Placing and Subscription

RNS Number : 6804O

Pacific Industrial & Log REIT PLC

09 November 2016

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL APPLICABLE SECURITIES LAWS OR REGULATIONS

Pacific Industrial & Logistics REIT plc

("Pacific Industrial & Logistics", the "Company" or the "Group")

Placing and Subscription to raise £11,124,300
Appointment of New Directors
Declaration of Interim Dividend
Redemption of Preference Shares
and
Posting of Circular and Notice of General Meeting

Pacific Industrial & Logistics REIT plc (AIM:PILR), a specialist Real Estate Investment Trust focused on smaller lot size industrial and logistics properties, is pleased to announce a conditional equity placing by finnCap and Radnor Capital Partners of 11,124,300 new ordinary shares of 1p each ("Ordinary Shares") on behalf of the Company by way of a placing and subscription (the "Placing and Subscription").

HIGHLIGHTS

·                       Placing and Subscription of 11,124,300 new Ordinary Shares at a price of 100 pence per Ordinary Share (the "Issue Price"), raising gross proceeds of £11.1 million;

·                       The proceeds of the Placing and Subscription will primarily be used to fund future acquisitions and reduce gearing to c.45%;

·                       Appointment of Mr. Nigel Rich CBE as non-executive chairman, formerly Chairman of Segro plc, and Mr. Mark Johnson, the CEO and co-founder of Pacific Investments with Sir John Beckwith, as a non-executive director, both with effect from 1 January 2017;

·                       Declaration of interim dividend of 3.0 pence per Ordinary Share;

·                       Placing and Subscription is conditional upon (among other things) shareholder approval; and

·                       Circular to shareholders in relation to the Placing and Subscription to be despatched later today.

Richard Moffitt, CEO of Pacific Industrial & Logistics, commented:

"We are pleased to report that the Company has conditionally raised £11.1 m of equity capital from predominantly new and some existing investors, validating the investment strategy employed by the Company. This additional capital will provide the Company with further liquidity and a more diversified Shareholder base. We will now work to rapidly deploy the funds raised by acquiring quality assets from our pipeline."

"I would like to welcome Nigel Rich and Mark Johnson to the Board, who join on 1 January 2017. With extensive public market and property sector experience between them we are excited by the contribution they will make to Pacific Industrial & Logistics."

GENERAL MEETING

A circular will be sent to shareholders  today giving notice of a general meeting of Pacific Industrial & Logistics (the "Circular") to be held at 11.00 a.m. (London time) on 25 November 2016 (the "General Meeting") at the offices of Gowling WLG (UK) LLP, 4 More London Riverside, London SE1 2AU. A copy of the Circular will shortly be available on the Company's website www.pacificil.com.

INTERIM DIVIDEND TIMETABLE

The Directors have proposed paying an interim dividend of 3.0 pence per Ordinary Share in relation to the period from incorporation to 30 September 2016. The interim dividend will be paid by no later than 23 December 2016 to qualifying Shareholders on the register at the close of business on 25 November 2016 (which excludes, for the avoidance of doubt, any Ordinary Shares to be issued pursuant to the Placing and Subscription). The ex-dividend date will be 24 November 2016.

At the time of the Company's admission to AIM, the Company stated that it intended to declare dividends on a half-yearly basis in March and September, subject to its loan-to-value being 50 per cent. or less. Accordingly, the Directors reserve the right to withdraw the interim dividend should the completion of the Placing and/or Subscription not take place and/or the loan-to-value is greater than 50 per cent. following the reduction of the Group's debt facility. The Interim Dividend will be paid in full as a REIT property income distribution in respect of the Group's tax exempt property rental business.

DIRECTOR APPOINTMENTS

The Board is pleased to announce that, on 1 January 2017: (i) Mr. Nigel Rich CBE will be appointed as non-executive chairman of the Company; and (ii) Mr. Mark Johnson, the co-founder of Pacific, will be appointed as a non-independent non-executive director of the Company. At the same time, Jonathan Gray will step down as chairman but shall continue to serve as a non-executive director of the Company.

Mr. Nigel Rich CBE

Nigel brings a wealth of Board experience, having operated across the globe in senior positions, most recently at Segro plc. Nigel served as the Chief Executive Officer of Trafalgar House from 1994 to 1996 and previously spent 20 years at the Jardine Matheson Group in Asia, serving as its Chief Executive from 1989 to 1994 and as a Managing Director of Jardine Matheson Holdings from 1989 to 1994. Nigel has served as the Chairman of the Board at Hamptons International and as the Chairman of the Board of Segro plc from October 2006 until April 2016. He was a Director of Xchanging B.V. and then Deputy Chairman of Xchanging UK. He served as a Non -Executive Director of KGR Absolute Return PCC, Castle Asia Alternative PCC Ltd. and Matheson & Co. He has also served as a Member of The Takeover Panel (UK). Nigel holds a CA from the Institute of Chartered Accountants of England and Wales. Nigel will join the audit, management engagement and valuation committees.

Mr. Mark Johnson

Mark Johnson is the CEO of Pacific which he co-founded in 1994 with Sir John Beckwith. Mark qualified as a lawyer before working in corporate finance at Barclays Merchant Bank and Barclays de Zoete Wedd. He was CEO of the Riverside Group, one of the UK's leading leisure companies, under the chairmanship of Sir John. Mark is (and was) a founding partner and shareholder/director of Pacific's investment portfolio and private equity companies, including Liontrust, Thames River Capital, River & Mercantile, Argentex and Pacific Asset Management. Mark has worked with Sir John for over 20 years. Mark will join the valuation committee.

For further information regarding Pacific Industrial & Logistics REIT plc please call: 

Pacific Industrial & Logistics REIT Plc Richard Moffitt  CEO	[phone]
finnCap - Nominated Adviser and Broker Stuart Andrews/ Grant Bergman/ Giles Rolls Corporate Finance Christian Hobart Corporate Broking	[phone]
Radnor Capital Partners - Capital Advisory Tom Durie / Joshua Cryer	[phone]

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Defined terms used but not defined in this announcement have the meaning set out in the circular.

Background to, and reasons for, the Placing and the Subscription

On 7 October 2016 the Company announced that the gross asset value of the Company increased by 10.7 per cent. from £27 million at acquisition to £29.9 million, delivering a return on investment of c.24 per cent. from a 100 pence issue price to 123.87 pence Adjusted Net Asset Value per Ordinary Share as at 30 September 2016 (which excludes, for the avoidance of doubt, the payment of the Interim Dividend). The Company has significantly exceeded expectations since IPO through upward-only rent reviews and active asset management in a sector that continues to benefit from strong fundamentals post-EU referendum.

The Directors believe that the Placing and the Subscription have the following principal benefits for Shareholders:

·           provides additional capital which will enable the Company to benefit from its current pipeline;

·           increases the number of Ordinary Shares in issue, which may provide Shareholders with additional liquidity and the Company with a more diversified Shareholder base; and

·           enlarges the Company, thereby spreading operating costs over a larger capital base, which should reduce the Company's total expense ratio.

Portfolio update, pipeline and market outlook

Portfolio update

The Company completed its successful IPO and acquisition of the Initial Portfolio in April 2016. Working in conjunction with the tenants of the Initial Portfolio, and in line with their strategy, the Company's management team has carried out the following asset management activities: (i) signed a rent review memorandum and lease extension with one tenant in Bedford at a market leading local rent of £6 psf., increasing the annual rent psf. by 38 per cent.; (ii) introduced new lease terms on a leasehold property allowing for the build out and use of the existing property as a retail outlet; and (iii) signed a new long lease following a full refurbishment by a tenant in Bedford.

The Board commissioned an independent valuation report from CBRE. The gross asset value increased by 10.7 per cent. from £27 million at purchase to £29.9 million, delivering a return on investment of c.24 per cent. from a 100 pence issue price to 123.87 pence Adjusted Net Asset Value per Ordinary Share as at 30 September 2016 (which excludes, for the avoidance of doubt, the payment of the Interim Dividend). Management believe there is further significant upside for the Initial Portfolio.

Pipeline

The Company is currently engaged in various stages of negotiations on potential acquisitions that meet the investment objective and investing policy. The management team believe these assets are complementary to the existing portfolio of the Company with low capital values in well positioned logistical locations. The Company expects to have invested the net proceeds of the Placing and the Subscription by the first quarter of 2017.

The acquisition of any potential investments by the Company is subject, among other things, to the Company completing satisfactory due diligence and the approval of the Directors. Any such acquisitions will also be subject to agreement having been reached between the Company, the Manager and the relevant counterparty as to the terms of such acquisitions. There can be no assurance that any potential investments will be purchased by the Company.

Market outlook

There has been considerable commentary in the press on the commercial property sector as a whole. The sub sector that the Company operates in, industrial and logistics, has shown little change since the EU referendum in the view of the Directors, and the Directors are aware of a number of transactions closing at pre-referendum valuations.

The Directors believe that this sector remains less vulnerable than other real estate sectors as consumers continue to migrate online and demand for logistics remains high. With growing demand from consumers who continue to rely on e-commerce, companies have to adapt their strategies. Supply in key locations across the Midlands, and other regional locations, remains constrained and development opportunities are limited.

The Directors have identified a strong pipeline of attractive assets that are complementary to the Company's existing portfolio and located in key logistical locations. The Board believes these assets present the Company with a good opportunity to grow its portfolio in the coming months, subject to the necessary financing.

Redemption of Preference Shares

In order to provide the Group with medium term funding at the time of the IPO, affiliates of Pacific subscribed for, in aggregate, 2 million Preference Shares at £1.00 per Preference Share. The Preference Shares are entitled to a 6 per cent. cumulative dividend payable on redemption and are redeemable at any time over a period of 18 months from the IPO.

Taking into account the net proceeds of the Placing and the Subscription, the Board believes it is in the best interests of Shareholders to redeem all of the Preference Shares following completion of the Placing and the Subscription. Accordingly, immediately following completion of the Placing and the Subscription, the Board intends to serve a compulsory redemption notice on the holders of Preference Shares in accordance with the articles of association of the Company at c.£1.0378 per Preference Share. Redemption of the Preference Shares is expected to take place on 28 November 2016. The redemption of the Preference Shares will be funded from the proceeds of the Placing and the Subscription.

The redemption of the Preference Shares is a related party transaction pursuant to the AIM Rules as Sir John Beckwith (the ultimate beneficial owner of Pacific and its affiliates) is a substantial shareholder of the Company. The Directors consider, having consulted with the Company's nominated adviser, finnCap, that the terms of the redemption of the Preference Shares are fair and reasonable insofar as the Company's shareholders are concerned.

The Placing and the Subscription

9,499,300 Placing Shares have been placed with placees at the Issue Price and subscribers have subscribed for 1,625,000 Subscription Shares at the Issue Price to raise gross proceeds of c.£11.1 million. Neither the Placing nor the Subscription is underwritten.

The Issue Price represents: (i) a discount of approximately 6.54% per cent. to the closing mid-market price of 107 pence per Ordinary Share on 8 November 2016 (being the last practical date prior to the announcement of the Placing and Subscription); and (ii) a discount of approximately 17.27 per cent. to the prevailing Adjusted Net Asset Value at 30 September 2016 (being the last practicable date prior to the announcement of the Placing and the Subscription), as adjusted to take into account the declaration and payment of the Interim Dividend.

The Placing and the Subscription is conditional, inter alia, on the approval of Resolutions 1 and 2 at the General Meeting of the Company to be held at 11.00 a.m. on 25 November 2016 and upon Admission of the Placing Shares and the Subscription Shares to trading on AIM. It is expected that Admission of the Placing Shares and the Subscription Shares will occur on 28 November 2016.

The Ordinary Shares issued pursuant to the Placing and the Subscription will, when issued, be credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares including the right to receive all dividends and other distributions declared, made or paid after their date of issue.

The Placing Agreement

Pursuant to the terms of the Placing Agreement: (i) finnCap, as agent for the Company, conditionally agreed to use its reasonable endeavours to place the Placing Shares on a non-underwritten basis at the Placing Price; and (ii) Radnor conditionally agreed to use its reasonable endeavours to introduce potential Placees to finnCap.

The Placing Agreement contains certain warranties from the Company and the Manager in favour of finnCap and Radnor in relation to, inter alia, certain matters relating to the Company and its business. In addition, the Company and the Manager have agreed to indemnify finnCap and Radnor in relation to certain liabilities they may incur in respect of the Placing. finnCap has the right to terminate the Placing Agreement in certain circumstances prior to Admission including, without limitation, in the event of a breach of the Company to comply in any material respect with its obligations under the Placing Agreement, the occurrence of a force majeure event or a material adverse change in the financial condition of the Group. Under the terms of the Placing Agreement the Company has agreed to pay finnCap a corporate finance fee and commissions based on the number of Placing Shares which are the subject of the Placing and a fee to Radnor.

Pacific participation in the Subscription

Pacific, Sir John Beckwith and his affiliates, have agreed to subscribe for 750,000 Subscription Shares pursuant to the Subscription. This subscription for Ordinary Shares is a related party transaction pursuant to the AIM Rules as Sir John Beckwith (the ultimate beneficial owner of Pacific and its affiliates) is a substantial shareholder of the Company. The Directors consider, having consulted with the Company's nominated adviser, finnCap, that the terms of the subscription by Pacific, Sir John Beckwith and his affiliates are fair and reasonable insofar as the Company's shareholders are concerned.

Shareholders should note that, following completion of the Placing and the Subscription, Pacific, Sir John Beckwith and his affiliates will be interested in 7,600,000 Ordinary Shares (representing 35.44 per cent. of the Enlarged Share Capital). Should any of Pacific, Sir John Beckwith or his affiliates acquire any further interest in Ordinary Shares (or should any one of them acquire any interest in Ordinary Shares such that they are interested in 30 per cent. of more of the voting rights of the Company), the Takeover Panel may regard this as giving rise to an obligation upon that member of the Concert Party to make an offer for the entire issued share capital of the Company at a price no less than the highest price paid by any of them in the previous 12 months.

Admission and dealings

Application will be made to the London Stock Exchange for the Placing Shares and the Subscription Shares to be admitted to trading on AIM. The Placing Shares and the Subscription Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive dividends and other distributions declared following Admission. It is expected that Admission will become effective and that dealings in the Placing Shares and the Subscription Shares will commence on 28 November 2016.

Directors' participation in the Subscription

The following Directors are subscribing for Ordinary Shares pursuant to the Subscription. Their subscription for new Ordinary Shares is taking place on the same terms and conditions as the wider Placing.

Director	No. of Ordinary Shares subscribed for pursuant to the Subscription	Resulting holding of Ordinary Shares	% of Enlarged Issued Ordinary Share Capital
Richard Moffitt	50,000	300,000	1.4%

Proposed Director	No. of Ordinary Shares subscribed for pursuant to the Subscription	Resulting holding of Ordinary Shares	% of Enlarged Issued Ordinary Share Capital
Nigel Rich	75,000	75,000	0.3%
Mark Johnson	50,000	150,000	0.7%

The subscription for Ordinary Shares by Richard Moffitt is a related party transaction pursuant to the AIM Rules. The independent Directors (being Jonathan Gray and Bruce Anderson) consider, having consulted with the Company's nominated adviser, finnCap, that the terms of the subscription by Richard Moffitt are fair and reasonable insofar as the Company's shareholders are concerned.

General Meeting

A notice convening the General Meeting to be held at the offices of Gowling WLG (UK) LLP, 4 More London Riverside, London SE1 2AU, at 11.00 a.m. on 25 November 2016 is set out at the end of this document. At the General Meeting, the following Resolutions will be proposed:

Resolutions relating to the Placing and the Subscription (Resolutions 1 and 2)

Resolutions 1 and 2 will be proposed to grant the Directors the authority to allot the Placing Shares and the Subscription Shares (which are equivalent to approximately 51.88 per cent. of the Enlarged Share Capital) without first offering them to existing Shareholders on a pre-emptive basis.

The Directors believe it would not be in the Shareholders' best interests to incur the significant additional expense that would be required to implement a fully pre-emptive offer of Ordinary Shares to Shareholders. The Directors have therefore concluded that seeking general authority from Shareholders to issue the Placing Shares and the Subscription Shares other than on a pre-emptive basis is the most flexible and cost effective method available to the Company.

Resolutions relating to general authority to allot Ordinary Shares and waiver of pre-emption rights (Resolutions 3 and 4)

Resolutions 3 and 4 will, if passed, renew the authorities given to the Directors to allot Ordinary Shares on a non-pre-emptive basis at the time of the Company's IPO, but reflecting the increased number of Ordinary Shares comprised in the Enlarged Issued Share Capital broadly on the same terms as the equivalent resolution passed at that time. The authority sought under these Resolutions will expire at the earlier of the conclusion of the annual general meeting of the Company in 2017 or 30 September 2017.

Intention of Directors and Pacific

The Directors intend to vote in favour of each of the Resolutions in respect of their aggregate beneficial interest in respect of 280,000 Ordinary Shares, representing approximately 2.71 per cent. of the Existing Ordinary Shares.

Pacific, Sir John Beckwith and his affiliates intend to vote in favour of each of the Resolutions in respect of their aggregate beneficial interest in respect of 6,700,000 Ordinary Shares, representing approximately 64.93 per cent. of the Existing Ordinary Shares.

Placing and Subscription Statistics

Issue Price	£1.00
Number of Placing Shares	9,499,300
Number of Subscription Shares	1,625,000
Gross proceeds of the Placing and the Subscription	£11.1 million
Number of Ordinary Shares in issue on the date of this document*	10,317,910
Number of Preference Shares in issue on the date of this document	2,000,000
Number of Ordinary Shares in issue at Admission of the Placing Shares and the Subscription Shares*	21,442,210
Number of Warrants in issue at the date of Admission of the Placing Shares and the Subscription Shares*	3,027,000
Number of Preference Shares in issue immediately following Admission of the Placing Shares and the Subscription Shares	-
Placing Shares and Subscription Shares expressed as a percentage of the Enlarged Share Capital*	51.88 per cent.

* Assuming no Warrants are exercised on or before Admission

Expected Timetable

Latest time and date for receipt of Forms of Proxy	11.00 a.m. on 23 November 2016
Ex-dividend date	24 November 2016
General Meeting	11.00 a.m. on 25 November 2016
Date for Shareholders to be on register in order to receive dividend	close of business on 25 November 2016
Admission of Placing Shares and Subscription Shares	8.00 a.m. on 28 November 2016
Expected date for CREST accounts to be credited in relation to Placing Shares and Subscription Shares	28 November 2016
Redemption of the Preference Shares	28 November 2016
Dispatch of definitive share certificates (where applicable) in relation to Placing Shares and Subscription Shares	by no later 5 December 2016
Dividend payment date to qualifying Shareholders	by no later 23 December 2016

Notes:

Certain of the events in the above timetable are conditional upon, amongst other things, the approval of the Resolutions at the General Meeting.

If any of the events contained in the timetable should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service.

Additional Information

Further details required to be disclosed under Rule 17 of, and paragraph (g) of Schedule 2 to, the AIM Rules for Mr. Nigel Rich CBE and Mr. Mark Johnson is as follows:

Mr. Nigel Mervyn Sutherland Rich CBE, aged 71

Mr Rich CBE has held the following directorships and/or been a partner in the following partnerships within the period of five years prior to the date of this document:

Current directorships/partnerships	Past directorships/partnerships
British Empire Trust PLC The Tobacco Pipe Makers and Tobacco Trade  Benevolent Fund Chelsea Square Garden Limited Matheson & Co.,Limited	Pacific Assets Trust PLC Segro plc The R&A Foundation R&A Trust Company (No.1) Limited R&A Trust Company (No.2) Limited Bank of the Philippine Islands (Europe) PLC R&A Championships Limited Xchanging Limited

Mr. Mark Christopher Johnson, aged 58

Mr Johnson has held, other than other companies in the Group, the following directorships and/or been a partner in the following partnerships within the period of five years prior to the date of this document:

Current directorships/partnerships

Past directorships/partnerships1

Pacific Capital Partners Limited London and Continental Partners LLP Pacific Industrial LLP Pacific Asset Management LLP Mortar Capital Limited MCJ Holdings Limited Argentex LLP Pacific Foreign Exchange Ltd Rivercrest Capital LLP Burlington Global Limited Pacific Leisure & Media Limited PHL 2 Limited Pacific and York Ltd Pacific Investments Limited Beckwith Capital Investment Limited Puma Asset Management Limited B@1 Limited Pacific Healthcare Limited Pacific Leisure, Entertainment & Media Limited Pacific Investments Management Ltd Key Rock Developments Limited

Beckwith Investment Management Limited River and Mercantile Group PLC Pacific Venture Capital LLP (Dissolved) Law 17151 Ltd (Dissolved) Law 17141 Ltd (Dissolved) Tryline Holdings Limited (Dissolved) Imagestate Plc Odyssey Venture Partners Limited The General Property Investment Company Limited River and Mercantile Asset Management LLP Roundshield LLP Property Capital Partners Europe LLP

¹ Imagestate Plc entered administration on 13 April 2006 and was dissolved on 15 September 2007.

 

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