Admission to AIM and CISX
Not for distribution, directly or indirectly, in whole or in part in or into the United States, Canada, Australia, Japan, the Republic of Ireland or South Africa or to US persons.
This announcement is not an admission document. This document does not constitute or form part of, and should not be construed as, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or warrants in the Company or securities in any other entity nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. This document does not constitute a recommendation regarding any securities.
Any investment decision must be made exclusively on the basis of the final admission document published by the Company and any supplement thereto (the 'Admission Document'). Any defined terms used in this announcement shall have the same meaning as defined in the Admission Document, unless otherwise defined herein. Copies of the Admission Document will be available on the Company website www.newriverretail.com and from the Company's registered office.
NewRiver Retail Limited (AIM: NRR) Raises £25 million
Admission to AIM and the CISX
Placing Price of 250 pence per Ordinary Share
NewRiver Retail Limited ('NewRiver Retail' or the 'Company'), the newly formed specialist commercial property investment and asset management company, today announces that it has successfully raised £25 million ('Placing') at a price of 250 pence per Ordinary Share ('Share') ('Placing Price') subject, inter alia, to admission of the Shares to trading on AIM and the Daily Official List of the Channel Islands Stock Exchange, LBG ('CISX') ('Admission').
Admission is scheduled, and dealings are expected to commence, today at 8.00 am, 1 September 2009.
The Company has been established to take advantage of opportunities in the UK commercial property market, specifically targeting the retail sector, through active and entrepreneurial asset management and risk controlled development using both its own balance sheet capital and co-investment and joint venture structures.
DETAILS OF THE PLACING AND ADMISSION
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The Company has raised gross proceeds of £25 million, subject to Admission to AIM and the CISX
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The Placing comprises 10 million shares at 250p per Share
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At the Placing Price, the market capitalisation for NewRiver Retail upon Admission will be £25 million
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This initial fundraising of £25 million represents seed capital which will be used to acquire assets which fit within the Company's investment policy; take forward joint venture discussions which are currently in progress and where appropriate enter into new co-investment or joint venture discussions with other parties; and finalise the recruitment of the core management team of NewRiver Capital Limited ('NRC'), NewRiver Retail's wholly-owned subsidiary and property manager and adviser
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Following this initial fundraising, NewRiver intends to raise further equity capital at a later date in order to accelerate its business plan and acquire assets in accordance with the Company's investment policy
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A total of £5.11m cash invested by certain directors of NewRiver Retail including Paul Roy and members of the NRC Management Team, including David Lockhart and Allan Lockhart
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The Shares are scheduled to be admitted to trading on AIM and to listing on the Daily Official List of the CISX under the symbol 'NRR' at 08.00am today
OVERVIEW OF THE COMPANY AND MANAGEMENT TRACK RECORD
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NewRiver Retail intends to exploit opportunities in the UK commercial real estate market through active and entrepreneurial asset management coupled with risk controlled development to create added value and deliver returns for shareholders
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The Company will be an active investor and intends to become one of the leading sector-focused value-creating property investment businesses operating in the UK retail sector
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Experienced board of Directors, chaired by Paul Roy, a skilled advisory and management team led by David Lockhart and Allan Lockhart who have a combined experience of more than 50 years in the UK commercial property market and a strong long-term track record established across both a variety of real estate ventures and a range of economic conditions
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David Lockhart founded the real estate management and development company Halladale Group plc in 1991, generating significant returns for shareholders through to its sale in 2007 for £171 million
David Lockhart, Director of NewRiver Retail and CEO of New River Capital, said:
'The Board is delighted to have raised this initial seed capital from supportive institutional and other investors. Our team has a strong proven track record of creating shareholder value through exploiting opportunities in the UK commercial property market. We believe that the time is now right to capitalise on emerging opportunities, particularly in the retail sector. I am confident that NewRiver's specialist focus will create an innovative and exciting platform from which to capitalise on the opportunities that will arise from the next cycle in the property market.'
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For further information:
The Admission Document is available, free of charge, from the Company's website at www.newriverretial.com and from the Company's registered office.
NewRiver Retail Ltd Tel: 01481 725 540
Serena Tremlett
NewRiver Capital Tel: 020 3178 4579
David Lockhart
Allan Lockhart
Bell Pottinger Corporate & Financial Tel: 0207 861 3232
David Rydell
Rosanne Perry
BofA Merrill Lynch Tel: 0207 628 1000
(Bookrunner and Nominated Adviser)
Simon Fraser
David Church
George Close-Brooks
Kinmont (Financial Adviser) Tel: 0207 087 9100
Gavin Kelly
John O'Malley
NEWRIVER RETAIL LTD
1. NEWRIVER RETAIL'S BUSINESS AND OPPORTUNITY
NewRiver Retail has been established as a specialist real estate investor and asset manager for the purposes of taking advantage of certain opportunities that the Directors believe the next cycle in the UK property market will present, with particular focus on the UK retail sector.
The Company will be advised on property matters (both investment and management) by NewRiver Capital, a recently incorporated vehicle which will become a wholly-owned subsidiary of the Company with effect from Admission and which will be operated by a highly experienced management team, including David Lockhart and Allan Lockhart. The NRC Management Team has a strong long-term track record, established across both a variety of real estate ventures and across a range of economic conditions in the real estate sector. David Lockhart and Allan Lockhart were both key members of the management team which successfully led Halladale Group plc, a real estate management and development company previously traded on AIM until its sale in 2007. More information in relation to David Lockhart's and Allan Lockhart's experience and track record is provided below.
The Directors believe that now is the right time to establish a platform from which to invest in the next cycle of the property market. The Company intends to create value through active and entrepreneurial asset management and risk controlled development, utilising both its own balance sheet and co-investment and joint venture structures. The Company will be an active investor and intends to implement strategies to enhance the quality and value of the assets which it acquires and improve annual rental income. A key objective of NewRiver Retail is to become one of the leading sector-focused value-creating property investment businesses operating in the UK retail sector.
The Directors believe that a quoted, capitalised vehicle is appropriate for such an opportunity. The Company is therefore proceeding with an initial fundraising of £25 million of seed capital, which it intends to use to: (i) seek to acquire assets which fit with the Company's investment policy; (ii) take forward joint venture discussions which are currently in progress and, where appropriate, enter into joint venture or co-investment discussions with other parties; and (iii) finalise the recruitment of the core NRC Management Team.
Following the initial raising of seed capital, the Company intends to raise further equity capital at a later date in order to accelerate its business plan and acquire assets in accordance with the Company's investment policy. Whilst any further equity fundraisings are anticipated to be for more than the initial fundraising of seed capital, there can be no guarantee that any further fundraising(s) will occur. If this is the case, the Directors believe that there are a number of alternative opportunities the Company could pursue to further its investment policy, including, in particular, joint ventures and other co-investment structures with third parties.
Based on current market conditions, the Directors intend that the Group's level of borrowings will be between 50 per cent. and 65 per cent. of the gross value of its real estate assets (as at the last published NAV valuation date). However, gearing will be governed by careful consideration of both the cost and availability of borrowing and the ability to mitigate the impact of interest rate rises. The Company's articles of incorporation do not contain any borrowing limits.
2. MANAGEMENT EXPERIENCE AND TRACK RECORD
The Company will be advised on property matters (both investment and management) by its wholly-owned subsidiary, NewRiver Capital. NewRiver Capital has appointed a highly experienced management team, led by David Lockhart and Allan Lockhart, who have been involved in the UK commercial property market for over 30 years and 20 years respectively.
David Lockhart founded the real estate management and development company, Halladale, in 1991. Halladale was a success as a public company, generating significant returns for its shareholders from its admission to AIM in 2001 until it was sold in 2007.
Allan Lockhart, after 13 years advising major property companies and institutions on retail investment and development at Strutt & Parker, joined Halladale in 2002 as Retail Director of its principal trading subsidiary and was responsible for co-ordinating the acquisition and implementation of the asset management strategies of over 20 shopping centres as well as acquiring and completing several profitable retail developments.
Halladale was admitted to trading on AIM in April 2001 with a market capitalisation of approximately £10 million and was sold to Stockland Corporation in April 2007 for £171 million (having raised over £60 million of additional equity and convertible unsecured loan capital during the intervening period). In share price terms, this resulted in a 440 per cent. Total Shareholder Return for investors who held shares in Halladale from the time of its admission to AIM until its sale, compared with Total Shareholder Returns on the FTSE All Share Real Estate and FTSE All Share indices, respectively, of 175 per cent. and 44 per cent. over the same period. This represented an out-performance of those indices of 265 per cent. and 396 per cent., respectively, and an internal rate of return of approximately 31 per cent. per annum. At the time of its admission to trading on AIM, Halladale's NNNAV per share was 63.7 pence. The offer price paid by Stockland when it acquired Halladale in 2007 was 225 pence per share. Over this time, Halladale's portfolio of third party assets under management grew from approximately £116 million to approximately
£1.5 billion.
In the financial years from April 2002 to April 2006, Halladale's profits before tax grew at a compound annual growth rate of 52.9 per cent. (to £6.3 million) and dividends per share grew at a compound annual growth rate of 32 per cent. (to 3.8 pence).
3. INVESTMENT POLICY
In the context of the NRC Management Team's experience and the Directors' analysis of the opportunities currently available in UK real estate, NewRiver Retail will focus on retail sector investments in the United Kingdom. It intends to capitalise on the significant and rapid fall in capital values in the retail sector by identifying opportunities that the Directors expect to deliver added value and generate returns for Shareholders through capital and rental income growth, active and entrepreneurial asset management, risk controlled development and refurbishment opportunities and recycling of assets. Whilst the approach will be opportunistic, as a result of the NRC Management Team's extensive sector knowledge and the bespoke research on which NewRiver Retail's business plan is based, the Company initially intends to target opportunities where rental income is derived from tenants operating mainly in the value, aspirational and food retailing sectors. This strategy would be accelerated should the Company raise further equity capital. The Directors believe that investments in these areas should be capable of achieving total geared returns of in excess of 15 per cent. per annum. There can, however, be no guarantee that the Company will achieve its target investment returns.
The Directors believe that the key attractions of investing in the UK retail sector are as follows:
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The sector has displayed good, longer term performance characteristics with the added benefit of lower volatility and a lower risk profile when compared with other segments of UK real estate.
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The retail sector is forecast to show positive growth from 2010 (source: CBRE).
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The retail sector is large, accounting for 46 per cent. of the IPD All Property index, thus providing liquidity in the longer term.
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The occupational market is constantly evolving and changing format, which plays to the skills of an experienced and well-organised team.
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UK retail sales volumes have proved to be very resilient in the current economic climate.
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Given the geographical spread and growth of multiple retail tenants, strong relationships can be built with these tenants, providing the ability to roll-out value-creating strategies to different assets.
The Directors believe that this property cycle will produce above average returns for those industry participants able to execute focused business plans through careful real estate asset selection, implementation of value-creating strategies and well-timed exits. Opportunism will continue to be important, but reliance on yield compression and financing structures may not be able to drive returns as it has done in the last 5 years. The Directors believe that the sector knowledge, expertise and active and entrepreneurial asset management skills of the NewRiver Capital Management Team will place the Company in a strong position to exploit the opportunities in the UK retail sector.
Against this background, NewRiver Retail will adopt an opportunistic investment policy targeting shopping centres, retail parks, portfolio retail assets and vacant stores with sub-division potential and which will focus on:
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The food sector within retail, where sales growth continues to be positive, retailers are keen to acquire space across a range of store formats and good tenant covenants are available.
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Towns which are demographically balanced, with lower occupational costs and where there is limited competition from both out-of-town retailing and competing town centres, which should attract a broader range of retailers, thus leading to rental growth.
In addition, NewRiver Retail will also target, in locations with an under-provision of food retailing, the acquisition of shopping centres with a food retailer as an existing anchor tenant and shopping centres or other key property assets where, through the application of the NRC Management Team's extensive sector experience, NewRiver Capital will seek to create opportunities to attract a major food retailer as an anchor tenant. In certain cases, NewRiver Retail may make investments using co-investment structures or with joint venture partners.
It is the intention of the Directors to target the acquisition of asset lot sizes of £5 million to £50 million to produce a diversified portfolio for the Company in accordance with its investment policy. However, NewRiver Retail also plans to take advantage of any other investment opportunities which may arise, including from forced sales, debt restructuring and bank foreclosures, in lot sizes that may fall outside the above range or the core investment strategy. Where NewRiver Retail identifies opportunities of a larger scale, it may choose to pursue these opportunities by investing through co-investment structures or with joint venture partners and it has already identified potential joint venture partners in relation to potential investments, with whom it has commenced discussions. In particular, until the Company has completed a further fundraising or fundraisings, it may need to pursue opportunities through joint ventures or co-investment structures.
4. INVESTMENT MANAGEMENT AND NEWRIVER CAPITAL
The Company and NewRiver Capital entered into the Property Management and Advisory Agreement on 26 August 2009. The Property Management and Advisory Agreement is conditional upon Admission occurring.
As the Group's property manager and adviser, NewRiver Capital will have responsibility for:
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reviewing and making recommendations in relation to the investment policy
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sourcing and assisting with the acquisition of properties that fall within the Company's investment policy;
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implementing a comprehensive and focused active and entrepreneurial asset management strategy to deliver added value for NewRiver Retail;
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arranging senior and subordinated debt (if required) to optimise the capital structure and support the acquisition process;
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advising in relation to the creation of a range of co-investment structures and sourcing joint venture partners as an alternative source of capital; and
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sourcing work-out opportunities with banks and other major property owners seeking to reduce their exposure to UK commercial real estate.
Once a potential opportunity has been identified, NewRiver Capital will carry out detailed due diligence and produce a business plan which will analyse and include a risk and opportunity assessment in relation to: (i) rental streams; (ii) exit strategies; (iii) asset management; and (iv) external factors, such as ancillary income growth and risk controlled redevelopment. NewRiver Capital is subject to certain constraints in incurring costs associated with due diligence and will be required to seek prior approval from the Board for incurring costs in the event that such costs are likely to exceed certain thres holds.
Where the Board has given express initial approval for an investment or this is not required under the terms of the Property Management and Advisory Agreement, then subject to the overall supervision and approval of the Board, NewRiver Capital will negotiate the purchase, investment, joint venture or other terms of the investment with the relevant counterparty. At the end of the due diligence and negotiation process, NewRiver Capital's investment committee, using all of the information available to it, will decide whether to make a recommendation to the Board in relation to the relevant investment opportunity and the Board will have the ultimate decision as to whether or not to proceed. If the Board then resolves to pursue an opportunity, it will notify NewRiver Capital accordingly.
NewRiver Capital has entered into an asset management agreement with Sackville TCI Property (GP) Limited ('Sackville'), a member of the Scottish Widows group, dated 28 April 2008 relating to the Bury Street Shopping Precinct in Abingdon, Oxfordshire (the 'Abingdon Management Contract'), under which it is required to assist Sackville in maximising the internal rate of return of the property. Further information in relation to the Abingdon Management Contract can be found in paragraph 6.7 of Part 9 of the Admission Document.
5. DIVIDEND POLICY
Subject to compliance with Section 304 of the Law and the satisfaction of the solvency test set out therein (as described in more detail in paragraph 11 of Part 3 of the Admission Document), it is the intention of the Directors to pay dividends on the basis of a progressive and sustainable dividend policy. There can, however, be no guarantee as to the amount of any dividend payable by the Company.
6. PLACING AND USE OF PROCEEDS
The Placing has raised £25 million before expenses from institutional and other investors, as well as from certain Directors and members of the NRC Management Team who will be investing approximately £5 million in aggregate. Application has been made for the entire issued ordinary share capital of the Company to be admitted to trading on AIM and to listing on the Daily Official List of the CISX. It is expected that Admission will become effective and dealings in the Ordinary Shares will commence on AIM and the CISX at 8.00 a.m. (London time) on 1 September 2009. The Directors intend to use the funds from the Placing to: (i) seek to acquire assets which fit with the Company's investment policy; (ii) take forward joint venture discussions which are currently in progress and, where appropriate, enter into joint venture or co-investment discussions with other parties; and (iii) finalise the recruitment of the core NRC Management
Team.
The net proceeds of the Placing will be deployed according to the investment policy.
Certain of the Directors and certain members of the NRC Management Team who will be acquiring new Ordinary Shares pursuant to the Placing have undertaken, save in limited circumstances, not to dispose of any of their Ordinary Shares for a period of one year following Admission.
In addition, the Company has agreed with Merrill Lynch International not to issue or agree to issue any Ordinary Shares (or options over Ordinary Shares) for a period of 180 days from Admission without Merrill Lynch International's prior written consent (such consent not to be unreasonably withheld or delayed).
7. WARRANTS
Shareholders who subscribe for Ordinary Shares in the Placing will receive Warrants to subscribe for Ordinary Shares representing 3 per cent., in aggregate, of the Fully Diluted Share Capital (as set out in the Admission Document). It is not currently intended that the Warrants will be admitted to trading on AIM, the CISX or any other stock exchange.*
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Important Notices
The publication of this announcement and the Placing and sale of the Ordinary Shares and Warrants in certain jurisdictions may be restricted by law. No action has been or will be taken by the Company, Merrill Lynch International or Kinmont to permit a public offering of the Ordinary Shares or Warrants to permit the possession or distribution of this announcement (or any other offering or publicity materials) in any jurisdiction where action for that purpose may be required. Accordingly, neither this announcement nor any advertisement or any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with applicable laws and regulations. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions could result in a violation of the laws of such jurisdictions. In particular, neither this announcement nor any copy of it may be taken, distributed or transmitted, nor may its contents be disclosed directly or indirectly, in or into the United States of America, its territories or possessions or to any US person (each a 'US Person' as defined in Rule 902 of Regulation S under the Securities Act of 1933, as amended (the 'Securities Act')). This announcement does not constitute an offer to sell or the solicitation of an offer to buy the Ordinary Shares or Warrants discussed herein. No public offer of the Ordinary Shares or Warrants is being made in the United States of America. In addition, the Company will not be registered under the US Investment Company Act of 1940, as amended, and investors will not be entitled to the benefits of such act. The Ordinary Shares and Warrants may not be offered, sold, pledged or otherwise transferred or delivered within the United States or to, or for the account or benefit of, any US Person. In connection with the Placing, the Ordinary Shares and Warrants are being offered and sold only outside the United States to, and for the account or benefit of, non-US Persons in 'offshore transactions' within the meaning of, and in reliance on the exemption from registration provided by, Regulation S under the Securities Act. Moreover, this announcement is not for distribution in or into Australia, Canada, Japan, South Africa or the Republic of Ireland. In particular, the Ordinary Shares and Warrants described in this announcement have not been and will not be registered under the applicable securities laws of Australia, Canada, Japan, South Africa or the Republic of Ireland and, subject to certain exceptions, may not be offered or sold directly, or indirectly, in or into Australia, Canada, Japan, South Africa or the Republic of Ireland, or to or for the account or benefit of any person resident in Australia, Canada, Japan, South Africa or the Republic of Ireland.
In relation to the United Kingdom, this announcement is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the 'Order'); (b) high net worth companies, unincorporated associations and other bodies falling within Article 49(2)(a) to (d) of the Order; and (c) other persons to whom it may otherwise lawfully be communicated (all such persons together with qualified investors (as defined in the Prospectus Directive (directive 2003/71/EC) (the 'Prospectus Directive')) being referred to as 'relevant persons'). Any person who is not a relevant person should not act or rely on this announcement or any of its contents. Any investment, or investment activity to which this announcement relates is available only in the United Kingdom to relevant persons and will be engaged in only with relevant persons. By receiving or accessing this announcement, you are deemed to warrant to the Company, Merrill Lynch International and Kinmont that you fall within the categories of person described above.
This announcement is only directed to, and the Placing is only directed at, persons in member states of the European Economic Area ('EEA') who are 'qualified investors' within the meaning of Article 2(1)(e) of the Prospectus Directive ('Qualified Investors'). This announcement must not be acted on or relied upon in any member state of the EEA other than the UK, by persons who are not Qualified Investors. Any investment or investment activity to which this announcement relates is available, in any member state of the EEA other than the UK, only to Qualified Investors, and will be engaged in only with such persons. This announcement has been prepared on the basis that all offers of Ordinary Shares will be made pursuant to any exemption under the Prospectus Directive, as implemented in member states of the EEA, from the requirement to produce a prospectus for offers of Ordinary Shares. Accordingly, any person making or intending to make any offer within the EEA of Ordinary Shares which are not the subject of the Placing contemplated in this announcement should only do so in circumstances in which no obligation arises for the Company, Merrill Lynch International or Kinmont to produce a prospectus for such Placing. None of the Company, Merrill Lynch International or Kinmont has authorised, nor do they authorise, the making of any offer of Ordinary Shares through any financial intermediary, other than offers made by Merrill Lynch International or Kinmont which constitute the final placement of Ordinary Shares contemplated in this announcement.
The Placing and the distribution of this announcement and other information in connection with the offer in certain jurisdictions may be restricted by law and persons into whose possession this announcement or any other document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
This announcement includes information, statements, beliefs and opinions which are forward-looking, and which reflect current estimates, expectations and projections about future events. The information and opinions expressed in this document are provided as of the date of this document. Statements containing the words 'believe,' 'expect,' 'intend,' 'should,' 'seek,' 'anticipate,' 'will,' 'positioned,' 'project,' 'risk,' 'plan,' 'may,' 'estimate' or, in each case, their negative and words of similar meaning are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. In addition, even if the outcome and financial effects of the plans and events described herein are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods.
Historical statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Prospective investors should not place undue reliance on either forward-looking or historical statements, which are based on the information available as of the date of this announcement. In this regard, certain financial information contained herein has been extracted from, or based upon, information available in the public domain and/or provided by the Company and/or NRC. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. No statement in this announcement is intended to be nor may it be construed to be a profit forecast.
Persons receiving this announcement should note that each of Merrill Lynch International and Kinmont are regulated by the Financial Services Authority and are acting exclusively for the Company and for no one else in connection with the Placing and Admission. Merrill Lynch International and Kinmont will not regard any other person (whether or not a recipient of this announcement) as their respective client and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Merrill Lynch International and Kinmont respectively or for advising any other person on the contents of this document or the Placing and Admission. Apart from the responsibilities and liabilities, if any, which may be imposed on Merrill Lynch International and Kinmont by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder or under the regulatory regime of any other jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither Merrill Lynch International nor Kinmont nor any of their respective affiliates accepts any responsibility whatsoever for the contents of this announcement or for any statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Placing. Merrill Lynch International and Kinmont and each of their respective affiliates, each accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this announcement or any such statement. No representation or warranty express or implied, is made by either Merrill Lynch International or Kinmont or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information set out in this announcement.
This information is provided by RNS
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