Disposal of German Property Portfolio

RNS Number : 2758N

CareCapital Group plc

31 August 2011

 



31 August 2011

CARECAPITAL GROUP PLC

("CareCapital" or "the Company")

Sale of German Property Portfolio ("Disposal")

The Company is pleased to announce that it has agreed to sell its German property portfolio ("German Portfolio") to NorthWest Value Partners, Inc. ("NorthWest"), a privately-owned real estate investor based in Toronto, Canada.  The aggregate consideration for the Disposal of the German Portfolio under terms of the sale and purchase agreements ("Sale and Purchase Agreements") is €27.35 million, payable in cash on completion subject to completion apportionments and retentions as security against a breach of obligations by the respective sellers under the Sale and Purchase Agreements.  In addition, NorthWest is to pay the land transfer tax due on completion of the Disposal amounting to approximately €1.3 million as well as the costs for notarisation.

Under the AIM Rules for Companies, the Disposal is deemed to be a disposal resulting in a fundamental change of business and is therefore subject to the approval of shareholders in a general meeting.  Accordingly the Company will shortly be sending a circular to Shareholders setting out in detail the terms of the Disposal, which will, inter alia, contain the notice of the general meeting ("General Meeting").

Information on NorthWest

Since its inception in 1992, NorthWest has established a very strong track record of successfully acquiring, developing and building value in real estate across Canada.

In 2004, NorthWest founded NorthWest Healthcare Properties REIT ("NWH") and acquired approximately CDN$1.0 billion in healthcare real estate throughout Canada and built a national operating platform.

On 25 March 2010, NWH completed a CDN$175 million Initial Public Offering on the Toronto Stock Exchange which has been well received by retail investors.  NorthWest has retained an ownership stake of approximately 21 per cent. in NWH.

Information on CareCapital

The Company is currently progressing nine primary care projects in the UK with a predicted capital value to the Company on completion of £40 million. Of these, four of the projects are in Wales and are part of a joint venture with Gaufron Healthcare Ltd. The developments in Coventry and the Wirral are under construction and due for completion in December 2011 and January 2012 respectively. The Southampton Gateway project, which is being developed in conjunction with Bouygues Developments (UK) Limited, has planning consent and will start on site in November 2011; this development includes 368 student accommodation units in addition to medical and retail facilities and, in total has a capital value in excess of £20 million.

In addition, the Group is a 28.75% shareholder and a leading participant in Advanced Proton Solutions, a Jersey CI company which develops and operates cancer treatment centres using the latest technologies. A planning application for its first UK development in London has been submitted.  Capital raising specifically for Advanced Proton Solutions for this initiative is at an advanced stage.

A pipeline of further primary care projects in the UK and proton therapy centres in the UK, the US, Europe, the Middle East and South East Asia is being pursued.

Reasons for the Transaction

The Company and its management have been involved in the healthcare real estate market both in the UK and Germany for a number of years, and have substantial experience in this sector.  The Directors believe that these sectors continue to show good opportunities for growth as central and local governments seek to improve the quality and efficiency of the primary healthcare service. However the development and ownership of healthcare real estate assets is capital intensive, whereas the Company has a current market capitalisation of approximately £3 million.  Equity market conditions have precluded the raising of equity finance by the Company on sensible terms and therefore the Company currently has limited access to capital resources. 

The Group now urgently requires additional financing in order to repay the overdue short term loan facility ("Loan") provided by the Company's Chairman, Dr Michael Sinclair,  in October 2008, as set out in the circular to shareholders dated 3 October 2008, and to enable the Company to continue the development of healthcare properties in the UK as well as for working capital purposes.  

Therefore, in order to enable to provide the Company with the finance it requires, the Directors consider that the Disposal is in the best interest of the Company and its shareholders.

Terms of the Disposal

Under the terms of the seven Sale and Purchase Agreements, which are agreements governed by German law, NorthWest or other newly formed German or Luxembourg subsidiary companies of NorthWest, will acquire the German Portfolio of CareCapital as set out below.  The consideration for the Disposal is €27.35 million in aggregate subject to the potential retention and completion apportionments referred to above.  In addition, NorthWest is to pay the land transfer tax due on completion of the Disposal amounting to approximately €1.3 million as well as the costs for notarisation.  As part of the Disposal, CareCapital has provided warranties and indemnities in respect of the German property assets which are extensive though not uncommon under German law.  The Sale and Purchase Agreements have been notarised and are subject to registration of the property transfers in Germany and Shareholder approval which is being sought at the General Meeting by the passing of the Resolution.

The German Property Portfolio was valued at €33.2 million in the Company's interim accounts for the six months to 30 June 2010.  The current net rental income of the German Portfolio is €1.96 million per annum.

CareCapital's German Portfolio comprises the following:

Investment properties:

Name	Tenure
Gesundheitszentrum Adlershof 1	freehold (Eigentum)
Gesundheitszentrum Adlershof 2	freehold (Eigentum)
Gesundheitszentrum Konigs Wusterhausen	freehold (Eigentum)
Gesundheitszentrum Berlin-Neukolln	freehold (Eigentum)
Gesundheitszentrum Marktredwitz	heritable building right (Erbbaurecht)

Development properties:

Name	Tenure
Pankow	freehold (Eigentum)
Gesundheitszentrum Konigs Wusterhausen 2	freehold (Eigentum)

The investment properties and the development properties set above are owned by the Group's German subsidiary companies and these together own the Group's interest in the German Portfolio.  These German subsidiary companies have individually entered into property transfers under the terms of the Sale and Purchase Agreements with newly formed German or Luxembourg subsidiary companies of NorthWest, which agreements have been notarised in accordance with German law in order to enable their registration to be effected.

It is anticipated that the Disposal will be completed on or before 30 September 2011, depending on the completion of all condition precedents under the terms of the Sale and Purchase Agreements, including registration of a priority right of conveyance in each of the respective land registers.  If the condition precedents have not been met by 31 December 2011, NorthWest would be entitled to rescind the Sale and Purchase Agreements and the Group's German subsidiary companies may become entitled to rescind the agreements under local law for delays by NorthWest.

Warranties and indemnities

The Disposal is subject to various warranties and indemnities provided by the Group's German subsidiary companies to NorthWest in relation to the German Portfolio which are extensive but not uncommon for a transaction of this nature. 

In addition, Dr Michael Sinclair  has under the terms of the Share Purchase Agreements agreed to provide personal guarantees in respect of the Group's German subsidiary companies' obligations under the warranties and indemnities provided to NorthWest pursuant to the Sale and Purchase Agreements. 

Furthermore, as a result of the interests which Dr Sinclair has in the Disposal by reason of being party to the Sale and Purchase Agreements and as a result of the repayment of the Loan, the authority of shareholders will be sought at the General Meeting, by the proposal of a resolution, to authorise any situational conflicts which may arise in accordance with the Companies Act.  

Proposed new warrants

Dr Michael Sinclair currently holds 10,600,000 warrants to acquire 10,600,000 new shares at 15p per ordinary share of 1p each in the capital of the Company ("Share") and Paul Stacey currently holds 7,066,667 warrants to acquire 7,066,667 new Shares at 15p per Share, both granted under the terms of a warrant instrument dated 27 October 2008 ("Warrant Instrument").  The warrants are of little or no present value given the current market price of the Company's Shares. 

The Independent Directors recognise the significance of the personal indemnities which have been given by Dr Sinclair under the terms of the Share Purchase Agreements.  In recognition of the risk incurred by Dr Sinclair in giving such personal guarantees in respect of the Company's obligations under the warranties and indemnities provided to NorthWest pursuant to the Sale and Purchase Agreements, and in recognition of the significant contribution to the Company by Paul Stacey, the Independent Directors have agreed that the Company will make a further grant of new warrants to each of Dr Sinclair and Paul Stacey, as to 10,600,000 new Shares and 7,066,667 new Shares respectively, upon which their respective warrants which were granted under the Warrant Instrument will be surrendered by them and cease to have any further effect.

It is proposed that the new warrants referred to in the preceding paragraph will be substantially on the same terms as the previous warrants granted under the Warrant Instrument save that the exercise price will be 4.5p per new Share and they will expire five years after the date of grant but will not be capable of exercise for a period of 12 months after the date of grant.  These proposed new warrants cannot however be granted by the Company until such time as a vote of independent shareholders of the Company has been obtained and the appropriate circular has been drawn up by the Company and sent to shareholders seeking such approval, which the Independent Directors intend to do after completion of the Disposal. 

Use of Proceeds

The cash proceeds of the Disposal will immediately be used to repay the debt secured on the property assets within the German Portfolio amounting to €26.31 million in aggregate.  Of this, £1.9 million (plus accrued interest) will be used to repay the outstanding amount of the Loan due to Dr Michael Sinclair, which was due to be repaid on completion of the Disposal, and £500,000 (plus accrued interest) will be used to repay a second loan due to a private investor.  The remainder of the proceeds from the Disposal amounting to approximately €1.04 million will be used to discharge professional fees, to progress the development of the Company's UK healthcare property pipeline and for working capital purposes.

Annual Results and Resumption of Trading

On 29 June 2011, trading in the Company's shares was suspended on AIM as the Company did not publish its results for the financial year ended 31 December 2010 by 30 June 2011 as it is required to do in accordance with the AIM Rules for Companies.  The Directors believe that the Company's preliminary results for the financial year ended 31 December 2010 will be announced, published and despatched to Shareholders on or before 30 September 2011.  It is estimated that the Company's annual general meeting, notice of which will be included with the annual accounts, will be convened for on or before 26 October 2011.

Accordingly the Directors believe that trading will resume in the Shares immediately following the publication of the Company's preliminary results for the financial year ended 31 December 2010 and the announcement of interim results for the six months to 30 June 2011 which the Directors expect to occur on or before 30 September 2011.

Information on the Remaining Business

Following the Disposal, the Company's objectives will be focussed the financing and progress of the proton beam initiative in the UK and elsewhere through Advanced Proton Solutions and on the delivery of its existing pipeline of medical centre developments including the securing of project related funding such as forward sale and financing arrangements. It is also intended to identify and progress new healthcare development opportunities in conjunction with both the public and private sectors.

For further information please visit www.carecapital.co.uk or contact:

CareCapital Group Plc                                                             Paul Stacey, Chief Executive 

                                                                                                Tel: [phone]

Libertas Capital Corporate Finance Limited                              Sandy Jamieson 

            Tel: [phone] 

Rivington Street Corporate Finance Limited                              Jon Levinson   

                                                                                                Tel: [phone]

 

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