Result of Placing and Admission of Shares
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, TO US PERSONS OR IN OR INTO THE UNITED STATES, OR INTO OR FROM CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND OR JAPAN.
This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information in the prospectus dated 25 February 2014 (the "Prospectus") published by Custodian REIT Plc in connection with the initial public offering and the admission of its ordinary shares to the premium segment of the Official List of the Financial Conduct Authority and to trading on London Stock Exchange plc's main market for listed securities. A copy of the Prospectus is available from the Company's website.
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 Custodian REIT Plc 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.
Custodian REIT Plc
Announcement of the result of the Placing and Offer for Subscription and Admission of the Ordinary Shares to the premium segment of the Official List and dealing in the Ordinary Shares on the London Stock Exchange's Main Market
26 March 2014
Background
Custodian REIT Plc (the "Company") is a newly incorporated closed-ended investment company that has been established with an indefinite life.
The Company will invest in a diversified portfolio of UK commercial real estate properties to achieve its investment objective of providing Shareholders with an attractive level of income together with the potential for capital growth.
Custodian Capital Limited is the discretionary investment manager of the Company and will deal with the acquisition of real estate assets to add to the Company's investment portfolio and will decide upon and manage the development and disposal of assets in that portfolio.
Results of the Issue
The Company is pleased to announce that an aggregate of 131,989,310 Ordinary Shares have been allotted, conditional on Admission, at the Issue Price of 100p:
· 76,989,310 Ordinary Shares will be issued as consideration for the Initial Property Portfolio, the acquisition of which has been approved by the requisite majority of each Initial Property Portfolio Fund, meaning that the Initial Property Portfolio will be acquired in its entirety by the Company; and
· the maximum gross proceeds of £55 million have been raised through the initial Placing of 32,616,409 Ordinary Shares and through the allocation of 22,383,591 Ordinary Shares under the Offer for Subscription. The Placing and the Offer for Subscription were significantly oversubscribed.
Admission is expected at 8 a.m. on 26 March 2014.
The ISIN number is GB00BJFLFT45 and the SEDOL code for the Ordinary Shares is BJFLFT4. The Ordinary Shares will trade under the TIDM CREI.
Numis Securities acted as Sponsor, Financial Adviser and Broker to the Company.
Key Features of the Company
Investment Objective and Target Return
· The Company's investment objective is to provide Shareholders with an attractive level of income together with the potential for capital growth from investing in a diversified portfolio of commercial real estate properties in the UK.
· The Company anticipates that income will constitute the majority of the return to Shareholders. However, in line with its investment objective, the Company will seek to invest in properties with the potential for capital growth and believes that this approach will enhance Shareholders' total return over the long term.
· On the basis of market conditions as at the date of this announcement, the Company will target* an annualised dividend yield, payable quarterly, of.
o 5.25 per cent. in respect of the financial year ending 31 March 2015; and thereafter
o 6.25 per cent. in respect of each financial year,
each by reference to the Issue Price.
* This is a target only and not a profit forecast. There can be no assurance that the target can or will be met and it should not be taken as an indication of the Company's expected or actual future results. Accordingly, potential investors should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the Company will make any distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.
Investment Policy
The Company's investment policy is to invest in a diversified portfolio of UK commercial real estate properties.
The target portfolio will be a UK commercial property portfolio characterised by small lot sizes with individual property values of less than £7.5 million at acquisition. The target portfolio should not exceed a maximum weighting to any one property sector, or to any geographic region, of greater than 50 per cent.
The Company will pursue its investment policy as follows:
· The Company intends to hold a portfolio of UK commercial property, diversified by sector, location, tenant and lease term;
· The portfolio will be diversified by location across the UK with a focus on areas with high residual values, strong local economies and an imbalance between supply and demand. Within these locations the objective is to acquire modern buildings or those that are considered fit for purpose by occupiers.
· The Company will target a portfolio with no one tenant or property accounting for more than 10 per cent of the total rent roll of the Company's portfolio at the time of purchase, except:
o in the case of a single tenant which is a governmental body or department, where no percentage limit to proportion of the total rent roll shall apply; or
o in the case of a single tenant rated by ICC with a credit rating of less than 60 in which case the exposure to such single tenant may not exceed 5 per cent. of the total rent roll (a credit rating in the range of 51-60 represents "normal, limited risk potential, normal terms").
· The Company will seek to maintain an average unexpired lease term of over 5 years across the portfolio secured against low risk tenants and to minimise rental voids.
· The Company will not undertake speculative development (that is, development of property which has not been leased or pre-leased), save for refurbishment of existing holdings, but may (provided that it shall not exceed 20 per cent. of the gross assets of the Company) invest in forward funding agreements or forward commitments (these being, arrangements by which the Company may acquire pre-development land under a structure designed to provide the Company with investment rather than development risk) of pre-let developments, where the Company intends to own the completed development.
· The Company may use gearing, including to fund the acquisition of property and cash flow requirements. Over the medium term, the Company is expected to target borrowings of 25 per cent of the aggregate market value of all the properties of the Company at the time of borrowing.
· The Company reserves the right to use efficient portfolio management techniques, such as interest rate hedging and credit default swaps, to mitigate market volatility.
· Uninvested cash or surplus capital or assets may be invested on a temporary basis in:
o cash or cash equivalents, money market instruments, bonds, commercial paper or other debt obligations with banks or other counterparties having a single-A (or equivalent) or higher credit rating as determined by an internationally recognised rating agency; or
o any "government and public securities" as defined for the purposes of the FCA rules.
· Any material change to the Company's investment policy will require the prior approval of Shareholders.
Investment Opportunity
The Company is being launched to offer potential investors the opportunity to access a diversified portfolio of UK commercial real estate properties, including, subject to certain conditions being satisfied, the Initial Property Portfolio. By targeting smaller lot size properties, the Company intends to provide investors with a differentiated source of long-term income at a level representing an attractive dividend yield relative to that currently available from existing closed and open ended funds investing in UK commercial real estate properties. The smaller lot size segment of the property sector has attracted increased investor demand over the preceding six months but the Directors believe it continues to represent a potentially attractive investment opportunity.
The Acquisition
On 25 February 2014 the Company entered into conditional agreements (the "Acquisition Agreements") with each of the Initial Property Portfolio Funds to acquire the properties comprised in the Initial Property Portfolio. The Acquisition Agreements were conditional, inter alia, on the approval of the requisite majority of the Initial Property Portfolio Investors in each Initial Property Portfolio Fund. Each Acquisition Agreement has been approved by the requisite majority of Initial Property Portfolio Investors in the relevant Initial Property Portfolio Fund, and has become unconditional in all other respects save for Admission. The Company will therefore acquire on Admission all of the Properties comprised in the Initial Property Portfolio Fund.
Dividend policy
The Company intends to pay interim dividends on a quarterly basis in cash. Subject to market conditions and the level of the Company's net income, the first interim dividend is expected to be declared in July 2014 in respect of the period from launch to 30 June 2014.
On the basis of market conditions as at the date of this document the Company will target* an annualised dividend yield, payable quarterly, of:
(a) 5.25 per cent. in respect of the financial year ending 31 March 2015; and thereafter
(b) 6.25 per cent. in respect of each financial year,
each by reference to the Issue Price.
* This is a target only and not a profit forecast. There can be no assurance that the target can or will be met and it should not be taken as an indication of the Company's expected or actual future results. Accordingly, potential investors should not place any reliance on this target in deciding whether or not to invest in the Company or assume that the Company will make any distributions at all and should decide for themselves whether or not the target dividend yield is reasonable or achievable.
Gearing policy
The Company intends to operate with a conservative level of gearing, with a target over the medium term of borrowings of 25 per cent. of the aggregate market value of all properties of the Company as at the time of drawdown (market value to be determined in accordance with the most recent valuation of the properties at that time). Following Admission it is expected that gearing will be reduced to zero in order to minimise cash drag on investment returns, and the Company reserves the right to operate with zero or lower than target gearing at other times.
The borrowings will be secured by way of a first charge over a discrete number of those properties in the Initial Property Portfolio acquired by the Company, leaving as many properties unencumbered as possible. Additional properties will be added to the charged portfolio, as required, to maintain the minimum loan-to-value ratio of the Company's borrowings.
The Company has entered into the Loan Facility Agreement with Lloyds Bank PLC to provide a £25 million revolving credit facility, which will be secured by way of a first charge over a discrete portfolio of properties, providing the lender with a minimum loan-to-value ratio of 49 per cent. on those properties specifically charged to it, and a floating charge over all the of the Borrower's assets and undertaking. The Company has also entered into a duty of care deed with Lloyds Bank PLC and Custodian Capital Limited, its Investment Manager, in connection with the Investment Manager's managing agent duties under the Investment Management Agreement.
Placing Programme
The Company has made arrangements under which the Board has discretion to issue pursuant to the Placing Programme up to 168,010,690 Ordinary Shares. The Placing Programme is intended to be flexible and may have a number of closing dates in order to provide the Company with the ability to issue Ordinary Shares over a period of time. The Placing Programme is intended to satisfy market demand for the Ordinary Shares and to raise further money for investment in accordance with the Company's investment policy.
Enquiries
Further information, please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Nathan Imlach +44 (0)1162 408 741
Numis Securities Limited +44 (0)20 7260 1000
Nathan Brown / Hugh Jonathan
Important Information
This announcement has been prepared by, and is the sole responsibility of, Custodian REIT Plc. Terms used and not defined in this announcement bear the meaning given to them in the Prospectus.
Numis Securities Limited is acting only for Custodian REIT Plc in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of Numis Securities Limited or advice to any other person in relation to the matters contained herein.
The Company is not and will not be registered under the US Investment Company Act of 1940, as amended. The Ordinary Shares have not been, nor will they be, registered under the US Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States or under the applicable securities laws of Australia, Canada, Japan, the Republic of Ireland or the Republic of South Africa. Subject to certain exceptions, the Ordinary Shares may not be offered or sold in the United States, Australia, Canada, Japan, the Republic of Ireland or the Republic of South Africa or to or for the account or benefit of any national, resident or citizen of Australia, Canada, Japan, the Republic of Ireland or the Republic of South Africa or any person located in the United States. Placings under the Placing Programme and the distribution of this announcement in other jurisdictions may be restricted by law and the persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions.
This announcement includes "forward-looking statements". All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's business strategy and plans are forward-looking statements.
Forward-looking statements are subject to risks and uncertainties and accordingly the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These factors include but are not limited to those which will be described in the formal prospectus.
These forward-looking statements speak only as at the date of this announcement. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Financial Services Act 2012, the Listing Rules or Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.
This information is provided by RNS
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