Management Internalisation

RNS Number : 9308V

Sirius Real Estate Limited

20 January 2012

 



Internalisation of the management of Sirius Real Estate Limited

("Sirius" or the "Company")

Sirius Real Estate Limited ("Sirius" or the "Company") is pleased to announce that it has reached agreement with the principals of its external asset manager to internalise the core management of Sirius (the "Internalisation") via the acquisition of Sirius Facilities GmbH ("Facilities") from the interests of Kevin and Frank Oppenheim (the "Oppenheims") and the Principle Capital Group ("Principle Capital").  Facilities is the Berlin based provider of property and asset management services to the Group. The total consideration for the acquisition is €5.1 million payable through the transfer of 15 million shares and approximately €1.9m in cash. The internalisation becomes effective on completion of the acquisition of Facilities which is expected to occur by the end of the month.   

This acquisition is the culmination of an in-depth review of the Company's assets and operations conducted by the Board.  As part of the review, the Board considered a range of options for the future management of Sirius following termination on 3 May 2011 of the existing asset management agreement between the Company, Sirius Cooperatief U.A. and Principle Capital Sirius Real Estate Asset Management Limited ("PCSREAM") dated 30 April 2007 as amended on 8th August 2008 (the "AMA") and concluded that the optimal solution to the future management arrangements would be the internalisation of key elements of the existing operational team.  The acquisition of Facilities, which will continue to be headed by Andrew Coombs and Alistair Marks, will bring the majority of the management of Sirius in house, and ensure the Company retains the sales and operational platform built over the last few years.  Facilities employs 150 people located at its Head Office in Berlin and at various Sirius properties across Germany.

As confirmed at the time of the Company's interim results announcement in December 2011, the Company continues to trade in line with market expectations. The management team will remain focused on increasing occupancy whilst reducing the overall cost base of the business. Looking ahead, the management team will also be developing a new strategic plan for the business. This is likely to include further asset management activities to optimise the portfolio and some strategic asset disposals of carefully selected assets enabling a consolidation of the business and the creation of a new financial and operational base upon which the Company would seek to grow.

Robert Sinclair, Chairman of Sirius, commented:

"This acquisition will benefit Sirius as it better aligns the interests of the management team with those of the shareholders and it brings the operating platform under control and ownership of Sirius.  The internalisation will significantly reduce the overall cost base of the Group and remove the significant uncertainty around the future management structure which will allow the Company to refocus its efforts on generating real improvements in shareholder returns.  Andrew and Alistair and their highly experienced team have been progressively improving the operational performance of the Sirius property portfolio and I fully expect this newly aligned management structure to enable the Company to generate tangible improvement in value to our shareholders."

Further information on the Internalisation

The Company will also acquire other assets as part of the internalisation, including the following:

-      Principle Corporate Services BV ("PCS") - the administrator of the Netherlands special purpose vehicles

-      Marba Holland B.V. ("Marba Holland") - the holder of a 1% interest in Sirius Cooperatief UA

-      94.9% of the Minority interests of 5.1% in each of 20 Netherland based property holding companies, all with a net asset value of €1,019,000 at 31 March 2011.

-      Intellectual property, including all brands and trademarks, domain names, sales and marketing infrastructure and operational systems used by Facilities to manage the assets.

The Consideration payable for these assets will be satisfied as follows:

-      by the transfer from treasury of 15 million shares in Sirius; with a value at close of trading on 19 January 2012 of £3.2 million;

-      approximately €1.9 million in cash;

Termination of the existing AMA will be accelerated so that the effective date of the internalisation is the completion date. Sirius will immediately benefit from an annual cost saving of at least €2.0 million resulting from a significantly reduced cost base.

Disposal of non-core properties

A new Advisory Services Agreement ("ASA") has been entered into with PCSREAM and an associated entity ("the Advisors"). In terms of this agreement, the Advisors will continue to provide some advisory services to the Company in relation to the sale of a portfolio of mostly non-core properties ("non-core properties") with a total valuation of c. €100 million (about 20% of the Sirius portfolio) and the on-going management and sale of the Bremen-HAG property. The Advisor's role will focus on providing advice on sale of the non-core properties although all decisions relating to these assets will remain with the Sirius Board.  Day-to-day management of the non-core properties other than Bremen-HAG remain under the control of Facilities. This appointment of the Advisors will terminate on the earlier of the sale of all the assets subject to the advisory agreement and 31 January 2014. Certain deferred incentives will become payable to the Advisors depending on the successful outcome of the sales process. PCSREAM shall receive a fee of €120,000 per annum for the management of Bremen-HAG.

The Royal Bank of Scotland has given its consent for the change of Manager in accordance with the RBS facility agreement and BerlinHyp have been notified in accordance with the BerlinHyp facility agreement. There are no outstanding conditions to Completion of the acquisition of Facilities and this is expected to occur by the end of the month. The acquisition of the minority interests is subject to consent from The Royal Bank of Scotland and this is expected within a month.

The Consideration Shares will be subject to a lock in until 30 June 2013, other than for a disposal to meet a claim for breach of warranty or indemnity or by way of acceptance of an offer (or the giving of an irrevocable undertaking).

Other provisions of the agreements include a non-Compete agreement between Sirius and Principle Capital, Brian Myerson and the Oppenheims.

Related party transaction

The Internalisation is classified as a related party transaction under Rule 13 of the AIM Rules for Companies.  As such, the Directors of Sirius consider, having consulted with Peel Hunt (the Company's nominated adviser), that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Enquiries:

Sirius                                                                                                                                     01481 729 466

Robert Sinclair                                                                                                 

Peel Hunt                                                                                                                                                                      

Capel Irwin                                                                                                                         020 7418 8900

Alex Vaughan                                   

Cardew Group                                                                                                                                                 

Tim Robertson                                                                                                                  020 7930 0777

Georgina Hall                   

 

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