Proposed issue of equity

RNS Number : 6080E

Custodian REIT PLC

05 November 2015

 

THE INFORMATION IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION DIRECTLY OR INDIRECTLY IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, ANY EEA STATE (OTHER THAN THE UK) OR ANY OTHER EXCLUDED TERRITORY.

5 November 2015

CUSTODIAN REIT PLC

("Custodian REIT" or "the Company")

Publication of Placing, Open Offer and Offer for Subscription Prospectus

The Board of the Company today announces that the Company proposes to raise gross proceeds of up to £50 million, with the ability to increase this to up to £75 million (approximately £48.8 million and £73.4 million, respectively, net of expenses) through the issue of up to 71,976,967 new Ordinary Shares by way of a Placing, an Open Offer and an Offer for Subscription (the "Issue"), all at 104.2 pence per Ordinary Share (the ''Issue Price'').  In addition to the Issue, the Company is facilitating potential issues of up to 100 million Ordinary Shares pursuant to a rolling twelve month Placing Programme.

The Company has published a prospectus relating to the Issue and the Placing Programme (the "Prospectus") which will be available on the Company's website (http://www.custodianreit.com) and will be posted to Shareholders on Friday 6 November 2015.

Unless otherwise defined, capitalised words and phrases in this announcement shall have the meaning given to them in the Prospectus.

Issue highlights

·      Placing, Open Offer and Offer for Subscription at a price of 104.2 pence per Ordinary Share to raise gross proceeds of up to £50 million, with the ability to increase this to up to £75 million

·      The Issue Price of 104.2 pence per Ordinary Share is a premium of approximately 3% (adjusting for the dividend of 1.5 pence per Ordinary Share in respect of the quarter to 30 September 2015 to which the new Ordinary Shares will not be entitled) to the latest published (unaudited) NAV per Ordinary Share of 102.6 pence

·      Up to 38,661,131 Ordinary Shares will be made available to Qualifying Shareholders at the Issue Price pro rata to their holdings of Existing Ordinary Shares, on the terms and subject to the conditions of the Open Offer, on the basis of one new Ordinary Share for every five Existing Ordinary Shares held and registered in the name of each Qualifying Shareholder on the Record Date

·      The Issue Price reflects a 4.8% discount to the closing mid-market price of 109.5 pence per Ordinary Share on 3 November 2015

Current trading and prospects

As at 31 October 2015 the value of the Property Portfolio was approximately £246 million and consisted of 101 assets held directly by the Company.  The Property Portfolio is held in accordance with the Investment Policy and the Investment Objective and accordingly the properties are diversified by region, sector and income.

In order to fund property acquisitions and the Company's general working capital requirements, as at 31 October 2015, approximately £64.6 million had been raised by the issue of Ordinary Shares since the Initial Admission Date, at an average premium of 6% to the prevailing NAV at the time of each such issue. The success of such issues has allowed the Company to seek to maximise the opportunities in the property market and exploit economies of scale relating to ongoing charges.  This has been further enhanced by drawing and deploying £20 million of variable rate, five year term debt and £20 million of ten year fixed rate debt to meet the Company's gearing target of 25% loan to value, which, as at the date of the Prospectus, was 17.3%.

The Company believes that the current property market dynamic supports its strategy of targeting a high income return, fully covered by income from smaller lot size properties across regional markets.

The Investment Manager anticipates that demand for property will continue from across the investor spectrum as interest rates stay ''lower for longer'' and that a competitive investment market has the potential to generate value growth.

The Company's focus on smaller lot sizes has allowed it to secure a strong pipeline of opportunities and it is expected that lesser levels of competition for these assets will endure, with many larger funds continuing to sell their smaller lots.

Given this market dynamic, and an expectation of continued growth in the regions, it is anticipated that the Company's typical investment in good quality secondary regional property will show value relative to larger lots.  This value may be expressed through a higher initial income yield, but also through opportunities for future rental growth which are not ''priced-in'' to every deal.

Reasons for the Issue and use of proceeds

To capitalise on current opportunities to invest in commercial real estate properties in the UK, the Company proposes to raise further capital to make further investments.  To ensure the Company's continued compliance with the Investment Policy and the Facilities Agreements, the Directors believe that the most effective method of raising such funds is to complete the Issue and the Placing Programme.

The net proceeds of the Issue and the Placing Programme are expected to be used first to repay amounts drawn under the RCF (approximately £3.9 million as at 31 October 2015) and then invested by the Company within a period of six to nine months after Admission (depending on the amount of net proceeds of the Issue) in the property pipeline (including the Target Portfolio discussed below) and additional UK commercial real estate properties to complement the properties in the Property Portfolio.

The Company recently entered into non-legally binding heads of terms to acquire a portfolio of 11 UK commercial properties for an aggregate consideration of approximately £69.4 million.  The Target Portfolio is consistent with the Investment Policy, comprising smaller size, good quality, secondary offices, retail and industrial assets diversified by tenant and region.  The tenant covenant profile also meets the minimum criteria set out in the Investment Policy.

It is intended, subject to the completion of due diligence and to contract, that the acquisition of the Target Portfolio will be completed in two tranches in early January 2016.  First, it is intended that approximately £28 million of assets will be acquired through a combination of the Company's existing cash resources and capacity under the RCF.  Second, it is intended that the balance of the Target Portfolio (or part thereof) will be acquired by the Company subject to the availability of net proceeds of the Issue and the Placing Programme.

Following the intended acquisition of the Target Portfolio, the weighted average unexpired lease term of the Property Portfolio as a whole would stand at approximately 6.1 years.  The Board believes the acquisition will enhance returns to Shareholders while improving dividend cover and offering the potential for a number of asset management opportunities.

In addition to the Target Portfolio, the Company has committed pipeline investments in the form of the funding of pre-let industrial developments in Cannock and Stevenage, and the completion of the refurbishment of an industrial unit in Milton Keynes.  This committed pipeline totals approximately £5 million of further investment.  The Company also has a £6.6 million leisure park under offer and the Investment Manager continues to track other investment opportunities including a single let industrial property, a high street retail property adjoining an existing portfolio holding and a city centre office building.  The combined value of these other opportunities is approximately £12.5 million.

Principal terms of the Issue

Up to 71,976,967 Ordinary Shares are available under the Issue at the Issue Price of 104.2 pence per Ordinary Share to raise up to £75 million (before expenses), of which 38,661,131 Ordinary Shares, to raise approximately £40.3 million (before expenses), are first available to existing Shareholders.  The total number of Ordinary Shares issued under the Issue will be determined by Numis, after consultation with the Company and the Investment Manager, and will be notified by the Company via an RIS announcement and the Company's website, prior to Admission.

All elements of the Issue have the same Issue Price. The Issue Price was set based on the Directors' assessment of market conditions and to ensure the Issue Costs are at least covered by the premium of the Issue Price over the NAV per Ordinary Share.

At the Annual General Meeting of the Company held on 22 July 2015, the Directors sought approval from Shareholders for, amongst other things, approval to allot new Ordinary Shares.  The necessary resolutions were passed by the Shareholders and the Directors now have unused authority and power to allot up to 80,952,829 Ordinary Shares, without being required to first offer such Ordinary Shares to Shareholders.  If required, the Directors may convene a general meeting of the Company to seek further authorities to allot Ordinary Shares as and when required to enable the Placing Programme to be fully implemented.

Expected timetable

Issue	2015 (unless stated)
Record Date for entitlements under the Open Offer	6.00 p.m. on 2 November
Posting of the Prospectus and Application Form	6 November
Placing and Offer for Subscription opens	6 November
Ex-entitlement date for the Open Offer	6 November
Basic Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST	as soon as possible after 8.00 a.m. on  6 November
Latest time for requesting withdrawal of Basic Entitlement and Excess CREST Open Offer Entitlements from CREST	4.30 p.m. on 20 November
Latest time and date for depositing Open Offer Entitlements into CREST	3.00 p.m. on 23 November
Latest time and date for splitting of Application Forms (to satisfy bona fide market claims)	3.00 p.m. on 24 November
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction	11.00 a.m. on 26 November
Latest time and date for receipt of Offer for Subscription Application Forms	11.00 a.m. on 27 November
Latest time and date for receipt of commitments under the Placing	11.00 a.m. on 27 November
Admission and dealings in Issue Shares commence on the Main Market	8.00 a.m. on 3 December
Crediting of CREST accounts in respect of the Issue Shares	8.00 a.m. on 3 December
Share certificates in respect of the Issue Shares despatched	week commencing 7 December
Placing Programme
Placing Programme opens	3 December
Publication of the Placing Programme Price in respect of each Subsequent Placing	As soon as reasonably practicable following the closing of each Subsequent Placing
Admission and crediting of CREST accounts in respect of each Subsequent Placing	8.00 a.m. on each day Ordinary Shares are issued pursuant to a Subsequent Placing
Share certificates in respect of Ordinary Shares despatched	Approximately one week following admission of the relevant Ordinary Shares
Last date for Ordinary Shares to be issued pursuant to the Placing Programme	3 November 2016

-Ends-

For further information, please contact:

Custodian Capital Limited
Richard Shepherd-Cross / Nathan Imlach / Ian Mattioli	Tel: [phone]
	www.custodiancapital.com

Numis Securities Limited	Tel: [phone]
Sales: Katherine Miller / Chris Gook
Corporate: Hugh Jonathan / Nathan Brown	www.numiscorp.com

Camarco	Tel: [phone]
Ed Gascoigne-Pees	www.camarco.co.uk

Notes to Editors

Custodian REIT plc is a UK real estate investment trust, which listed on the main market of the London Stock Exchange on 26 March 2014.  Its portfolio comprises properties predominantly let to institutional grade tenants on long leases throughout the UK and is characterised by small lot sizes, with individual property values of less than £7.5 million at acquisition. 

The Company offers investors the opportunity to access a diversified portfolio of UK commercial real estate through a closed-ended fund.  By targeting smaller lot size properties, the Company intends to provide investors with an attractive level of income with the potential for capital growth. 

Custodian Capital Limited is the discretionary investment manager of the Company. 

For more information visit www.custodianreit.com and www.custodiancapital.com.

Important Information

This announcement has been prepared by, and is the sole responsibility of, Custodian REIT Plc. Terms used and not defined in this announcement bear the meaning given to them in the Prospectus.

Numis Securities Limited is acting only for Custodian REIT Plc in connection with the matters described in this announcement and is not acting for or advising any other person, or treating any other person as its client, in relation thereto and will not be responsible for providing the regulatory protection afforded to clients of Numis Securities Limited or advice to any other person in relation to the matters contained herein.

The Company is not and will not be registered under the US Investment Company Act of 1940, as amended. The Ordinary Shares have not been, nor will they be, registered under the US Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States or under the applicable securities laws of any Excluded Territory. Subject to certain exceptions, the Ordinary Shares may not be offered or sold in the United States or any Excluded Territory or to or for the account or benefit of any national, resident or citizen of any Excluded Territory or any person located in the United States. Placings under the Placing Programme and the distribution of this announcement in other jurisdictions may be restricted by law and the persons into whose possession this announcement comes should inform themselves about, and observe any such restrictions.

This announcement includes "forward-looking statements". All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's business strategy and plans are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties and accordingly the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These factors include but are not limited to those which will be described in the formal prospectus.

These forward-looking statements speak only as at the date of this announcement. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Financial Services Act 2012, the Listing Rules, the Disclosure Rules and Transparency Rules or the Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

 

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