Notice of EGM

RNS Number : 9214T

UK Commercial Property Trust Ltd

15 June 2009

 



RIS ANNOUNCEMENT

UK COMMERCIAL PROPERTY TRUST LIMITED

15 June 2009

RECOMMENDED PROPOSALS TO APPROVE THE CONTINUATION OF THE COMPANY, TO AMEND THE COMPANY'S POLICY ON CONTINUATION VOTES AND TO AMEND THE COMPANY'S GEARING POLICY

Introduction and background

UK Commercial Property Trust Limited is a closed-ended Guernsey registered investment company which is listed on the Official List of the UK Listing Authority. It was launched in September 2006. 

The Company's investment objective is to provide Shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified portfolio of UK commercial properties.

At the Continuation EGM held in December 2007, an ordinary resolution was passed approving the continuation of the Company. The circular issued by the Directors in relation to that Continuation EGM stated that if the ordinary resolution was passed approving the continuation of the Company, the Directors would not convene another extraordinary general meeting to consider the continuation of the Company unless the market price of a Share was more than five per cent. below the published NAV of a Share for a continuous period of 90 dealing days or more following the first anniversary of the Continuation EGM. On 1 May 2009 the Directors announced that the Shares had traded at a discount of more than five per cent. to their NAV for 90 continuous dealing days following the first anniversary of the Continuation EGM and accordingly that the Directors would convene an extraordinary general meeting to consider a further continuation resolution. As at 10 June 2009, the discount was 3.1 per cent. 

The Company has today published a circular (the 'Circular') convening an Extraordinary General Meeting to be held at 11 a.m. on 10 July 2009 at Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL to consider an ordinary resolution to approve the continuation of the Company. The Circular and this announcement also explain why the Directors believe that the continuation of the Company is in the best interests of Shareholders as a whole and recommend that Shareholders vote in favour of Resolution 1 at the EGM.

The Directors also believe it is in the best interests of Shareholders that, for reasons set out in more detail in the section of the Circular and this announcement headed 'Amendment of the Company's policy on continuation votes', if Resolution 1 is passed, the Company should not be required to hold another continuation vote unless the market price of a Share is more than five per cent. below the published NAV of a Share for a continuous period of 90 dealing days or more following the second anniversary (rather than the first anniversary) of the passing of Resolution 1. Therefore, Resolution 2 is being proposed to ask Shareholders to approve the extension of the period between continuation votes. Details of why the Directors recommend that Shareholders vote in favour of Resolution 2 are set out in the Circular and this announcement.

In the event that Resolution 1 is passed the Directors also intend to propose a resolution to approve the amendment to the Company's gearing policy in order that the borrowing limit be the higher of 10 per cent. of the Group's net assets at the time of drawdown or £80 million (the current debt facility available to the Group) as discussed in more detail in the Circular and this announcement.

Performance of the Company and recent asset management activity

The Company was launched fully invested in September 2006 and increased in size as a result of the acquisition of a further portfolio of properties in early 2007. As at 31 March 2009, the Property Portfolio was valued at £526 million. On 17 April 2009, the Company announced it had acquired a further property valued at £31.4 million.

As noted in the Annual Reports and Accounts of the Company for the year ended 31 December 2008, despite the difficult market conditions, the Company was able to control the level of voids during 2008. During the year there was a total of 14 lettings in the Property Portfolio adding £1.6 million to the Property Portfolio's income (after incentives, including rent free periods, the last of which lapses in August 2009). The majority of these have been within the Company's office stock with lettings at Arlington Street, London, Colmore Row, Birmingham and Charter Place, Uxbridge.

The Company has also been successful in retaining income via lease renewal activity. Over 2008, nine leases were renewed out of a total of eighteen tenant negotiations. The total passing rent for all lease renewals was £1.075 million being broadly in line with ERV.

The retention and improvement of this income stream continues to be at the heart of the Company's policy for the Property Portfolio. A notable example of this policy during 2008 was the regear of the lease of an 85,000 sq. ft. office building at 5-7 Chancery Lane, London. Negotiations with the tenant resulted in an extension of the lease term by a further five years and a revised rent of £3.4 million from a passing rent of £2.57 million. The resultant impact of letting and asset management activity has been to move the average lease length in the portfolio from 10 years and eight months to 11 years over the period from December 2007.

A total of £915,000 has been spent on refurbishment projects within the Property Portfolio. One major project which is still being considered is the redevelopment of the BHS department store at The Parade in Swindon where the Council's Planning Committee has now voted in favour of a revised planning application subject to finalising the provisions of a section 106 Agreement for an additional 17,000 sq. ft. of retail floor space. Pre-lets have been agreed on 60 per cent. of the space. The Company hopes to be in a position to start on site in early 2010.

Over the period from the launch of the Company to 31 March 2009 (being the most recent quarter end) the NAV total return per Share (with dividends re-invested) was -18.17 per cent. compared with the total return on the FTSE All-Share Index over this period of -47.0 per cent, and on the FTSE Real Estate Index of -68.7 per cent. For this same period the Property Portfolio generated a total return of -22.4 per cent. (excluding acquisition costs) compared with a total return from the IPD Index of -27.5 per cent.

At the close of business on 10 June 2009, the Shares were trading at a discount of 3.1 per cent. compared with the Sector average discount of 21.7 per cent. 

As at 31 March 2009 the Company had total assets (less current liabilities) of £566.5 million.

Investment outlook

Forecasting when the current problems afflicting both the property and wider investment markets will come to an end is almost impossible. The depth of the current recession will be determined by the ability of the banks to restart the credit markets through lending at competitive and not restrictive rates, by improved investor confidence in both domestic and international investment markets and by consumer confidence recovering to a level that halts the current flow of negative news emanating from the retail sector.

In the current downturn, protecting current revenue streams, maintaining and creating value through active asset management and remaining alive to any opportunities that may arise in the current markets are the Company's priorities.

The Manager anticipates that the market will continue to drift downwards, albeit at a much more moderate rate, over the coming 12 month period. Further market decline should be as a direct consequence of the more muted impact of rental decline and, dependent on the quality of the underlying portfolio and/or asset, tenant default. The Property Portfolio's covenant strength, the continued positive rent collection rates, and the fact that there is no heavy reliance on lettings and developments for future reversions provide an underlying resilience to the portfolio.

Discount and share buy backs

For the period from launch to 20 May 2009 the Company bought back 41,445,142 Shares, equivalent to 4.7 per cent. of the issued share capital prior to the commencement of the share buy backs in September 2007. The Shares were bought back at an average discount of 20.2 per cent. to the published NAV (adjusted for any quarterly dividends which had gone ex-dividend) and provided an enhancement to the NAV of 0.86p per Share (1.4 per cent. to the share price as at 19 May 2009). The Shares were bought back into treasury.

The Prospectus contains a statement that the Directors intend to use the share buy back authority to purchase Shares (subject to the income and cash flow requirements of the Company) if the Share price is more than five per cent. below the published NAV for a continuous period of 20 dealing days or more. To ensure a fair comparison, the Directors believe that such discount should be calculated by adjusting the published NAV for any quarterly dividends for which the share price has gone ex-dividend.

It is the Board's intention that it will continue to consider share buy backs in future where it believes that it will enhance shareholder value while giving careful consideration to the Company's cashflows together with development and asset management opportunities as they arise.  

Amendment of the Company's policy on continuation votes

If the continuation of the Company is approved at the Extraordinary General Meeting then, in accordance with the Prospectus, the Directors would next be required to convene an extraordinary general meeting to consider the continuation of the Company if the market price of a Share was more than five per cent. below the published NAV of a Share for a continuous period of 90 dealing days or more following the first anniversary of the Extraordinary General Meeting.

The Directors believe that it would be more appropriate for the 90 dealing days to run from the second anniversary of the Extraordinary General Meeting rather than the first anniversary. Resolution 2 to be proposed at the EGM approves the extension of this period to the next potential continuation vote.

The Directors believe that this extension would permit the Manager to manage the Company's assets for the medium term rather than managing the assets with the prospect of having to realise the Property Portfolio on a shorter timescale. It should be noted that the passing of Resolution 2 would not prevent the Directors from putting a continuation vote to Shareholders earlier, in the event that they believed it to be in Shareholders' best interests.

Gearing policy 

The Prospectus stated that it was the Directors intention to limit any borrowings of the Company to a maximum of 10 per cent. of the Group's net assets at the time of drawdown.  

The Board announced on 20 June 2008 that it had put in place and had available an £80 million seven year term loan facility with Lloyds TSB Scotland plc. The Company is entitled to use the amounts drawn down under the facility for all general corporate purposes which will include making acquisitions in accordance with the Company's investment policy, working capital and share buy backs.  

The Board believes that the prevailing market conditions will continue to provide attractive opportunities for the Company to acquire further properties to strengthen the Company's performance during and following the current economic downturn and to enhance the income returns on the Property Portfolio. The Board and the Manager will continue to monitor carefully opportunities to utilise the Company's cash resources, both existing and under the debt facility, to enhance returns for Shareholders.  

As the Group's unaudited net assets as at 31 March 2009 were £566.5 million, the Board believes that it is in the best interests of Shareholders that the gearing policy of the Group be amended to permit borrowings up to the higher of 10 per cent. of the Group's net assets at the time of drawdown or £80 million, so that the full loan facility can be utilised, if this is judged by the Directors to be in Shareholder's best interests.  

Extraordinary General Meeting 

The Extraordinary General Meeting has been convened for 11 a.m. on 10 July 2009, to be held at Trafalgar Court, Les Banques, St. Peter Port, Guernsey GY1 3QL. All Shareholders are entitled to attend, speak and vote on the Resolutions to be proposed at the EGM, which will all be proposed as ordinary resolutions.

If Resolution 1 is not passed, the Directors will convene a further extraordinary general meeting of the Company to be held within six months of the date of the EGM to consider the winding up of the Company or a reconstruction of the Company, which will offer all Shareholders the opportunity to realise their investment.

If Resolutions 1 and 2 are passed, the Directors would not intend to convene another extraordinary general meeting to consider the continuation of the Company unless the Shares trade at a discount of over five per cent., calculated as described above, for 90 dealing days or more following the second anniversary of the EGM.

Majority Shareholder voting intention

Subsidiary entities of Pearl Group Limited are entitled to exercise the votes attached to 564,093,026 Shares (being 67.3 per cent. of the Company's issued share capital) and have indicated that they currently intend to vote in favour of the Resolutions.

Recommendation

The Board, which has been advised by Dickson Minto W.S., considers that the continuation of the Company, the amendment of the Company's policy on continuation votes and the amendment to the Company's gearing policy are in the best interests of the Shareholders as a whole. Accordingly, the Board unanimously recommends all Shareholders to vote in favour of all of the Resolutions to be proposed at the Extraordinary General Meeting.

The Directors, who in aggregate have an interest in 70,000 Shares (being 0.008 per cent. of the issued share capital), intend to vote their entire beneficial holdings in favour of the Resolutions.

Document availability

Copies of the Circular have been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:

UK Listing Authority
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS

Enquiries

Douglas Armstrong, Dickson Minto W.S.

0207 628 4455

Nigel Russell/Graeme Caton/Graham Reaves, G&N Collective Funds Services Limited

0131 226 4411

The Company Secretary, Northern Trust International Fund Administration Services (Guernsey) Limited

01481 745 001

Gary Hutcheson/Gerry Brady, Ignis Investment Services Limited

0141 222 8000

Definitions

'Board' or 'Directors'	means the board of directors of the Company
'Company'	means UK Commercial Property Trust Limited
'Continuation EGM'	means the extraordinary general meeting of the Company held on 19 December 2007
'EGM' or 'Extraordinary General Meeting'	means the extraordinary general meeting of the Company convened for 11 a.m. on 10 July 2009 (or any adjournment thereof) notice of which is set out on page 7 of the Circular published on 15 June 2009
'ERV'	means the estimated rental value
'Group'	means the Company and its direct and indirect subsidiary entities
'IFRS'	means International Financial Reporting Standards as adopted in the European Union
'IPD'	means Investment Property Databank Limited
'IPD Index'	means the IPD UK Balanced Monthly and Quarterly Universe prepared by IPD
'Manager'	means Ignis Investment Services Limited
'NAV'	means the net asset value of a Share calculated under IFRS
'Property Portfolio'	means the direct property assets of the Company
'Prospectus'	means the prospectus published by the Company at the time of its launch in September 2006
'Resolutions' or 'Resolution 1' or 'Resolution 2' or 'Resolution 3'	means the resolutions to approve the continuation of the Company, the amendment to the Company's policy on continuation votes and to amend the Company's gearing policy each as set out in the notice of the EGM on page 7 of the Circular published on 15 June 2009
'Sector'	means the sector comprising offshore incorporated, main market London listed property investment companies invested principally in mainstream UK commercial property, being the Company, F&C Commercial Property Trust Limited, ING UK Real Estate Income Trust Limited, Invista Foundation Property Trust Limited, ISIS Property Trust Limited, IRP Property Investments Limited, Standard Life Investments Property Income Trust Limited and The Advantage Property Income Trust Limited
'Shareholders'	means the holders of Shares
'Shares'	means ordinary shares of 25p each in the capital of the Company

Where the context requires, references to 10 June 2009 should be treated as being references to the latest practicable date prior to the publication of the Circular and this announcement.

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