Announcement re: Rights Issue

RNS Number : 9422J

Workspace Group PLC

07 July 2011

 



THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION, DISTRIBUTION OR FORWARDING, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN AND THE REPUBLIC OF SOUTH AFRICA AND SHOULD NOT BE DISTRIBUTED IN, FORWARDED TO OR TRANSMITTED IN OR INTO ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL SECURITIES LAWS OR REGULATIONS OF SUCH JURISDICTION. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

7 July 2011

Workspace Group PLC

("Workspace", the "Company" or the "Group")

1 for 4 Rights Issue of 288,182,835 New Ordinary Shares at 23 pence each to raise net proceeds of approximately £63 million

Workspace today announces the details of a fully underwritten Rights Issue to raise approximately £63 million (net of expenses). The Rights Issue is being made on the basis of 1 New Ordinary Share for every 4 Existing Ordinary Shares at a price of 23 pence per New Ordinary Share, representing a discount of 19.9 per cent. to the closing mid market price of 29.25 pence on 6 July 2011 (after adjusting for the proposed final dividend of 0.55 pence per Existing Ordinary Share which will not be payable to holders of the New Ordinary Shares).

Highlights:

·      1 for 4 Rights Issue to raise approximately £63 million (net of expenses), fully underwritten.

·      Provides Workspace with additional financial resources to accelerate the investment programme across its existing portfolio and take advantage of attractively priced property acquisition opportunities.

Rothschild is acting as sole Sponsor and Financial Adviser to the Company with respect to the Rights Issue.

Espirito Santo Investment Bank ("BESI") and Investec are acting as Joint Bookrunners, Brokers and Underwriters. The Rights Issue is fully underwritten by BESI and Investec. The Rights Issue is being made to Qualifying Shareholders on the register as at 5 July 2011.

Harry Platt, CEO of Workspace said:

"The Group continues to perform strongly and we see exciting opportunities to invest incrementally in our estate. The Rights Issue will enable us to take advantage of attractive re-positioning and acquisition opportunities that should deliver income and capital growth enhancing returns to our shareholders."

Expected timetable of principal events

Each of the times and dates in the table below is indicative only and may be subject to change.

Record Date for entitlement under the Rights Issue	5 July 2011
Announcement of the Rights Issue and publication of the Prospectus	7 July 2011
Admission and commencement of dealings in Nil Paid Rights and Fully Paid Rights on the London Stock Exchange	8.00 a.m. on 12 July 2011
Existing Ordinary Shares marked "ex-rights" by the London Stock Exchange	8.00 a.m. on 12 July 2011
Record date for the final dividend for the period ended 31 March 2011	15 July 2011
Latest time and date for acceptance, payment in full and registration or renunciation of Provisional Allotment Letters	11.00 a.m. on 26 July 2011
Admission and commencement of dealings in New Ordinary Shares, fully paid, on the London Stock Exchange	8.00 a.m. on 27 July 2011

1. The ability to participate in the Rights Issue is subject to certain restrictions relating to Qualifying Shareholders with registered addresses outside the United Kingdom, details of which are set out in Part 3 of the Prospectus.

2. References to times in this announcement are to London times.

3. The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement, the prospectus and in the Provisional Allotment Letters may be adjusted by the Company in consultation with its advisers, in which event details of the new times and dates will be notified to the UK Listing Authority, the London Stock Exchange and, where appropriate, Qualifying Shareholders.

4. The timing of the events in the above timetable will be subject to all relevant regulatory approvals being obtained.

Analyst presentation

A presentation for analysts will be held today at 9.30 a.m. (London time) at City Profile, Augustine House, 6A Austin Friars, London, EC2N 2HA.

The meeting can also be accessed through the following dial-in facility:

Dial in number for UK landline users: 0800 368 1950

Dial in number for overseas and mobile users: [phone]

PIN: 404782#

This summary should be read in conjunction with the full text of this Announcement.

For further information, please contact:

Workspace Group PLC	Tel: [phone]
Harry Platt, Chief Executive
Graham Clemett, Finance Director
Rothschild (Financial Adviser and Sponsor)	Tel: [phone]
Alex Midgen Richard Blackwell
BESI (Joint Bookrunner, Broker and Underwriter)	Tel: [phone]
Peter Tracey Richard Crawley
Investec (Joint Bookrunner, Broker and Underwriter)	Tel: [phone]
Keith Anderson David Anderson
City Profile	Tel: [phone]
Jonathan Gillen
Simon Courtenay

IMPORTANT INFORMATION

This announcement has been issued by and is the sole responsibility of Workspace Group PLC. This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security in the capital of the Company in any jurisdiction.

This announcement does not constitute a prospectus. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No relevance may or should be placed by any person whatsoever on the information contained in this announcement or its accuracy or completeness. The information in this announcement is subject to change. Nothing in this announcement should be interpreted as a term or condition of the Rights Issue. Any decision to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any Nil Paid Rights, Fully Paid Rights and/or New Ordinary Shares must be made only on the basis of the information contained in and incorporated by reference into the Prospectus. Copies of the Prospectus will be available on publication from the Company's website at www.workspacegroupplc.co.uk, provided that the Prospectus will not be available to Excluded Territory Shareholders.

This announcement and any materials distributed in connection with this announcement are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation which would require any registration or licensing within such jurisdiction. The Nil Paid Rights, the Fully Paid Rights,  the New Ordinary Shares and the provisional allotment letters if and when issued in connection with the Rights Issue have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or under the securities legislation of any state or territory or jurisdiction of the United States and may not be offered, sold taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, in or into the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with state securities laws. There will be no public offer of the securities mentioned herein in the United States. Neither this announcement (including and any materials distributed in connection with this announcement) nor any part or copy of it may be transmitted into the United States territories or possessions or distributed, directly or indirectly, in the United States, its territories or possessions. Neither this announcement nor any copy of it may be taken or transmitted into Australia, Canada, Japan or the Republic of South Africa or any other such jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. Any failure to comply with the above restrictions may constitute a violation of the securities laws of the United States, Australia, Canada, Japan or the Republic of South Africa. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. The Nil-paid Rights, the Fully-paid Rights and the New Ordinary Shares have not been and will not be registered under the applicable securities laws of Australia, Canada, Japan or the Republic of South Africa and, subject to certain exemptions, may not be offered or sold within Australia, Canada, Japan or the Republic of South Africa.

This announcement and any materials distributed in connection with this announcement may include forward-looking statements. These forward-looking statements are statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which the Company operates. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the Prospectus, because they relate to events and depend on circumstances that may or may not occur in the future. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this announcement. The Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials. No reliance may be placed, for any purposes whatsoever, on the information contained in this announcement or on its completeness (including, without limitation, on the fairness, accuracy, completeness of the information or opinions contained herein) and this announcement should not be considered a recommendation by the Company, the Banks or any of their respective directors, officers, employees, advisers or any of their respective affiliates in relation to any purchase of or subscription for securities. No representation or warranty, express or implied, is given by or on behalf of the Company, the Banks or any of their respective directors, officers, employees, advisers or any of their respective affiliates, or any other person, as to the accuracy, fairness or sufficiency or completeness of the information or opinions or beliefs contained in this announcement (or any part hereof). None of the information contained in this announcement has been independently verified or approved by the Banks or any other person. Recipients of this presentation and/or the Prospectus should conduct their own investigation, evaluation and analysis of the business, data and property described in this presentation and/or, if and when published, in the Prospectus. Save in the case of fraud, no liability is accepted for any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this announcement or its contents or otherwise in connection with this announcement.

Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting solely for the Company in relation to the Rights Issue and nobody else and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Rothschild nor for providing advice in relation to the Rights Issue or any other matter referred to in this announcement.

Execution Noble Limited (which conducts its UK investment banking business as Espirito Santo Investment Bank) ("BESI") which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting solely for the Company in relation to the Rights Issue and nobody else and will not be responsible to anyone other than the Company for providing the protections afforded to clients of BESI nor for providing advice in relation to the Rights Issue or any other matter referred to in this announcement.

Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting solely for the Company in relation to the Rights Issue and nobody else and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Investec nor for providing advice in relation to the Rights Issue or any other matter referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed upon Rothschild, BESI and Investec by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, each of Rothschild, BESI and Investec accepts no responsibility whatsoever and makes no representation or warranty, express or implied, concerning the contents of this announcement, including its accuracy, completeness or verification, or concerning any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the New Ordinary Shares, the Nil Paid Rights, the Fully Paid Rights or the Rights Issue, and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Each of Rothschild, BESI and Investec accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to herein) which it might otherwise have in respect of this announcement or any such statement.

Neither the content of Workspace's website nor any website accessible by hyperlink on Workspace's website is incorporated in, or forms part of, this announcement.

Workspace Group PLC

1 for 4 Rights Issue of 288,182,835 New Ordinary Shares at 23 pence each to raise net proceeds of approximately £63 million

1. INTRODUCTION

Workspace today announces the details of a fully underwritten Rights Issue to raise approximately £63 million (net of expenses). The Rights Issue is being made on the basis of 1 New Ordinary Share for every 4 Existing Ordinary Shares at a price of 23 pence per New Ordinary Share, representing a discount of 19.9 per cent. to the closing mid market price of 29.25 pence on 6 July 2011 (after adjusting for the proposed final dividend of 0.55 pence per Existing Ordinary Share which will not be payable to holders of the New Ordinary Shares).

The Rights Issue has been fully underwritten by the Joint Underwriters, BESI and Investec.

Approximately £50 million of the net proceeds of the Rights Issue is to provide the Company with additional financial resources, which will be used to accelerate the investment programme across the Group's existing property portfolio. In addition, approximately £13 million of the net proceeds of the Rights Issue will be used to fund property acquisitions.

2. BACKGROUND AND REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

2.1 Overview

The Board believes the Group has made significant progress over the last two years; the operational performance of the business has been robust despite the challenging economic environment and a number of steps to strengthen the balance sheet have been completed successfully. Against this background the Board has set clear priorities to take the business forward, building on the progress of the last two years:

•           to continue to drive occupancy and rental income growth;

•           to maximise value from our property portfolio; and

•           to utilise and exploit our brand fully.

2.2 Operational performance and positioning of the business

Workspace's portfolio continues to perform strongly. Our customer base of small and growing businesses has shown itself to be relatively resilient against the backdrop of a challenging economic environment and we continue to see strong demand from SMEs across London. This is demonstrated by our performance highlights for the year ended 31 March 2011:

•           like-for-like cash rent roll growth up 3.9 per cent.;

•           like-for-like occupancy 86.2 per cent. up from 83.6 per cent. at 31 March 2010;

•           profit before tax of £53 million up from £26 million in the prior year;

•           underlying property valuation increased 4.7 per cent.; and

•           EPRA NAV per share up 10 per cent. to 29.5p.

We target 90 per cent. occupancy at our like-for-like properties (which are not being redeveloped, refurbished or sold) and as we approach this level we have greater opportunity to deliver incremental growth in rental income through pricing increases. 40 of the 80 properties in our like-for-like portfolio already exceeded this occupancy target at 31 March 2011 with a further 10 between 85 per cent. and 90 per cent. occupancy.

The strongest demand for space has been at our larger business centres and our redevelopment initiatives will significantly increase the amount of this higher value space across our portfolio. Accelerating our investment programme will also enable us to take advantage of the improving demand environment we are experiencing.

2.3 Use of proceeds

The primary purpose of the Rights Issue is to provide the Company with additional financial resources which will be used to accelerate the redevelopment programme across the Group's property portfolio. The Board believes that the redevelopment and repositioning opportunities that the Rights Issue will enable offer attractive and enhanced returns, have a relatively low risk profile and will deliver an acceleration in rental and asset value growth.

The Group currently has a pipeline of existing sites with planning consent, or where planning consent is expected shortly, which, once redeveloped, are expected to deliver a significant uplift in rent roll and valuation. The majority of these planning consents have been achieved over the last two years.

The Board also believes that there are likely to be opportunities to acquire attractively priced commercial property with asset management (and in many cases redevelopment) potential. Acquisitions will primarily be made by the BlackRock Joint Venture, although specific acquisitions adjacent to existing Workspace properties may be made directly by Workspace.

Of the net proceeds from the Rights Issue of £63 million:

•           approximately £50 million will be used to accelerate the investment in redevelopment opportunities; and

•           approximately £13 million will be used to fund property acquisitions.

The net proceeds will initially be applied to reduce the drawn amount on the revolver bank facility, with the balance held as cash, until the proceeds are invested on the redevelopment and acquisition opportunities.

2.4 Portfolio redevelopment strategy

Workspace has a track record of realising intrinsic value within its portfolio from redevelopment and regeneration activities, recent examples being the redevelopment of Clerkenwell Workshops and of Canterbury Court at Kennington Park. Workspace's properties in London are usually near to good transport links, with capital values (£137 per sq. ft. as at 31 March 2011) below replacement cost, and in many cases, with low building densities. As a result, these estates have considerable potential for intensification of use, regeneration or change of use. During the recession a more limited level of capital investment was made in the Group's property portfolio. However, good progress was made obtaining planning permissions. As a result, we have a significant pipeline of redevelopment projects where planning consent has been achieved or where planning is well progressed.

Workspace has two strategies for redevelopment across its existing asset base:

•           Redevelopment and repositioning of existing properties: Obtain planning consent to redevelop and reposition existing commercial properties to improve the quality and amount of lettable space; and

•           'New for Old': Obtain mixed-use planning consents for intensification of use on a site and then sell the residential component to a developer. Workspace will receive back as part of the proceeds a new, higher-specification business centre, together with cash and/or overage.

The Directors believe that these strategies will increase the proportion of higher value business centres in inner London within the portfolio. These are the assets for which the Board expects there to be greater customer demand, reflected in improving occupancy and rent levels.

Within the portfolio there are 14 properties (of which eleven are within a six mile radius of the London Eye) where we have planning consent, or where planning consent is expected shortly, to redevelop and reposition, and four properties where we have a mixed-use planning consent. The Group also has other substantial opportunities across the rest of its portfolio that can be exploited over time. Discussions are already underway with the local planners on a range of further redevelopment projects on existing properties.

2.4.1 Redevelopment and repositioning of existing properties

Where planning consent has been obtained for core Workspace uses, Workspace intends to develop these sites itself. These projects are typically build-outs to existing properties rather than new developments. Furthermore, the additional space and repositioning of the building to attract higher value customers can often assist in uplifting the rents for the existing space. The Group is able to achieve enhanced returns on these types of project since there are no costs associated with acquiring new land. The Board considers such projects to be relatively low risk since the Group understands the local letting environment and has a high level of confidence on expected costs and returns, where customer demand and pricing is known.

The Group currently has 12 existing sites with planning consent and a further two sites where planning consent is expected shortly, over approximately 0.5 million sq. ft. of existing space to create approximately 0.8 million sq. ft. of improved, higher quality space. In total, the schemes require some £98 million of capital expenditure that the Group intends to fund through a combination of the proceeds from the Rights Issue, its own internal resources and cash realised from disposals. Based on conservative appraisals, we estimate that these projects could in total deliver an annualised uplift of over £11 million in rent roll.

Each of the consented development projects can be undertaken independently, in some cases on a phased basis to maximise returns, and the Group will make a commercial assessment on an individual basis to enable the occupancy and income impact to be managed. The short term nature of our leases means that we can progress with any of these schemes relatively quickly, and there is a mix of shorter and longer term projects. The redevelopment of Canalot Studios is due to commence shortly, and it is currently anticipated that a further five development projects will commence within the next nine months.

Property	Type	Description of Scheme	Planning Consent	Indicative Start	Estimated duration (months)	Existing space    (sq. ft.) (3)	New & Refurbished Space (sq. ft.)	Estimated Capital Required
Canalot Studios, W10	Business Centre	Roof extension and new entrance hall	Received	2011	9	33,000	50,000	£5m
Kennington Park, SW9	Business Complex	1. Lower ground floor retail / gym (Canterbury Court) 2. Additional floor (Chester House)	Received	2011	12	47,000	62,000	£5m
Whitechapel, E1	Offices	Extension to existing office building	Received	2011	6	3,000	9,000	£1m
Greville Street, EC1	Offices	Repositioning of existing building	Received	2011	9	11,000	10,000	£2m
Great Guildford St, SE1	Business Centre	Roof extension and new ground floor reconfiguration	Pending(1)	2012	12	93,000	102,000	£14m
Leyton Village, E10	Industrial Estate	New industrial building on vacant space	Received	2012	9	19,000	65,000	£6m
Exmouth House, EC1	Business Centre	Additional floor and refurbishment	Received	2012	12	54,000	57,000	£3m
Linton House, SE1	Business Centre	Additional floor	Received	2012	12	34,000	49,000	£4m
Westminster, SE11	Business Centre	New business centre on predominantly vacant space	Received	2012	14	12,000	61,000	£15m
Barley Mow, W4	Business Centre	Extension to existing business centre	Received	2012	13	74,000	102,000	£10m
Westwood, NW10	Industrial Estate	New industrial building / studios on vacant space	Received	2012	12	47,000	89,000	£8m
Greenheath, E2	Business Centre	Refurbishment and extended business centre	Pending(2)	2012	12	48,000	45,000	£7m
Bounds Green, N11	Industrial Estate	New industrial building on vacant space	Received	2012	8	-	13,000	£1m
Baldwin Gardens, EC1	Business Centre	New business centre to replace existing building	Received	2013	14	43,000	65,000	£17m
Total						518,000	779,000	£98m

(1)     Consent granted for new ground floor reconfiguration. Application submitted for roof extension under delegated   powers, consent expected shortly.

(2)     Application being considered under delegated powers. Consent expected shortly.

(3)     Excludes existing site space not subject to redevelopment.

Over time this list will be supplemented by further schemes that are being progressed through the planning process. In addition, the Group retains flexibility to sell certain assets with planning permission should it believe that this will generate higher returns.

2.4.2 Mixed used redevelopments  ('New for Old')

On some larger sites, consent has been obtained by Workspace for higher density mixed-use schemes, generally residential and commercial. In these cases, Workspace looks to bring in third party developers to take development and construction risk, and provide the required expertise for schemes of this nature. Value will typically be realised through receiving a completed business centre at the end of the redevelopment together with cash and/or overage on the residential component.

An example is Wandsworth Business Village, previously a 77,000 sq. ft. building built in the early part of the last century providing office and studio space with relatively low rents. Consent has been obtained for 209 apartments to be built in two phases and a new 75,000 sq. ft. business centre. A development agreement was signed in March 2011 with specialist London residential developer Mount Anvil. Mount Anvil will fund and manage the redevelopment of the site and Workspace will receive the new business centre in consideration for granting a 999 year lease to Mount Anvil on the residential component of the scheme. Workspace will retain the overall freehold of the site and will also receive 50 per cent. of any sales proceeds from the sale of the private residential component in excess of £50 million.

This model can be replicated on a number of other sites across the portfolio. We currently have mixed-use planning consents at the following sites:

With planning(1)	Estimated Timing	Existing Commercial Space (sq. ft.)	New   Commercial Space (sq. ft.)	New   Residential	Description
Wandsworth Business Village, SW18	2011-2014	77,000 (studio/office)	75,000 (business centre)	209 units	Replacement of studio space with new business centre (in 2 phases) and residential
Aberdeen Studios, N5	2012-2014	53,000 (studio / industrial)	63,000 (business centre)	72 units	Replacement of studio and light industrial space with new business centre and residential
Bow Enterprise Park, E3	2012-2016	76,000 (industrial)	60,000 (business centre)	557  units	Replacement of light industrial space with new business centre and residential
Grand Union Centre, W10	2012-2014	51,000 (studio / industrial)	80,000 (business centre)	145 units	Replacement of studio and light industrial space with new business centre and residential
Total		257,000	278,000	983 units

(1)         Note: £33 million of added value in existing valuation for projects with planning as at March 2011

In total these consented schemes will deliver some 278,000 sq. ft. of high quality business space (replacing 257,000 sq. ft. of lower grade space) and an estimated £4.3 million uplift in annualised rent roll for no capital outlay by Workspace. 

We are also in active discussions with the planners at a further five sites as follows:

Other current projects	Existing Commercial Space (sq. ft.)	New   Commercial Space (sq. ft.)	Proposed Residential	Status
Poplar, E14	75,000	60,000	392 units	In for planning
Tower Bridge, SE16(1)	303,000	80,000	1,070 units	In discussion with planners
Creekside, SE8	106,000	50,000	215 units	In discussion with planners
Rainbow, SW20	15,000	30,000	200 units	In discussion with planners
Marshgate, E15	93,000	50,000	375 units	In discussion with planners
Total	592,000	270,000	2,252 units

(1)           Excludes existing site space not subject to planning application

In total, these sites would replace 592,000 sq. ft. of existing space with an estimated 270,000 sq. ft. of higher quality space, with over 2,000 residential units.

2.5 Portfolio activity

2.5.1 Active portfolio management

The Group has a long record of active portfolio management, creating significant value from the acquisition and disposal of property assets. £541 million of property has been acquired and £438 million of property has been sold over the last ten years.

Significant valuation uplifts have been achieved on disposals, particularly where we have obtained planning consent for alternative use such as residential and student housing. In these instances the site will be sold with the benefit of planning consent.

The Group has made a range of disposals over the last 12 months generating gross proceeds of approximately £48.3 million. The Board expects to complete a further three disposals by the end of the current financial period generating gross proceeds of approximately £9.1 million. The total expected proceeds of £57.4 million would represent an overall exit income yield of 5.9 per cent.

Property	Price	Use	Status
Langdale House	£4.3 million	Commercial	Sold in July 2010
Unit 5, Cullen Way	£0.3 million	Commercial	Sold in January 2011
Surrey House	£4.7 million	Hotel	Sold in January 2011
BlackRock Portfolio	£35.1 million	Commercial	Sold in February 2011
Ewer Street (Car Park)	£3.9 million	Student housing	Sold in April 2011
Magenta House	£4.0 million	Student housing	Contracted  - subject to vacant possession
Alscot Road	£1.7 million	Residential	Contracted  - subject to vacant possession
Greenheath (Car Park)	£3.4 million	Residential	Contracted - subject to planning consent

The Group will continue to look for opportunities to generate added value and cash from the

sale of properties and tracts of land across the portfolio.

2.5.2 Acquisition strategy

Over a long period we have tracked a large number of properties across London that we believe may be suitable for our business model giving us an extensive data base of potential acquisitions. Many of our property purchases in the past have been made off-market through direct negotiation with private property owners.

The Directors believe that in the current environment there are likely to be more opportunities to acquire attractively priced commercial property with asset management and/or redevelopment potential. In particular, we see potential opportunities for purchases from leveraged investors, distressed vendors and government and local authorities. The Group's strategy is to acquire interesting buildings in areas of change with good transport links and re-market the property under the Workspace brand to SMEs with intensive management and focused marketing to improve occupancy and rental pricing. In addition, over time, it is expected that some of these properties may also provide opportunities for intensification or change of use.

In February 2011, Workspace and BlackRock formed the BlackRock Joint Venture to invest in freehold properties in London or adjacent South East locations. The BlackRock Joint Venture was seeded with a portfolio of eight properties purchased directly from Workspace for £35 million. The JV partners may commit up to a further £65 million of equity into the BlackRock Joint Venture, representing an additional investment of up to £13.1 million from Workspace and £51.9 million from BlackRock.

The BlackRock Joint Venture properties are managed by Workspace and operated under the Workspace logo and brand. Workspace is responsible for sourcing and recommending investment opportunities. Over £200 million of acquisition opportunities are under review and, to date, offers have been made on three properties in addition to the eight seed properties.

The BlackRock Joint Venture targets high income yielding, multi-let, industrial or office buildings where there is potential for further rental growth and added value from active asset management. Workspace receives a property management fee, together with a performance fee based on the relative performance of the BlackRock Joint Venture against the comparator IPD index and a minimum IRR of 10 per cent. over the five year life of the BlackRock Joint Venture. Overall, including management fees (but excluding performance fees), Workspace is targeting double-digit returns, on an ungeared basis, from investments made by the BlackRock Joint Venture. Returns may be enhanced by raising debt within the BlackRock Joint Venture, which has a gearing limit of 50 per cent.

The Group intends to earmark approximately £13 million of the net proceeds of the Rights Issue to take advantage of acquisition opportunities. Acquisitions will primarily be made by the BlackRock Joint Venture, and any investment by Workspace into the Blackrock Joint Venture over and above the approximate £13 million of the net proceeds allocated for acquisitions will be funded through internal resources and disposal proceeds. Specific acquisitions adjacent to existing Workspace properties may also be made directly by Workspace. In general, the Group remains flexible to acquisition opportunities which offer better risk adjusted returns than the redevelopment opportunities within the current portfolio.

3. GROUP FUNDING

In December 2009, the Group completed the acquisition of the former Glebe Joint Venture for £83 million, including the assumption of £68 million of debt within Workspace Glebe. As part of this transaction, Workspace Glebe's £134 million debt was reduced to £83 million, of which £15 million was repaid by Workspace, and restructured into a new five year facility.

In July 2010, the Group signed a new five year £200 million debt facility with a club of four banks to replace the debt facility previously provided by GE Real Estate and BayernLB. The facility was structured as a five year term loan to June 2015 with bullet repayment at maturity.

In June 2011, the Group signed a New RBS Facility of £125 million for four years to June 2015 on similar terms to its previous facility.

Bank loans at 30 June 2011 were £367 million. The borrowings are hedged by £270 million of interest rate swaps at an average rate of 3.8 per cent. to November 2012. The Group's weighted average debt maturity was four years as at 30 June 2011. As at 31 March 2011, the Group had a loan to value ratio of 51 per cent. The Rights Issue proceeds will substantially reduce the Group's loan to value ratio.

4. SUMMARY AND PRINCIPAL TERMS OF THE RIGHTS ISSUE

Under the terms of the Rights Issue, 288,182,835 New Ordinary Shares are being offered, by way of rights, to Qualifying Shareholders (other than, subject to certain exemptions, Excluded Overseas Shareholders) at a Rights Issue Price of 23 pence per New Ordinary Share, payable in full on acceptance by not later than 11.00 a.m. on 26 July 2011. The Rights Issue will raise £63 million (net of expenses).

The Rights Issue is being made on the following basis:

1 New Ordinary Share for every 4 Existing Ordinary Shares

held by Qualifying Shareholders on the Record Date and so in proportion to any other number of Existing Ordinary Shares then held, and otherwise on the terms and conditions as set out in the Prospectus and, in the case of Qualifying non-CREST Shareholders (other than, subject to certain exemptions, Excluded Overseas Shareholders) only, the Provisional Allotment Letter.

The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with Existing Ordinary Shares, including the right to all future dividends or other distributions made, paid or declared after the date of issue except that the New Ordinary Shares will not rank for the final dividend for the year ended 31 March 2011 of 0.55 pence per Ordinary Share. This proposed dividend, if approved by Shareholders at the Company's annual general meeting, is expected to be paid on 5 August 2011, and the record date for the final dividend, of 15 July 2011, falls prior to the issue of the New Ordinary Shares. Details of the rights attaching to Ordinary Shares appear in the Articles of Association, a description of which appears in paragraph 6 of Part 10 of the Prospectus.

New Ordinary Shares representing fractional entitlements will not be allotted to Qualifying Shareholders and, where necessary, entitlements to New Ordinary Shares will be rounded down to the nearest whole number. Such fractional entitlements will be aggregated and, if possible, sold in the market. The net proceeds of such sales (after deduction of expenses) will be aggregated and will ultimately accrue for the benefit of the Company, save that Qualifying Shareholders will receive any proceeds in respect of a fractional entitlement in the unlikely event that such proceeds have a value of £3.00 or more. Holdings of Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue.

The Rights Issue is conditional upon:

(a)        Admission becoming effective by not later than 8.00 a.m. on 12 July 2011 (or such later time and/or date as the Company, the Sponsor and the Joint Underwriters may agree (being not later than 3.00 p.m. on 19 July 2011)); and

(b)        the Sponsor and Underwriting Agreement having become unconditional in all respects (save for conditions relating to Admission) and not having been terminated in accordance with its terms prior to Admission.

Application has been made to the UK Listing Authority for the New Ordinary Shares to be admitted to the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on its main market for listed securities. It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence on the London Stock Exchange, nil paid, at 8.00 a.m. on 12 July 2011.

The latest time and date for acceptance and payment in full of the New Ordinary Shares will be 11.00 a.m. on 26 July 2011.

Based on the Closing Price of 29.25 pence per share and the Rights Issue Price of 23 pence for each New Ordinary Share, the theoretical ex-rights price of an Ordinary Share is 27.56 pence (after adjusting for the final dividend for the year ended 31 March 2011 of 0.55 pence per Existing Ordinary Share).

The terms and conditions of the Rights Issue, including the procedure for acceptance and payment and the procedure in respect of rights not taken up, are set out in Part 3 of the Prospectus.

5. CURRENT TRADING AND PROSPECTS

The Group today released its Interim Management Statement covering the period from 1 April 2011 to 7 July 2011 which included the following statements:

Highlights for the first quarter ended 30 June 2011:

§  Total occupancy up 0.4% in the quarter to 84.0%

§  Total cash rent roll up 1.4% (£0.7m) in the quarter to £49.6m

§  Like-for-like occupancy stable at 86.4%

§  Like-for-like cash rent roll up 1.2% (£0.5m) in the quarter to £43.5m

§  Underlying property valuation at 15 June 2011 up 1.3% (£9m) to £727m

5.1 Portfolio Performance

We are continuing to see good levels of customer enquiries and lettings, despite the impact of the long Easter holiday in the quarter. At our like-for-like properties, we have seen rent per sq. ft. improve 1.6% to £12.27 with cash rent roll up 1.2% (£0.5m) to £43.5m and like-for-like occupancy steady at 86.4%.

Workspace Group Portfolio	Quarter to 30 June 2011	Quarter to 31 March 2011	Quarter to 30 June 2010
Average enquiries per month	911	1,045	908
Average lettings per month	77	79	87
Total cash rent roll(1)	£49.6m	£48.9m	£51.2m
Total occupancy(1)	84.0%	83.6%	82.7%
Like-for-like cash rent roll(2)	£43.5m	£43.0m	£41.7m
Like-for-like occupancy(2)	86.4%	86.4%	84.8%
Like-for-like rent per sq. ft.	£12.27	£12.06	£11.84

(1)   Total cash rent roll and occupancy at June 2010 includes the 8 properties sold into the BlackRock Workspace joint venture in February 2011.

(2)   Like-for-like has been restated in the quarter for the transfer out of Aberdeen Business Centre ahead of its redevelopment and transfer in of the Kennington Park estate (excluding areas within the estate being refurbished).

5.2 Valuation

The valuation of the Group's properties as at 15 June 2011 was £726.8m (31 March 2011: £718.7m). There has been an underlying increase in the valuation of 1.3% (£9.4m), excluding the impact of capital expenditure and the sale of the car park at Ewer Street for student housing in April 2011, for £3.9m.

Total estimated rental value (ERV), excluding disposals, was up 2.3% (£1.4m) in the period to £62.8m, this includes £1.2m at Wandsworth Business Village (£nil at 31 March 2011) where the mixed-use redevelopment of the site is now underway.

Total existing use income yield (based on cash rent roll) was 7.7% (31 March 2011: 7.7%) and added value has increased by £3m, excluding disposals, to £78m. Overall, net initial yield as reported by our valuers, CBRE, was 6.9% (31 March 2011:6.8%).

5.3 Banking Facilities

On 6 July 2011, HSBC became an additional lender to the recently refinanced £125m RBS facility, taking up a £62.5m participation alongside RBS.  This adds a further bank to the base of high quality lenders to the Workspace Group.

6. SHARE CONSOLIDATION

The Company is seeking authority from Shareholders at the Company's annual general meeting on 28 July 2011 to undertake a share consolidation, further details of which were set out in the circular to Shareholders accompanying the notice of general meeting. If approved, the record date for the share consolidation will fall after the issue of the New Ordinary Shares, and the Rights Issue is therefore being undertaken on the basis of the Company's share capital prior to any such share consolidation.

7. DIVIDENDS

As a REIT, the Group is required to distribute a minimum of 90 per cent. of the Group's UK profits (as defined in Section 530 of the Corporation Tax Act 2010) from its qualifying property rental business by way of a PID. The Group's intention is to grow the dividend progressively on an annual basis, subject to trading profits after interest growing at a sufficient rate to support such a dividend.

The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to all future dividends or other distributions made, paid or declared after the date of their issue except that the New Ordinary Shares will not rank for the final dividend for the year ended 31 March 2011 of 0.55 pence per Existing Ordinary Share. This dividend, if approved by Shareholders at the Company's annual general meeting, is expected to be paid on 5 August 2011, and the record date for the final dividend, being 15 July 2011, is prior to the issue of the New Ordinary Shares.

8. ACTION TO BE TAKEN

On the basis that dealings commence on 12 July 2011, the latest time for acceptance by Shareholders under the Rights Issue will be 11.00 a.m. on 26 July 2011. The procedure for acceptance and payment is set out in Part 3 of the Prospectus.  Further details will also appear in the Provisional Allotment Letter which will be sent to all Qualifying Non-CREST Shareholders (other than, subject to certain exemptions, Excluded Overseas Shareholders).

If you are in any doubt as to what action you should take, you should immediately seek your own financial advice from your stockbroker, bank manager, solicitor or other independent professional adviser who, if you are taking advice in the UK, is duly authorised under FSMA or from any appropriately authorised independent financial adviser if you are in a territory outside the UK, in each case who specialises in advice on the acquisition of shares and other securities.

9. BOARD INTENTIONS

The Board considers that the Rights Issue is in the best interests of the Company and its Shareholders as a whole. All of the Directors except Mr Cragg intend to take up in full their rights to subscribe for New Ordinary Shares under the Rights Issue in respect of their own beneficial holdings of Existing Ordinary Shares, which amount, in aggregate, to 13,345,805 Existing Ordinary Shares, representing approximately 1.158 per cent. of the issued share capital of the Company. Mr Cragg intends to sell sufficient of his Nil Paid Rights entitlement in order to provide sufficient funds to subscribe for New Ordinary Shares under the Rights Issue in respect of the balance of his entitlement.

DEFINITIONS

"Admission" admission of the New Ordinary Shares, nil paid, to (i) the premium segment of the Official List and (ii) trading on the main market of the London Stock Exchange becoming effective in accordance with the Listing Rules and the Admission and Disclosure Standards of the London Stock Exchange, respectively;

"Announcement" means the announcement of the Rights Issue made by the Company on 7 July 2011 or "this document";

"BayernLB"Bayerische Landesbank London Branch;

"BESI" or "Espirito Santo Investment Bank" Execution Noble Limited, which conducts its UK Investment banking activities as Espirito Santo Investment Bank;

"BlackRock" BlackRock UK Property Fund, the 79.9 per cent. shareholder of BWPT;

"BlackRock Joint Venture Agreement" BlackRock Workspace Property Trust, a Jersey property unit trust, which is a joint venture between the Company and BlackRock;

"Board" or "Directors" the board of directors of the Company;

"certificated" or "certificated form" a share which is not in uncertificated form;

"Closing Price"the closing, middle market quotation of an Ordinary Share on 6 July 2011 (the latest practicable date prior to the release of this announcement) of 29.25 pence, as published in the Daily Official List;

"Company" or "Workspace" or "Group" Workspace Group PLC;

"CREST" the relevant system (as defined in the Regulations) for the paperless settlement of trades and the holding of securities in uncertificated form operated by Euroclear in accordance with the Regulations;

"EPRA" the European Public Real Estate Association;

"Excluded Territories" Australia, Canada, Japan, the Republic of South Africa and the United States;

"Ex-Rights Date"12 July 2011;

"Existing Ordinary Shares" the 1,152,731,338 existing Ordinary Shares in issue as at the date of this announcement;

"Fully Paid Rights" rights to acquire New Ordinary Shares, fully paid

"GE Real Estate" GE Real Estate Finance Limited;

"Excluded Overseas Shareholders" (other than as agreed in writing by the Company and the Sponsor and as permitted by applicable law) Shareholders who are located in or who have registered addresses in the US or any other Excluded Territory;

"Gearing" net debt as a percentage of net assets;

"Glebe Joint Venture" the former joint venture between the Company and Glebe;

"Group" the Company, its subsidiaries and subsidiary undertakings and/or (where the context requires) any one or more of them;

"Investec" Investec Bank plc;

"IRR" internal rate of return;

"Joint Underwriters" BESI and Investec;

"London Stock Exchange" London Stock Exchange plc;

"New Ordinary Shares" the new Ordinary Shares to be issued by the Company in accordance with the Rights Issue;

"New RBS Facility" the facility in place between the Company and RBS

"Nil Paid Rights" rights to acquire New Ordinary Shares, nil paid;

"Official List"the official list maintained by the UK Listing Authority pursuant to Part VI of FSMA;

"Ordinary Shares"ordinary shares of ten pence each in the capital of the Company;

"Overseas Shareholders" Shareholders who are resident in, or who are citizens of, or who have registered addresses in, territories other than the United Kingdom;

"PID" a Property Income Distribution

"pounds sterling"or "£" or "pence" or "p" the lawful currency of the United Kingdom; "Prospectus" the Prospectus to be issued by the Company in respect of the Rights Issue, together with any supplements or amendments thereto

"Prospectus Rules"the Prospectus Rules of the Financial Services Authority made under section 73A of FSMA;

"Provisional Allotment Letter" the provisional allotment letter issued to Qualifying Non-CREST Shareholders; Qualifying Shareholders holding Ordinary Shares in uncertificated form; Qualifying Shareholders holding Ordinary Shares in certificated form;

"Qualifying CREST Shareholders" Qualifying Shareholders holding Ordinary Shares in uncertificated form;

"Qualifying non-CREST Shareholders" Qualifying Shareholders holding Ordinary Shares in certificated form;

"Qualifying Shareholders" holders of Ordinary Shares on the Company's register of members at close of business on the Record Date;

"RBS" The Royal Bank of Scotland plc;

"RBS Facility"the facility in place between the Company and RBS

 "REIT" real estate investment trust, a tax regime which in the UK exempts participants from corporation tax both on UK rental income and gains arising on UK investment property sales, subject to certain requirements set out in the Corporation Tax Act 2010;

"Record Date"close of business on 5 July 2011;

"Registrar"Computershare Investor Services PLC;

"Regulations" the Uncertificated Securities Regulations 2001 (as amended); a service provided by the London Stock Exchange for the distribution to the public of announcements and included within the list maintained at the London Stock Exchange's website;

"Rights Issue" the proposed offer by way of rights to Qualifying Shareholders to acquire New Ordinary Shares, on the terms and conditions set out in the Prospectus and, in the case of Qualifying Non-CREST Shareholders only, the Provisional Allotment Letter;

"Rights Issue Price" the issue price of 23 pence per New Ordinary Share;

"Rothschild" or "Sponsor" N M Rothschild & Sons Limited;

"Shareholders" holders of Ordinary Shares;

"SMEs" small and medium-sized business enterprises with, typically, a turnover of less than £1 million per annum and/or staff of fewer than 50;

"Sponsor and Underwriting Agreement" the sponsor and underwriting agreement dated 7 July 2011 between the Sponsor, the Joint Underwriters and the Company;

"United Kingdom"or "UK" the United Kingdom of Great Britain and Northern Ireland; and

"Workspace Glebe"Workspace Glebe Limited, the former Glebe Joint Venture company;

 

END

 

 

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