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West End Londn Prop

Intention to Float
RNS Number : 1196V
West End of Londn Prop Invst Co Ltd
09 January 2013
 



NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART TO U.S. PERSONS (AS DEFINED IN THE SECURITIES ACT) OR IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR IN, INTO OR FROM ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

Terms used but not defined in this announcement shall have the meaning given to them in the Admission Document to be issued by the Company on or around the date of this announcement.

 

 

 

For Immediate Release                                                                                                                                                9 January 2013

 

 

WELPIC ANNOUNCES ITS INTENTION TO FLOAT ON AIM TARGETTING AN

ISSUE SIZE IN EXCESS OF £100 MILLION

 

West End of London Property Investment Company ("WELPIC" or the "Company"), a newly formed, Guernsey incorporated closed-ended investment company, today announces its intention to proceed with an issue of Ordinary Shares ("Shares") to raise in excess of £100 million and seek admission of its Shares to trading on the AIM market ("AIM") operated by the London Stock Exchange ("Admission").  

 

The Company's objective is to gain exposure to office property in the West End and Mid-Town areas of London, two of the most sought after markets in the UK property market, by investing in West End of London Property Unit Trust ("WELPUT"), a Jersey closed-ended unit trust with a proven track record, which was established in 2001. WELPUT owns an £873 million (as at 28 December 2012) portfolio of diversified real estate assets located in London's West End and Mid-Town office markets, through which it targets capital appreciation and income return.   

 

Following Admission, the Company will not have any substantial assets or business other than Units in WELPUT. It is the Company's intention to increase its market capitalisation to in excess of £250 million over the next 18 to 24 months and, if the Company achieves its growth plans, to seek admission to the Main Market of the London Stock Exchange.

 

KEY HIGHLIGHTS

 

·     WELPIC will provide investors with exposure to office property in the West End of London and Mid-Town office markets by investing in WELPUT, a market-leading institutional investment fund which has built a strong equity base including some of the UK's largest pension funds.

·     Schroders and the senior team of Grafton Advisors have been working together managing and advising WELPUT since its launch in 2001. The combination is unique, offering the investment management capability of Schroders, a leading global asset manager, with the investment and development expertise of Grafton Advisors, a West End property specialist , and has delivered a strong track record demonstrated by WELPUT delivering a total return of over 26 per cent. per annum over the three years to 30 September 2012.   Grafton Advisors is wholly owned by Quintain Estates and Development PLC and, together with Schroders, its team launched WELPUT while at Benchmark Group PLC. The WELPUT management team is highly experienced and well-resourced and the key members of the team have been involved since WELPUT's inception.

·     The Net Proceeds of the Issue, less a retention for working capital purposes, will be fully invested into WELPUT shortly following Admission and Shareholders will therefore gain immediate access to an £873 million portfolio comprising 12 West End of London and Mid-Town properties (the "Portfolio").

·     The Portfolio provides the potential to add value through significant refurbishment and re-letting opportunities timed for anticipated growth in rental values in the West End and Mid-Town office markets.

·     An investment in WELPIC enables investors to gain access to WELPUT via a listed entity at a purchase price which appears attractive based on WELPIC's ability to acquire units at WELPUT's NAV shortly following Admission, particularly when compared to listed property companies investing predominantly in London that are currently commanding premia to their respective NAVs.

·     The West End of London office market has delivered long term outperformance on a total return basis, being the top performing property segment over three, five and 10 years (to September 2012 as measured by IPD).

·     This relative outperformance is expected to continue to be driven by the highly diversified occupational base and restricted scope for new development due, in particular, to planning constraints. This is expected to lead to attractive rental growth prospects and, according to CBRE, rental values in the West End could grow by 4.4 per cent. per annum  to the end of 2016 (against 2.2 per cent. per annum for the UK property market). Adding support to the favourable prospects for West End offices is their significant global appeal to investors.

·     WELPUT distributes all of its net income on a quarterly basis after expenses and after making provision for any anticipated liabilities. The distribution yield for WELPUT is currently 3.6 per cent. per annum and has ranged from 2.6 to 4.0 per cent. per annum over the last three years. WELPIC will, as far as reasonably practicable, distribute by way of dividend payments all cash income that it receives from WELPUT.

·     WELPIC'S Board includes a highly qualified independent team of non-executive directors chaired by Robert King.

·     Certain key members of the management and property advisory team at Schroders and Grafton Advisers have agreed to subscribe, in aggregate, £125,000 for Ordinary Shares pursuant to the Placing.

·     Oriel Securities has been appointed as Nominated Adviser, Placing Agent, Broker and Bookrunner.

·     Unconditional dealings on AIM are expected to commence on 5 February 2013.

 

Commenting, Robert King, non executive chairman of WELPIC, said:

"Admission of WELPIC to AIM provides investors with an opportunity to invest in a high quality portfolio of West End offices at NAV, run by a management team that has delivered a strong track record of outperformance. We believe this presents a compelling investment opportunity at an attractive price, particularly when compared to listed London property companies, which are currently commanding premia to their respective NAVs.

 "The continued involvement of Schroders with WELPIC and WELPUT, and Grafton Advisors with the underlying WELPUT portfolio, with their considerable combined experience, should prove invaluable as we seek to grow the Company over time."

 

William Hill, Head of Property, Schroder Property Investment Management, investment adviser to WELPIC, added:

"WELPIC provides investors with a listed and tradable security that gives direct exposure to an established portfolio of West End and Mid-Town London assets. By acquiring existing units, there is no cash drag and no associated investment costs of acquiring property, making it a very efficient route for investors to gain exposure to the market. Furthermore, the planned growth of WELPIC provides a long term source of capital for the growth of the portfolio and optionality for existing WELPUT holders to switch into WELPIC."

 

Nigel Kempner, Head of Grafton Advisors, property adviser to WELPUT, concluded:

"The West End and Mid-Town office markets are experiencing a shortage in available supply of new space with an increasing amount of demand. This environment normally leads to rental growth, which we anticipate will be strong over the next two years at least, whilst also generating continued interest from international investors, leading to strengthening capital values. Our portfolio is well positioned to take advantage of these market conditions and we believe that WELPIC will provide investors with a unique opportunity to participate in this growth."

 

 

For further information, please contact:

 

Schroder Property Investment Management

William Hill

Tel: +44 (0) 20 7658 6000

 

Grafton Advisors

Nigel Kempner

Tel: +44 (0)20 7518 8000

 

Oriel Securities Limited (Nominated Adviser and Broker)

Roger Clarke

Gareth Price

Maha Saeed

Tel:  +44 (0)20 7710 7600

 

FTI Consulting

Dido Laurimore

Daniel O'Donnell

Tel:  +44 (0) 20 7831 3113

 

BACKGROUND INFORMATION

WELPIC - THE COMPANY

The Company is a newly formed, Guernsey incorporated closed-ended investment company. The Company's objective is to gain exposure to office property in the West End of London and Mid-Town by investing in WELPUT, a Jersey closed-ended unit trust that was established on 12 July 2001. WELPUT has a diversified portfolio of office properties within the West End of London and Mid-Town and targets capital appreciation and income return.

The target size of the Issue is in excess of £100 million. Following Admission, the Company will not have any substantial assets or business other than Units in WELPUT and cash. It is the Company's intention to increase its market capitalisation to in excess of £250 million over the 18 to 24 months following Admission and, if the Company achieves its growth plans, to seek admission to the Main Market of the London Stock Exchange.

WELPIC'S INVESTMENT POLICY

The Company's investment objective is through its holding of Units in WELPUT, to achieve a blend of income and capital growth by gaining exposure to office properties, which may include ancillary retail and residential accommodation, in the West End of London and Mid-Town. Gearing by the Group is permitted, up to a maximum, in aggregate, of 20 per cent. of the Group's consolidated  Net Asset Value immediately following draw down.  

INFORMATION ON WELPUT

As at 28 December 2012 (being the date of the most recent valuation of WELPUT), WELPUT had total assets of approximately £873 million and net assets of £647 million. WELPUT has a proven track record over the 11 years since its launch and has a robust investment process with Schroder Property Managers (Jersey) Limited acting as manager to WELPUT, advised by Grafton Advisors, a specialist in Central London property investment and development with a focus on the West End. WELPUT was the winner of the 2012 IPD European Property Investment Award (UK Specialist Fund), recognising it as the top performing unlisted UK property fund over the three years through to the end of 2011.

WELPUT's investment objective is to achieve a blend of income and capital growth through active asset management using a level of gearing, depending on market conditions, to enhance returns. WELPUT's aim is to achieve a return from the Portfolio at an average of one per cent. above the IPD West End and Mid-Town Office Benchmark over the life of WELPUT and to enhance Unitholders' returns by using gearing.

SCHRODERS AND GRAFTON ADVISORS

Schroders and the senior team of Grafton Advisors have been working together managing and advising WELPUT since its launch in 2001. The combination is unique, offering the investment management capability of Schroders, a leading global asset manager, with the investment and development expertise of Grafton Advisors, a West End property specialist. Grafton Advisors is wholly owned by Quintain Estates and Development PLC and, together with Schroders, its team launched WELPUT whilst at Benchmark Group PLC. The WELPUT management team is highly experienced and well-resourced and the key members of the team have been involved since WELPUT's inception.

INVESTMENT OPPORTUNITY

An investment in the Company will provide Shareholders with the following:

●       Exposure to WELPUT, a market leading institutional investment fund which has built up a strong equity base including some of the UK's largest pension funds. The Net Proceeds of the Issue less a retention for working capital purposes will be fully invested into WELPUT shortly following Admission and Shareholders will therefore gain immediate access to an £873 million portfolio of 12 West End of London and Mid-Town properties. These properties provide the potential to add value through significant refurbishment and re-letting opportunities timed for the anticipated growth in the rental values in the West End of London. WELPUT has a strong track record, delivering a total return of over 26 per cent. per annum over the three years to 30 September 2012 and its property portfolio substantially outperformed the IPD Benchmark over the same period. WELPUT has demonstrated its ability to realise value from its Properties and to successfully re-invest sale proceeds.

●       Investment in the West End of London property market which currently appears to have  a favourable outlook. Offices in the West End of London have outperformed the UK property market as a whole over the recent past and the longer term according to the IPD Index. This relative outperformance is expected to continue to be driven by the highly diversified occupational base and restricted scope for new development due, in particular, to planning constraints. This is expected to lead to attractive rental growth prospects and according to CBRE rental values in the West End could grow by 4.4 per cent. per annum to the end of 2016 (against 2.2 per cent. per annum for the UK property market). Adding support to the favourable prospects for West End offices is their significant global appeal to investors.

●       Access to WELPUT's highly experienced and well-resourced management team which combines the complementary skill sets of Schroders and Grafton Advisors. The senior management of both Schroders' property business and Grafton Advisors have been involved in WELPUT since its inception in 2001.

●       Access to WELPUT via a listed entity at an attractive purchase price due to the Company's ability to acquire Units at NAV shortly following Admission, particularly when compared to listed property companies investing predominantly in London that are currently commanding premia to their respective net asset values.  

●       Participating in a company that intends to increase its market capitalisation to in excess of £250 million over the 18 to 24 months following Admission by raising further equity finance or as a result of Unitholders swapping Units for Ordinary Shares.

DISTRIBUTION POLICY

The Company will, as far as reasonably practicable, taking into account the costs and taxes of the Company, its working capital requirements and the Guernsey Companies Law, distribute to Shareholders by way of dividend payments all cash income (after deduction of reasonable expenses) that it receives from WELPUT.

WELPUT distributes all of its net income on a quarterly basis after expenses and after making provision for any anticipated liabilities. The distribution yield for WELPUT is currently 3.6 per cent. per annum and has ranged from 2.6 to 4.0 per cent. per annum over the last three years.

 

GEARING

Gearing by the Group will be permitted, up to a maximum, in aggregate, of 20 per cent. of the Group's Net Asset Value immediately following draw down.

At 8 January 2013 (being the latest practicable date prior to the publication of this announcement), WELPUT's debt was 27.4 per cent. of its gross asset value and the average cost of WELPUT's debt was 4.5 per cent. The target range of debt for WELPUT is currently 25 per cent. to 35 per cent. of gross asset value compared with the maximum permitted at 50 per cent.

THE ISSUE AND USE OF PROCEEDS

The Company is targeting an Issue of in excess of £100 million by way of a placing of Ordinary Shares and arrangements whereby Unitholders in WELPUT may swap their Units for Ordinary Shares. The Placing is not being underwritten and the Issue will not proceed if the Minimum Net Proceeds would not be achieved. On the basis that the Placing is subscribed as to £100 million, the Net Proceeds would be £98.0 million.

The Net Proceeds of the Issue will be used to invest into WELPUT as well as to fund the Company's operational expenses.

The ongoing costs of the Company are estimated to be approximately £320,000 per annum, equating to a total expense ratio for the Company of 0.33 per cent. (assuming a market capitalisation at Admission of £100 million).

The total expense ratio for WELPUT is currently 0.9 per cent. and incudes the annual management fees payable to the Manager and the Property Adviser which, in aggregate, are 0.5 per cent. of the Aggregate Trust Value.

 

LIFE OF THE COMPANY AND WELPUT  

The Company has been established with unlimited life.

WELPUT was established on 12 July 2001 for an initial term of ten years. In 2008, Unitholders approved the extension of the life of WELPUT for a further period of ten years to 12 July 2021. A vote by the Unitholders will be held at an Extraordinary General Meeting (to be held between 30 March 2018 and 30 September 2018) to approve the extension of the term of WELPUT for a further period of up to ten years. Unitholders in WELPUT may redeem their Units in WELPUT during redemption periods in 2014 and 2017.

In the event that WELPUT terminates for any reason, the Directors of the Company will consider whether there are opportunities to make one or more investments which will provide Shareholders with exposure to real estate assets in the West End of London and Mid-Town which have similar characteristics to the Portfolio of WELPUT, or which will provide exposure to other comparable assets which have the potential to deliver attractive returns for Shareholders.

MANAGEMENT TEAM PARTICIPATION

Certain key members of WELPUT's management and property advisory team have agreed to subscribe, in aggregate, £125,000 for Ordinary Shares pursuant to the Placing.

 

 

This announcement does not constitute, or form part of, and should not be construed as, an offer to sell or issue, or a solicitation of an offer to buy or subscribe for, any securities in any jurisdiction nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever nor should the fact of its distribution form the basis of, or be relied on in connection with, any contract therefor.

The securities of the Company have not been and will not be registered under the Securities Act and may not be offered or sold within the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.  The securities referred to herein have not been registered under the applicable securities laws of Australia, Canada, the Republic of South Africa or Japan and, subject to certain exceptions, may not be offered or sold within Australia, Canada, the Republic of South Africa or Japan or to any national, resident or citizen of Australia, Canada, the Republic of South Africa or Japan.

The contents of this announcement, which have been prepared by and are the sole responsibility of the Company, have been approved by Schroder Property Investment Management Limited solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000.

This announcement has been issued by and is the sole responsibility of the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by, Oriel Securities Limited ("Oriel") or by any of its respective affiliates or agents as to or in relation to the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers and any liability therefore is expressly disclaimed.

Oriel, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser to the Company and is acting for no-one else in connection with the Issue and Admission and the contents of this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Oriel nor for providing advice in connection with the Issue and Admission and the contents of this announcement or any other matter referred to herein.

Application will be made to the Guernsey Financial Services Commission (the "GFSC") for the Company to be declared as a registered closed-ended collective investment scheme pursuant to the Protection of Investors (Bailiwick of Guernsey) Law 1987 (as amended) (the "POI Law") and the Registered Collective Investment Schemes Rules 2008 (the "Rules"). There is no guarantee that upon application to the GFSC for registration of the Company that such registration will be granted.

The issue of the Shares and the Placing is conditional upon the GFSC declaring the Company to be a registered closed-ended collective investment scheme pursuant to the POI Law and the Rules.

Forward-looking Statements

This announcement contains "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 Directors' and/or the Adviser's and/or the Property Adviser's current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "projects", "anticipates", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon 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. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Directors and/or the Adviser and/or the Property Adviser 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 concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth and strategies of the Company and the industry in which it operates.

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. The forward-looking statements contained in this announcement speak only as of the date of this announcement. The Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law or the AIM Rules for Companies.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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