TIDMSLI
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 GBP100 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
GBP70.6 million (in addition to the existing Bank Facility) and its existing,
available cash reserves of approximately GBP22 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 GBP6 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 GBP308.8 million.
The Property Portfolio generates a current net annual rent of approximately
GBP19.2 million (being an Income Return of 5.9 per cent.) and an aggregate
estimated net annual rent of approximately GBP22 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 GBP14.75 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 GBP165 million as at 19 October
2015. The New Portfolio generates a current net annual rent of
approximately GBP10.8 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 GBP460 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 GBP29 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 GBP100 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 GBP80 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
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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 GBP165 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 GBP165 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 GBP80 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 GBP84,432,692
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 GBP84,432,692 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
GBP40,567,308 and the Revolving Credit Facility of GBP30,000,000 which amounts
to, in aggregate, GBP70,567,308.
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 GBP155 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
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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 GBP171
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 9 December 2015
under the Offer
Latest date for commitments under the Initial 10 December 2015
Placing
General Meeting 11 December 2015
Results of the Initial Placing and Offer and 11 December 2015
General Meeting announced
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:
Current net
Properties* Sector Region annual rent
receivable
Properties valued at GBP15 - GBP20 million - Property Portfolio
White Bear Yard, Standard London GBP527,334
Clerkenwell, London Office Mid-Town
DSG Blackpool Road, Retail North West GBP1,040,895
Preston Warehouse
Chester House, Office Park South East GBP1,257,640
Farnborough
Aerospace Centre,
Farnborough GU14 6TQ
(Leasehold)
The Symphony Group, Industrial North West GBP1,080,000
Ickles Way, ROUK
Rotherham
Properties valued at GBP15 - GBP20 million - New Portfolio
Elstree Tower, Standard South East GBP1,320,000
Borehamwood Office
Properties valued at GBP10 - GBP15 million - Property Portfolio
Denby 242, Denby, Industrial Midlands GBP0 Rent Free, GBP
DE5 8NN ROUK 1,153,138 per
annum from 15
March 2015
Hertford Place Maple Standard South East GBP1,156,900
Cross Rickmansworth Office
St James's House, Standard Midlands GBP862,102
Cheltenham Office
3b-c Michigan Drive Industrial South East GBP712,980
Milton Keynes ROSE
Hollywood Green, High Street London GBP787,878
Wood Green, London Retail
Bourne House, The Standard South East GBP0 Rent Free, GBP
Causeway, Staines Office 696,995 per
annum from 15
January 2016
Ocean Trade Centre, Industrial Scotland GBP442,700
Altens Industrial ROUK
Estate, Aberdeen
Ground Floor, New Standard London GBP546,103
Palace Place, Monck Office and
Street, Retail
Westminster, London
(Leasehold)
Howard Town Retail Retail North West GBP677,430
Park, Glossop Warehouse
Properties valued at GBP10 - GBP15 million - New Portfolio
Charter Court, Bath Standard South East GBP815,448
Road, Slough Office
82-84 Eden Street, Retail Greater GBP200,264
Kingston Upon Thames London
Properties valued at GBP5 - GBP10 million - Property Portfolio
Tetron 141, Industrial Midlands GBP635,216
Swadlingcote ROUK
Explorer 1 & 2, Standard South East GBP701,490
Mitre Court, Crawley Office
1/1A Marsh Way, Industrial Eastern GBP450,000
Fairview Industrial England
Park, Rainham, Essex
(Leasehold)
Tetron 93, Industrial Midlands GBP375,448
Swadlingcote ROUK
Dorset Street, Standard South East GBP459,166
Southampton Office
Bathgate Retail Retail Scotland GBP478,625
Park, Bathgate Warehouse
Unit 6 Broadway Industrial North West GBP854,626
Business Park,
Oldham
Silbury House, Standard South East GBP373,500
Silbury Boulevard, Office
Milton Keynes
Units 1&2 Olympian Retail North West GBP380,000
Way, Leyland, Warehouse
Preston
Halfords, Valley Retail North West GBP515,825
Road, Bradford Warehouse
Matalan, Kings Lynne Retail Eastern GBP378,500
Warehouse England
Properties valued at GBP5 - GBP10 million - New Portfolio
The Quadrangle Standard South West GBP700,000
Cheltenham Office
Ceva Logistics Standard East Midlands GBP597,637
Earlstrees Rd Corby Industrial
The Kirkgate, Church Standard South East GBP550,000
St Epsom Office
Walton Summit Industrial North West GBP590,000
Industrial Estate ROUK
Preston
Budbrooke Industrial Standard West Midlands GBP476,623
Estate Warwick industrial
Swift House, Cosford Industrial West Midlands GBP523,574
Lane Rugby ROUK
Foxholes Business Standard South East GBP459,747
Park Hertford Industrial
P&O, Whitecliffs Industrial South East GBP479,090
Business Park, Dover ROSE
Victoria Shopping Retail West Midlands GBP485,000
Park Hednesford
Causeway House Standard South East GBP347,703
Teddington Office
Symiths Toys, Middle Retail North East GBP371,138
Engine Lane, North Warehouse
Shields
The Point Retail Retail North West GBP370,000
Park Rochdale Warehouse
Wincanton, Portbury, Industrial South West GBP379,643
Bristol ROUK
Foundary Lane Industrial South East GBP125,450
Horsham ROSE
Properties valued at GBP0 - GBP5 million - Property Portfolio
Endeavour House, Office Park South West GBP415,000
Langford Business
Park Kiddlington
Interplex 16 Ash Industrial South West GBP192,000
Bridge Rd Bristol ROUK
Interfleet House, Office Park East Midlands GBP390,000
Pride Park, Derby
The IT Centre, Office Park North East GBP360,624
Innoation Way, York
Matalan, Mayo Retail North West GBP318,278
Avenue, Bradford Warehouse
Dawson Rd, Mount Standard South East GBP282,758
Farm Milton Keynes Industrial
Units 1&2 Deans Ind Standard Scotland GBP405,076
Estate, Cullen Sq Industrial
Livingston
Persimon House, Office Park South East GBP306,643
Crossways Business
Park, Dartford
31/32 Queen Sq, Standard South West GBP160,000
Bristol Office
Unit 2 Brunel Way, Standard South East GBP225,000
Segensworth East Industrial
Fareham
Farrah Unit, Standard South East GBP212,380
Crittall Rd, Witham Industrial
Turin Crt Bird Hall Office Park North West GBP340,850
Lane Cheadle Hume
Stockport
Unit 4 Monkton Industrial North East GBP220,000
Business Park ROUK
Hebburn, Newcastle
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Unit 4 Easter Industrial North West GBP184,000
ParkWingates Bolton ROUK
21 Gavin Way Nexus Industrial West Midlands GBP200,250
Point Birmingham ROUK
Unit 14 Interlink Industrial East Midlands GBP155,415
Park Bardon ROUK
Travis Perkins Standard South West GBP112,000
Cheltenham Industrial
1b Crown Farm, Standard East Midlands GBP60,000
Mansfield Industrial
Properties valued at GBP0 - GBP5 million - New Portfolio
Broadoak Business Standard North West GBP303,179
Park, Trafford Park, Industrial
Manchester
Anglia House, Standard South East GBP426,648
Station Road, Office
Bishops Stortford
The Range, Southend Retail South East GBP303,410
on Sea Warehouse
Units 1-4 Opus Way, Standard North West GBP268,035
Warrington Industrial
Ceres Court, Standard South East GBP198,712
Kingston Upon Thames Retail
(leasehold)
1. 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 Rent review
option
B&W Group 10 years 13 November 2018 N/A
Limited
White Bear Yard 5 years 23 June 2019 N/A
Management
Limited
IDEO LLC 10 years 23 June 2019 N/A
White Bear Yard 10 years 23 June 2019 N/A
Management
Limited
Current net annual rent GBP527,334 (increasing
to GBP1,057,743 on expiry of rent frees)
Market Value GBP15-20
million
Elstree Tower, Elstree Way, Borehamwood
Office South East
Tenant Lease Term Lease expiry/break Rent review
option
Sungard 10 years 24 March 2025 / 24 25 March 2020
Availability March 2020
Services (UK)
Ltd
Current net annual rent GBP1,320,000
Market Value GBP15-20 million
Currys and PC World, Preston
Retail Warehouse
Tenant Lease Term Lease expiry/break Rent review
option
DSG 25 years 25 December 2030 25 November 2020
Current net annual rent GBP1,040,895
Market Value GBP15-20 million
Chester House, Farnborough Aerospace Centre, Farnborough
Office Park
Tenant Lease Term Lease expiry/break Rent review
option
BAE Systems plc 27 years 31 December 2023 10 April 2017
Current net annual rent GBP1,257,640
Market Value GBP15-20 million
The Symphony Group, Ickles Way Rotherham
Industrial
Tenant Lease Term Lease expiry/break Rent review
option
The Symphony 20 years 15 September 2034 16 September
Group plc 2019
Current net annual rent GBP1,080,000
Market Value GBP15-20 million
Denby 242, Denby Rd, Denby
Industrial
Tenant Lease Term Lease expiry/break Rent review
option
Techno Cargo 15 years 14 March 2025 15 March 2016
Logistics
Current net annual rent GBP0 (increasing to GBP
1,153,138 at expiry of rent free)
Market Value GBP10-GBP15
million
Hertford Place, Rickmansworth
Office
Tenant Lease Term Lease expiry/break Rent review
option
Trebor Bassett 20 years 19 December 2022 20 December 2017
Ltd
Current net annual rent GBP1,156,900
Market Value GBP10-GBP15
million
St James's House, Cheltenham
Office
Top five tenants Lease Term Lease expiry/break Rent review
option
BPE Solicitors 12 years 21 March 2024 22 March 2019
LLP
Barnett 11 years 29 October 2022 29 October 2019
Waddingham LLP
Tangible UK 10 years 6 July 2021/ 7 7 July 2016
Limited July 2016
Local World Ltd 10 years 8 August 2025 / 9 August 2020
8 August 2020
Volo Commerce 10 years 3 March 2024 4 March 2019
Ltd
Current net annual rent GBP862,102
Market Value GBP10-GBP15 million
Charter Court, 50 Windsor Road, Slough
Office
Tenant Lease Term Lease expiry/break Rent review
option
Webloyalty 7 years 22 June 2020 1 March 2015
International
Ltd
Airwave 13 years 24 December 2021 30 April 2018
Solutions Ltd
Webloyalty 7 years 22 June 2020 1 March 2015
International
Ltd
Current net annual rent GBP815,448
Market Value GBP10-GBP15
million
3 B - C Michigan Drive Milton Keynes
Industrial
Tenant Lease Term Lease expiry/break Rent review
option
Bong UK Ltd 12 years 2 January 2026 Annual fixed
increases
Current net annual rent GBP712,980
Market Value GBP10-GBP15
million
1. 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 % of Current
net annual net annual
rent rent of
Property
Portfolio
Sunguard Availability Office GBP1,320,000 4.1%
Services (UK) Ltd
BAE Systems Office GBP1,257,640 3.9%
Trebor Basset Office GBP1,156,900 3.6%
The Symphony Group Plc Industrial GBP1,080,000 3.4%
DSG Retail GBP1,040,895 3.3%
Warehouse
Bong UK Ltd Industrial GBP712,980 2.2%
Royal Bank Of Scotland PLC Office GBP700,000 2.2%
Matalan Retail GBP696,778 2.2%
Warehouse
Grant Thornton Office GBP680,371 2.1%
Euro Car Parks Ltd Industrial GBP635,216 2.0%
1. Summary of tenure
As a percentage of aggregate Market Value
Tenure Property New Portfolio Combined
Portfolio Portfolio
Freehold/ 70.6% 86.1% 76.0%
Feuhold
Leasehold 29.4% 13.9% 24.0%
1. 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 Property New Portfolio Combined IPD Quarterly
Length Portfolio Portfolio Universe*
0-5 years 31.6% 66.4% 34.0% 35%
5-10 years 43.6% 30.9% 37.4% 31%
10-15 17.8% 2.7% 20.2% 15%
years
15-20 5.4% 0.0% 4.0% 7%
years
20 + years - 0.0% 1.0% 12%
% Void (by 2.2% 1.46% 2.0% 6.9%
rent)
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).
1. 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 Current gross % of current Cumulative %
expiration or annual rent gross annual of current
break option rent gross annual
rent
2016 GBP2,598,142 8.5% 8.5%
2017 GBP2,290,483 7.5% 16%
2018 GBP2,906,199 9.5% 25.5%
2019 GBP2,552,809 8.3% 33.8%
2020 GBP1,707,521 5.6% 39.4%
2021+ GBP17,448,366 57.0% 100%
The aggregate current net annual rent of the Property Portfolio is
approximately GBP19.23 million and the aggregated estimated net annual rental
value is approximately GBP22.04 million.
The aggregate current net annual rent of the New Portfolio is approximately GBP
10.81 million and the aggregated estimated net annual rental value is
approximately GBP11.81 million.
1. 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
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Covenant Property New Portfolio Combined IPD Quarterly
Strength Portfolio Portfolio Universe*
Negligible & 61% 58% 58% 57%
Government
risk
Low risk 15% 24% 18% 21%
Low-medium 10% 2% 7% 6%
risk
Medium-high 8% 4% 6% 2%
risk
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
1. 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.
1. 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.
1. 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 New Portfolio Combined IPD Quarterly
Portfolio Portfolio Universe*
London 3% 0.0% 2% 15.2%
West End
London 7% 0.0% 4.3% 4.9%
City
East 5.1% 10.5% 14.2% 10.5%
Midlands
South East 36% 55% 43% 33.6%
South West 8% 9% 8% 6.5%
West 1% 19% 4% 6.6%
Midlands
North East 10% 3% 8% 2%
North West 11% 14% 12% 12%
Scotland 7% 0.0% 4% 5.5%
* Source: IPD Quarterly Universe
1. 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 New Portfolio Combined IPD Quarterly
Portfolio Portfolio 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
1. 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 New Combined IPD Quarterly
Portfolio Portfolio Portfolio Universe*
South East Standard 5.4% 8.3% 7.6% 9.7%
Retail
Rest of UK Standard 0% 0% 0% 7.1%
Retail
Shopping Centres 0% 0% 0% 9.1%
Retail Warehouses 15.4% 13.6% 14.5% 16.7%
Central London 10.0% 0.0% 6.5% 15.2%
Offices
South East Offices 22.5% 31% 19.1% 9.5%
Rest of UK Offices 9.3% 6.2% 8.2% 5.1%
South East 9.8% 13.1% 12.1% 10.8%
Industrial
Rest of UK 27.6% 27.8% 31.9% 7.6%
Industrial
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 GBP14.75 million. As at 30 September 2015, the
market value of the Maple Cross Property was GBP14 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 GBP84,432,692 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
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