REIT Conversion, CULS issue a

RNS Number : 1297V

NewRiver Retail Limited

28 October 2010

 



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NewRiver Retail Limited ("NewRiver" or "The Company")

Proposed REIT conversion, issue of up to £25.0 million of convertible unsecured loan stock, portfolio acquisition and notice of EGM

NewRiver Retail Limited, the specialist real estate investor and asset manager, today announces a range of proposals to continue the Company's growth and development:

·             the proposed election to HMRC to become a UK real estate investment trust ("UK-REIT")

·             the proposed issue of up to £25.0 million of 5.85 per cent. Convertible Unsecured Loan Stock

·             the acquisition of a portfolio of five UK retail properties from Standard Life for £14.0 million

REIT Conversion

After a thorough review by the NewRiver Board, and in light of the interest of UK and international real estate investors in UK-REITs, the Company proposes to make an election to become a UK-REIT. The Board considers that conversion will make the Company more attractive to UK and international real estate investors and should improve the Company's access to additional capital. For these reasons, which are described in more detail in the circular posted to shareholders today (which is also available on the Company's website, www.newriverretail.com), the Board believes that conversion to a UK-REIT platform would be in the best interests of the Company's shareholders as a whole.

Proposed issue of the Convertible Unsecured Loan Stock ("CULS")

The Company is seeking to raise up to £25.0 million, through the issue, at par, of the CULS which will be issued with a coupon of 5.85 per cent. and a conversion rate of 1 Ordinary Share for every £2.80 nominal value of CULS. The closing mid-market price of NewRiver shares on 27 October 2010 was 249 pence.

Of the £25.0 million of CULS, £15.0 million is to be placed firm with a fund managed by Forum Partners Investment Management LLC ("Forum"), the global real estate investment management firm, with up to a further £10.0 million available for subsequent issue by the Group at its discretion. A fund managed by Forum has conditionally committed for a period of three months from the date of REIT conversion to subscribe, at the request of NewRiver, for up to £2.0 million nominal value of CULS and funds managed by Spearpoint Limited ("Spearpoint"), the Channel Islands based independent investment boutique, have conditionally committed for a period of three months from the date of REIT conversion to subscribe, again at the request of NewRiver, for up to £8.0 million nominal value of CULS.

If the further CULS are issued within the three months post REIT conversion then they will be issued on identical terms to those announced today. Thereafter, the Board is seeking the authority to issue a further £10.0 million of CULS on as nearly identical terms as possible, subject to any amendments necessary taking into account the then prevailing market conditions, at any point up to the Company's next AGM, at which point the authority will lapse unless renewed by shareholders.

Under the terms of the CULS instrument, any outstanding CULS shall be repaid in full on 31 December 2015. Until the CULS has been repaid by the Issuer in full or converted into ordinary shares of no par value in the Company ("Ordinary Shares"), interest will accrue on it on a daily basis at a gross rate equal to an annual rate of 5.85 per cent.. Such interest is due and payable by the Issuer on 30 June 2011 and thereafter on 31 December and 30 June in any year whilst the CULS remains outstanding.

Prior to such repayment, a holder of CULS may convert all or any of its CULS into Ordinary Shares at the rate of 1 Ordinary Share for every £2.80 nominal value of CULS held during the period commencing on the date of issue and ending on the expected repayment date of 31 December 2015.

Under the rules of the CISX, the Company is currently not able to issue the CULS itself.  Therefore, the Company has incorporated the Issuer, a wholly-owned, special purpose vehicle created for the sole purpose of issuing the CULS. Application will be made for the CULS to be admitted to trading on the Daily Official List of the CISX. It is expected that admission will become effective and dealings in the CULS will commence on the CISX at 8:00 a.m. on 24 November 2010. The Issuer will comply with the abbreviated CISX regime in relation to listed debt securities.

Acquisition of the Standard Life Portfolio

NewRiver Retail Portfolio No. 2 Limited, a wholly-owned subsidiary of the Company, has conditionally exchanged contracts to acquire a group of five properties from Standard Life (the "Standard Life Portfolio") for a total consideration of £14.0 million. In aggregate, the net initial yield of the portfolio is projected to be 9.0 per cent..

The acquisition of the Standard Life Portfolio is not conditional upon the issue of the CULS or the Company's conversion to a UK-REIT. Certain of the proceeds of the CULS will initially be utilised by NewRiver Retail Portfolio No. 2 Limited to complete this acquisition until external senior debt is drawn down, with the balance of the proceeds of the issue of the CULS to be applied in the Company's continuing investment programme.

The five retail properties comprising the Standard Life Portfolio have an approximate total net lettable area of 139,000 square foot and are in the following locations: Doncaster, Grimsby, Hereford, Warrington and Worthing and the key retail tenants are Superdrug, Next, TK Maxx and New Look. The portfolio has a weighted average unexpired lease term of 6.5 years.

Board composition

Subject to Shareholder approval of the UK-REIT conversion at the Extraordinary General Meeting ("EGM"), it is proposed that Allan Lockhart, Mark Davies and Nick Sewell be appointed to the Board. Each of Allan, Mark and Nick are directors of NewRiver Capital and are employed by the Group. They will not receive any additional remuneration for their appointments as Directors of the Company.

In addition, subject to the approval of the resolutions by the NewRiver shareholders at the EGM and the subscription agreement with Forum becoming unconditional in accordance with its terms, it is proposed that Andrew Walker be appointed to the Board as Forum's representative.

Extraordinary General Meeting

The EGM will be held at the offices of Morgan Sharpe at Isabelle Chambers, Route Isabelle, St Peter Port, Guernsey on 19 November 2010 at 10am. Details of the proposals, including the resolutions to be proposed at the EGM, are set out in a circular which will be posted to shareholders today and is available on the Company's website - www.newriverretail.com.

David Lockhart, Executive Director of NewRiver Retail Limited said:

"This is a key fundraise for NewRiver, enabling us to keep up the momentum on a number of excellent acquisition opportunities currently in the pipeline. We are delighted to welcome two new cornerstone investors in Forum and Spearpoint, who are both well known to the management team at NewRiver, as the fund managers were substantial long-term investors in Halladale, and are supportive of our ambitious growth plans.

"Having deployed all of the funds raised at the time of Admission of the Company to AIM in 2009 and subsequent fundraising in April this year, NewRiver has acquired a diversified and well-balanced portfolio with numerous value-creating asset management opportunities. With the strength of the pipeline, NewRiver has every expectation that the proceeds of the CULS will be utilised in full over the next few months.

"The proposed conversion to UK REIT status is an important structural change for the Company that will bring NewRiver onshore, is tax efficient and offers shareholders transparency on our profit distribution policy with the requirement to pay out a minimum of 90% of the income profits of the Company's property rental business. These are all important developments for NewRiver as we continue to grow and realise our ambition of becoming the UK's leading specialist retail real estate investor and asset manager."

- Ends -

For further information:

Details of the proposals, including the resolutions to be proposed at the EGM, are set out in a circular which will be posted to shareholders today and is available on the Company's website - www.newriverretail.com.

NewRiver Retail Limited

Serena Tremlett                                                                                                               Tel: [phone]

NewRiver Capital Limited                                                                           

David Lockhart                                                                                                                  Tel: [phone]

Kinmont (Financial Adviser)

John O'Malley

Mathew Thackery                                                                                                            Tel: [phone]

Cenkos Securities                                                                                                           

Ian Soanes

Max Hartley                                                                                                                       Tel: [phone]

Pelham Bell Pottinger                                                                                                  

David Rydell

Rosanne Perry                                                                                                                  Tel: [phone]

 

END

 

 

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