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Monday 21 August, 2017

Warehouse REIT PLC

Warehouse REIT announces Intention to Float on AIM

RNS Number : 4747O
Warehouse REIT PLC
21 August 2017



This announcement is an advertisement and not a prospectus and investors should not purchase any Ordinary Shares referred to in this announcement except on the basis of information in the Prospectus to be published by Warehouse REIT plc in due course in connection with the initial public offering and the admission of its ordinary shares to trading on the AIM Market ("AIM") operated by London Stock Exchange plc (the "London Stock Exchange"). A copy of the Prospectus will, following publication, be available from


The contents of this announcement, which have been prepared by and are the sole responsibility of Warehouse REIT plc (the "Company"), have been approved by G10 Capital Limited (the "AIFM"), as a financial promotion solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 ("FSMA").


21 August 2017


Warehouse REIT plc


(the "Company" or "Warehouse REIT")


Warehouse REIT Announces Intention to Float on AIM




Warehouse REIT plc, a newly incorporated, externally managed, closed-ended investment company, today announces its proposed issue of up to 150 million Ordinary Shares to raise gross proceeds of up to £150 million via a placing and offer for subscription (including an intermediaries offer) of ordinary shares in the capital of the Company (the "Issue").


The Company will invest in a diversified portfolio of UK warehouse assets located in urban areas. The Company has already entered into arrangements to acquire, conditional upon Admission, the Tilstone Property Portfolio (the "Portfolio"), a hand-picked seed portfolio of 27 assets, each of which reflects and adheres to the Company's investment criteria, valued in aggregate at £108.85 million.


The Company is targeting a dividend yield of 5.5p equivalent to a yield of 5.5 per cent. for the year ending 31 March 2019, (covered by earnings and based on the issue price of 100 pence per Ordinary Share) and a total return of at least 10 per cent, through a combination of dividends and  NAV growth. The Company intends to become a real estate investment trust ("REIT") shortly after Admission. It is the Company's intention to pay dividends on a quarterly basis and in accordance with the REIT Regime.


The Company is an alternative investment fund ("AIF") for the purposes of the AIFM Directive and as such is required to have an investment manager who is duly authorised to undertake the role of an alternative investment fund manager. The Investment Manager is currently G10 Capital Limited, which role will pass to Tilstone Partners Limited ("TPL"), on receipt of FCA approval.  TPL is the vehicle of the management team which assembled the Portfolio and has been responsible for the growth and management of the Portfolio from the first acquisition in 2013 to Admission.


Key Highlights


Hand-picked income producing seed portfolio


·   The £108.85 million, 27 asset Tilstone Property Portfolio, comprises a diversified portfolio of freehold and long leasehold UK warehouse assets, delivering a 7% net initial yield as at 31 March 2017;

·     The Portfolio includes primarily multi-let warehouses in the industrial/manufacturing, storage and distribution, trade-counter and retail warehouse/leisure sub-sectors;

·      Totals 129 tenants, with top ten by rent roll including strong covenants such as Boots, Amazon, Asda and Argos;

·    TPL has taken the portfolio value to £108.85 million, delivering rental income growth of approximately 12 per cent. per annum and ERV growth of approximately 6 per cent per annum since acquisition on those assets held for more than two years. This has been achieved through a reduced void rate, achieving planning permission for higher-rental use warehouse class and by capex investment;

·   The progress to date demonstrates TPL's ability to undertake significant value-enhancing asset management initiatives and its ability to source and acquire off-market assets that can provide a sustainable and attractive level of income with considerable upside potential.


Compelling fundamentals supporting the urban warehouse sector investment


·    Occupier demand for urban warehouse space is increasing as the growth in e-commerce has driven the rise in internet shopping and investment by retailers in the "last mile" delivery sector;

·      The urban warehouse sector offers one of, if not the highest, initial yields of all UK property sectors;

·     Demand for and take-up of vacant warehouse space has come from an increasingly diversified occupier base.  In 2007, demand for warehouse accommodation from online retailers accounted for just one per cent. of the UK take-up but this figure grew to 29 per cent. by 2016.  The change in the market dynamic is clear, with online sales projected to grow to nearly double by 2021;

·      Characterised by sustainable current rental levels, while prevailing shorter WAULTs provide opportunities to improve income security and add value;

·    Constrained supply (driven in part by the cost of replacement being higher than the investment value of the underlying buildings) of new stock being developed over the last 10 years, coupled with very little development planned over the next five years, has frustrated occupier choice and resulted in rental growth;

·    Available warehouse stock is close to historic lows. Vacancy rates have been falling over the last five years from double digits to just 4 per cent.  The low availability of rental stock together with increased demand will give rise to the potential for rental growth. Real availability of warehouse space is likely to be further decreased taking into account vacant stock that is under-managed and the continued loss of supply to other higher value uses such as residential;

·   Conventional factory / production and other traditional manufacturing represents an area of further demand for industrial property, which is likely, over time, to generate a further supply deficit  through crowd out demand for some modern buildings by conventional businesses.


Extensive pipeline of attractive acquisition opportunities


·    The UK warehouse market comprises approximately 3 billion square feet.  As such, the Company believes that the sector has scale which will facilitate the Company's ambition to grow;

·     The Company has already identified and entered into negotiations with the vendors of a number of assets, totalling approximately £88 million, which meet the Company's investment objective and investment policy, including off-market assets identified through TPL and the Savills' network;

·   The Company will not undertake speculative development save for refurbishment and/or extension of existing holdings.


Attractive target returns and a progressive dividend policy


·    The Company will target an annual return of at least 10 per cent. through a combination of dividends and growth in NAV;

·     The first interim dividend is expected to be declared in January 2018 of approximately 1p per share and then again in May 2018 for the period ending 31 March 2018 of approximately 1.5p per share and will represent a dividend yield covered by earnings equivalent to approximately 4.5% per annum;

·     For the year ending 31 March 2019, the Company expects to pay a total dividend of 5.5p equivalent to a yield of 5.5% covered by earnings and thereafter will adopt a progressive dividend policy in-line with anticipated growth in earnings;

·     It will target a dividend equivalent to at least 6% in line with the REIT requirements to distribute at least 90% of its property income as set out below, all dividend yields by reference to the Issue Price.


Asset management opportunities


·     There are a number of opportunities to grow the existing income within the Portfolio through a combination of near term rental growth, repositioning of the assets and growing tenant demand towards those occupiers involved in the e-commerce supply chain;

·     Longer-term, well-located urban warehouse buildings with the appropriate specification have a number of different uses, with altered permitted use and the resulting change of occupier delivering significant rental uplift and  capital growth. 


Management structure and Board with deep sector experience


·    The TPL management team has 95 years of combined commercial property experience, an established history of buying and letting commercial properties throughout the UK and have developed strong relationships with key participants operating in the warehouse sector;

·     Oversight will be provided by a highly experienced Board of Directors with many years of capital markets exposure and a distinguished track record operating across the real estate and related industry sectors.


Proprietary out-sourced model


·     The Company has also adopted a cost-effective, out-sourced model that enables the Company to capitalise on the network of Savills offices throughout the UK with its specialisms across a whole range of relevant services. Savills access to UK-wide marketed real estate transactions allows the Company to benefit from its leading industrial agency practice, as well as ensuring that the Company has access to Savills' highly specialist sector knowledge, experience and research;

·     To date Savills has been instrumental in assisting the Company with the composition of the seed portfolio, as well as asset enhancing initiatives including successful planning consents.


Management alignment with shareholders


·    The directors of TPL have committed to retaining a sizeable £16m of equity in the REIT, which will be locked up for two years, with members of the Board and management team subscribing for a further a £1.8m in shares of the Company, which will be locked up for one year, strengthening the alignment of interests between TPL and the Company;

·    The agreement with TPL provides for an efficient cost base and no performance fees associated with managing the assets.


Peel Hunt LLP ("Peel Hunt") is acting as nominated adviser and broker to the Company.


Neil Kirton, Non-executive Chairman of Warehouse REIT, commented:


"Warehouse REIT offers an attractive proposition for investors that are looking for exposure to what has been one of the best performing asset classes in the sector and which is supported by compelling underlying drivers for future outperformance. The highly experienced management team has built a diversified portfolio that has provided them with a platform to demonstrate its ability to deliver both capital growth and an improved income profile. With an identified pipeline of assets with similar characteristics, we are confident that Warehouse REIT will provide shareholders with an attractive income focussed total return."


Andrew Bird, Managing Director of Tilstone, added:


"Warehouse REIT provides an exciting opportunity for the management team to continue to build a diverse UK warehouse property portfolio which will benefit from the ongoing rental growth independently forecast to be 3% per annum over the next five years.  Our job is to seek to outperform the forecast. With our own investment in the REIT, there can be no better alignment with the wider shareholder base."


Expected timetable




Time and date

Prospectus published


23 August 2017

Placing and Offer for Subscription (including the Intermediaries Offer) opens


23 August 2017

Latest time and date for receipt of completed Application Forms and payment in full under the Offer for Subscription

Latest time and date for receipt of applications and payment in full under the Intermediaries Offer                              


1.00 pm 14 September 2017



10.00 am 15 September 2017

Latest time and date for receipt of commitments under the Placing


12.00 noon 15 September 2017

Announcement of the results of the Issue through a Regulatory Information Service


15 September 2017

Admission and expected commencement of dealings in Ordinary Shares on AIM(1)


8.00 am 20 September 2017

Completion of the Acquisition


8.00 am 20 September 2017

CREST accounts to be credited


20 September 2017

Despatch of definitive share certificates (where applicable)(2)


Week commencing 25 September 2017



Tilstone Partners Limited

Andrew Bird, Paul Makin                                                                          +44 (0) 1244 470 090

G10 Capital Limited (part of the Lawson Conner Group), acting as AIFM

Agnese Soldane, Gerhard Grueter                                                           +44 (0) 20 3696 1302

Peel Hunt LLP (Financial Adviser, Nominated Adviser and Broker and Sole Bookrunner)

Capel Irwin - Corporate                                                                             +44 (0) 20 7418 8900

Sohail Akbar - ECM

Kathy Boate - Intermediaries Offer Coordinator

FTI Consulting (Financial PR & IR Adviser to the Company)

Dido Laurimore, Ellie Sweeney, Richard Gotla                                          +44(0) 20 3727 1000




Further Information


1. Directors of the Company

The Directors are responsible for the determination of the Company's investment policy and have overall responsibility for the Company's activities, including the review of investment activity and performance and the control and supervision of the Company's service providers. All of the Directors are non-executive whilst the majority are independent of TPL. Brief biographical details of the Directors are as follows:


Neil Kirton - Non-Executive Chairman

Neil has over 25 years of experience working in the securities and investment banking industries in the City of London and is presently a Managing Director at Kroll Associates UK in their Investigations and Disputes Practice and Head of the London office.


He is a Non-Executive director at Ingenta plc. Neil was formerly Global Head of Equity Distribution at ABN AMRO Bank NV and a member of ABN AMRO's Global Equity Directorate. He was Head of UK Equity Sales and Deputy Chief Executive at Hoare Govett. He was Head of Corporate Finance and Chief Executive Officer at a London securities house, and sat as an Executive director on the board of Arbuthnot Banking Group plc.


Stephen Barrow - Non-Executive Director (non-independent)

Stephen is an experienced Global Equity investor. Formerly Chief Investment Officer at IronBridge International and Head of Global Equities at Deutsche Asset Management, Stephen managed over £5 billion of assets for a wide variety of clients including many large global institutions. Stephen is presently a non-employee Partner of Absolute Return Partners in Richmond and manages his own portfolio. Stephen and his wife are both Tilstone Investors.


Simon Hope - Non-Executive Director (non-independent)

Simon Hope has advised some of the most successful investment houses over the last 25 years including The Royal Bank of Scotland plc, Lloyds Bank plc, London Metric Property plc and Hansteen Holdings plc. He is a member of the Charities Fund Property Board which has a current fund value of approximately £500 million and is the first Common Investment Fund available to all charities in England and Wales that directly invests in UK commercial property.


He was chair of Savills UK Limited's proprietary trading arm, Grosvenor Hill Ventures Limited, during a five-year period when this fund delivered an IRR in excess of 35 per cent. Simon is an Executive Director of Savills UK Limited and Head of Capital Markets. Simon is the non-executive chairman of TPL and represents TPL on the Board. Simon and his wife are both Tilstone Investors.


Martin Meech - Non-Executive Director

Martin Meech is the Group Property Director of Travis Perkins Plc and Chief Executive Officer at Travis Perkins (Properties) Ltd, the largest supplier of building materials in the UK. In this role, Martin oversees the Group freehold portfolio with a market value in excess of £500m and is also responsible for Group Environment.


Previously, Martin has been a Non-Executive Director of Quintain Plc. Martin also has operational experience at Dixons Retail and Halfords Group Plc. Martin was formerly Chairman of the BRC Property Advisory Group and a member of the Bank of England Property Forum. Martin is also a Chartered Surveyor and a Fellow of the Royal Institution of Chartered Surveyors.


Aimee Pitman - Non-Executive Director

Aimee runs her own Strategy Consulting business, Pitman & Co. Consulting. As an independent consultant she works alongside the partners of Eden McCallam LLP, a London based consultancy firm, as a Client Director where she co-leads their Travel & Leisure and Property practices. Aimee has over 25 years' experience in strategy development across sectors, most notably real estate, travel and leisure and financial services.


Formerly a Vice President within MAC Group/Gemini Consulting's strategy practice, Aimee went on to work over a number of years with European travel group, TUI, supporting them on strategy, distribution, and operational excellence. She currently serves as a non-Executive adviser of McArthur Glen and as an advisor to Go Native Serviced Apartments.


2. The Investment manager


The Investment Manager is currently G10 Capital Limited, which role will pass to Tilstone Partners Limited ("TPL"), on receipt of FCA approval. G10 has appointed TPL to act as its appointed representative in respect of the Company. As the appointed representative TPL will be responsible for working with and advising the Company and G10 in respect of sourcing investment opportunities which meet the Company's investment policy and will also be responsible for managing the underlying real estate assets within the Company's investment portfolio, Upon receiving regulatory approval as an alternative investment fund manager, TPL will become the Investment Manager and the relationship with G10 will cease. The services of TPL as the Investment Manager, once it has received FCA approval as an AIFM, will be exclusive to the Company.


Key Personnel of TPL


Simon Hope - Non-Executive Chairman

Please refer to the above for the biographical details of Simon Hope.


Andrew Bird - Managing Director

Andrew founded the Tilstone brand in 2010 originally with the goal to focus on commercial property investment and development. After identifying opportunities within the warehouse sector, the focus moved in August 2013 to creating the Tilstone Property Portfolio. As Managing Director of TPL, he takes overall responsibility for strategy, direction and business performance.


Prior to TPL, Andrew joined the Board of Barlows plc in 1994, a north-west focussed commercial property company with a listing on the Main Market of London Stock Exchange. He was subsequently part of a consortium that took the company private in 2001. The business created a separate asset management company through which Andrew served on the Investment Committee of Westbury Plc, a quoted property fund (2002-2007). Andrew has also served as a Non-Executive Director of Dee Valley Group plc, a London Stock Exchange quoted water utility company.


Paul Makin - Investment Director

Paul Makin is the Investment Director of TPL and steers the sourcing of investment opportunities, asset management and focuses on creating positive occupier relationships. He has extensive investment consultancy experience through his work at CBRE Limited and subsequently at Mapeley Estates Limited (a previously quoted property company), where he was Head of Investment and Investment Asset Management, tasked with extracting value from outsourcing contracts and new acquisitions. He expanded his horizons with a senior investment asset management role at real estate private equity company, Moorfield Group Limited, taking a key role in the purchase and asset management of projects such as the UK Logistics Fund in a joint venture with Segro plc.


Peter Greenslade - Finance Director

Peter qualified as a Chartered Accountant with Binder Hamlyn (now part of Deloitte) before working for a number of blue chip companies in a variety of finance roles including Grand Metropolitan (Diageo plc), De La Rue plc and ICL plc. During his time as Finance Director of Robert Walters plc the company successfully floated on the Main Market of London Stock Exchange and whilst at Spectron Group Limited the company was restructured and eventually sold to a trade buyer.


He has significant experience in company management, control, reporting and corporate activity, especially in the private equity arena. As part of the management team of Axiom Consulting Limited he was involved in a management buyout from Aon Limited funded by private equity and later its trade sale to Charles Taylor plc. He was also part of the team at Kane Group Limited who undertook the private equity backed acquisition of HSBC Insurance Services Limited. He is also a founder of RPL Investments limited, a company which specialises in assisting with raising funds for small businesses as well as advising on corporate strategy.


Property manager


The Tilstone Subsidiaries have appointed Savills to act as Property Manager for their respective properties pursuant to the terms of a series of property management agreements. The Property Manager provides a wide range of services including: ensuring compliance with all current property regulations (including relevant health and safety requirements); collection of rent; administration of service charges; and accounting for VAT. Under separate specific appointments, the Tilstone Subsidiaries also engage the service of Savills as and when necessary to procure the service of building surveying and project management, leasing of vacant space, landlord and tenant services for rent reviews and lease renewals, planning advice regarding the preparation and submission of planning applications and capital markets advice for the acquisition of investment properties. Whilst Savills are the service provider of choice, the Tilstone Subsidiaries are at liberty to engage the services of whichever consultant it considers to be appropriate.


3. Investment policy and objective

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


The Company may acquire property interests either directly or through corporate structures (whether onshore UK or offshore) and also through joint venture or other shared ownership or co-investment arrangements.


The Company will invest and manage its portfolio with an objective of spreading risk and, in doing so, will maintain the following investment restrictions:


·      the Company will only invest, directly or indirectly, in warehouse assets located in the UK;

·      no individual warehouse property will represent more than 20 per cent. of the last published gross

asset value of the Company at the time of investment;

·      the Company will target a portfolio with no one tenant accounting for more than 10 per cent. of the gross Contracted Rents of the Company at the time of purchase. In any event, no more than 20 per cent. of the gross assets of the Company will be exposed to the creditworthiness of any one tenant at the time of purchase;

·    the portfolio will be diversified by location across the UK with a focus on areas with strong underlying investment fundamentals; and

·     the Company will not invest more than 10 per cent. of its gross assets in other listed closed-ended investment funds.


The Company will consider investments where there is potential for active asset management, including general refurbishment works.


The Company will not undertake speculative development (that is, development of property which has not been at least partially leased or pre-leased or de-risked in a similar way), save for refurbishment and/or extension of existing holdings. The Company may, provided that the exposure to these assets at the time of purchase shall not exceed 15 per cent. of the gross assets of the Company, invest directly, or via forward funding agreements or forward commitments, in developments including pre-developed land, where the structure is:


(i) designed to provide the Company with investment rather than development risk;

(ii) where the development has been at least partially pre-let or sold or de-risked in a similar way; and

(iii) where the Company intends to hold the completed development as an investment asset.


The Company will be permitted to invest cash, held by it for working capital purposes and awaiting investment, in cash deposits and gilts. The Company may also invest in derivatives for the purpose of efficient portfolio management. In particular, the Company may engage in interest rate hedging or otherwise seek to mitigate the risk of interest rate increases as part of the Company's efficient portfolio management strategy.


It is envisaged that a LTV ratio of between 30 per cent. and 40 per cent. would be the optimal capital structure for the Company over the longer term. However, in order to finance value enhancing opportunities, the Company may temporarily incur additional gearing, subject to a maximum LTV ratio of 50 per cent., at the time of an arrangement.


4. The investment case for the warehouse property sector

The Company intends to invest in the UK warehouse property market. Given that the urban warehouse sector is experiencing an increase in demand from e-commerce, the Company will focus on acquiring multi-let urban warehouse estates and some single let assets located close to conurbations and/or motorways. Urban warehouses are experiencing strong occupier demand not only from businesses that operate in the "last mile" economy but also from a diverse range of other sectors, thereby increasing competition for these units. The urban warehouse sector is separate to and can be distinguished from the Big Box dominated pure distribution/logistics sector. The Company's investment focus on urban warehouses provides a number of advantages:


·      the urban warehouse sector offers one of, if not the highest, initial yields of all UK property sectors;

·      sustainable current rental levels;

·    constrained supply (driven in part by the cost of replacement being higher than the investment value of the underlying buildings) of new stock being developed over the last 10 years and very little development being planned over the next 5 years, all of which has frustrated occupier choice and resulted in rental growth;

·      increasing occupier demand driven by the rise in internet shopping and the "last mile" delivery sector;

·     flexibility in building use (subject, where applicable, to applicable planning permissions) which has already evolved significantly over time and which provides potential value add opportunities;

·      low levels of building obsolescence; and

·      prevailing shorter WAULTs providing opportunities to improve income security and add value.


The Company and TPL will focus on the acquisition of assets most likely to benefit from rental growth. Rather than being a passive investor, the Company and TPL believe in acquiring assets with added value opportunities which are capable of being realised through pro-active management in accordance with the Company's investment policy. The Directors recognise that there is a strong correlation between the rental value of a warehouse and its permitted use under the planning system. Successfully securing planning permission for the change of use of a warehouse to either trade counter or retail, for example, can have the effect of doubling the rental value. Working closely with the planning team at Savills, TPL have already achieved some success in this regard in relation to the Tilstone Property Portfolio and TPL believe that there remains further opportunities within the Tilstone Property Portfolio to increase rental returns in this way. TPL believe that any objective to obtain planning permission should be coupled with and based upon a detailed understanding of occupiers' requirements to ensure that the right level of space is created, in suitable locations and with the appropriate permitted use so as to maximise value.        


5. The Tilstone Property Portfolio

The Tilstone Property Portfolio, which has been valued at £108.85 million as at 31 March 2017, comprises a diversified portfolio of freehold and long leasehold  warehouse assets located within the UK and includes warehouses in the industrial/manufacturing, storage and distribution, trade-counter and retail warehouse/leisure sub-sectors. A majority of the Tilstone Property Portfolio comprises multi-let warehouse assets.


6. Finance arrangements

The Tilstone Property Portfolio has been funded through a combination of debt and equity finance arrangements provided by the Tilstone Investors, the Associated Lenders and third party finance provided by HSBC and Tedel.


Tilstone Holdings has the benefit of a term loan facility for an amount of £29.3 (at an interest rate of 2.50 per cent. above LIBOR) together with a revolving credit facility of £15.0 (at an interest rate of 2.75 per cent. above LIBOR) provided by HSBC. As at the date of the Prospectus, approximately £27.8 million and £13.9 million has been drawn down respectively under these facilities.


Following Admission, it is the intention that the revolving credit facility will be repaid. The Company anticipates that Tilstone Holdings will be able thereafter to amend the provisions of the HSBC Facility Agreement so as to increase the term loan facility to £30.0 (at an interest rate of 2.25 per cent. above LIBOR) and increase the revolving credit facility to £35.0 (at an interest rate of 2.4 per cent. above LIBOR), in each case extending the term of the loans to five years from the date of the amendment. In obtaining these amended terms, Tilstone Holdings will be required to adhere to an LTV ratio of not greater than 50 per cent.


Tilstone Warehouse has the benefit of a term loan facility for an amount of £40.0 provided by Tedel of which approximately £33.5 million is drawn as at the date of the Prospectus. The Tedel Facility will be repaid in full on Admission. An early repayment charge equivalent to 0.5 per cent. of the total amount of the Tedel Facility will be incurred. This charge will be paid by Tilstone Warehouse from funds made available to it by the Company out of the proceeds of the Issue.


Within the Tilstone Subsidiaries there is approximately £8.9 million of subordinated shareholder debt provided by the Tilstone Investors and the Associated Lenders and it is intended that this will be repaid by the Company on Admission out of the proceeds of the Issue.


7. The Acquisition

The Company is to enter into the Acquisition Agreements with the Tilstone Investors pursuant to which the Company will conditionally agree to acquire the Tilstone Property Portfolio with effect on Admission, further information on which will be set out in the  Prospectus.


Immediately prior to Admission, the Tilstone Property Portfolio will be owned by the Tilstone Subsidiaries. The Tilstone Holdings Subsidiaries are wholly-owned subsidiaries of Tilstone Holdings and the Tilstone Warehouse Subsidiaries are wholly-owned subsidiaries of Tilstone Warehouse.


Pursuant to the terms of the Acquisition Agreements, the Company will acquire the entire issued share capital of Tilstone Holdings and Tilstone Warehouse from the Tilstone Investors. Accordingly, on completion of the Acquisition, each of the Tilstone Subsidiaries will become either direct or indirect subsidiaries of the Company.


Each of the Acquisition Agreements is conditional upon Admission and completion of the Acquisition will therefore occur automatically upon and simultaneously with Admission. Upon the Acquisition Agreements becoming unconditional and being completed, the Company will pay to the Tilstone Investors, pro rata to their respective interests in Tilstone Holdings and Tilstone Warehouse as at the date of the Prospectus, an amount representing the value of the assets within the Tilstone Property Portfolio (including cash and income) reduced by the amount of the outstanding indebtedness as at the date of Admission. The consideration under the Acquisition Agreements will be satisfied by: (i) the issue of the Consideration Shares; and (ii) the payment of the Cash Consideration (together with any post-completion net asset adjustment).


The Tilstone Warehouse Agreement provides for additional contingent consideration in the total aggregate amount of £900,000 to become payable by the Company to the Tilstone Warehouse Investors pro rata to their respective interests in Tilstone Warehouse as at the date of the Prospectus, in the event that within five years from the date of Admission relevant detailed or outline Development Planning Permission(s) is or are granted by the local planning authority in respect of the property at Queenslie Industrial Estate, Glasgow, Scotland and an independent valuer determines that the grant of such Development Planning Permission(s) have increased the value of the property by not less than £900,000. TPL has already submitted an application in respect of the Development Planning Permission to the relevant planning authorities.


The Tilstone Investors are all related, either directly or indirectly, to TPL whilst two of them are also Directors. On the assumption that the Issue is fully subscribed, the Consideration Shares will represent 9.6 per cent. of the Enlarged Share Capital. Further details of the terms of the Acquisition are set out in the Prospectus.


8. Key strengths of the Group and TPL

TPL will be responsible for working with the Company to identify investment opportunities which meet the Company's investment policy.


The Directors believe that the Company and TPL have a number of key strengths which will assist the Company in meeting its investment objective.


The Tilstone Property Portfolio has been independently valued at £108.85 million as at 31st March 2017. The TPL management team are confident of increasing the annual rent. If the Company is able to let all of the space that was vacant at the Valuation Date, the annual rent will increase by approximately £1.0 million. TPL believes there will be further income uplifts as the Net Contracted Rents on the Tilstone Property Portfolio rise to ERV, generating an additional amount of approximately £0.5 million per annum. For the avoidance of doubt, this is prior to any additional rental growth (IPF are forecasting rental growth of 2.7 per cent. for 2017 for industrial rents). Furthermore there are ongoing planning strategies for several assets (in locations such as Glasgow and Winsford) where TPL believe successful outcomes will assist in enhancing annual rental income. TPL works hard to keep up to speed with what it terms "space intelligence", knowing what potential and existing occupiers require from their occupational property strategies and, most importantly, the affordable level of rent. Understanding the value of space to its occupier is fundamental in forecasting future rental growth together with understanding the sustainability of prevailing levels of rental values for a given market. Prior to purchasing any asset, TPL will not just look at the "bricks and mortar", but will also meet each occupier to understand the business and its current and future property requirements.


TPL believes that there are a number of sources from which it can identify properties to acquire, including auction sales, portfolio sales and single asset disposals sourced from a range of vendors including banks, financial institutions, private individuals and property companies, some directly targeted as owners of properties which meet the Company's investment criteria. Other sources of transactions include commercial investment agents, accountants, insolvency practitioners and occupational letting agents based in London and the main regional markets.


The Directors believe that it is individual stock selection that ultimately drives investment performance. In preference to acquiring portfolios (which often attract premium prices) TPL will continue to focus on individual asset acquisitions (or acquisitions of small groups of assets) for which it has a set procedure. Ultimately, investment performance comes from consistent rental income growing in real terms from asset management initiatives focused on an in depth knowledge of occupier requirements to ensure buildings offer long term solutions and efficiencies for existing and prospective tenants alike. Provided buildings continue to serve the needs of occupiers, leases are typically renewed and income streams are maintained and grown. TPL has retained 70 per cent. of all lease renewals on the properties within the Tilstone Property Portfolio that have been for more than two years and maintained the WAULT at approximately 6 years from approximately 6.5 years at purchase.


The TPL management team have a history of developing relationships with its tenants, which can lead to other asset management opportunities. By way of example, TPL aims to use its understanding of applicable planning laws to extract value through potential changes of use or the widening of the existing use which can often result in increases to the rental value of a property.


TPL has worked with a number of the UK clearing banks with a strong history of lending against UK commercial property, including warehouses. TPL's knowledge of prevailing margins and hedging options will enable it to advise the Board on options available to minimise risk whilst taking advantage of existing prevailing low interest rates.


Savills act as property manager to the Tilstone Property Portfolio and will continue to act in that role on behalf of the Group. TPL believe that the strength of their relationship with Savills is a key strength of the Group. This relationship enables the Company to capitalise on the network of Savills offices throughout the UK with its specialisms across a whole range of relevant services, the access to which will enable the Company to capitalise on multiple asset acquisition opportunities in line with the Company's investment criteria which will enhance its portfolio.


As at the date of the Prospectus, TPL only manages the assets included within the Tilstone Property Portfolio and, following Admission, it has undertaken in the Investment Management Agreement that it will only manage those assets which are owned by the Group. Accordingly, TPL does not currently have, and following Admission is not expected to have, any conflicts of interest with the Group.




The Directors and TPL believe there is a strong pipeline and are continually evaluating a number of opportunities which would meet the Company's investment criteria. The Company anticipates building its portfolio through the acquisition of individual assets and portfolios with a typical average purchase price of between £2.5 million to £10 million per property. Assuming the Company raises the estimated net proceeds of £146.8 million, and after payment of: (i) the Cash Consideration; (ii) the Debt Repayment Amount; and iii) the Shareholder Debt Repayment Amount, and assuming an LTV of 30 per cent., the Company will have approximately £120 million available for future acquisitions.


TPL continually screens the market place for potential investment opportunities and typically reviews a potential pipeline of £1 billion over a 12 month period and has screened in excess of £750 million of assets so far during 2017. TPL, on behalf of the Company, has already identified a number of assets which meet the Company's investment objective and investment policy, including off-market assets identified through TPL's network. TPL has identified and is in discussions or negotiations regarding approximately £88 million of properties as potential investment opportunities for the Company and its Group following Admission.






Important notice


The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness.

This announcement is an advertisement and not a prospectus and investors should not purchase any Ordinary Shares referred to in this announcement except on the basis of information in the Prospectus.

This announcement has been issued by and is the sole responsibility of the Company.

The material set forth herein is for informational purposes only and does not constitute an offer of securities for sale or a solicitation of any offer to buy securities in the United States, Australia, Canada, Japan, South Africa or any other jurisdiction in which such an offer or solicitation is unlawful.  The securities referred to herein have not been and will not be registered under the United States 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, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any applicable securities laws of any state or other jurisdiction of the United States.  No public offering of securities will be made in the United States

Any purchase of Ordinary Shares in the proposed initial public offering should be made solely on the basis of the information contained in the final Prospectus to be issued by the Company in connection with the initial public offering and Admission. No reliance may or should be placed by any person for any purposes whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment when the definitive Prospectus is published. In particular, the proposals referred to herein are tentative and are subject to verification, material updating, revision and amendment.

The initial public offering timetable, including the date of Admission, may be influenced by a range of circumstances such as market conditions. There is no guarantee that the initial public offering and the Admission will occur and you should not base your financial decisions on the Company's intentions in relation to the initial public offering and Admission at this stage. Acquiring Ordinary Shares to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning the initial public offering. The value of Ordinary Shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the initial public offering for the person concerned. Past performance or information in this announcement or any of the documents relating to the initial public offering cannot be relied upon as a guide to future performance.

Each of G10 Capital Limited and Peel Hunt LLP is authorised and regulated in the United Kingdom by the Financial Conduct Authority, and is acting exclusively for the Company and no-one else in connection with the initial public offering and Admission. They will not regard any other person as their respective clients in relation to the initial public offering and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, nor for providing advice in relation to the initial public offering an Admission, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

In connection with the initial public offering and the Admission, Peel Hunt LLP and any of its respective affiliates, acting as investors for their own accounts, may purchase Ordinary Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Ordinary Shares and other securities of the Company or related investments in connection with the initial public offering and the Admission or otherwise. Accordingly, references in the Prospectus, once published, to the Ordinary Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by Peel Hunt LLP and any of their affiliates acting as investors for their own accounts. Peel Hunt LLP does not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

None of the Company, G10 Capital Limited or Peel Hunt LLP nor any of their respective affiliates or agents accepts any responsibility or liability whatsoever for,/ or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. The Company, G10 Capital Limited and Peel Hunt LLP and their respective affiliates accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Company's board of directors' current beliefs and expectations about future events. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, the results of operations, financial condition prospects, growth and dividend policy of the Company and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance.

These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. Forward looking statements speak only as of the date of this announcement.

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.

Each of the Company, G10 Capital Limited and Peel Hunt LLP and their respective affiliates expressly disclaim any responsibility, obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise.

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