Initial Placing, Offer for Subscription & Placing

RNS Number : 0119G

Picton Property Income Limited

01 May 2014

 



THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, INTO THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS AN ADVERTISMENT AND NOT A PROSPECTUS. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE OR ACQUIRE ANY TRANSFERABLE SECURITIES (AS DEFINED IN SCHEDULE 11A OF THE FINANCIAL SERVICES AND MARKETS ACT 2000), NOR SHALL IT FORM THE BASIS OF ANY CONTRACT FOR THE SALE OF ANY INTEREST IN A TRANSFERABLE SECURITY OR A SOLICITATION, INDUCEMENT, ADVICE OR RECOMMENDATION TO EFFECT ANY TRANSACTION OF ANY KIND WHATSOEVER. POTENTIAL INVESTORS SHOULD READ THE RELEVANT PROSPECTUS (WHICH WILL BE PUBLISHED SHORTLY FOLLOWING APPROVAL BY THE UK LISTING AUTHORITY) CAREFULLY BEFORE ANY INVESTMENT DECISION IS MADE.

Picton Property Income Limited

("Picton", or the "Company")

1 May 2014                              

INITIAL PLACING, OFFER FOR SUBSCRIPTION AND PLACING PROGRAMME

The Board of Picton announces a proposal to issue up to 59,322,034 New Ordinary Shares at 59 pence per New Ordinary Share to raise gross proceeds of up to approximately £35 million by way of an Initial Placing (the "Placing") and Offer for Subscription (the "Offer") (together the "Initial Offers").

The Company is also proposing a Placing Programme (together with the Initial Offers the "Capital Raise") to fund future acquisitions that support the Company's investment objective and acquisitions criteria.

New Ordinary Shares will only be issued to new and existing Shareholders at a premium to the prevailing Net Asset Value ('NAV') at the time of issue and will therefore be accretive to the prevailing NAV for existing Shareholders.

Highlights:

·      Proposal to issue up to 59,322,034 New Ordinary Shares at 59 pence per New Ordinary Share to raise gross proceeds of up to approximately £35 million by way of the Initial Offers

·      Issuing new shares at a premium to the prevailing NAV per share ensures the Capital Raise is accretive to the prevailing NAV for existing Shareholders

·      Issue Price of 59 pence per New Ordinary Share under the Initial Offers represents a premium of 4.7% to the 31 March 2014 NAV of 56.36 pence per share and discount of 4.5% to the Closing Share Price of 61.75 pence per share as at 30 April 2014

·      Following the placing of shares in November 2013, which raised gross proceeds of £11.9 million, the Company has made acquisitions of property worth over £51 million and the proceeds have been fully utilised. The Initial Offers will provide the Company with additional capital to enable it to take advantage of current investment opportunities and make further investment in the Company's existing investment portfolio

·      Of the £33.8 million net proceeds from the Initial Raise, approximately 75 per cent. is expected to be invested in property acquisitions with the remainder to be invested in opportunities within the existing portfolio as well as for general corporate purposes

·      The proposed Placing Programme is to enable the Company to raise additional capital as and when it identifies
properties that are suitable for acquisition. This should, in turn, enable the Investment Manager to act opportunistically, by making a series of accretive property acquisitions whilst also mitigating the risk of cash drag on Shareholders' funds.

The Company is currently preparing a prospectus in connection with these proposals which will be published in due course following approval by the UK Listing Authority ("UKLA"). 

The issue of New Ordinary Shares on a non-pre-emptive basis requires Shareholder approval and the Company is preparing a Circular for Shareholders which will be published and posted to Shareholders in due course.

Nick Thompson, Chairman of Picton, said: "It is important given the current level of activity in the UK real estate market to be able to deploy capital quickly to secure available opportunities. This disciplined approach and phased structure of the placing programme provides Picton with the flexibility to make acquisitions while maximising the overall income profile of the Company and mitigating the risk of cash drag on shareholders' funds."

Michael Morris, Chief Executive of Picton Capital, said: "The proceeds from this latest capital raising will be used to acquire income accretive properties and to invest further within the existing assets as we continue the process of reshaping Picton's portfolio. We have now fully utilised the combined proceeds of our last placing and the capital recycled from the sale of assets to acquire over £51 million of new property."

There will be a call for analysts at 9.00 a.m. this morning, hosted by Michael Morris, Chief Executive of Picton Capital. If you wish to dial in, please contact James Verstringhe at [e-mail]

For further information:

Picton Property Income Limited
David Sauvarin	Telephone: [phone]
Picton Capital Limited
Michael Morris	Telephone: [phone]
Oriel Securities Limited
Roger Clarke, Tom Yeadon	Telephone: [phone]
J.P.Morgan Cazenove
William Simmonds, Ed Murray	Telephone: [phone]
Tavistock Communications Jeremy Carey, James Verstringhe	Telephone: [phone]

Background to and benefits of the Proposals

With improved liquidity within the property market, Picton has started to reshape its portfolio through the sale of a number of smaller or low yielding assets and investment into new opportunities that have enhanced the portfolio and created additional prospects for further value creation. In addition, the Board of the Company (the "Board") has identified further projects within the existing portfolio which would benefit from additional capital investment, where existing space can be enhanced and occupier demand satisfied.

The Company is also seeing good investment opportunities, having access to both on and off market potential transactions. It has proven itself able to execute transactions swiftly and efficiently and believes that it could deploy the proceeds of a capital raise effectively and relatively rapidly, as recent purchases have demonstrated.

The Board considers that the Company should now raise funds in order to put itself in a position to take advantage of investment opportunities that the Directors expect to arise during the coming year. However, the Board does not believe that it would be in the best interests of Shareholders to seek to raise all of the funds now, as this would expose the holders of the Existing Ordinary Shares to a portfolio containing a substantial amount of un-invested cash, which could potentially have an adverse effect on the Company's performance and dividend cover.

Consequently, the Board has sought to structure the Capital Raise to provide the Group with as much flexibility as possible, enabling the Group to raise funds quickly, in a cost efficient manner and as investment opportunities are identified, while at the same time minimising cash drag. It is also the Director's belief that the Capital Raise will ensure that the Group's transactional reputation is enhanced in the market by providing the Group with an enhanced ability to undertake transactions which are not conditional on securing financing. This is likely to lead to better achieved prices and more attractive acquisition opportunities being offered to the Group.

The Board believes that the Capital Raise will confer the following benefits for Shareholders and the Company:

·      providing additional capital will enable the Company to take advantage of current investment opportunities in the market and make further investment in the Group's existing investment portfolio;

·      the expected accretive yield on new investments should lead to growth in net income which in turn is likely to lead to an enhancement in NAV growth or the potential for an increase in the underlying dividend paid by the Group;

·      employing a placing programme will minimise cash drag and assist in matching the capital requirements of the Company to the investment opportunities which arise over the next 12 months;

·      enhancing the NAV per Ordinary Share of Existing Ordinary Shares through new share issues at a premium to NAV per Ordinary Share;

·      providing a larger equity base over which the fixed costs of the Company may be spread, thereby reducing its on-going expense ratio and increasing returns to Shareholders;

·      reducing the Group's gearing ratio and strengthening its balance sheet, will enable the Group to access more favourable debt funding in the future, and in particular ahead of the 2016 ZDP refinancing;

·      providing the ability to increase the asset base outside the existing security pools to increase the flexibility around future investment and debt financing and, in particular, the ability to access further secured debt financing;

·      the Placing and Offer for Subscription allows new investors to invest in the Company and is thereby expected to enhance liquidity in the Ordinary Shares; and

·      increasing the market capitalisation of the Company, potentially enhances the scope for further institutional investment in the Company and improves the secondary market liquidity of the Ordinary Shares.

Use of Proceeds

The Board intends to use the net proceeds to finance further property acquisitions in accordance with the Group's investment policy, finance capital projects within its existing portfolio and for general corporate purposes. Of the £33.8 million net proceeds from the Initial Raise, approximately 75 per cent. is expected to be put towards property acquisitions with the remainder to be utilised within the existing portfolio.

Picton intends to use the net proceeds in excess of the amounts referred to above to finance further property acquisitions in accordance with its investment policy. The Group's geographic and asset diversity enables it to consider a wide choice of investment opportunities across the property market and as such the Board believes it should have good access to deal flow.

Within this framework, acquisitions will be made on an opportunistic basis, acquiring assets with strong property fundamentals and which will meet the Group's investment objective in the short to medium term. The Group's investment of the net proceeds should be income accretive for shareholders and is expected to improve the income profile within the property portfolio as well as providing further asset and income diversification. Additionally, it is expected that the investment of the net proceeds will continue to increase the average lot size within its portfolio, whilst providing further opportunities to enhance both the income and/or capital position through active portfolio management.

The Group has identified approximately £5 million of capital projects within the existing portfolio, including further office led refurbishments in Croydon, Angel Gate, Fleet, Glasgow and Chester which are aimed at enhancing the quality of assets, with a view to improving letting prospects and achieving enhanced rental levels on lettings. In addition, the Group is also considering other opportunities within the portfolio, where there may be further potential to create additional value including where ''special purchaser'' status may allow the Group to benefit from off-market opportunities and the creation of valuation synergies. In addition to the money spent on capital projects, the Group also intends to use approximately £4 million of the net proceeds for general corporate purposes. 

The Initial Placing and Offer for Subscription

Under the Initial Offers, subject to compliance with applicable laws and the Company's Articles, including the approval of shareholders for the Initial Offers at a general meeting, the Company is proposing to issue up to 59,322,034 New Shares at 59 pence per New Ordinary Share to raise gross proceeds of up to approximately £35 million. The Initial Placing and Offer Price is based on the prevailing NAV per Share on 31 March 2014 plus a premium to cover the costs of the Initial Offers.

The New Shares will rank pari passu in all respects with the existing Ordinary Shares, (save for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the allotment of the relevant New Shares). Investors subscribing for New Ordinary Shares under the Initial Offers will not be entitled to receive any dividend for the period from 1 January 2014 to 31 March 2014.

The Initial Offers are conditional on:

·      Initial Admission occurring at 8.00 a.m. on 23 May 2014, (or such other time or date, not being later than 30 June 2014 as the Company, J.P. Morgan Cazenove and Oriel Securities may agree);

·      the Resolution in connection with the Capital Raise being passed at the EGM; and

·      the Placing Agreement becoming otherwise unconditional in respect of the Initial Placing and not being terminated in accordance with its terms before the Initial Admission becomes effective.

The Directors intend to apply the net proceeds of the Initial Offers in accordance with the Company's investment objective and policy. The Initial Placing and Offer is not being underwritten.

Applications will be made to the FCA for admission of the New Ordinary Shares to the Official List. Applications will also be made for the New Shares to be admitted to trading on the London Stock Exchange. It is expected that Admission will become effective and that unconditional dealings in the New Ordinary Shares will commence on the main market for listed securities of the London Stock Exchange at 8.00 a.m. (London time) on or around 23 May 2014.

The New Ordinary Shares will be issued in registered form and may be held in uncertificated form. The New Ordinary Shares allocated will be issued to Placees through the CREST system unless otherwise stated. The New Shares will be eligible for settlement through CREST with effect from Initial Admission.

Further details of the Initial Offers and as to how Shareholders can apply for New Ordinary Shares will be set out in the Prospectus which is expected to be published shortly.

The Placing Programme

The Company is also proposing the Placing Programme to enable the Company to raise additional capital as and when it identifies properties that are suitable for acquisition. This should, in turn, enable the Investment Manager to act opportunistically, by making a series of accretive property acquisitions whilst also mitigating the risk of cash drag on Shareholders' funds. Further details of the Placing Programme will be set out in the Prospectus.

Conditional on the appropriate resolutions being passed at the EGM, the Company will be authorised to issue up to 170,000,000 New Ordinary Shares pursuant to the Initial Offers and the Placing Programme. The number of New Ordinary Shares available under the Placing Programme is dependent on the number of New Ordinary Shares issued under the Initial Offers: the total size of the Capital Raising is 170,000,000 New Ordinary Shares and consequently the size of the Placing Programme will be the difference between 170,000,000 New Ordinary Shares and the number of New Ordinary Shares issued under the Initial Offers.

It is proposed that the New Ordinary Shares made available pursuant to each Subsequent Placing will be issued or sold at a price (the "Subsequent Placing Price"), which will not be less than the prevailing NAV per Ordinary Share at the time of allotment plus a premium to cover the expenses of such issue. The Subsequent Placing Price will be announced through an RIS as soon as is practicable following the allotment or sale of the New Ordinary Shares.

The Directors intend to apply the net proceeds of the Placing Programme in making investments in accordance with the Company's investment objective and policy. The Placing Programme is not being underwritten. The issue of New Ordinary Shares pursuant to the Placing Programme is at the discretion of the Directors.

Each Subsequent Placing under the Placing Programme is conditional on:

·      the Subsequent Admission occurring on such time and date as the Company, J.P. Morgan and Oriel Securities may agree prior to the closing of that Subsequent Placing, not being later than 30 April 2015;

·      the Resolution in connection with the Capital Raise being passed at the EGM; and

·      the Placing Agreement becoming otherwise unconditional in respect of the Subsequent Placing, and not being terminated in accordance with its terms before the Subsequent Admission becomes effective.

If any of these conditions are not met, that Subsequent Placing will not proceed.

The Placing Programme is flexible and may have a number of closing dates in order to provide the Company with the ability to issue New Ordinary Shares over a period of time.

Application will be made to the FCA for admission of the New Ordinary Shares to the premium segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will take place and dealing will commence in the New Ordinary Shares 3 Business Days after their issue. The New Ordinary Shares will be issued or sold in registered form and may be held in uncertificated form. The New Ordinary Shares will be issued or transferred to placees through the CREST system unless otherwise stated. The New Ordinary Shares will be eligible for settlement through CREST (with effect from Admission in the case of New Ordinary Shares).

The Company

The Company was incorporated on 15 September 2005 with the name ING UK Real Estate Income Trust Limited and registered number 43673 with liability limited by shares in Guernsey under the Companies (Guernsey) Law 2008 (as amended). The Company changed its name to Picton Property Income Limited on 26 May 2011. The Company is domiciled in Guernsey. The Company has been incorporated with an unlimited life. The registered office of the Company is PO Box 255, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL and the telephone number is 01481 745 001. 

The ISIN for the Ordinary shares is GB00BOLCW208 and the SEDOL is BOLCW20.

Important Information

This Announcement has been issued by and is the sole responsibility of the Company.

This Announcement is for information purposes only and does not constitute an invitation to subscribe for or otherwise acquire or dispose of securities in the Company in any jurisdiction. The information contained in this Announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this Announcement or its accuracy or completeness, This Announcement does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, any investments nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract therefor.

This Announcement is an advertisement and not a prospectus. This Announcement does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any shares in the Company or securities in any other entity, in any jurisdiction, including the United States, nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction. This Announcement does not constitute a recommendation regarding any securities.

Any investment decision must be made exclusively on the basis of the prospectus published by the Company and any supplement thereto in connection with the admission of ordinary shares of the Company to the Official List of the UK Listing Authority and to trading on the London Stock Exchange's main market for listed securities.

J.P. Morgan Cazenove which is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority and Oriel Securities Limited which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (together, the Joint Sponsors), are acting exclusively for the Company and no-one else in connection with the Issue or the matters referred to in this Announcement, will not regard any other person as their respective client in relation to the Issue and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for providing advice in relation to the Issue or any transaction or arrangement referred to in this Announcement.

This Announcement is not for release, publication or distribution (directly or indirectly) in or into the United States, Canada, Australia, New Zealand, Japan or the Republic of South Africa, to any "US person" as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act") or into any other jurisdiction where applicable laws prohibit its release, distribution or publication. The distribution of this Announcement and the Initial Offers and Placing Programme in certain jurisdictions may be restricted by law. No action has been taken by the Company or the Joint Sponsors that would permit an offering of the New Ordinary Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and the Joint Sponsors to inform themselves about, and to observe, such restrictions.

The New Ordinary Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or benefit of, US Persons.  The Company will not be registered as an "investment company" under the Investment Company Act of 1940, and investors will not be entitled to the benefits of that Act.  In addition, relevant clearances have not been, and will not be, obtained from the securities commission (or equivalent) of any province of Australia, New Zealand, Canada, Japan or the Republic of South Africa and, accordingly, unless an exemption under any relevant legislation or regulations is applicable, none of the New Shares may be offered, sold, transferred or delivered, directly or indirectly, in Australia, New Zealand, Canada, Japan or the Republic of South Africa.

No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Company, Picton Capital Limited (the "Investment Manager"), the Joint Sponsors or by any of their respective affiliates or agents as to or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed. The Company, the Investment Manager, the Joint Sponsors and their respective affiliates accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this Announcement or its contents or otherwise arising in connection therewith.

Certain statements in this Announcement are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The information contained in this Announcement is subject to change without notice and neither the Company nor the Joint Sponsors assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.

The expected timetable including the date of Admission may be influenced by a range of circumstances such as market conditions. There is no guarantee that Admission will occur and you should not base your financial decisions on the Company's intentions in relation to the Initial Offers, the Placing Programme and Admission at this stage. Acquiring New Ordinary Shares to which this Announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments. This Announcement does not constitute a recommendation concerning the Capital Raise. The value of New Ordinary Shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the Capital Raise for the person concerned. Past performance or information in this Announcement or any of the documents relating to the Issue cannot be relied upon as a guide to future performance.

 

END

 

 

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