Re Joint Venture
WORKSPACE GROUP PLC ANNOUNCES JOINT VENTURE
WITH THE BLACKROCK UK PROPERTY FUND
Workspace Group PLC (Workspace), the leading provider of space to small and medium sized enterprises (SMEs) across London, announces today that it has entered into a joint venture (JV) with the BlackRock UK Property Fund to be known as the BlackRock Workspace Property Trust (BWPT).
BWPT will invest in freehold properties in London or adjacent South East locations which are high income yielding multi-let industrial or office buildings where there is potential for further rental growth and added value from active asset management. The target lot size range is £5m to £20m, although larger and smaller opportunities will be considered.
Workspace will be responsible for sourcing and recommending investment opportunities for BWPT. All BWPT owned properties will be managed by Workspace and will be operated under the Workspace logo and brand.
The JV partners will commit up to £100m of equity into BWPT, with the BlackRock UK Property Fund committing up to £79.9m (79.9%) and Workspace up to £20.1m (20.1%). Once these funds have been committed there is the option for further investment subject to the approval of both partners. The term of the JV is five years with an option for two one-year extensions.
BWPT will initially be seeded with a portfolio of eight properties (for details see note 1) purchased directly from Workspace for £35m at a net initial yield of 8.2%. These properties are predominantly light industrial estates across London and the purchase price represents the portfolio's December 2010 valuation as determined by CBRE, independent valuers.
During the investment period, which is the shorter of 18 months from close or until the remaining funds have been invested, Workspace has agreed to give BWPT first refusal on acquisition opportunities which meet the Trust's property criteria.
Workspace will receive a property management fee, together with a performance fee based on the relative performance of BWPT against the comparator IPD index and a minimum IRR of 10% pa over the life of the Trust.
Cash proceeds of £28m, net of the £7m equity investment, from the sale of the seed portfolio to BWPT will be used by Workspace to reduce borrowings (together with a small adjustment to hedging) which will reduce Workspace's Loan to Value ratio by around 1.5%. Term facilities will be reduced by £20m. The initial impact on trading profit after interest is broadly neutral, with the reduction in income net of new management fees offset by a lower interest cost.
Commenting, Harry Platt, Chief Executive Officer of Workspace, said:
"This joint venture with BlackRock is an exciting opportunity to work with a substantial and highly regarded partner. It provides a new income stream with growth potential and a broader platform to deliver shareholder value from expanding our property portfolio and brand presence across London whilst we can continue to pursue the attractive returns from investment in upgrading and expanding our existing properties."
Commenting, Marcus Sperber, Portfolio Manager of the BlackRock UK Property Fund, said:
"Partnering with Workspace, the pre-eminent provider of space to the London SME community, is a tremendous opportunity for the BlackRock UK Property Fund which has had a successful track record of collaborating with specialist property managers to drive returns for its investors. BlackRock's research indicates that London industrial property will be one of the UK's strongest performing sectors over the next five years."
Note 1:
Properties purchased comprise Charles House, UB2; Europa Studios, NW10; Horton Road Industrial Estate, UB7; Kingsmill Business Park, KT1; Progress Way Business Park, CR0; Rudolf Place, SW8; Union Court, SW4; and Windmill Place, UB2.
NOTE TO EDITORS
About Workspace
Workspace Group PLC is a property based business devoted to the provision of office, studio and light industrial workspace for SMEs. The Group aims to achieve an attractive return for its shareholders whilst at the same time supporting the growth of SMEs across London and encouraging urban regeneration.
About BlackRock UK Property Fund
The BlackRock UK Property Fund is an unclassified open-ended unit trust with a current net asset value of approximately £2bn. It based in Jersey and is an unregulated collective investment scheme in the UK. The fund aims to deliver consistently good performance from a diversified portfolio of high quality UK commercial property.
-ends-
Date: 24 February 2011
For more information contact:
Workspace Group PLC City Profile
Harry Platt, Chief Executive Simon Courtenay
Graham Clemett, Finance Director 020 7448 3244
020 7247 7614
This information is provided by RNS