducted. |
| Indicative timetable |
| An indicative timetable of principal
events is as follows: |
| Event |
Indicative Timing |
| Initial Placing and
Offer opens |
17 November 2015 |
| Publication of Circular
and Prospectus |
17 November 2015 |
| Latest date for receipt
of Application Forms under the Offer |
9 December 2015 |
| Latest date for
commitments under the Initial Placing |
10 December 2015 |
| General Meeting |
11 December 2015 |
| Results of the Initial
Placing and Offer and General Meeting announced |
11 December 2015 |
| Admission and dealings
in New Shares commence |
15 December 2015 |
|
| A more detailed timetable will be
included in the Prospectus. |
| General |
| In deciding whether or not to vote
in favour of the Resolutions at the General Meeting to implement
the Proposals, Shareholders should rely only on the information
contained in, and should follow the procedures described in, the
Circular and the Prospectus. |
All enquiries:
Jason Baggaley/Gordon Humphries,
Standard Life Investments
Tel: 0131 245 2833/0131 245 2735
Graeme Caton, Winterflood Investment
Trusts
Tel: 020 3100 0268
Douglas Armstrong, Dickson Minto
W.S.
Tel: 020 7649 6823
Winterflood Securities Limited, which is authorised and
regulated by the Financial Conduct Authority, is acting for the
Company and for no-one else in connection with the Proposals and
will not be responsible to anyone other than the Company for
providing the protections afforded to clients of Winterflood
Securities Limited, or for affording advice in relation to the
Proposals.
Dickson Minto W.S., which is authorised and regulated by the
Financial Conduct Authority, is acting for the Company and for
no-one else in connection with the Proposals and will not be
responsible to anyone other than the Company for providing the
protections afforded to clients of Dickson Minto W.S., or for
affording advice in relation to the contents of the Proposals.
APPENDIX I
DETAILS OF THE PROPERTY
PORTFOLIO, THE NEW PORTFOLIO AND THE COMBINED PORTFOLIO
A detailed description and comparison
of the Company's existing Property Portfolio (based on the Valuer's
valuation report as at 30 September
2015), the New Portfolio (based on the Knight Frank
valuation report as at 19 October
2015) and the Combined Portfolio is set out below:
| Properties* |
Sector |
Region |
Current net annual rent
receivable |
| Properties valued at
£15 - £20 million – Property Portfolio |
| White Bear Yard, Clerkenwell,
London |
Standard Office |
London Mid-Town |
£527,334 |
| DSG Blackpool Road, Preston |
Retail Warehouse |
North West |
£1,040,895 |
| Chester House, Farnborough Aerospace
Centre, Farnborough GU14 6TQ (Leasehold) |
Office Park |
South East |
£1,257,640 |
| The Symphony Group, Ickles Way,
Rotherham |
Industrial ROUK |
North West |
£1,080,000 |
| Properties valued at
£15 - £20 million – New Portfolio |
| Elstree Tower, Borehamwood |
Standard Office |
South East |
£1,320,000 |
| Properties valued at
£10 - £15 million – Property Portfolio |
| Denby 242, Denby, DE5 8NN |
Industrial ROUK |
Midlands |
£0 Rent Free,
£1,153,138 per annum from 15 March 2015 |
| Hertford Place Maple Cross
Rickmansworth |
Standard Office |
South East |
£1,156,900 |
| St James's House, Cheltenham |
Standard Office |
Midlands |
£862,102 |
| 3b-c Michigan Drive Milton
Keynes |
Industrial ROSE |
South East |
£712,980 |
| Hollywood Green, Wood Green,
London |
High Street
Retail |
London |
£787,878 |
| Bourne House, The Causeway,
Staines |
Standard Office |
South East |
£0 Rent Free,
£696,995 per annum from 15 January 2016 |
| Ocean Trade Centre, Altens
Industrial Estate, Aberdeen |
Industrial ROUK |
Scotland |
£442,700 |
Ground Floor, New Palace
Place, Monck Street,
Westminster, London (Leasehold) |
Standard Office and
Retail |
London |
£546,103 |
| Howard Town Retail Park,
Glossop |
Retail Warehouse |
North West |
£677,430 |
| Properties valued at
£10 - £15 million – New Portfolio |
| Charter Court, Bath Road,
Slough |
Standard Office |
South East |
£815,448 |
| 82-84 Eden Street, Kingston Upon
Thames |
Retail |
Greater London |
£200,264 |
| Properties valued at
£5 - £10 million – Property Portfolio |
| Tetron 141, Swadlingcote |
Industrial ROUK |
Midlands |
£635,216 |
| Explorer 1 & 2, Mitre
Court, Crawley |
Standard Office |
South East |
£701,490 |
| 1/1A Marsh Way, Fairview Industrial
Park, Rainham, Essex (Leasehold) |
Industrial |
Eastern England |
£450,000 |
| Tetron 93, Swadlingcote |
Industrial ROUK |
Midlands |
£375,448 |
| Dorset Street, Southampton |
Standard Office |
South East |
£459,166 |
| Bathgate Retail Park, Bathgate |
Retail Warehouse |
Scotland |
£478,625 |
| Unit 6 Broadway Business Park,
Oldham |
Industrial |
North West |
£854,626 |
| Silbury House, Silbury Boulevard,
Milton Keynes |
Standard Office |
South East |
£373,500 |
| Units 1&2 Olympian Way, Leyland,
Preston |
Retail Warehouse |
North West |
£380,000 |
| Halfords, Valley Road, Bradford |
Retail Warehouse |
North West |
£515,825 |
| Matalan, Kings Lynne |
Retail Warehouse |
Eastern England |
£378,500 |
| Properties valued at
£5 - £10 million – New Portfolio |
| The Quadrangle Cheltenham |
Standard Office |
South West |
£700,000 |
| Ceva Logistics Earlstrees Rd
Corby |
Standard
Industrial |
East Midlands |
£597,637 |
| The Kirkgate, Church St Epsom |
Standard Office |
South East |
£550,000 |
| Walton Summit Industrial Estate
Preston |
Industrial ROUK |
North West |
£590,000 |
| Budbrooke Industrial Estate
Warwick |
Standard
industrial |
West Midlands |
£476,623 |
| Swift House, Cosford Lane Rugby |
Industrial ROUK |
West Midlands |
£523,574 |
| Foxholes Business Park Hertford |
Standard
Industrial |
South East |
£459,747 |
| P&O, Whitecliffs Business Park,
Dover |
Industrial ROSE |
South East |
£479,090 |
| Victoria Shopping Park
Hednesford |
Retail |
West Midlands |
£485,000 |
| Causeway House Teddington |
Standard Office |
South East |
£347,703 |
| Symiths Toys, Middle Engine Lane,
North Shields |
Retail Warehouse |
North East |
£371,138 |
| The Point Retail Park Rochdale |
Retail Warehouse |
North West |
£370,000 |
| Wincanton, Portbury, Bristol |
Industrial ROUK |
South West |
£379,643 |
| Foundary Lane Horsham |
Industrial ROSE |
South East |
£125,450 |
| Properties valued at
£0 - £5 million – Property Portfolio |
| Endeavour House, Langford Business
Park Kiddlington |
Office Park |
South West |
£415,000 |
| Interplex 16 Ash Bridge Rd
Bristol |
Industrial ROUK |
South West |
£192,000 |
| Interfleet House, Pride Park,
Derby |
Office
Park |
East Midlands |
£390,000 |
| The IT Centre, Innoation Way,
York |
Office Park |
North East |
£360,624 |
| Matalan, Mayo Avenue, Bradford |
Retail Warehouse |
North West |
£318,278 |
| Dawson Rd, Mount Farm Milton
Keynes |
Standard
Industrial |
South East |
£282,758 |
| Units 1&2 Deans Ind Estate,
Cullen Sq Livingston |
Standard
Industrial |
Scotland |
£405,076 |
| Persimon House, Crossways Business
Park, Dartford |
Office Park |
South East |
£306,643 |
| 31/32 Queen Sq, Bristol |
Standard Office |
South West |
£160,000 |
| Unit 2 Brunel Way, Segensworth East
Fareham |
Standard
Industrial |
South East |
£225,000 |
| Farrah Unit, Crittall Rd,
Witham |
Standard
Industrial |
South East |
£212,380 |
| Turin Crt Bird Hall Lane Cheadle
Hume Stockport |
Office Park |
North West |
£340,850 |
| Unit 4 Monkton Business Park
Hebburn, Newcastle |
Industrial ROUK |
North East |
£220,000 |
| Unit 4 Easter ParkWingates
Bolton |
Industrial ROUK |
North West |
£184,000 |
| 21 Gavin Way Nexus Point
Birmingham |
Industrial ROUK |
West Midlands |
£200,250 |
| Unit 14 Interlink Park Bardon |
Industrial ROUK |
East Midlands |
£155,415 |
| Travis Perkins Cheltenham |
Standard
Industrial |
South West |
£112,000 |
| 1b Crown Farm, Mansfield |
Standard
Industrial |
East Midlands |
£60,000 |
| Properties valued at
£0 - £5 million – New Portfolio |
| Broadoak Business Park, Trafford
Park, Manchester |
Standard
Industrial |
North West |
£303,179 |
| Anglia House, Station Road, Bishops
Stortford |
Standard Office |
South East |
£426,648 |
| The Range, Southend on Sea |
Retail Warehouse |
South East |
£303,410 |
| Units 1-4 Opus Way, Warrington |
Standard
Industrial |
North West |
£268,035 |
| Ceres Court, Kingston Upon Thames
(leasehold) |
Standard Retail |
South East |
£198,712 |
- Details of the ten largest properties (Combined
Portfolio)
Set out below is a brief description
of the ten largest Properties in the Combined Portfolio.
| White Bear Yard,
Clerkenwell, London |
| Mid Town
Office |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| B&W Group Limited |
10 years |
13 November 2018 |
N/A |
| White Bear Yard Management
Limited |
5 years |
23 June 2019 |
N/A |
| IDEO LLC |
10 years |
23 June 2019 |
N/A |
| White Bear Yard Management
Limited |
10 years |
23 June 2019 |
N/A |
Current net
annual
rent
£527,334 (increasing to £1,057,743 on expiry of rent frees)
Market
Value
£15-20 million |
| Elstree Tower,
Elstree Way, Borehamwood |
| Office South
East |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| Sungard Availability Services (UK)
Ltd |
10 years |
24 March 2025 / 24 March 2020 |
25 March 2020 |
Current net
annual
rent
£1,320,000
Market
Value
£15-20 million |
| Currys and PC World,
Preston |
| Retail
Warehouse |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| DSG |
25 years |
25 December 2030 |
25 November 2020 |
Current net
annual
rent
£1,040,895
Market
Value
£15-20 million |
| Chester House,
Farnborough Aerospace Centre, Farnborough |
| Office Park |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| BAE Systems plc |
27 years |
31 December 2023 |
10 April 2017 |
Current net
annual
rent
£1,257,640
Market
Value
£15-20 million |
| The Symphony Group,
Ickles Way Rotherham |
| Industrial |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| The Symphony Group plc |
20 years |
15 September 2034 |
16 September 2019 |
Current net
annual
rent
£1,080,000
Market
Value
£15-20 million |
| Denby 242, Denby Rd,
Denby |
| Industrial |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| Techno Cargo Logistics |
15 years |
14 March 2025 |
15 March 2016 |
Current net
annual
rent
£0 (increasing to £1,153,138 at expiry of rent free)
Market
Value
£10-£15 million |
| Hertford Place,
Rickmansworth |
| Office |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| Trebor Bassett Ltd |
20 years |
19 December 2022 |
20 December 2017 |
Current net
annual
rent
£1,156,900
Market
Value
£10-£15 million |
| St James's House,
Cheltenham |
| Office |
| Top five tenants |
Lease Term |
Lease expiry/break
option |
Rent review |
| BPE Solicitors LLP |
12 years |
21 March 2024 |
22 March 2019 |
| Barnett Waddingham LLP |
11 years |
29 October 2022 |
29 October 2019 |
| Tangible UK Limited |
10 years |
6 July 2021/ 7 July 2016 |
7 July 2016 |
| Local World Ltd |
10 years |
8 August 2025 /
8 August 2020 |
9 August 2020 |
| Volo Commerce Ltd |
10 years |
3 March 2024 |
4 March 2019 |
Current net
annual
rent
£862,102
Market
Value
£10-£15 million |
| Charter Court, 50
Windsor Road, Slough |
| Office |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| Webloyalty International Ltd |
7 years |
22 June 2020 |
1 March 2015 |
| Airwave Solutions Ltd |
13 years |
24 December 2021 |
30 April 2018 |
| Webloyalty International Ltd |
7 years |
22 June 2020 |
1 March 2015 |
Current net
annual
rent
£815,448
Market
Value
£10-£15 million |
| 3 B – C Michigan
Drive Milton Keynes |
| Industrial |
| Tenant |
Lease Term |
Lease expiry/break
option |
Rent review |
| Bong UK Ltd |
12 years |
2 January 2026 |
Annual fixed increases |
Current net
annual
rent
£712,980
Market
Value
£10-£15 million |
- Tenant concentration
The tenants that contribute in excess
of two per cent. of the current net annual rent of the Property
Portfolio and the New Portfolio can be summarised as follows:
| Lease Name |
Sector |
Current net annual rent |
% of
Current net annual rent of Property Portfolio |
| Sunguard
Availability Services (UK) Ltd |
Office |
£1,320,000 |
4.1% |
| BAE Systems |
Office |
£1,257,640 |
3.9% |
| Trebor
Basset |
Office |
£1,156,900 |
3.6% |
| The Symphony
Group Plc |
Industrial |
£1,080,000 |
3.4% |
| DSG |
Retail
Warehouse |
£1,040,895 |
3.3% |
| Bong UK Ltd |
Industrial |
£712,980 |
2.2% |
| Royal Bank Of
Scotland PLC |
Office |
£700,000 |
2.2% |
| Matalan |
Retail
Warehouse |
£696,778 |
2.2% |
| Grant
Thornton |
Office |
£680,371 |
2.1% |
| Euro Car Parks
Ltd |
Industrial |
£635,216 |
2.0% |
- Summary of tenure
|
As a percentage of aggregate Market Value |
| Tenure |
Property Portfolio |
New
Portfolio |
Combined Portfolio |
| Freehold/Feuhold |
70.6% |
86.1% |
76.0% |
| Leasehold |
29.4% |
13.9% |
24.0% |
- Lease length
The Properties in the Property
Portfolio have a total of 113 tenants (excluding car parking
spaces, wayleaves and substations). The New Properties in the
New Portfolio have a total of 118 tenants. The length of the
leases can be summarised as follows:
|
As a percentage of current gross annual rent |
| Lease
Length |
Property Portfolio |
New
Portfolio |
Combined Portfolio |
IPD
Quarterly Universe* |
| 0-5 years |
31.6% |
66.4% |
34.0% |
35% |
| 5-10 years |
43.6% |
30.9% |
37.4% |
31% |
| 10-15 years |
17.8% |
2.7% |
20.2% |
15% |
| 15-20 years |
5.4% |
0.0% |
4.0% |
7% |
| 20 + years |
- |
0.0% |
1.0% |
12% |
| % Void (by rent) |
2.2% |
1.46% |
2.0% |
6.9% |
| AWULTC |
7.1
years |
4.4
years |
6.2
years |
7.45
years |
*Source: IPD Quarterly Universe
(excluding leases over 35 years) 30 June
2015
AWULTC means Average Weighted
Unexpired Lease Term Certain (to lease end or break option date if
sooner).
- Income profile (Combined Portfolio)
The occurrence of the earlier of lease
expiries and break options of the Property Portfolio and the New
Portfolio can be summarised as follows:
| Year of expiration or break
option |
|
Current gross
annual rent |
% of current gross
annual rent |
Cumulative % of
current gross annual rent |
| 2016 |
|
£2,598,142 |
8.5% |
8.5% |
| 2017 |
|
£2,290,483 |
7.5% |
16% |
| 2018 |
|
£2,906,199 |
9.5% |
25.5% |
| 2019 |
|
£2,552,809 |
8.3% |
33.8% |
| 2020 |
|
£1,707,521 |
5.6% |
39.4% |
| 2021+ |
|
£17,448,366 |
57.0% |
100% |
The aggregate current net annual rent of the Property Portfolio is
approximately £19.23 million and the aggregated estimated net
annual rental value is approximately £22.04 million.
The aggregate current net annual rent
of the New Portfolio is approximately £10.81 million and the
aggregated estimated net annual rental value is approximately
£11.81 million.
- Covenants
The covenant strength of the tenants
of the Properties and the New Properties can be summarised as
follows:
|
As a percentage of current gross annual rent |
| Covenant
Strength |
Property Portfolio |
New
Portfolio |
Combined Portfolio |
IPD
Quarterly Universe* |
| Negligible &
Government risk |
61% |
58% |
58% |
57% |
| Low risk |
15% |
24% |
18% |
21% |
| Low-medium risk |
10% |
2% |
7% |
6% |
| Medium-high risk |
8% |
4% |
6% |
2% |
| High risk |
3% |
2% |
3% |
4% |
| Maximum risk |
2% |
1% |
1% |
6% |
| Unscored |
0% |
8% |
3% |
2% |
| Administration |
0% |
1% |
0% |
0% |
* Source: IPD Quarterly
Universe
** Based on D&B Risk of
Failure
- Lease terms
The occupational leases of the
Properties and the New Properties are on terms which could
reasonably be expected for properties of the type comprised in the
Property Portfolio and the New Portfolio. Subject to the above and
viewing the Property Portfolio and New Portfolio as a whole, the
occupational leases of the Properties in the Property Portfolio and
the New Properties in the New Portfolio are in general terms
institutionally acceptable.
- Property condition
Independent building surveys,
mechanical and electrical surveys and environmental surveys have
been undertaken for each of the Properties and the New Properties.
These have been reviewed by the Investment Manager and it is
considered that the condition of the Properties and the New
Properties is acceptable having regard to the properties' age, use,
type and lease terms.
- Regional weightings
The regional weightings of the
Property Portfolio, the New Portfolio and the Combined Portfolio
can be summarised as follows:
|
As a percentage of current gross annual rent |
|
Region |
Property Portfolio |
New
Portfolio |
Combined Portfolio |
IPD
Quarterly Universe* |
|
|
|
|
|
| London West End |
3% |
0.0% |
2% |
15.2% |
| London City |
7% |
0.0% |
4.3% |
4.9% |
| East Midlands |
5.1% |
10.5% |
14.2% |
10.5% |
| South East |
36% |
55% |
43% |
33.6% |
| South West |
8% |
9% |
8% |
6.5% |
| West Midlands |
1% |
19% |
4% |
6.6% |
| North East |
10% |
3% |
8% |
2% |
| North West |
11% |
14% |
12% |
12% |
| Scotland |
7% |
0.0% |
4% |
5.5% |
* Source: IPD Quarterly
Universe
- Sectoral weightings
The sectoral weightings of the
Property Portfolio, the New Portfolio and the Combined Portfolio
can be summarised as follows:
|
As a percentage of current gross annual rent |
|
Sector |
Property Portfolio |
New
Portfolio |
Combined Portfolio |
IPD
Quarterly Universe* |
| Retail |
21% |
21% |
21% |
42.6% |
| Office |
42% |
37% |
40% |
29.8% |
| Industrial |
37% |
41% |
39% |
18.4% |
| Other |
0% |
0% |
0% |
9.2% |
* Source: IPD Quarterly
Universe
- Sub-sector weightings
The sub-sector weightings of the
Property Portfolio, the New Portfolio and the Combined Portfolio
can be summarised as follows:
|
As a
percentage of current gross annual rent |
| Region |
Property
Portfolio |
New
Portfolio |
Combined
Portfolio |
IPD Quarterly
Universe* |
|
|
|
|
|
| South East Standard Retail |
5.4% |
8.3% |
7.6% |
9.7% |
| Rest of UK Standard Retail |
0% |
0% |
0% |
7.1% |
| Shopping Centres |
0% |
0% |
0% |
9.1% |
| Retail Warehouses |
15.4% |
13.6% |
14.5% |
16.7% |
| Central London Offices |
10.0% |
0.0% |
6.5% |
15.2% |
| South East Offices |
22.5% |
31% |
19.1% |
9.5% |
| Rest of UK Offices |
9.3% |
6.2% |
8.2% |
5.1% |
| South East Industrial |
9.8% |
13.1% |
12.1% |
10.8% |
| Rest of UK Industrial |
27.6% |
27.8% |
31.9% |
7.6% |
| Other |
0% |
0.0% |
0% |
9.2% |
* Source: IPD Quarterly Universe
12. Disposals
from the Property Portfolio
Since 30
September 2015, the Company has completed the sale of the
Maple Cross Property for a consideration of £14.75 million.
As at 30 September 2015, the market
value of the Maple Cross Property was £14 million. This sale
completed on 6 November 2015.
APPENDIX II
DEFINITIONS
The meanings of the following terms shall apply throughout this
document unless the context otherwise requires.
| Acquisition |
the acquisition of all of the units
in the JPUT, the two ordinary shares in the General Partner and the
New Portfolio by the Group |
| Acquisition Agreement |
the sale and purchase agreement
relating to all the units in the JPUT and the entire issued share
capital of the General Partner dated 12 November 2015 |
| Admission |
the admission of the New Shares to
the Official List and to trading on the Main Market pursuant to the
Initial Placing and Offer |
| Admission Condition |
(i) the UKLA having acknowledged to
the Company or its agent (and such acknowledgement not having been
withdrawn) that the application for the admission of the New Shares
arising under the Issues, as the case may be, to the Official List
with a premium listing has been approved and (after satisfaction of
any conditions to which such approval is expressed to be subject
("listing conditions")) will become effective as soon as a dealing
notice has been issued by the FCA and any listing conditions having
been satisfied and (ii) the London Stock Exchange having
acknowledged to the Company or its agent (and such acknowledgement
not having been withdrawn) that the New Shares will be admitted to
trading |
| Application Form |
the application form which
accompanies this document for use in connection with the Offer |
| Bank |
The Royal Bank of Scotland plc, a
company incorporated in Scotland with registered number
SC090312 |
| Bank Facility |
the £84,432,692 term loan facility
provided to the Company by the Bank pursuant to the Facility
Agreement |
| Board or
Directors |
the directors of the Company |
| Circular |
the circular to be published in
connection with the Proposals |
| Combined Portfolio |
the Property Portfolio and the New
Portfolio |
| Company |
Standard Life Investments Property
Income Trust Limited, a company incorporated in Guernsey with
registered number 41352 |
| Combined Portfolio |
the Property Portfolio and the New
Portfolio |
| Estimated Net Annual
Rent |
is based on the current
rental value of a property:
(i)
ignoring any special receipts or deductions arising from the
property;
(ii)
excluding Value Added Tax and before taxation (including tax on
profits and any allowances for interest on capital or loans);
(iii) after making
deductions for superior rents (but not for amortisation), and any
disbursements including, if appropriate, expenses of managing the
property and allowances to maintain it in a condition to command
its rent; and
(iv) where a
property, or part of it, is let at the date of valuation, the
rental value reflects the terms of the lease,
and, where a property, or part of it, is vacant at the date of
valuation, the rental value reflects the rent the Valuer considers
would be obtainable on an open market letting as at the valuation
date |
| Facility Agreement |
the facility agreement in relation
to the Bank Facility between, among others, the Bank in various
capacities and the Company and the Property Subsidiary,
originally dated 22 December 2011, as amended by first and second
amendment agreements both dated 19 December 2014 |
| FCA |
the Financial Conduct Authority
acting in its capacity as the competent authority for the purposes
of Part IV of FSMA, or any successor authority |
| FSMA |
the Financial Services and Markets
Act 2000, as amended |
| General Meeting |
the general meeting of the Company
to be held at 30 St Mary Axe, London EC3A 8EP at 10 a.m. on 11
December 2015 to approve the issue of New Shares pursuant to the
Initial Placing and Offer and the Acquisition |
| General Partner |
Aviva Investors UK Real Estate
Recovery II (General Partner) Limited |
| Group |
the Company and the Property
Subsidiary and any other direct or indirect subsidiary (as that
term is defined in the Law) of the Company from time to time and,
subject to Admission and the completion of the Acquisition, the
JPUT, the Limited Partnership and the General Partner |
| Income Return |
is the current net annual rent
receivable for a property expressed as a percentage of the market
value of such property (without making any deduction in respect of
any acquisition costs for such property) |
| Initial Placing |
the placing of New Shares by the
Placing Agent |
| Investment Manager |
Standard Life Investments (Corporate
Funds) Limited, a company incorporated in Scotland with registered
number SC111488 |
| IPD |
Investment Property Databank
Limited |
| IPD IRIS |
the IPD Rental Information
Service |
| Issue Price |
82.0 pence per New Share (being a
premium of 2.84 per cent. to the NAV per Share as at 30
September 2015 once the accrued dividend for the period ending 30
September 2015 has been deducted) |
| JFSC |
Jersey Financial Services
Commission |
| JPUT |
Aviva Investors UK Real Estate
Recovery II Unit Trust, a Jersey property unit trust which
ultimately holds the New Portfolio |
| Knight Frank |
Knight Frank LLP, a limited
liability partnership with registered number OC305934 acting as the
independent valuer of the New Portfolio |
| Law |
the Companies (Guernsey) Law, 2008
as amended from time to time |
| LIBOR |
London Inter-bank Offered Rate |
| Limited Partnership |
Aviva Investors UK Real Estate
Recovery II Limited Partnership |
| Listing Rules |
the listing rules made by the FCA
under Part VI of FSMA as amended from time to time |
| London Stock Exchange |
London Stock Exchange plc |
| LTV |
Loan to value ratio (calculated as
borrowings less all cash as a proportion of the Group's Property
Portfolio valuation) |
| Main Market |
the London Stock
Exchange's main market for listed
securities being a regulated market for the purposes of Directive
2004/39/EC the "Markets in Financial Instruments Directive" |
| Maple Cross Property |
the property situated at Hertford
Place, Maple Cross, Rickmansworth |
| Minimum Issue Proceeds |
the minimum gross proceeds of the
Initial Placing and Offer being £80 million |
| NAV |
in relation to a Share, means its
net asset value on the relevant date calculated in accordance with
the Company's normal accounting policies |
| New Bank Facility |
the new term loan of up to
£40,567,308 and the new revolving credit facility of up to
£30,000,000 from the Bank |
| New Bank Facility
Agreement |
the amended and restated facility
agreement between the Bank, the Company and the Property
Subsidiary |
| New Portfolio |
the 22 properties indirectly held by
the JPUT through its interest in the Limited Partnership |
| New Properties |
the properties comprised in the New
Portfolio |
| New Shares |
the new Ordinary Shares to be issued
by the Company pursuant to the Initial Placing |
| New Term Loan |
the new term loan agreed with the
Bank for up to £40,567,308 |
| Offer for Subscription or
Offer |
the offer for subscription of New
Shares |
| Official List |
the Official List of the UK Listing
Authority |
| Ordinary Shareholders or
Shareholders |
holders of the Ordinary Shares |
| Ordinary Shares or
Shares |
ordinary shares of 1 pence each in
the capital of the Company |
| Placing Agent or
Winterflood Securities |
Winterflood Securities Limited,
acting through its division, Winterflood Investment Trusts |
| Placing Agreement |
the placing
agreement between the Company, the
Investment Manager and the Placing Agent |
| Properties |
the properties
comprised in the Property Portfolio,
or any of them as the context requires (each a "Property") |
| Property Portfolio |
the direct and indirect property
assets of the Group |
| Property Subsidiary |
Standard Life Investments Property Holdings Limited, a company
incorporated in Guernsey with registered number 41351 |
| Proposals |
the Acquisition and the Initial
Placing and Offer |
| Prospectus |
prospectus to be published in
connection with the Proposals |
| Resolutions |
the ordinary resolution to approve
the Acquisition and the special resolution to approve the allotment
of New Shares, pursuant to the Initial Placing and Offer, on a non
pre-emptive basis to be proposed at the General Meeting |
| Revolving Credit
Facility |
the revolving credit facility agreed
with the Bank for up to £30,000,000 |
| Shareholder |
a holder of Shares |
| Sponsor |
Dickson Minto W.S. |
| UKLA or UK Listing
Authority |
the Financial Conduct Authority,
acting in its capacity as the competent authority for the purposes
of Part VI of FSMA |
| United States or
USA |
the United States of America
(including the District of Columbia), its territories and
possessions, any state of the United States of America and all
other areas subject to its jurisdiction or any political
sub-division thereof |
| Valuer |
Jones Lang LaSalle Limited, a
company incorporated in England and Wales with registered number
01188567 |
| Vendor |
the vendors of the New Portfolio as
set out in the Acquisition Agreement |