TIDMCRC
RNS Number : 5102B
Circle Property PLC
14 February 2022
14 February 2022
Circle Property Plc
("Circle", the "Company" or the "Group")
Proposed GBP34.5 million Disposal of Kents Hill Park Conference
Centre,
Related Party Transaction
and
Notice of General Meeting
Circle Property Plc (AIM: CRC), which invests in, develops and
actively manages well-located regional office assets, is pleased to
announce that the trustees of the Circle Property Unit Trust (of
which 100 per cent. of the units are owned by the Company), having
sought advice from the Company's management and having received a
recommendation for the unitholder to enter into the contract for
sale, have conditionally exchanged contracts to sell Kents Hill
Park Conference Centre ("Kents Hill Park CC"), the Group's largest
asset, to LXI Property Holdings 4 Limited (a subsidiary of LXI REIT
plc, a REIT listed on the Main Market of the London Stock Exchange,
the "Buyer") for a cash consideration of GBP34.5 million (the
"Disposal").
Under AIM Rule 15, the sale consideration for the Disposal, when
aggregated with the sale consideration for the other disposals
completed by the Company in the previous twelve months, exceeds 75
per cent. compared with the Company's market capitalisation. The
Disposal is therefore conditional on the consent of Shareholders at
the General Meeting.
The Company will be posting a circular today to Shareholders
including, inter alia, details of the Disposal, revised executive
incentive arrangements and notice of a General Meeting to be
convened at the offices of Charles Russell Speechlys LLP, 5 Fleet
Place, London EC4M 7RD at 10.00 a.m. on 9 March 2022 (the
"Circular"). The Circular will be available shortly from the
Company's website at:
https://www.circleproperty.co.uk/investors/reports-and-presentations/2022
. Unless otherwise stated, terms used in this announcement have the
same meanings as given to them in the Circular.
Highlights
Kents Hill Disposal
-- The Company has exchanged contracts on its largest asset,
Kents Hill Park CC for GBP34.5 million. The asset is being sold 1.5
per cent. ahead of the last reported book value (30 September 2021:
GBP34 million) delivering an IRR of 21 per cent. since the
Company's admission to AIM in 2016;
-- Kents Hill Park comprises offices and a conference centre,
fully let to Compass Contract Services Limited, part of FTSE 100
listed Compass Group. Kents Hill Park was acquired by the Company
in December 2013 for GBP11 million;
-- Under the Company's ownership, Kents Hill Park has benefited
from significant active asset management including several lease
re-gears, refurbishment of multiple buildings within the park
including K1, K2 and K3, redevelopment of the site and lease
variations to incorporate fixed annual RPI uplifts.
Background to the Disposal and Recent Disposals
-- Since IPO, the Company has always strived to deliver
attractive returns to shareholders via its active asset management
approach;
-- The Company successfully divested out of retail and other
sub-sectors to focus exclusively on regional offices. All asset
disposals to date, have been at premium to book values due to
management's added value approach;
-- The proceeds of these sales were recycled into refurbishment
and redevelopment projects, as well as selective new assets, for
example, Concorde Park, Maidenhead acquired in August 2019 for
GBP14.6 million;
-- More recently, the Board has been focused on reducing
gearing, and where opportunistic sales could be made, has
selectively divested assets which have benefited from management's
added value strategy;
-- The proceeds from the Disposal will be utilised to further
reduce the Company's gearing. Following Completion, the Board has
resolved to utilise 50 per cent. of the proceeds to reduce debt,
leaving an outstanding amount under the Company's facility of
approximately GBP21.4 million;
-- Consequently, post all disposals, the Company's LTV will have
decreased from 46.6 per cent. (30 September 2021) to 29.4 per
cent;
-- Furthermore, post the completion of the Disposal, the
pro-forma unaudited net asset value ("NAV") per share (based on 30
September 2021 book values for the remaining assets in the Group's
portfolio) is estimated to be GBP2.77.
Shareholder Approval and Future Strategy
-- Following completion of the Disposal, the Company will remain
an operating company developing, investing in and actively managing
the remainder of its portfolio of 10 regional property assets,
valued at approximately GBP76 million (as at 30 September 2021)
compared with a current market capitalisation of approximately
GBP58 million;
-- Since admission to AIM, the Company has suffered from limited
liquidity in its shares and the share price has remained at a
significant discount to the Company's NAV;
-- Notwithstanding the strong financial and operational
performance of the Company since IPO, and strategic execution, the
structural discount in the Company's share price relative to its
NAV persists;
-- The Board has therefore determined to continue to make
targeted asset sales in an orderly manner over an extended period
of two to three years, if not sooner;
-- In line with this strategy, the Company's Remuneration
Committee has agreed revised executive incentive arrangements for
John Arnold, Chief Executive Officer and Edward Olins, Chief
Operating Officer, classified as a related party transaction under
AIM Rule 13, detailed below and in the Circular;
-- In summary, basic salaries will remain the same, the
discretionary bonus currently capped at 100 per cent. of salary
will be reduced by 30 per cent. and subject to KPIs relating to NAV
and earnings, and certain existing and future LTIP awards will be
replaced with a cash incentive payment based on how quickly, and
for what quantum, assets are sold;
-- The Board has strong conviction in the value of the Company's
assets, its management and its business plan, as well as in the
regional offices sector more generally;
-- The Board intends to return the remaining proceeds of the
Disposal and future asset sales to Shareholders in as orderly and
efficient manner as possible. The Board will update Shareholders in
due course as to the timing and mechanism, but it is anticipated
that a minimum of two returns of capital will be made and will
likely include a tender offer and/or share buyback, the first of
which is expected to occur within 12 months of completion of the
Disposal;
-- The Directors consider the Disposal to be in the best
interests of the Company and its Shareholders as a whole.
Accordingly, the Directors unanimously recommend that the
Shareholders vote in favour of the Resolutions to be proposed at
the General Meeting;
-- The Directors intend to vote in favour of their own
respective beneficial holdings of 4,399,276 representing
approximately 15.55 per cent. of the Company's issued share
capital.
Circle Property's Chairman, Ian Henderson, said:
"We are delighted to report this significant transaction for the
Company today. It is aligned to our strategy of targeted asset
sales and delivering premium returns on our quality regional
commercial offices portfolio. We have a proven track record of
crystallising value from our assets, which is reflected by the
Group's total shareholder return of 114.3% since IPO in February
2016.
Our intention is to return the proceeds of the Disposal and any
future asset sales to our Shareholders in an orderly manner,
alongside further reducing the Group's LTV. Notwithstanding the
strong financial and operational performance of the Company since
IPO, the discount in the Company's share price relative to its NAV
persists, and therefore the Company will, following completion of
the Disposal, continue to selectively divest assets in the best
interests of Shareholders."
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the UK version of the EU Market Abuse Regulation (2014/596) which
is part of UK law by virtue of the European Union (Withdrawal) Act
2018, as amended and supplemented from time to time.
+44 (0)20 7930
Circle Property Plc 8503
John Arnold, CEO
Edward Olins, COO
Cenkos Securities plc +44 (0)20 7397 8900
Katy Birkin
Mark Connelly
Radnor Capital
Joshua Cryer
Iain Daly +44 (0)20 3897 1830
Camarco +44 (0)20 3757 4992
Ginny Pulbrook
Toby Strong
1. Introduction
The Company announces that the trustees of the Circle Property
Unit Trust ( of which 100 per cent. of the units are owned by the
Company ), having sought advice from the Company's management and
having received a recommendation for the unitholder to enter into
the contract for sale, have conditionally exchanged contracts to
sell Kents Hill Park Conference Centre ("Kents Hill Park CC"), the
Group's largest asset, to LXI Property Holdings 4 Limited (a
subsidiary of LXI REIT plc, a REIT listed on the Main Market of the
London Stock Exchange) (the "Buyer") (the "Disposal"). The sale
price of GBP34.5 million represents a 1.5% increase on the 30
September 2021 valuation of GBP34 million, delivering an IRR of 21%
since the Company's admission to AIM in 2016, with completion of
the Disposal expected to take place on 25 March 2022, subject to
Shareholder approval.
Kents Hill Park CC comprises a conference, hotel and fitness
centre, fully let to Compass Contract Services (UK) Limited,
providing 159,872 sq ft of accommodation with an unexpired lease
term of 19.5 years and total rent passing of approximately GBP1.73
million per annum (GBP10.83 psf overall). Kents Hill Park CC,
together with Kents Hill Business Park was acquired by the Company
in December 2013 for approximately GBP11 million and the profit
before tax for the year ended 31 March 2021 attributable to Kents
Hill Park CC was GBP1.3 million.
50 per cent. of the proceeds from the Disposal (subject to
Completion) will be utilised, in line with the Board's previously
announced strategy, to reduce the Company's gearing from the
current level, with the balance being held as Group cash.
2. Background to, and reasons for, the Disposal
The portfolio held by the Group consisted of 16 commercial
property investments and developments in the UK with a value of
GBP73.9 million on admission to AIM in February 2016. As stated in
the Company's admission document, the Company's approach is to have
a diversified exposure to UK commercial real estate. The executive
Directors advise the Board on asset management strategies to
optimise and enhance value, and originate, appraise and present
investment proposals in accordance with the investment process and
objectives of the Group from time to time. The Board is advised on,
amongst others, investment strategy, asset purchases and sales,
portfolio/asset management and financing.
Circle looks at all sectors and locations within the UK where
assets can be acquired at or close to vacant possession values. In
order to achieve lettings swiftly and ahead of competition,
properties may be let at "soft"/below market rents, yet still
produce attractive initial yields. Property let on short-dated
leases or part vacant properties are considered where the initial
income covers the interest costs. In addition, vacant property may
be acquired or development opportunities undertaken where the
location is deemed to justify the risk profile.
Previous Disposals and Acquisition of Concorde Park,
Maidenhead
Following admission to AIM, the Company has made certain
non-core, strategic asset disposals, primarily in order to remove
its exposure to the retail market. The proceeds of these sales were
recycled into the Company's refurbishment and redevelopment
pipeline as well as towards the purchase of Concorde Park,
Maidenhead in August 2019, a south east office park for GBP14.6
million. Following these activities, the Company's portfolio is
exclusively focused on regional offices.
As initially reported in the Company's final results for the
year ended 31 March 2020 announced in September 2020, the Board
stated that it remained committed to reduce gearing from the level
at that time by opportunistic sales and that the Company had a
number of assets that have benefited from an active management
approach and added value following redevelopment, lease
restructures or renewals which the Board expected to be highly
sought after. The following selective sales were made in 2021:
Asset Date of Date property Consideration Sale Consideration Book Premium
disposal acquired paid (GBPm) Value to Book
by Circle (GBPm) Value
(GBPm)
Power House,
Davy Avenue, September
Milton Keynes March 2021 2006 4.475 3.55 3.25 9.23%
----------------- --------------- -------------- ------------------- -------- ---------
135 Aztec September December
West, Bristol 2021 2015 2.068 3.961 1.55 62%*
----------------- --------------- -------------- ------------------- -------- ---------
One Castle December November
Park, Bristol 2021 2012 4.165 20 19.25 3.9%
----------------- --------------- -------------- ------------------- -------- ---------
December
2021 (exchange
of contracts,
141 Moorgate, subject September
London to completion) 2006 3.735** 3.6** 2.85** 27.3%
----------------- --------------- -------------- ------------------- -------- ---------
* premium stated post refurbishment cost. 156% increase
pre-refurbishment cost
** representing 51.04% of the total consideration paid, total
sale consideration and total book value, respectively, due to the
Company as head lessee
Financing
The Company has a financing facility in place with RBS and HSBC
for GBP100 million. The senior revolving facility is for GBP60
million (of which the Company had drawn GBP62.3 million) with an
"accordion" option for a further GBP40 million (the
"Facility").
Following completion of the disposal of One Castle Park, Bristol
on 16 December 2021, GBP18 million of the sale proceeds were used
to repay a proportion of the Facility. Following this repayment,
the Group's LTV is 36.9% (excluding cash at bank) with a Group cash
balance of GBP7.6 million, reflecting a net LTV of 29.9%. The total
amount drawn down under the Facility is currently GBP40.544
million.
Disposal and Future Strategy
The Company announced today that the trustees of the Circle
Property Unit Trust ( of which 100 per cent. of the units are owned
by the Company) , having sought advice from the Company's
management and having received a recommendation for the unitholder
to enter into the contract for sale, have conditionally exchanged
contracts to sell Kents Hill Park CC, the Group's largest asset, to
LXI Property Holdings 4 Limited (a subsidiary of LXI REIT plc, a
REIT listed on the Main Market of the London Stock Exchange). The
sale price of GBP34.5 million represents a 1.5% increase on the 30
September 2021 valuation of GBP34 million, delivering an IRR of 21%
since the Company's admission to AIM in 2016, with Completion
expected to take place on 25 March 2022, subject to Shareholder
approval. 50 per cent. of the proceeds from the Disposal (subject
to Completion) will be utilised to reduce the Company's gearing
with the balance being held as Group cash.
Following Completion, the Board has resolved to repay GBP17.25
million (being 50 per cent. of the proceeds of the Disposal) of the
Facility which will result in the principal outstanding under the
Facility reducing to approximately GBP21.48 million. On Completion,
the Group's LTV will reduce to 29.4% (excluding cash at bank) with
the Group expected to have a cash balance of approximately GBP24.7
million.
Kents Hill Park CC comprises a conference, hotel and fitness
centre, fully let to Compass Contract Services (UK) Limited,
providing 159,872 sq ft of accommodation with an unexpired lease
term of 19.5 years and total rent passing of approximately GBP1.73
million per annum (GBP10.83 psf overall). Kents Hill Park CC was
acquired by the Company together with Kents Hill Business Park in
December 2013 for GBP11 million and the profit before tax for the
year ended 31 March 2021 attributable to Kents Hill Park CC was
GBP1.3 million.
Under AIM Rule 15, the sale consideration for the Disposal, when
aggregated with the sale consideration for the other disposals
completed by the Company in the previous twelve months detailed
above, exceeds 75% compared with the Company's market
capitalisation. The Disposal is therefore conditional on the
consent of Shareholders at the General Meeting.
Following Completion of the Disposal, the Company will remain an
operating company investing in, developing and actively managing,
the remainder of its portfolio of 10 regional commercial property
investment and development assets in the UK it owns, valued at
approximately GBP76 million as at 30 September 2021 compared with a
current market capitalisation of approximately GBP58 million.
Since admission to AIM, the Company has suffered from limited
liquidity in the Ordinary Shares and the share price has remained
at a significant discount to the Company's net asset value ("NAV").
The closing mid-market price of the Ordinary Shares on 11 February
2022 (being the latest practicable date prior to publication of
this announcement) was GBP2.05, a 25.18 per cent. discount to an
unaudited estimated NAV per share as at 30 September 2021 of
GBP2.74. Following Completion, the Company's pro-forma unaudited
NAV per share is estimated to be GBP2.77.
The Board has therefore decided to continue to make targeted
asset sales in an orderly manner over a period of two to three
years (if not sooner). In line with this strategy, the Company's
Remuneration Committee has agreed revised executive incentive
arrangements for John Arnold, Chief Executive Officer and Edward
Olins, Chief Operating Officer as detailed below in paragraph
5.
In addition, the Company will continue to achieve lettings at
estimated rental values and will complete scheduled developments
including at K3 Kents Hill, Milton Keynes (scheduled for completion
in Summer 2022) as well as other refurbishments and fit-outs as
necessary.
The Company has delivered total shareholder returns (calculated
as to NAV growth plus dividends) of 114.3% since IPO in February
2016 and the Company's share price since IPO has increased by
41.83% versus the FTSE AIM All Share Index, which has increased
over the same period by 19.20%.
The Board remains committed to maximising returns and delivering
value to Shareholders, and as such, the Board will evaluate and
determine returns of capital to Shareholders using a combination of
existing cash resources and the proceeds of any future asset sales
including from the Disposal. The Board expects that a minimum of
two returns of capital will be made to Shareholders, the structure
of which has yet to be decided by the Board but is likely to
include a tender offer and/or share buyback, the first of which is
expected to occur within 12 months of the date of the Disposal.
3. Property Portfolio
Following Completion, the Company will be the beneficial owner
of the following 10 regional commercial property investment and
development assets in the UK:
Property Valuation
as at 30
September
Ownership 2021 (GBPm)
710 & 720 Waterside Drive, Aztec West, Bristol Freehold 4.15
Concorde Park, Maidenhead Freehold 16.8
Park House, 300 Pavilion Drive, Northampton
Business Park Freehold 5.85
Victory House, 400 Pavilion Drive, Northampton Freehold 3.2
Cheltenham House, 14-16 Temple Street, Birmingham Freehold 4.5
Elizabeth House, London Road, Staines Freehold 3.0
Kents Hill Business Park, Kents Hill, Milton
Keynes (K1, K2, K3 - Offices) Freehold 13.4
36 Great Charles Street, Birmingham Freehold 4.9
Somerset House, Temple Street, Birmingham Freehold 17.35
141 Moorgate, London* Leasehold 2.85
--------------
76
==============
* exchanged contracts December 2021, subject to completion
expected in Q1 2022
4. Details of the Disposal
The trustees of the Circle Property Unit Trust ( of which 100
per cent. of the units are owned by the Company) , having sought
advice from the Company's management and having received a
recommendation for the unitholder to enter into the contract for
sale , have entered into a binding conditional sale and purchase
agreement ("SPA") with LXI Property Holdings 4 Limited (the
"Buyer") for the sale of Kents Hill Park CC. The Disposal is
conditional only on the passing of Resolution 1 at the General
Meeting.
Under the SPA, the Consideration for the Disposal will be
GBP34.5 million, to be satisfied in cash at Completion.
Under the SPA, the Long Stop Date for receipt by the Company of
Shareholder approval pursuant to the passing of Resolution 1 is 21
March 2022, with an expected date for Completion of 25 March 2022.
A deposit of GBP0.5 million has been paid by the Buyer.
5. Executive Remuneration Arrangements and Related Party Transaction
Existing Remuneration Arrangements
John Arnold, Chief Executive Officer and Edward Olins, Chief
Operating Officer (each an "Executive" and together, the
"Executives") are employed by the Company under service agreements
dated 11 February 2016.
The existing remuneration arrangements for the Executives are as
follows:
-- Basic Salary : John Arnold's annual basic salary is
GBP215,378 and Edward Olins' basic salary is GBP193,840.
-- Annual Discretionary Bonus : The Executives are entitled to
an annual discretionary bonus capped at 100% of basic salary which
is subject to assessment against the meeting of key performance
indicators ("KPIs") comprising the net asset value, earnings
(EBITDA) and a progressive dividend policy, each evenly
weighted.
-- LTIP Awards: The Executives are both eligible for annual
awards under the Circle Property plc 2016 Long Term Incentive Plan
("LTIP") in the form of conditional rights or nil cost options to
acquire Ordinary Shares, the quantum of which is capped at 200% of
basic salary per year. The LTIPs are subject to a three-year
vesting period subject to the performance of the Group with
reference to two performance conditions, the Group's total
shareholder return ("TSR") and a fixed hurdle rate for NAV, each
accounting for 50% of the award. TSR is a comparison of share price
plus dividends paid against a bespoke basket of peer group quoted
companies and REITs. The NAV target will not be met if under 8% and
if the NAV return is 14% or above then the NAV vesting criteria
will be met in full. Where the NAV increase falls between 8% and
14% the award will vest on a straight-line basis between 50% and
100%.
Revised Remuneration Arrangements
As part of the strategy to make targeted asset sales, it is
intended that the Executives' remuneration will be amended as
follows:
-- Basic Salary: The annual basic salary of both John Arnold and
Edward Olins will remain as set out above.
-- Annual Discretionary Bonus: The Executives will be entitled
to a reduced annual discretionary bonus capped at 70% of salary (a
reduction of 30%) which is subject to meeting key performance
indicators ("KPIs") regarding NAV and earnings (EBITDA).
-- LTIP Awards: The Remuneration Committee of the Board has
agreed under the revised remuneration arrangements, that previous
awards of nil cost options granted to the Executives pursuant to
the LTIP, as set out in the table below, will be treated as
follows:
o Already vested LTIP awards (i.e. 2016 LTIP, 2017 LTIP and 2018
LTIP Awards as set out in the table below) shall continue to exist
under the existing terms of the LTIP and related awards deeds.
o The Board shall exercise its discretion to determine that
unvested LTIP awards granted in 2019 and 2020 shall vest to a
limited extent (as set out in the table below), subject to
performance periods, and will lapse to the extent not vested.
o The Board shall exercise its discretion to determine that
unvested LTIP awards granted in 2021 shall lapse in full.
o No further awards shall be granted under the LTIP in 2022 or going forwards.
Assuming the Company continued with its current strategy of
investing in and developing properties (rather than targeted asset
sales), the approximate total value of forfeited bonus payments and
awards under the LTIP total approximately GBP1.8 million for John
Arnold and approximately GBP1.6 million for Edward Olins.
Year Grant Award No. of No. of Performance Performance Percentage No. of No. of Date
date Price shares shares period period of shares Ordinary Ordinary vested
granted granted start end date vested/ Shares Shares
John Edward date estimated vested/estimated vested/estimated
Arnold Olins to vest to vest to vest
John Arnold Edward
Olins
2016
LTIP 11-Feb-16 GBP1.49 134,229 120,805 1-Apr-16 31-Mar-19 87.50% 117,450 105,705 20-Aug-19
----------- --------- -------- -------- ------------ ------------ ----------- ----------------- ----------------- ----------
2017
LTIP 20-Aug-19 GBP1.49 137,584 123,826 1-Apr-17 31-Mar-20 87.50% 120,386 108,347 16-Oct-20
----------- --------- -------- -------- ------------ ------------ ----------- ----------------- ----------------- ----------
2018
LTIP 20-Aug-19 GBP1.49 141,023 126,921 1-Apr-18 31-Mar-21 100.00% 141,023 126,921 14-May-21
----------- --------- -------- -------- ------------ ------------ ----------- ----------------- ----------------- ----------
Two thirds
of
2019 original
LTIP 20-Aug-19 GBP1.84 234,107 210,697 1-Apr-19 31-Mar-22 43.75% 68,281 61,453 N/A
----------- --------- -------- -------- ------------ ------------ ----------- ----------------- ----------------- ----------
One third
of
2020 original
LTIP 16-Oct-20 GBP1.84 234,107 210,697 1-Apr-20 31-Mar-23 25.00% 19,509 17,558 N/A
----------- --------- -------- -------- ------------ ------------ ----------- ----------------- ----------------- ----------
2021
LTIP 07-Jul-21 GBP1.84 234,107 210,697 1-Apr-21 31-Mar-24 N/A N/A N/A N/A
----------- --------- -------- -------- ------------ ------------ ----------- ----------------- ----------------- ----------
-- Incentive Payment: T o compensate the Executives for the
retrospective reduction of LTIPs in 2019 and 2020, the lapsing of
LTIPs for 2021 and no further issues of awards under the LTIP in
2022 or going forwards, under the detailed rules of the proposed
2022 Incentive Plan and the definitions set out below, the
Executives will each also be eligible to receive a cash Incentive
Payment worth up to GBP2.5 million per Executive.
In summary:
-- The Incentive Payment is subject to a maximum overall cap of
GBP2.5 million per Executive. The size of the Incentive Payment
depends on how quickly, and for what quantum, the Assets are
sold.
-- No more than one Incentive Payment shall be paid to each
Executive and the Executive shall never be eligible to receive an
Incentive Payment under both Scenario 1 and Scenario 2 below.
-- Subject always to and included within that overall cap, the
Company shall also bear the cost of the Executives' National
Insurance contributions on any Incentive Payment.
-- Scenario 1: If the Assets are sold for less than their 31
March 2021 valuation then the maximum incentive payment ("MIP") an
Executive may receive is GBP750,000. This diminishes to GBP562,500
if the Assets are sold after 31 March 2023, and no Incentive
Payment at all would be paid if less than 90% of the Assets are
sold after 31 March 2024. The size of the Incentive Payment also
diminishes in direct proportion with the aggregate proceeds of
sale. Where the proceeds of sale are 80% of the 31 March 2021
valuation of the Assets, no Incentive Payment would be payable.
-- Scenario 2: If the Assets are sold for more than their 31
March 2021 valuation then the Incentive Payment is instead
calculated as a lump sum plus a percentage of the Overage. The lump
sum is either GBP750,000 or GBP562,500 and the percentage is 20% or
25% of the Overage (subject always to the cap on the aggregate
sum). No Incentive Payment would be made unless 90% of the Assets
(by value) had been sold by 31 March 2024.
Further details of the revised executive remuneration
arrangements are set out below.
The remuneration arrangements described above could be deemed to
fall outside of usual remuneration parameters and are therefore
classified as a related party transaction under AIM Rule 13. The
Directors (excluding John Arnold and Edward Olins), having
consulted with the Company's nominated adviser, Cenkos, believe
that the terms of the new incentive arrangements are fair and
reasonable insofar as Shareholders are concerned.
6. Current Trading and Prospects
The development at K3 Kents Hill is proceeding well and the
Company has already received strong tenant interest. The
development will cost approximately GBP2.45 million funded through
the Company's cash resources and the project is now scheduled for
completion in Summer 2022. This targeted spend will deliver an
attractive space which the Directors are confident will achieve a
good rental income. Moreover, the completed high-spec, modern
fit-outs at Concorde Park, Maidenhead and 36 Great Charles Street,
Birmingham are beginning to register increasing levels of tenant
interest, with higher levels of viewings and requests for
landlords' letting proposals.
The Company has been able to maintain exceptionally high rental
recovery in excess of 90% during the six months ended 30 September
2021. Rent collection for the current quarter ended 31 March 2022
stands at 76 per cent. and, with agreed monthly payments, this
figure increases to 79 per cent. of rent due. Conversations and
negotiations around rental arrears continue and the Board is
confident of a positive outcome, particularly as office attendance
and usage increases. The majority of the Group's tenants remain
firmly of the view that the office plays a central part in the
running of their respective businesses. Whilst having the
flexibility to work some of the time from home can be advantageous
in certain circumstances, dependent upon the individual and the
nature of the work, the view remains that team building,
collaboration, creativity, employee assessment, mentoring and
training is most effective within an office environment. Given all
of this, and reflected in the Group's solid financial metrics, the
Board remains of the view that whilst working patterns may adapt,
the office is very much here to stay.
On 29 November 2021, the Board declared an interim dividend of
3.5p, which was paid on 14 January 2022 to shareholders on the
register on 10 December 2021, with an ex-dividend date of 9
December 2021. This dividend was an increase of 40% on 2020's
COVID-19 impacted interim dividend of 2.5p and importantly, 6%
ahead of 2019's interim dividend of 3.3p.
7. General Meeting
COVID-19
Whilst Shareholder participation at the General Meeting is
important to the Board of Directors, the Board fully complies with
the current Government recommendations in relation to COVID-19 and
therefore Shareholders should consider whether or not it is
appropriate for them to attend the General Meeting in person.
Resolution 1 (to approve the Disposal) is being proposed as an
ordinary resolution and will require approval by a simple majority
of those votes cast (by persons present in person or by proxy) at
the General Meeting for Resolution 1 to be passed.
Resolution 2 (to approve the Company making market purchases of
Ordinary Shares) is proposed as a special resolution and will
require approval by 75 per cent. of those votes cast (by persons
present in person or by proxy) at the General Meeting for
Resolution 2 to be passed.
Completion of the Disposal is conditional, inter alia, on the
Shareholders passing Resolution 1 being proposed at the General
Meeting. If the Shareholders do not pass Resolution 1, completion
of the Disposal will not proceed.
8. Recommendation and Voting Intentions
The Disposal constitutes a fundamental change of the Company's
business for the purposes of Rule 15 of the AIM Rules and is
therefore subject to the approval of the Shareholders at the
General Meeting.
The Directors consider the Disposal to be in the best interests
of the Company and its Shareholders as a whole. Accordingly, the
Directors unanimously recommend that the Shareholders vote in
favour of the Resolutions to be proposed at the General Meeting, as
the Directors intend to do in respect of their own beneficial
holdings of 4,399,276 Ordinary Shares representing approximately
15.55 per cent. of the Company's existing Ordinary Shares.
FURTHER DETAILS ON REVISED EXECUTIVE REMUNERATION
ARRANGEMENTS
1 SCENARIO 1: Collective Sales less than or equal to Value Figure
1.1 In the event that the Collective Sales Figure is less than
the Value Figure, the gross Maximum Incentive Payment ("MIP") for
which each Executive shall be eligible shall be calculated in
accordance with the provisions of this Scenario 1.
1.2 The MIP for which each Executive may be eligible shall
diminish as time elapses, as follows:
1.2.1 If the Relevant Date falls between 1 April 2021 and 31
March 2023 (inclusive), the MIP shall be GBP750,000;
1.2.2 If the Relevant Date falls between 1 April 2023 and 31
March 2024, the MIP shall be GBP562,500;
1.2.3 If the Relevant Date falls on or after 1 April 2024 (or
never occurs), the MIP shall be nil, and each Executive shall not
be eligible to receive an Incentive Payment.
1.3 The proportion of the applicable MIP which each Executive
shall be eligible to receive as an Incentive Payment shall depend
upon the Collective Sales Figure and shall be calculated as
follows:
1.3.1 Where the Collective Sales Figure is less than 80% of the
Value Figure, no Incentive Payment shall be payable to each
Executive.
1.3.2 Where the Collective Sales Figure is 80% of the Value
Figure, an Incentive Payment of GBP200,000 shall be payable to each
Executive. Where the Collective Sales Figure exceeds 80% of the
Value Figure, this Incentive Payment shall increase proportionately
on a straight line basis up to the point at which the Collective
Sales Figure is 100% of the Value Figure. If the Collective Sales
Figure is equal to 100% of the Value Figure, each Executive would
be eligible to receive an Incentive Payment equal to 100% of the
applicable MIP. By way of illustration, example calculations are at
Appendix 1.
1.4 Where the Collective Sales Figure is greater than the Value
Figure, Scenario 1 shall not apply and the provisions of Scenario 2
shall instead apply.
1.5 The MIP payable to each Executive under this Scenario 1 in
any circumstance is GBP750,000.
2 Scenario 2: Collective Sales greater than Value Figure
2.1 Where the Collective Sales Figure is greater than the Value
Figure, the Incentive Payment for which each Executive shall be
eligible shall be calculated as a lump sum plus a percentage of the
Overage, in accordance with the following provisions of this
Scenario 2:
2.1.1 Where the Relevant Date falls between 1 April 2021 and 31
March 2023 (inclusive), the gross Incentive Payment for each
Executive shall be equal to GBP750,000 plus 25% of the Overage;
2.1.2 Where the Relevant Date falls between 1 April 2023 and 31
March 2024 (inclusive), the gross Incentive Payment for each
Executive shall be equal to GBP562,500 plus 20% of the Overage;
2.1.3 Where the Relevant Date falls on or after 1 April 2024 (or
never occurs), no Incentive Payment shall be payable to each
Executive.
2.2 If the Collective Sales Figure is equal to or less than the
Value Figure, this Scenario 2 shall not apply and the provisions of
Scenario 1 shall instead apply.
2.3 The gross Incentive Payment, if any, (together with any NICS
Payment) due to each Executive under this Scenario 2 shall be
subject always to an aggregate overall cap of GBP2.5 million and to
the other provisions of the 2022 Incentive Plan.
DEFINITIONS
Additional Figure : the total of the full purchase prices of all
New Assets (together with any related purchase incentives, legal
and professional fees and taxes)
Assets : the Original Assets together with the New Assets
Collective Sales Figure : the total aggregate proceeds of sale
received by the Company in cleared funds in respect of sales of
Assets which have been sold unconditionally by the Company after 31
March 2021, less costs and capital expenditure on improving any of
the Assets after 31 March 2021; in each case as determined by
RemCo
Incentive Payment : a payment to each Executive under the incentive plan
March 2021 Valuation : GBP135.4 million
MIP : the gross Maximum Incentive Payment for which the
Executive may be eligible under Scenario 1
New Assets : any assets that are acquired by the Company after
31 March 2021 and deemed at any time by RemCo to be included in
this definition of New Assets
Original Assets: the assets that are listed in Appendix 1 below
Overage : the Collective Sales Figure, less the Value Figure
Relevant Date: the earliest date on which the Collective Sales
Figure is equal to (or greater than) 90% of the Value Figure; or
such later date as the Company and the Executives may agree in
writing
RemCo : the Remuneration Committee of the board of directors of
the Company as constituted from time to time
Value Figure : the total of the 31 March 2021 Valuation plus (if
any) the Additional Figure
APPENDIX 1
"Original Assets" the Group's current and certain former
property assets set out as follows:
1. Park House, 300 Pavilion Drive, Northampton;
2. Victory House, 400 Pavilion Drive, Northampton;
3. Cheltenham House, 14-16 Temple Street, Birmingham;
4. Elizabeth House, London Road, Staines;
5. One Castlepark, Tower Hill, Bristol (sold - December 2021);
6. Kents Hill Business Park, Kents Hill, Milton Keynes (K1,
K2, K3 - Offices);
7. Conference Centre, Kents Hill Park, Timbold Drive, Milton
Keynes (subject of this Disposal);
8. 35-37 Great Charles Street, Birmingham;
9. 135 Aztec West, Almondsbury, Bristol (sold - September 2021);
10. Somerset House, Temple Street, Birmingham;
11. 141 Moorgate, London (sold, completion expected in Q1 2022);
12. 710 Aztec West, Bristol;
13. 720 Aztec West, Bristol;
14. Concorde Business Park, Maidenhead; and
15. Power House, Milton Keynes (sold - March 2021).
APPENDIX 2
Scenario 1 - Illustrative examples - assuming all other
eligibility criteria met
Example 1
-- Relevant Date is 1 April 2021 - 31 March 2023 inclusive;
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP108 million (and therefore less
than 80% of Value Figure); and
-- Incentive Payment would be Nil.
Example 2
-- Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP is GBP750,000);
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP108.32 million (80% of Value Figure); and
-- Incentive Payment would be GBP200,000.
Example 3
-- Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP is GBP750,000);
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP115.09 million (85% of the Value Figure); and
-- Incentive Payment would be GBP337,500.
Example 4
-- Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP is GBP750,000);
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP128.63 million (95% of the Value Figure); and
-- Incentive Payment would be GBP612,500.
Example 5
-- Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP is GBP750,000);
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP135.4 million (100% of the Value Figure); and
-- Incentive Payment would be GBP750,000.
Example 6
-- Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP is GBP750,000);
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP140 million (more than 100% of the Value Figure); and
-- No Incentive Payment under Rule 3. Rule 4 would apply instead.
Example 7
-- Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP is GBP 562,500 );
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP108.32 million (80% of Value Figure); and
-- Incentive Payment would be GBP200,000.
Example 8
-- Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP is GBP 562,500 );
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP115.09 million (85% of the Value Figure); and
-- Incentive Payment would be GBP290,625.
Example 9
-- Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP is GBP 562,500 );
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP128.63 million(95% of the Value Figure); and
-- Incentive Payment would be GBP471,875.
Example 10
-- Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP is GBP 562,500 );
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP135.4 million (100% of the Value Figure); and
-- Incentive Payment would be GBP562,500.
Scenario 2 - illustrative example - assuming all eligibility
criteria met
Example 11
-- Relevant date is on or before 31 March 2023;
-- Value Figure is GBP135.4 million;
-- Collective Sales Figure is GBP142.4 million;
-- Overage is GBP7 million;
-- Lump sum incentive payment would be GBP750,000;
-- 25% of the Overage would be an incentive payment of GBP1,750,000; and
-- Incentive Payment would be GBP2,500,000.
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END
MSCFFFVIFTIVLIF
(END) Dow Jones Newswires
February 14, 2022 02:00 ET (07:00 GMT)
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