Proposed Issue of Equity

RNS Number : 6709D

AEW UK Long Lease REIT PLC

01 February 2018

 

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, CANADA, JAPAN, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

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 summary, securities note and share registration document (together, the "Prospectus") published by AEW UK Long Lease REIT plc (the "Company" or "AEW UK Long Lease REIT") in connection with the placing, offer for subscription and intermediaries offer of ordinary shares of £0.01 each in the Company (the "Shares") (the "Issue") pursuant to the share issuance programme of the Company ("Share Issuance Programme") and the admission of such Shares to listing on the premium listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange plc ("Admission"). A copy of the Prospectus is available, inter alia, from www.aewukllreit.com.

This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction. Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

AEW UK Long Lease REIT plc

Placing, Offer for Subscription and Intermediaries Offer

£35 million maximum Issue

and

Publication of a Prospectus

1 February 2018

Further to the announcement made by AEW UK Long Lease REIT plc (the "Company" or "AEW UK Long Lease REIT") on 8 January 2018 of its intention to issue additional shares pursuant to its Share Issuance Programme, the board of directors of AEW UK Long Lease REIT is pleased to announce a placing, offer for subscription and intermediaries offer of new Shares (the "Issue") at a price of 99 pence per Share (the "Issue Price").

Background

At the time of its IPO in June 2017, the Company stated its expectation to invest substantially all the net proceeds of the IPO within nine months of listing by investing in alternative and specialist real estate sectors in the UK to offer a secure, diversified and inflation-linked income return, whilst at least maintaining capital values in real terms.  The Company is pleased to announce that £95.2 million (which includes the acquisition costs) has now been deployed in 14 properties, with the acquisition of a further two properties expected to complete in mid February 2018. This will result in deployment of the net IPO proceeds and substantially all of the £30 million drawn under the Company's new loan facility with Canada Life Investments, announced on 8 January 2018.

In addition, AEW UK Investment Management LLP (the "Investment Manager") has a further pipeline of five properties totaling £18.5 million under offer on behalf of the Company in the leisure, pub and hotel sectors, which meet the Company's investment policy and objectives and which are expected to complete during February and March 2018. The Investment Manager is also engaged in active due diligence on an attractive pipeline of assets in excess of £50 million. 

The Company's investments have, to date, exceeded the minimum portfolio targets with an average lease length of 22 years and 90% of the rental income from leases with rent reviews linked to inflation. Across the portfolio the average net initial yield is 5.6 per cent and the income is secured against 15 tenants, including Premier Inn Hotels, Biffa Waste Services Limited, Travelodge Hotels and Volkswagen Group UK Limited. The existing assets are diversified across eight sectors: hotels (24%); industrial (20%), car showrooms (17%), student accommodation (11%), medical/care (11%), leisure (8%), power stations (5%), and petrol filling stations (4%)¹.

The Company has declared dividends totalling 1 pence per Share, in line with the schedule announced at the time of the Company's IPO.

Benefits of the Issue:

The Directors believe that the Issue will have the following principal benefits for Shareholders:

·     Grow the Company, thereby spreading fixed operating costs over a larger asset base, which should reduce the on-going charges per Share

·     Provide additional capital which will enable the Company to benefit from the continued investment opportunities in the market and further diversify its assets

·     Potentially enhance the NAV per Share through new Share issuance at a premium to the prevailing NAV per Share, after the related costs have been deducted

·     Increase the number of Shares in issue, which may provide Shareholders with additional liquidity. This should enhance the marketability of the Company and should result in a broader investment base over the longer term

Key Highlights of the Issue: 

·     Maximum issue size of 35 million new Shares (the "New Shares")

·     Issue Price of 99.0 pence per New Share, representing a 0.6 per cent. discount to the closing price of 99.6 pence per Share as at 31 January 2018 and a 2.6 per cent. discount to the average 3 month closing price of 101.7 pence per Share

The Issue Price reflects the 1.0 pence per Share dividend received by investors since IPO

·    The Company is targeting an annual dividend of 5.5 pence per Share, paid quarterly, with effect from the financial year commencing 1 July 2018, with an ambition to grow this in line with UK inflation thereafter.² New Shares will rank pari passu with the existing Shares in all respects from the date of issue but will not be eligible for the dividend payable in respect of the period from 1 October 2017 to 31 December 2017

·     The Issue, which is not underwritten, is conditional, amongst other things, on the Share Issuance Agreement having become unconditional in accordance with its terms. If these conditions are not met, the Issue will not proceed and an announcement will be made via a Regulatory Information Service

·     Application will be made for the New Shares to be issued pursuant to the Issue to be admitted to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities

Investment Highlights: 

·     AEW UK Long Lease REIT invests in a diverse portfolio of assets within alternative and specialist property sectors that are under-represented in institutional portfolios and benefit from long-term demand drivers.

·     Key focus on capital preservation through detailed analysis and understanding of the real estate fundamentals, ensuring there is the potential for higher alternative use value and capital recovery.

·     Strong current pipeline of investment opportunities offering high quality, inflation-linked long-duration income. The five assets in the pipeline have an average net initial yield of c. 6.3% per cent and a weighted average unexpired lease term to first break of c. 20 years. This pipeline should enable the Company to deploy capital raised under the Issue in the near future, although there can be no certainty that the Company will complete any of the transactions in its investment pipeline.

·     The Company has a conservative level of gearing, with a target loan to value of 30%. On 8 January 2018, the Company announced that it had entered into a new £30 million loan facility with Canada Life Investments. The term facility is up to 35% loan to property value, provided on a portfolio basis.  The loan is fixed for 8 years at a total rate of 3.05% per annum. On 19 January 2018 the Group drew down on the entire facility. The released funds will be invested in the existing pipeline.

·     The Investment Manager has an experienced team with a track record in both long lease funds and REITs with an established pipeline of origination for long lease assets. They form part of AEW Global, one of the world's largest real estate managers, with more than €58 billion of assets under management.

The Issue will comprise:

·     an offer of Shares to certain institutional and professional investors in qualifying geographies (the "Placing");

·     an offer of Shares to the public in the UK (the "Offer for Subscription"); and

·     an offer of Shares to certain financial intermediaries in the UK, who will facilitate the participation of their retail clients in the UK (the "Intermediaries Offer").

 

The Intermediaries Offer

The Intermediaries Offer is now open following publication of the Prospectus. Retail investors can apply through stockbrokers and share dealing providers who are participating in the Offer as Intermediaries.

Retail investors can find further information about the Intermediaries Offer, including the Prospectus and a list of the firms acting as Intermediaries at www.aewukllreit.com. The current list of Intermediaries participating in the Intermediaries Offer are set out in Appendix A. Additional Intermediaries may elect to participate during the course of the Intermediaries Offer.

·     The minimum individual application size in the Intermediaries Offer will be £1,000.

·     The last date for the receipt of applications by Intermediaries is 14 February 2018. (Some Intermediaries may have an earlier deadline and you should consult your Intermediary for the exact date and time.)

Commenting on today's announcement, Steve Smith, Chairman of AEW UK Long Lease REIT:

"We are very pleased with AEW UK Long Lease REIT's progress since IPO last June, with the assembled portfolio providing high quality secure income with inflation-linkage. Having now fully invested the equity, the assets under offer will substantially fully utilise the debt that the Company has secured. , The Investment Manager is continuing to originate an attractive pipeline of assets across a range of property sectors, giving us an opportunity to raise additional capital that can be quickly deployed and increase the scale of the Company."

¹ All numbers are as at 31 January 2018, pro-forma, based on deployment of the net IPO proceeds and substantially all of the £30m debt, including the acquisition of two assets totalling £6m which are under offer (non-binding basis) and subject to completion.

² This is a target only. There is no guarantee that the target dividend can or will be achieved and it should not be taken as an indication of the Company's expected or actual return.

Expected Timetable:

		2018
Publication of Prospectus		Thursday 1 February
Latest time and date for receipt of completed application forms and payment in full under the Offer for Subscription		11.00 am, Wednesday 14 February
Latest time and date for receipt of completed application forms from intermediaries in respect of the Intermediaries Offer		3.00 pm, Wednesday 14 February
Latest time and date for commitments under the Placing		4.00 pm, Wednesday 14 February
Publication of the results of the Issue		Thursday 15 February
Admission and commencement of unconditional dealings in Shares in respect of the Issue		8.00 am, Monday 19 February

The dates specified are subject to change without further notice. Any changes to the expected timetable will be notified by the Company through a Regulatory Information Service.

Fidante Capital are acting as Sponsor, Financial Adviser and Sole Bookrunner to the Company. Solid Solutions Associates are acting as Intermediaries Offer Advisor. 

Terms used and not defined in this announcement will have the meanings given to them in the Prospectus.

Further details of the Issue and the Share Issuance Programme are set out in the Prospectus, which will shortly be available on the Company's website www.aewukllreit.com, and at the Company's registered office: 6^th Floor, 65 Gresham Street, London EC2V 7NQ.

A copy of the Prospectus will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.

For further information, please contact:

AEW UK Investment Management LLP Alex Short Laura Elkin	020 7016 4880
Sponsor, Financial Adviser and Sole Bookrunner Fidante Capital Katie Standley Nick Donovan Sales Patrick Valentine Justin Zawoda-Martin Daniel Balabanoff	020 7832 0900
Intermediaries Offer Enquiries [e-mail] Solid Solutions Nigel Morris	020 7549 1613
Media Enquiries [e-mail] TB Cardew	020 7930 0777
Ed Orlebar	07738 724 630
Tom Allison Lucy Featherstone	07789 998 020 07789 374 663

Investment Manager

AEW UK Investment Management LLP is part of AEW Global, one of the world's largest real estate managers, with €57.7 billion of assets under management as at 30 September 2017. AEW Global comprises AEW SA and AEW Capital Management L.P., a U.S. registered investment manager. In Europe, as at 30 September 2017, AEW Global managed €26.6 billion in value in properties of all types located in 15 countries, with c. 400 staff. The Investment Manager is a 50:50 joint venture between the principals of the Investment Manager and AEW Europe.

The Company

Investment Objective, Policy, and Strategy

The investment objective is to generate a secure and predictable income return, sustainable in real terms, whilst at least maintaining capital values, in real terms, by investing in a diversified portfolio of UK properties, predominately in alternative and specialist sectors.

In order to achieve its investment objective the Company invests in freehold and long leasehold properties across the whole spectrum of the UK property sector, but with a focus on alternative and specialist real estate sectors. Examples of alternative and specialist real estate sectors include, but are not limited to, leisure, hotels, healthcare, education, logistics, automotive, supported living and student accommodation.

The Company intends to achieve a diversified portfolio across both properties and tenants. The Company will focus on properties that can generate predictable income streams through long-leases and have contractual exposure to inflation rates at the time of investment.

The Company intends to supplement this core strategy with active asset management initiatives to re-gear certain mid-life leased properties.

The Company is not permitted to invest in land assets, including development land which does not have a development agreement attached, agriculture or timber.

In the current market environment the focus will be to invest in properties to construct a portfolio with the following minimum targets:

·     a weighted average unexpired lease term at the time of investment in excess of 18 years;

·     at least 85% of the portfolio's gross passing rent will have leases with rent reviews linked to inflation (RPI or CPI) at the time of investment;

·     investment in properties which typically have a value, at the time of investment, of between £2 million and £30 million;

·     at least 70% of the properties will be in non-traditional sectors;

·     less than 30% of the properties will be in the traditional sectors of retail, industrial and offices; and

·     over 90% of properties will be freehold or very long leasehold (over 100 years).

Once Gross Asset Value is £250 million or greater, future investments will be made to target a portfolio with at least 80% of the properties in non-traditional sectors, and less than 20% of the properties in traditional sectors.

Whilst each acquisition will be made on a case by case basis, it is expected that properties will typically offer the following characteristics:

·     existing tenants with strong business fundamentals and profitable operations in those locations;

·     depth of tenant/operator demand;

·     alternative use value;

·     current passing rent close to or below rental value; and

·     long-term demand drivers, including demographics, use of technology or built-for-purpose real estate.

The full text of the investment objective, policy, and strategy is set out in the Prospectus, which is available from www.aewukllreit.com.

Appendix A:

LIST OF INTERMEDIARIES CURRENTLY PARTICIPATING

AJ Bell Securities Limited (Youinvest)

Alliance Trust Savings Limited

Barclays Bank PLC (Barclays Smart Investor)

Charles Stanley & Co Limited

Cornhill Capital Limited

Equiniti Financial Services Limited (Selftrade)

Jarvis Investment Management Limited (SharedealActive; X-O.co.uk)

Redmayne-Bentley LLP

Saga Share Direct

Shareview

The Share Centre Limited 

DISCLAIMER

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. The material set forth herein is for information purposes only and is not intended, and should not be construed, as an offer of securities for sale in the United States or any other jurisdiction.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, South Africa or Japan. The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any 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 does not contain or constitute an offer for sale of, or the solicitation of an offer or an invitation to buy or subscribe for, Shares to any person in the United States, Australia, Canada, South Africa or Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

The Company will not be registered under the US Investment Company Act of 1940, as amended. In addition, the Shares referred to herein have not been and will not be registered under the US Securities Act of 1933 (the "Securities Act") or under the securities laws of any state of the United States and may not be offered or sold in the United States or to or for the account or benefit of US persons absent registration or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable State securities laws. The offer and sale of Shares referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of any state, province or territory of Australia, Canada, South Africa or Japan. Subject to certain exceptions, the Shares referred to herein may not be offered or sold in Australia, Canada, South Africa or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, South Africa or Japan. There will be no public offer of the Shares in the United States, Australia, Canada, South Africa or Japan.

Each of the Company, the Investment Manager, Fidante Capital and their respective affiliates expressly disclaim any 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.

Any purchase of Shares in the Issue should be made solely on the basis of the information contained in the Prospectus issued by the Company in connection with the Issue 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.

Fidante Partners Europe Limited (trading as Fidante Capital) is authorised and regulated in the United Kingdom by the Financial Conduct Authority, and acting exclusively for the Company and no-one else in connection with the Issue and Admission. They will not regard any other person as their respective clients in relation to the Issue 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 Issue and Admission, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

None of the Company, the Investment Manager, Fidante Capital or any of their respective affiliates 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, the Investment Manager, Fidante Capital 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.

Information to Distributors

The Shares should be considered as 'non-complex' in accordance MiFID (2014/65/EU) and the Markets in Financial Instruments Regulation (MiFIR - 600/2014/EU) ("MiFID II").

Solely for the purposes of the product governance requirements contained within: (a) MiFID II; (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Shares have been subject to a product approval process, which has determined that the Shares to be issued pursuant to the Issue and any Shares which may be issued pursuant to any subsequent Issue are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, distributors should note that: the price of the Shares may decline and investors could lose all or part of their investment; the Shares offer no guaranteed income and no capital protection; and an investment in the Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, Fidante Capital will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Shares.

Each distributor is responsible for undertaking its own Target Market Assessment in respect of the Shares and determining appropriate distribution channels.

 

END

 

 

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