TIDMCREI TIDMAPI
RNS Number : 2818A
Custodian Property Income Reit PLC
19 January 2024
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS,
PROSPECTUS EQUIVALENT DOCUMENT OR SCHEME DOCUMENT AND INVESTORS
SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE MERGER
OR NEW CREI SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE SCHEME
DOCUMENT AND THE COMBINED CIRCULAR AND PROSPECTUS WHICH ARE
PROPOSED TO BE PUBLISHED IN DUE COURSE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
19 January 2024
RECOMMED ALL-SHARE MERGER
OF
ABRDN PROPERTY INCOME TRUST LIMITED
with
CUSTODIAN PROPERTY INCOME REIT PLC
to be implemented by means of a Court-sanctioned scheme of
arrangement under Part VIII of the Companies (Guernsey) Law, 2008
(as amended)
Summary and highlights
The boards of Custodian Property Income REIT plc ("CREI") and
abrdn Property Income Trust Limited ("API") are pleased to announce
that they have reached agreement on the terms and conditions of a
recommended all-share merger pursuant to which CREI will acquire
the entire issued and to be issued share capital of API (the "
Merger "). It is intended that the Merger will be implemented by
means of a Court-sanctioned scheme of arrangement under Part VIII
of the Companies Law (the " Scheme ").
Under the terms of the Merger, Scheme Shareholders will
receive:
for each Scheme Share, 0.78 New CREI Shares
(the "Exchange Ratio")
The Exchange Ratio is based on the Rolled-Forward Unaudited EPRA
Net Tangible Asset value (" NTA ") of each of CREI and API as at 31
December 2023, subject to certain adjustments to reflect post
balance sheet asset disposals, the fair value of each company's
debt and derivatives, the relative levels of dividend cover between
the two companies and the costs expected to be incurred by each
party in connection with the Merger . Following completion of the
Merger, existing CREI Shareholders will hold approximately 59.7 per
cent. and API Shareholders approximately 40.3 per cent.
respectively in the CREI Group as enlarged by the API Group (the
"Combined Group ").
Applying the Exchange Ratio to the Closing Price per CREI Share
of 79.6 pence on 18 January 2024 (the "Latest Practicable Date")
values each API Share at 62.1 pence and the entire issued and to be
issued share capital of API at approximately GBP237 million, and
represents a premium of approximately:
29.4 per cent. to the Closing Price of 48.0 pence per API Share
on the Latest Practicable Date;
23.0 per cent. to the 1-month volume-weighted average price of
50.5 pence per API Share on the Latest Practicable Date; and
26.5 per cent. to the 3-month volume-weighted average price of
49.1 pence per API Share on the Latest Practicable Date.
The boards of CREI and API will retain their current dividend
policies for the period to the Effective Date. CREI and API have
agreed that API Shareholders will be entitled to receive and retain
a quarterly final dividend of up to 1.0 penny per API Share in
respect of the quarter ended 31 December 2023 (the "API Q4
Dividend") and that CREI Shareholders will be entitled to receive
and retain a quarterly interim dividend of up to 1.375 pence per
CREI Share in respect of the quarter ended 31 December 2023 (the
"CREI Q3 Dividend"). The API Q4 Dividend and the CREI Q3 Dividend
will each be declared on, and paid by reference to, a date falling
prior to the Effective Date, consistent with their respective past
practices as to timing and amount of such dividends. Payment of
each of the API Q4 Dividend and the CREI Q3 Dividend is expected to
occur in late February 2024. Further announcements will be made by
the boards of CREI and API in due course.
With effect from completion of the Merger, Custodian Capital
will provide investment management, administrative and advisory
services to the Combined Group pursuant to the terms of the Amended
and Restated Investment Management Agreement. It has been agreed
between CREI and Custodian Capital that Custodian Capital will
waive its management fee in relation to the net asset value ("NAV")
attributable to API for the first nine months following completion
of the Merger. There will also be a reduction in the management
fees payable by CREI to Custodian Capital for a period of two years
following completion of the Merger (the "Transition Period"), at
the end of which the Management Engagement Committee of CREI
intends to conduct its regular review of the terms of Custodian
Capital's appointment to ensure that the terms comply with market
and industry practice and remain in the best interests of
shareholders. In recognition of the waiver and reduction in fees,
the CREI Board has agreed to an extension to the term of Custodian
Capital's appointment pursuant to the terms of the Amended and
Restated Investment Management Agreement until the conclusion of
the Transition Period, at which point the contract will revert to
being terminable on 12 months' written notice.
API's existing investment management agreement (which includes
provisions for an orderly handover) will be terminated.
Following completion of the Merger, it is expected that the CREI
Board will comprise eight directors, with the addition of two of
the existing API Directors, Jill May and Sarah Slater. Following
the integration of the API portfolio, the CREI Board expects to
conduct a review of its succession plan, assessing its composition
and size to ensure an appropriate combination of skills,
experience, diversity and knowledge, pursuant to which the Board
intends to become fully independent.
It is intended that the Merger will be implemented by means of a
Court-sanctioned scheme of arrangement under Part VIII of the
Companies Law.
API will issue a circular (the "Scheme Document") which will
include full details of the Scheme, together with notices of the
API Court Meeting and the API General Meeting and the expected
timetable, and will specify the action to be taken by Scheme
Shareholders. It is expected that the Scheme Document, together
with the Forms of Proxy, will be published as soon as practicable
and in any event within 28 days of the date of this Announcement
(or such later date as may be agreed by CREI and API with the
consent of the Panel).
CREI is required to produce a circular and a prospectus (the
"Combined Circular and Prospectus") in connection with the Merger
(i) to convene a general meeting of CREI Shareholders at which
shareholders' approval of an ordinary resolution seeking authority
to issue the New CREI Shares will be sought and (ii) to facilitate
the admission to trading and listing of the New CREI Shares. It is
expected that the Combined Circular and Prospectus will be a single
document published at or around the same time as the Scheme
Document is published and posted to API Shareholders.
Background to, and reasons for, the Merger
CREI and API share an income-focused investment strategy with an
emphasis on regional, below-institutional sized assets that are
well-positioned to capture the rental growth and yield advantage
available in order to generate higher income returns and capital
growth for shareholders.
The CREI Board and the API Board believe that the Merger would
bring together two complementary portfolios to create a
differentiated REIT with enhanced diversification and share
liquidity and a fully covered and sustainable dividend for the
Combined Group's shareholders.
The boards of CREI and API believe there is a compelling
strategic and financial rationale for the Merger. In particular,
shareholders in the Combined Group are expected to benefit
from:
A substantially larger portfolio with approximately 200 assets
and a combined property value in excess of GBP1.0 billion as at 31
December 2023;
An enhanced portfolio diversification by asset, geography and
tenant with broad-based regional exposure, with 50% of the Combined
Group's income derived from the top 54 tenants and 90% of the
Combined Group's income derived from the top 204 tenants, an
average lot size of approximately GBP5.1 million and similar tenant
covenant profiles as at 31 December 2023;
A continuation of CREI's focus on below-institutional sized
assets which delivers greater diversification, with no single
tenant accounting for more than 2% of the Combined Group's rent
roll, and supports the performance of the portfolio in a variety of
market conditions. This focus enables CREI to find mispriced assets
and make counter-cyclical investments in order to secure future
rental and capital growth;
A suitable balance between the main commercial property sectors,
in keeping with each of CREI's and API's existing policies,
including significant exposure to the industrial sector
(representing 44% of the Combined Group's ERV as at 31 December
2023) which continues to benefit from low vacancy levels, limited
new supply, strong occupier demand and, hence, rental growth;
Meaningful reversionary potential with the combined ERV of
GBP84.3 million exceeding the combined passing rent of GBP68.1
million by 24% at 31 December 2023;
A shared commitment to sustainability underpinning the shared
asset management strategy with 81% of the combined portfolio
holding an EPC rating of C or above;
Material cost savings, comprising:
GBP1.0 million of recurring annual cost savings realised
principally from a reduction in management fees due to CREI 's
tiered fee structure and the removal of duplicated corporate
expenses and other potential operational efficiencies; and
GBP2.1 million of additional non-recurring cost savings during
the Transition Period as a result of a reduction in management fees
payable to Custodian Capital;
A stronger and more resilient balance sheet enhancing the
Combined Group's ability to grow and to address future refinancing
events, with the expected retention of CREI's and API's existing
debt facilities implying a pro forma LTV of approximately 30.2 per
cent., a weighted average cost of debt of 5.0 per cent. and a
weighted average debt maturity of 3.8 years for the Combined Group
as at 31 December 2023. The aggregate debt portfolio of GBP225
million of fixed rate debt expiring between 2025 - 2032 and the
GBP125 million of revolving credit facilities will allow for the
ongoing financing of the Combined Group in the long and short
term;
Continued commitment to paying a fully covered dividend, in line
with CREI's existing policy and practice since IPO, which is
expected to result in an uplift in annual dividends payable to API
Shareholders, with an objective of growing the dividend on a
sustainable basis;
Creation of an enlarged REIT with an enhanced market profile,
broader appeal to investors, greater share liquidity, and the scale
to support a larger weighting in key indices with potential for
inclusion in the FTSE 250 Index in due course;
Diversification of the shareholder register of the Combined
Group with a broad mix of private and institutional investors,
while enabling mutual shareholders to consolidate their holdings
across the two companies; and
Continued focus on corporate governance, with the CREI Board
benefiting from the added expertise of certain API Directors and
the transition to a fully independent board following the
integration of the two companies.
The Combined Group's pro forma sector weighting by ERV as at 31
December 2023 is shown below:
Weighting by ERV (as at 31 December
2023)
Sector CREI API Combined Group
-------- ------ ----------------------
Industrial 41% 48% 44%
-------- ------ ----------------------
Office 16% 25% 20%
-------- ------ ----------------------
Retail warehousing 22% 11% 18%
-------- ------ ----------------------
Other(*) 13% 12% 12%
-------- ------ ----------------------
High street retail 8% 4% 6%
-------- ------ ----------------------
(*) 'Other' sectors include: (i) in respect of the CREI
portfolio, pubs and restaurants, gyms, drive-throughs, motor trade,
leisure and trade counter; and (ii) in respect of the API
portfolio, leisure, data centres, student housing, hotels (and
apart-hotels) and healthcare.
The Combined Group's pro forma weighting by tenant quality as at
31 December 2023 is shown below:
Weighting by ERV (as at 31 December
2023)
Experian risk CREI API Combined Group
rating
-------- ------ ----------------------
Government 2% 9% 5%
-------- ------ ----------------------
Very low risk 57% 51% 54%
-------- ------ ----------------------
Low risk 8% 14% 10%
-------- ------ ----------------------
Below average
risk 13% 10% 12%
-------- ------ ----------------------
Above average
risk 8% 5% 7%
-------- ------ ----------------------
High risk 2% 1% 2%
-------- ------ ----------------------
Other 11% 9% 10%
-------- ------ ----------------------
Background to, and reasons for, the API Directors'
recommendation
API has consistently sought to meet shareholders' objectives by
investing in good quality assets that have the potential to provide
an above market level of total return as well as an attractive
level of income that has scope to grow. API has achieved this
through successful capital rotation and active asset management
resulting in an attractive portfolio, with industrial assets
constituting 48% of the portfolio by ERV as at 31 December
2023.
Over the last 18 months, however, API along with other
diversified investment trusts has had to contend with the
significant challenges facing the real estate sector as a whole,
with rising inflation leading to a substantial increase in interest
rates to levels not seen since before the Global Financial Crisis.
This in turn has impacted investor sentiment, real estate capital
values, transaction volumes and equity market liquidity,
notwithstanding operational robustness in many sub-sectors of the
market, including those to which API has significant exposure.
In API's case, these challenges have been compounded by the
relatively small scale of the company and in particular the need to
refinance its debt facility (consisting of a term loan and
revolving credit facility) in late 2022, ahead of the previous
maturity date in April 2023, at a time when politically induced
gilt market volatility was at its height. API currently pays an
annualised dividend of 4 pence per share which is not covered by
EPRA earnings, with cover of approximately 80% for the last
reported quarter ended 30 September 2023. In recognition of these
challenges, and the impact on API's share price and discount to
EPRA NTA per share, the Board elected to undertake a comprehensive
review of API's strategic options in Q3 2023 with the objective of
potentially delivering an uplift in value for API Shareholders, as
well as increased share liquidity and an enhanced and fully covered
dividend for API Shareholders.
Having assessed a wide range of potential strategic options in
detail, the API Board believes that there is a strong strategic and
financial rationale for a combination with CREI, noting in
particular:
That based on the Closing Price per CREI Share, the exchange
ratio represents a premium of approximately 29.4% to API's Closing
Price, 23.0% to API's 1-month volume-weighted average price and
26.5% to API's 3-month volume-weighted average price as at the
Latest Practicable Date;
API Shareholders are expected to experience an annualised uplift
in dividends of 7.3% (based on the Exchange Ratio and CREI's target
dividend of 5.5 pence per share) with the dividend being fully
covered;
CREI's and API's shared income-focused approach to investing in
diversified UK commercial property, the complementary nature of
their two portfolios, similar sectoral weightings and
sustainability credentials;
The enhanced capital structure of the Combined Group and its
superior ability to address future refinancing events as a
consequence;
The opportunity for API Shareholders to remain invested, with
ongoing exposure to API's attractive portfolio and its growth
prospects through holding shares in the Combined Group;
The superior valuation at which the CREI Shares have
historically traded relative to API's, with an average discount to
EPRA NTA per share of approximately 11% over the last year,
compared to approximately 37% for API, and approximately 10% over
the last 3 years compared to approximately 29% for API;
The anticipated increase in share liquidity by virtue of the
Combined Group's enhanced scale, potential index weightings and
broader appeal to investors;
The strong track record of Custodian Capital, as demonstrated by
CREI's total shareholder returns over time relative to peers;
and
The commitment of the CREI Board to strong corporate governance,
including through the appointment of two API Directors to the CREI
Board and the transition to a fully independent board following the
integration of the two companies.
In summary, the API Board is firmly of the view that a
combination with CREI represents an attractive opportunity for API
Shareholders to benefit from a significant premium to the current
share price and enhanced share liquidity and dividend income
through continued investment in a differentiated REIT of improved
scale.
Recommendations
The API Directors, who have been so advised by Lazard & Co.,
Limited (" Lazard ") as to the financial terms of the Merger,
consider the terms of the Merger to be fair and reasonable. In
providing its advice to the API Directors, Lazard has taken into
account the commercial assessments of the API Directors. Lazard is
providing independent financial advice to the API Directors for the
purposes of Rule 3 of the Takeover Code.
Accordingly, the API Directors intend to recommend unanimously
that Scheme Shareholders vote in favour of the Scheme at the API
Court Meeting (or, in the event that the Merger is implemented by
way of a Takeover Offer, to accept or procure the acceptance of the
Takeover Offer) and that API Shareholders vote in favour of the API
Resolution to be proposed at the API General Meeting, as the API
Directors have irrevocably undertaken to do in respect of their own
beneficial holdings of, in aggregate, 295,092 API Shares,
representing approximately 0.08 per cent. of the issued ordinary
share capital of API on the Latest Practicable Date.
In order to allot and issue the New CREI Shares, CREI will be
required to seek the approval of CREI Shareholders of the CREI
Resolution at the CREI General Meeting. The Merger is accordingly
conditional on the approval of the CREI Shareholders of the CREI
Resolution at the CREI General Meeting.
The CREI Directors consider the Merger to be in the best
interests of CREI Shareholders as a whole and intend unanimously to
recommend that CREI Shareholders vote in favour of the CREI
Resolution to be proposed at the CREI General Meeting, as those
CREI Directors, together with certain of Ian Mattioli's close
relatives and related trusts, who hold CREI Shares have irrevocably
undertaken to do in respect of their own holdings of, in aggregate,
6,204,817 CREI Shares , representing approximately 1.41 per cent.
of the issued ordinary share capital of CREI on the Latest
Practicable Date.
Letter of intent
In addition to the irrevocable undertakings referred to above
received from the API Directors, CREI has received a letter of
intent to vote in favour of the resolutions relating to the Merger
at the API Meetings (or in the event that the Merger is implemented
by a Takeover Offer, to accept such Takeover Offer) from Brooks
Macdonald Asset Management in respect of 11,376,425 API Shares,
representing approximately 2.98 per cent. of the issued ordinary
share capital of API on the Latest Practicable Date.
In total, CREI has therefore received irrevocable undertakings
and a letter of intent, including those irrevocable undertakings
from all API Directors, in respect of, in aggregate, 11,671,517 API
Shares, representing approximately 3.06 per cent. of the issued
ordinary share capital of API on the Latest Practicable Date.
Further details of these irrevocable undertakings and letter of
intent are set out in Appendix 3 to this Announcement.
Information on CREI
CREI, established in 2014, is a UK real estate investment trust
which seeks to deliver an enhanced income return by investing in a
diversified portfolio of smaller, regional, Core/Core-plus
properties let to predominantly institutional grade tenants across
the UK. CREI seeks to provide investors with an attractive level of
income and the potential for capital growth from a portfolio with
strong environmental credentials, becoming the REIT of choice for
private and institutional investors seeking high and stable
dividends from well - diversified UK real estate. In line with
CREI's published growth strategy, its investment policy has been
amended to specify that CREI is committed to seeking further
growth, which may involve strategic property portfolio acquisitions
and corporate consolidation, such transactions potentially
including public and private companies, holding companies and
special purpose vehicles.
CREI's portfolio was valued at GBP602 million as at 31 December
2023 with an EPRA Topped-Up Net Initial Yield of 6.2%, a
reversionary yield of 7.8%, a 41% weighting by ERV to industrial
assets and Rolled-Forward Unaudited EPRA NTA of GBP413 million or
93.7 pence per CREI Share. As at the Latest Practicable Date, CREI
had a market capitalisation of GBP351 million. CREI is externally
managed by Custodian Capital, a property management and investment
business which is regulated by the FCA.
A fundamental element of CREI's strategy is to target smaller
sized properties, principally characterised by properties with
individual values of less than GBP10 million at acquisition, to
capture the yield advantage available relative to larger sized
properties. In the period from 2010 - 2023, data sourced from
PropertyData(1) shows that there is a transaction yield advantage
of approximately 150 basis points between properties with
individual values below GBP10 million versus properties with
individual values above GBP10 million, compared to a yield
advantage of approximately 60 basis points between 2000 - 2010. The
CREI Board believes that this implied increase in yield
differential since 2010 is not entirely reflective of a rise in
risk associated with smaller properties but also due to a change in
the supply and demand dynamics in the market. The CREI Board
believes these dynamics are principally because of an increase in
strategies that pursue larger sized properties, which has resulted
in a reduction in the associated yields, which has coincided with
those same investors reducing their exposure to smaller sized
properties and thus increasing the supply of such assets and
associated yields.
Custodian Capital is a wholly-owned subsidiary of Mattioli Woods
plc ("Mattioli Woods"), the specialist wealth management and
employee benefits business, with in excess of GBP15 billion of
assets under management, administration or advice. CREI entered the
UK REIT regime on 27 March 2014. As a consequence of CREI
continuing to be a UK REIT and meeting the relevant conditions, it
should not be subject to UK corporation tax on the profits (income
and capital gains) derived from its investment property portfolio
and while CREI remains within the UK REIT regime, the disposal of
any properties currently held by it and used within its property
rental business should continue to be tax exempt.
(1) Average transaction yields between Q1 2010 - Q1 2023 as per
PropertyData.
Information on API
API, established in 2003, is a UK real estate investment trust
investing in a diversified portfolio of UK commercial properties in
the industrial, office, retail and "other" sectors with the
objective of providing shareholders with an attractive level of
income together with the prospect of income and capital growth.
API's portfolio was valued at GBP439 million as at 31 December
2023 with an EPRA Topped-Up Net Initial Yield of 5.4%, a
reversionary yield of 7.3%, a 48% weighting by ERV to industrial
assets and Rolled-Forward Unaudited EPRA NTA of GBP299 million or
78.5 pence per API share. As at the Latest Practicable Date, API
had a market capitalisation of GBP183 million.
Timetable and Conditions
It is intended that the Merger will be implemented by way of a
Court-sanctioned scheme of arrangement under Part VIII of the
Companies Law. Subject to the Panel's consent, CREI reserves the
right to implement the Merger by way of a Takeover Offer.
The terms of the Merger and resolutions concerning related
matters will be put to the Scheme Shareholders at the API Court
Meeting, to the API Shareholders at the API General Meeting and to
the CREI Shareholders at the CREI General Meeting. The Merger is
conditional upon the resolutions to be put to the Scheme
Shareholders at the API Court Meeting and the API Shareholders at
the API General Meeting and the CREI Resolution being passed by the
requisite majorities. In order to become Effective, the Scheme must
be approved by a majority in number of Scheme Shareholders present
and voting (and entitled to vote) at the API Court Meeting, whether
in person or by proxy, representing at least 75 per cent. of the
voting rights of such Scheme Shareholders. In addition, at the API
General Meeting, the API Resolution to authorise the API Board to
implement the Scheme and to amend the Articles must be passed by
API Shareholders representing at least 75 per cent. of the votes
validly cast on the resolution, whether in person or by proxy. The
API General Meeting will be held immediately after the API Court
Meeting. At the CREI General Meeting the CREI Resolution requires
the approval of a simple majority of votes cast, in person or by
proxy, in order to be passed. The CREI General Meeting will be held
simultaneously with the API Meetings.
The Merger will be made in accordance with the Takeover Code and
on the terms and subject to the Conditions which are set out in
Appendix 1 to this Announcement and on the further terms and
conditions that will be set out in the Scheme Document.
It is expected that the Scheme Document containing further
information about the Merger and notices of the API Meetings,
together with the Forms of Proxy, and the Combined Circular and
Prospectus containing further information on CREI and the Combined
Group and notice of the CREI General Meeting will be published
within 28 days of the date of this Announcement (or such later date
as may be agreed by CREI and API with the consent of the Panel). It
is currently expected that the Scheme will become Effective in
early April 2024.
Comments on the Merger
Commenting on the Merger, David MacLellan, Chairman of CREI
said:
"The Board is pleased to announce the merger of CREI and API
which it firmly believes will benefit both our existing and new
shareholders. This transaction creates a well-positioned REIT of
significant scale, giving the Combined Group's shareholders the
opportunity to participate in the returns from the complementary
API and CREI portfolios, with a fully covered and sustainable
dividend and a focus on ESG.
In the current interest rate environment, security and
resilience of cash flows, scale and liquidity, supported by a clear
and compelling strategic direction are the defining characteristics
of a successful REIT. The challenges the wider listed property
sector has faced over the last 18 months highlight the merits of
CREI 's differentiated approach and operational robustness, which
contribute to CREI's strong rating relative to its peers. The
income and income growth characteristics of the API portfolio
should enable the merged entity to optimise earnings and maintain
CREI 's progressive dividend policy.
Shareholders in the Combined Group will benefit from material
cost savings and efficiencies along with benefitting from
significant future growth opportunities to enhance shareholder
returns".
Commenting on the Merger, James Clifton-Brown, Chair of API
said:
"API has always sought to focus on delivering attractive,
income-driven returns for shareholders. Over the years, API's
manager, abrdn Fund Managers, has assembled an attractive portfolio
on the company's behalf, with a weighting to more favoured areas of
the market, a diversified tenant base and a focus on ESG. The board
of API would like to thank the management team for the important
role they have played in assembling and managing the portfolio.
The Merger will enable API Shareholders to retain exposure to
the portfolio and its growth prospects at a significant premium to
API's share price, with the prospect of superior share liquidity
and an enhanced and fully covered dividend . The API Board believes
that, with increased scale and an enhanced capital structure, the
Combined Group will be well positioned for the future. The API
Board is therefore pleased to recommend the Merger to API
Shareholders."
This summary should be read in conjunction with, and is subject
to, the full text of this Announcement and its Appendices. The
Merger will be subject to the Conditions and further terms set out
in Appendix 1 and to the full terms and conditions which will be
set out in the Scheme Document. Appendix 2 to this Announcement
contains the sources of information and bases of calculation of
certain information contained in this Announcement. Summary details
of the irrevocable undertakings and letter of intent received by
CREI are set out in Appendix 3. Property valuation reports for CREI
and API (each as at 31 December 2023) are set out in Appendix 4
pursuant to Rule 29 of the Takeover Code. Certain terms used in
this summary and this Announcement are defined in Appendix 6.
A pre-recorded video briefing in relation to the Merger,
presented by Richard Shepherd-Cross of Custodian Capital, is
available on CREI's website at www.custodianreit.com .
Enquiries
Custodian Property Income REIT plc (CREI)
David MacLellan (Chair)
via Deutsche Numis
Deutsche Numis (Financial Adviser and Corporate
Broker to CREI)
Nathan Brown
Stuart Ord
Alexander Kladov
George Shiel +44 20 7260 1000
FTI Consulting (Financial PR Adviser to CREI)
Richard Sunderland
Andrew Davis
Oliver Parsons +44 20 3727 1000
abrdn Property Income Trust Limited (API)
James Clifton-Brown (Chair)
via Winterflood
Lazard (Financial Adviser to API)
Patrick Long
Jolyon Coates +44 20 7187 2000
Winterflood (Corporate Broker to API)
Neil Langford +44 20 3100 0160
Stephenson Harwood LLP is acting as English legal adviser to
CREI in connection with the Merger.
Addleshaw Goddard LLP is acting as English legal adviser to API
in connection with the Merger.
Important notices
Numis Securities Limited (which is trading for these purposes as
Deutsche Numis) (" Deutsche Numis "), which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom,
is acting exclusively for CREI and for no one else in connection
with the Merger and/or any other matter referred to in this
Announcement and will neither regard any other person as its client
nor be responsible to anyone other than CREI for providing the
protections afforded to its clients or for providing advice in
connection with the Merger, the contents of this Announcement, or
any other matters referred to in this Announcement. Neither
Deutsche Numis nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct, indirect,
consequential, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of Deutsche Numis in
connection with this Announcement, any statement or other matter or
arrangement referred to herein or otherwise.
Lazard & Co., Limited (" Lazard "), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority,
is acting exclusively as financial adviser to API and no one else
in connection with the matters set out in this Announcement and
will not be responsible to anyone other than API for providing the
protections afforded to clients of Lazard nor for providing advice
in relation to the matters set out in this Announcement. Neither
Lazard nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Lazard in connection with this
Announcement, any statement contained herein or otherwise.
Winterflood Securities Limited ("Winterflood"), which is
authorised and regulated by the Financial Conduct Authority in the
United Kingdom, is acting exclusively for API and no-one else in
connection with the matters set out in this Announcement and will
not be responsible to anyone other than API for providing the
protections afforded to customers of Winterflood or for providing
advice in relation to the matters set out in this Announcement.
Neither Winterflood nor any of its affiliates owes or accepts any
duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise)
to any person who is not a client of Winterflood in connection with
this Announcement, any statement contained herein or otherwise.
Further information
This Announcement is for information purposes only and is not
intended to and does not constitute, or form part of an offer,
invitation or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of any
securities, or the solicitation of any vote or approval in any
jurisdiction, pursuant to the Merger or otherwise, nor shall there
be any sale, issuance or transfer of securities of API in any
jurisdiction in contravention of applicable law. The Merger will be
made solely pursuant to the terms of the Scheme Document (or, if
the Merger is implemented by way of a Takeover Offer, the Offer
Document), which will contain the full terms and conditions of the
Merger, including details of how API Shareholders may vote in
respect of the Merger. Any vote, approval, decision in respect of,
or other response to, the Merger should be made only on the basis
of the information contained in the Scheme Document and the
Combined Circular and Prospectus (or any other document by which
the Merger is made by way of a Takeover Offer).
CREI will prepare the Combined Circular and Prospectus,
containing information on the New CREI Shares and the Combined
Group. CREI and API urge API Shareholders to read the Scheme
Document and the Combined Circular and Prospectus carefully when
they become available because they will contain important
information in relation to the Merger, the New CREI Shares and the
Combined Group.
The statements contained in this Announcement are made as at the
date of this Announcement, unless some other time is specified in
relation to them, and the release of this Announcement shall not
give rise to any implication that there has been no change in the
facts set out in this Announcement since such date. This
Announcement does not constitute a prospectus or prospectus
equivalent document.
No person should construe the contents of this Announcement as
legal, financial or tax advice. If you are in any doubt about the
contents of this Announcement or the action you should take, you
are recommended to seek your own independent financial advice
immediately from your stockbroker, bank manager, solicitor,
accountant or from an independent financial adviser duly authorised
under FSMA if you are resident in the United Kingdom, or another
appropriately authorised independent financial adviser, if you are
in a territory outside the United Kingdom.
Neither the GFSC nor the States of Guernsey take any
responsibility for the financial soundness of API or for the
correctness of any of the statements made or opinions expressed
with regard to it.
Overseas Shareholders
This Announcement has been prepared for the purpose of complying
with Guernsey law, English law, the Takeover Code, the Market Abuse
Regulation, the Disclosure Guidance and Transparency Rules and the
Listing Rules and information disclosed may not be the same as that
which would have been disclosed if this Announcement had been
prepared in accordance with the laws of jurisdictions outside the
United Kingdom or Guernsey. Nothing in this Announcement should be
relied on for any other purpose.
The release, publication or distribution of this Announcement in
or into certain jurisdictions other than the United Kingdom or
Guernsey may be restricted by the laws and/or regulations of those
jurisdictions and therefore persons into whose possession this
Announcement comes who are subject to the laws and/or regulations
of any jurisdiction other than the United Kingdom or Guernsey
should inform themselves about and observe any such applicable laws
and/or regulations in their jurisdiction. In particular, the
ability of persons who are not resident in the United Kingdom or
Guernsey to vote their Scheme Shares or API Shares (as applicable)
with respect to the Scheme at the API Court Meeting or the API
Resolution at the API General Meeting, or to appoint another person
as proxy to vote at the API Court Meeting or the API General
Meeting on their behalf, may be affected by the laws of the
relevant jurisdiction in which they are located. Further details in
relation to Overseas Shareholders will be contained in the Scheme
Document. Any failure to comply with any such restrictions may
constitute a violation of the securities laws of any such
jurisdiction. To the fullest extent permitted by applicable law,
the companies and persons involved in the Merger disclaim any
responsibility or liability for the violation of such restrictions
by any person.
Unless otherwise determined by CREI or required by the Takeover
Code, and permitted by applicable law and regulation, the Merger
will not be made available, in whole or in part, directly or
indirectly, in, into or from a Restricted Jurisdiction where to do
so would violate the laws in that jurisdiction and no person may
vote in favour of the Merger by any such use, means,
instrumentality or from within a Restricted Jurisdiction or any
other jurisdiction if to do so would constitute a violation of the
laws of that jurisdiction. Copies of this Announcement and any
formal documentation relating to the Merger are not being, and must
not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in or into or from any Restricted Jurisdiction
and persons receiving such documents (including custodians,
nominees and trustees) must not mail or otherwise forward,
distribute or send them in or into or from any Restricted
Jurisdiction. Doing so may render invalid any related purported
vote in respect of the Merger. If the Merger is implemented by way
of a Takeover Offer (unless otherwise permitted by applicable law
and regulation), the Takeover Offer may not be made directly or
indirectly, in or into, or by the use of mails or any means or
instrumentality (including, but not limited to, facsimile, e-mail
or other electronic transmission, telex or telephone) of interstate
or foreign commerce of, or of any facility of a national, state or
other securities exchange of any Restricted Jurisdiction and the
Takeover Offer may not be capable of acceptance by any such use,
means, instrumentality or facilities.
Further details in relation to Overseas Shareholders will be
contained in the Scheme Document.
Forward-looking statements
This Announcement (including information incorporated by
reference into this Announcement), oral statements made regarding
the Merger, and other information published by CREI and API contain
statements about CREI, API and/or the Combined Group that are or
may be deemed to be "forward-looking statements". All statements
other than statements of historical facts included in this
Announcement, may be forward-looking statements. Forward-looking
statements are prospective in nature and are not based on
historical facts, but rather on current expectations and
projections of CREI and API about future events, and are therefore
subject to risks and uncertainties which could cause actual results
to differ materially from the future results expressed or implied
by the forward-looking statements.
The forward-looking statements contained in this Announcement
include statements relating to the expected effects of the Merger
on CREI and API, the expected timing and scope of the Merger and
other statements other than historical facts. Often, but not
always, forward-looking statements can be identified by the use of
forward-looking words such as "plans", "expects" or "does not
expect", "is expected", "is subject to", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases
or statements that certain actions, events or results "may",
"could", "should", "would", "might" or "will" be taken, occur or be
achieved. Forward looking statements include statements relating to
the following: (i) future capital expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial
condition, dividend policy, losses and future prospects; and (ii)
business and management strategies and the expansion and growth of
CREI's or API's or the Combined Group's operations and potential
synergies resulting from the Merger.
Although CREI and API believe that the expectations reflected in
such forward-looking statements are reasonable, neither CREI nor
API can give assurance that such expectations will prove to be
correct. By their nature, forward-looking statements involve risk
and uncertainty because they relate to events and depend on
circumstances that will occur in the future.
There are a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by such forward-looking statements. These factors include,
but are not limited to: the ability to complete the Merger; the
ability to obtain requisite regulatory and shareholder approvals
and the satisfaction of other Conditions on the proposed terms;
changes in the global political, economic, business and competitive
environments and in market and regulatory forces; changes in future
exchange and interest rates; changes in tax rates; future business
combinations or disposals; changes in general economic and business
conditions; changes in the behaviour of other market participants;
the anticipated benefits from the Merger not being realised as a
result of changes in general economic and market conditions in the
countries in which CREI and API operate; weak, volatile or illiquid
capital and/or credit markets; changes in the degree of competition
in the geographic and business areas in which CREI and API operate;
and changes in laws or in supervisory expectations or requirements.
Other unknown or unpredictable factors could cause actual results
to differ materially from those expected, estimated or projected in
the forward-looking statements. If any one or more of these risks
or uncertainties materialises or if any one or more of the
assumptions proves incorrect, actual results may differ materially
from those expected, estimated or projected. Such forward-looking
statements should therefore be construed in the light of such
factors.
Neither CREI nor API, nor any of their respective associates or
directors, officers or advisers, provides any representation,
assurance or guarantee that the occurrence of the events expressed
or implied in any forward-looking statements in this Announcement
will actually occur. Given the risks and uncertainties, you are
cautioned not to place any reliance on these forward-looking
statements. Other than in accordance with their legal or regulatory
obligations, neither CREI nor API is under any obligation, and each
of CREI and API expressly disclaim any intention or obligation, to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Disclosure requirements of the Takeover Code
Under Rule 8.3(a) of the Takeover Code, any person who is
interested in 1 per cent. or more of any class of relevant
securities of an offeree company or of any securities exchange
offeror (being any offeror other than an offeror in respect of
which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following
the commencement of the offer period and, if later, following the
announcement in which any securities exchange offeror is first
identified. An Opening Position Disclosure must contain details of
the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree
company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be
made by no later than 3.30 p.m. (London time) on the 10th Business
Day following the commencement of the offer period and, if
appropriate, by no later than 3.30 p.m. (London time) on the 10(th)
Business Day following the announcement in which any securities
exchange offeror is first identified. Relevant persons who deal in
the relevant securities of the offeree company or of a securities
exchange offeror prior to the deadline for making an Opening
Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Takeover Code, any person who is, or
becomes, interested in 1% or more of any class of relevant
securities of the offeree company or of any securities exchange
offeror must make a Dealing Disclosure if the person deals in any
relevant securities of the offeree company or of any securities
exchange offeror. A Dealing Disclosure must contain details of the
dealing concerned and of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of
(i) the offeree company and (ii) any securities exchange
offeror(s), save to the extent that these details have previously
been disclosed under Rule 8. A Dealing Disclosure by a person to
whom Rule 8.3(b) applies must be made by no later than 3.30 p.m.
(London time) on the Business Day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Quantified Financial Benefits Statement
Statements of estimated cost savings and synergies relate to
future actions and circumstances which, by their nature, involve
risks, uncertainties and contingencies. As a result, the cost
savings and synergies referred to may not be achieved, may be
achieved later or sooner than estimated, or those achieved could be
materially different from those estimated. Neither the Quantified
Financial Benefits Statement nor any other statement in this
Announcement should be construed as a profit forecast or
interpreted to mean that the Combined Group's earnings in the first
full year following the Effective Date, or in any subsequent
period, would necessarily match or be greater than or be less than
those of CREI or API for the relevant preceding financial period or
any other period. For the purposes of Rule 28 of the Takeover Code,
the Quantified Financial Benefits Statement contained in this
Announcement is the responsibility of CREI and the CREI
Directors.
No profit forecasts or estimates
No statement in this Announcement is intended as a profit
forecast or profit estimate for any period and no statement in this
Announcement should be interpreted to mean that earnings or
earnings per share for CREI or API for the current or future
financial years would necessarily match or exceed the historical
published earnings or earnings per share for CREI or API.
Rounding
Certain figures included in this Announcement have been
subjected to rounding adjustments. Accordingly, figures shown for
the same category presented in different tables may vary slightly
and figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures that precede them.
Publication on a website
In accordance with Rule 26.1 of the Takeover Code, a copy of
this Announcement will be made available, subject to certain
restrictions relating to persons resident in Restricted
Jurisdictions, on CREI's website at www.custodianreit.com and API's
website at www.abrdnpit.co.uk by no later than 12 noon (London
time) on the first Business Day following the date of this
Announcement.
For the avoidance of doubt, neither the contents of these
websites nor the contents of any websites accessible from any
hyperlinks is incorporated into or forms part of this
Announcement.
Requesting hard copy documents
In accordance with Rule 30.3 of the Takeover Code, API
Shareholders may request a hard copy of this Announcement (and any
information incorporated by reference in this Announcement), free
of charge, by contacting Northern Trust International Fund
Administration Services (Guernsey) Limited ("Northern Trust")
during business hours on 01481 745001 (from within the United
Kingdom) and +44 (0) 1481 745001 (from outside the United Kingdom)
or by submitting a request in writing to The Company Secretary, at
team_api@ntrs.com. Calls are charged at the standard geographic
rate and will vary by provider. Calls outside the United Kingdom
will be charged at the applicable international rate. Lines will be
open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding
public holidays in England and Wales.
For persons who receive a copy of this Announcement in
electronic form or via a website notification, a hard copy of this
Announcement will not be sent unless so requested. Such persons may
also request that all future documents, announcements and
information to be sent to them in relation to the Merger should be
in hard copy form.
Scheme Process
In accordance with Section 5 of Appendix 7 of the Takeover Code,
API will announce through a Regulatory Information Service key
events in the Scheme process including the outcomes of the API
Meetings and the Sanction Hearing.
Unless otherwise consented to by the Court and the Panel, any
modification or revision to the Scheme will be made no later than
the date which is 14 days prior to the API Meetings (or any later
date to which such meetings are adjourned). In accordance with
Section 11 of Appendix 7 of the Takeover Code, if the Scheme lapses
or is withdrawn all documents of title and other documents lodged
will be returned as soon as practicable and in any event within 14
days of such lapsing or withdrawal.
Information relating to API Shareholders
Please be aware that addresses, electronic addresses and certain
other information provided by API Shareholders, persons with
information rights and other relevant persons for the receipt of
communications from API may be provided to CREI during the Offer
Period as required under Section 4 of Appendix 4 to the Takeover
Code to comply with Rule 2.11(c) of the Takeover Code.
Rule 2.9 of the Takeover Code
For the purposes of Rule 2.9 of the Takeover Code, CREI confirms
that, as at the close of business on the Latest Practicable Date,
it had in issue 440,850,398 ordinary shares of one penny which
carry voting rights of one vote per share and are admitted to
trading on the London Stock Exchange with ISIN GB00BJFLFT45 .
For the purposes of Rule 2.9 of the Takeover Code, API confirms
that, as at the close of business on the Latest Practicable Date
(being the last Business Day before the date of this Announcement),
it had in issue 381,218,977 ordinary shares of one penny each
(excluding any shares held as treasury shares) which carry voting
rights of one vote per share and are admitted to trading on the
London Stock Exchange with ISIN GB0033875286 .
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS,
PROSPECTUS EQUIVALENT DOCUMENT OR SCHEME DOCUMENT AND INVESTORS
SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE MERGER
OR NEW CREI SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE SCHEME
DOCUMENT AND THE COMBINED CIRCULAR AND PROSPECTUS WHICH ARE
PROPOSED TO BE PUBLISHED IN DUE COURSE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
19 January 2024
RECOMMED ALL-SHARE MERGER
OF
ABRDN PROPERTY INCOME TRUST LIMITED
with
CUSTODIAN PROPERTY INCOME REIT PLC
to be implemented by means of a Court-sanctioned scheme of
arrangement under Part VIII of the Companies (Guernsey) Law, 2008
(as amended)
SUMMARY AND HIGHLIGHTS
The boards of CREI and API are pleased to announce that they
have reached agreement on the terms and conditions of a recommended
all-share merger pursuant to which CREI will acquire the entire
issued and to be issued share capital of API (the "Merger"). It is
intended that the Merger will be implemented by means of a
Court-sanctioned scheme of arrangement under Part VIII of the
Companies Law (the "Scheme").
Under the terms of the Merger, which will be subject to the
Conditions and further terms set out in Appendix 1 to this
Announcement and to the full terms and conditions which will be set
out in the Scheme Document, Scheme Shareholders will be entitled to
receive:
for each Scheme Share, 0.78 New CREI Shares
The Exchange Ratio is based on the Rolled-Forward Unaudited EPRA
NTA of each of CREI and API as at 31 December 2023, subject to
certain adjustments to reflect post balance sheet asset disposals,
the fair value of each company's debt and derivatives, the relative
levels of dividend cover between the two companies and the costs
expected to be incurred by each party in connection with the
Merger. Following completion of the Merger, existing CREI
Shareholders will hold approximately 59.7 per cent. and API
Shareholders approximately 40.3 per cent. respectively in the
Combined Group.
Applying the Exchange Ratio to the Closing Price per CREI Share
of 79.6 pence as at the Latest Practicable Date values each API
Share at 62.1 pence and the entire issued and to be issued share
capital of API at approximately GBP237 million, and represents a
premium of approximately:
29.4 per cent. to the Closing Price of 48.0 pence per API Share
on the Latest Practicable Date;
23.0 per cent. to the 1-month volume-weighted average price of
50.5 pence per API Share on the Latest Practicable Date; and
26.5 per cent. to the 3-month volume-weighted average price of
49.1 pence per API Share on the Latest Practicable Date.
Appendix 4 to this Announcement contains reports from
independent property valuers for CREI 's and API 's property
assets, each as at 31 December 2023, pursuant to the requirements
of Rule 29 of the Takeover Code. These property valuation reports
will, subject to the requirements of the Takeover Code, be
reproduced in the Combined Circular and Prospectus and the Scheme
Document, which are expected to be published as soon as reasonably
practicable and in any event within 28 days of this Announcement
(or such later date as may be agreed by CREI and API with the
consent of the Panel). Each of Knight Frank and Savills has given
and not withdrawn its consent to the publication of its valuation
report in this Announcement in the form and context in which it is
included.
It is expected that the Scheme Document will be published as
soon as practicable and, in any event, within 28 days of this
Announcement, unless CREI and API otherwise agree, and the Panel
consents, to a later date. It is expected that the API Court
Meeting and the API General Meeting will be held in February 2024
and that, subject to the satisfaction of the Conditions and the
further terms set out in Appendix 1 to this Announcement and to be
set out in full in the Scheme Document, the Scheme is expected to
become Effective in early April 2024.
Background to, and reasons for, the Merger
CREI and API share an income-focused investment strategy with an
emphasis on regional, below-institutional sized assets that are
well-positioned to capture the rental growth and yield advantage
available in order to generate higher income returns and capital
growth for shareholders.
The CREI Board and the API Board believe that the Merger would
bring together two complementary portfolios to create a
differentiated REIT with enhanced diversification and share
liquidity and a fully covered and sustainable dividend for the
Combined Group's shareholders.
The boards of CREI and API believe there is a compelling
strategic and financial rationale for the Merger. In particular,
shareholders in the Combined Group are expected to benefit
from:
A substantially larger portfolio with approximately 200 assets
and a combined property value in excess of GBP1.0 billion as at 31
December 2023;
An enhanced portfolio diversification by asset, geography and
tenant with broad-based regional exposure, with 50% of the Combined
Group's income derived from the top 54 tenants and 90% of the
Combined Group's income derived from the top 204 tenants, an
average lot size of approximately GBP5.1 million and similar tenant
covenant profiles as at 31 December 2023;
A continuation of CREI's focus on below-institutional sized
assets which delivers greater diversification, with no single
tenant accounting for more than 2% of the Combined Group's rent
roll, and supports the performance of the portfolio in a variety of
market conditions. This focus enables CREI to find mispriced assets
and make counter-cyclical investments in order to secure future
rental and capital growth;
A suitable balance between the main commercial property sectors,
in keeping with each of CREI's and API's existing policies,
including significant exposure to the industrial sector
(representing 44% of the Combined Group's ERV as at 31 December
2023) which continues to benefit from low vacancy levels, limited
new supply, strong occupier demand, and hence rental growth;
Meaningful reversionary potential with the combined ERV of
GBP84.3 million exceeding the combined passing rent of GBP68.1
million by 24% at 31 December 2023;
A shared commitment to sustainability underpinning the shared
asset management strategy with 81% of the combined portfolio
holding an EPC rating of C or above;
Material cost savings, comprising:
GBP1.0 million of recurring annual cost savings realised
principally from a reduction in management fees due to CREI 's
tiered fee structure and the removal of duplicated corporate
expenses and other potential operational efficiencies; and
GBP2.1 million of additional non-recurring cost savings during
the Transition Period as a result of a reduction in management fees
payable to Custodian Capital;
A stronger and more resilient balance sheet enhancing the
Combined Group's ability to grow and to address future refinancing
events, with the expected retention of CREI's and API's existing
debt facilities implying a pro forma LTV of approximately 30.2 per
cent., a weighted average cost of debt of 5.0 per cent. and a
weighted average debt maturity of 3.8 years for the Combined Group
as at 31 December 2023. The aggregate debt portfolio of GBP225
million of fixed rate debt expiring between 2025 - 2032 and the
GBP125 million of revolving credit facilities will allow for the
ongoing financing of the Combined Group in the long and short
term;
Continued commitment to paying a fully covered dividend, in line
with CREI's existing policy and practice since IPO, which is
expected to result in an uplift in annual dividends payable to API
Shareholders, with an objective of growing the dividend on a
sustainable basis;
Creation of an enlarged REIT with an enhanced market profile, a
broader appeal to investors, greater share liquidity, and the scale
to support a larger weighting in key indices with potential for
inclusion in the FTSE 250 Index in due course;
Diversification of the shareholder register of the Combined
Group with a broad mix of private and institutional investors,
while enabling mutual shareholders to consolidate their holdings
across the two companies; and
Continued focus on corporate governance, with the CREI Board
benefiting from the added expertise of certain API Directors and
the transition to a fully independent board following the
integration of the two companies.
The Combined Group's pro forma sector weighting by ERV as at 31
December 2023 is shown below:
Weighting by ERV (as at 31 December
2023)
Sector CREI API Combined Group
-------- ------ ----------------------
Industrial 41% 48% 44%
-------- ------ ----------------------
Office 16% 25% 20%
-------- ------ ----------------------
Retail warehousing 22% 11% 18%
-------- ------ ----------------------
Other(*) 13% 12% 12%
-------- ------ ----------------------
High street retail 8% 4% 6%
-------- ------ ----------------------
(*) 'Other' sectors include: (i) in respect of the CREI
portfolio, pubs and restaurants, gyms, drive-throughs, motor trade,
leisure and trade counter; and (ii) in respect of the API
portfolio, leisure, data centres, student housing, hotels (and
apart-hotels) and healthcare.
The Combined Group's pro forma weighting by tenant quality as at
31 December 2023 is shown below:
Weighting by ERV (as at 31 December
2023)
Experian risk CREI API Combined Group
rating
-------- ------ ----------------------
Government 2% 9% 5%
-------- ------ ----------------------
Very low risk 57% 51% 54%
-------- ------ ----------------------
Low risk 8% 14% 10%
-------- ------ ----------------------
Below average
risk 13% 10% 12%
-------- ------ ----------------------
Above average
risk 8% 5% 7%
-------- ------ ----------------------
High risk 2% 1% 2%
-------- ------ ----------------------
Other 11% 9% 10%
-------- ------ ----------------------
Quantified Financial Benefits Statement
The CREI Directors, having reviewed and analysed the potential
cost savings of the Combined Group, as well as taking into account
factors they can influence, believe the Combined Group can deliver
shareholder value through the expected realisation of
approximately:
GBP1.0 million of pre-tax recurring run-rate cost synergies by
the end of the first year following the Effective Date (the
"Recurring Cost Synergies"); and
GBP2.1 million of additional non-recurring pre-tax cost
synergies during the Transition Period (the "Transition Period Cost
Synergies").
The Recurring Cost Synergies are expected to be realised
principally from:
Management fees: unification of investment management under
Custodian Capital, delivering an estimated GBP0.5 million of
annualised run-rate cost synergies derived from lower management
and administrative fees charged on the API investment properties
(the "Management Fee Savings"); and
Corporate and administrative: rationalisation of duplicated
listing, administration and operational expenses delivering at
least an estimated GBP0.5 million of annualised run rate cost
synergies.
The additional Transition Period Cost Synergies are expected to
be realised principally from:
Amended management fee tiers: reduction in the management fees
payable by CREI to Custodian Capital for the Transition Period
delivering an estimated GBP0.3 million of annualised run rate cost
synergies (GBP0.6 million total estimated cost synergies) through
the consolidation of the first two fee tiers into one fee tier,
such that the consolidated fee tier will be calculated as a fee of
0.75 per cent. in respect of the NAV of the Combined Group which is
less than or equal to GBP500 million (rather than a fee of 0.90 per
cent. in respect of NAV up to GBP200 million and 0.75 per cent. up
to GBP500 million) (the "Amended Management Fee Tier Savings");
and
Partial management fee waiver: Custodian Capital has agreed to
waive its management fee in relation to the NAV attributable to the
API portfolio for the first nine months following completion of the
Merger (the "Partial Management Fee Waiver Savings") delivering an
estimated GBP1.5 million of cost synergies in the first year
following the Effective Date.
In order to achieve the Management Fee Savings, the Amended
Management Fee Tier Savings and the Partial Management Fee Waiver
Savings, it is estimated that API will incur one-off costs of
between GBP1.5 million and GBP2.0 million in connection with the
termination of the API Investment Management Agreement. These costs
will be incurred within the first year following the Effective Date
and have been reflected as a cost to API within the Exchange Ratio.
The CREI Directors expect that any costs incurred in the
realisation of the other cost synergies will be immaterial.
Other potential adverse effects of the Merger have been
considered and were determined by the CREI Directors to be
immaterial for the analysis.
The identified cost savings will accrue as a direct result of
the Merger and would not be achieved on a standalone basis.
These statements relating to identified cost savings and
estimated savings relate to future actions or circumstances which
by their nature involve risks, uncertainties and contingencies. As
a consequence, the identified synergies and estimated savings
referred to may not be achieved, may be achieved later or sooner
than estimated, or those achieved could be materially different
from those estimated.
Further information on the bases of belief supporting the
Quantified Financial Benefits Statement, including the principal
assumptions and sources of information, is set out in Appendix 5 to
this Announcement.
board RecommendationS
The API Directors, who have been so advised by Lazard as to the
financial terms of the Merger, consider the terms of the Merger to
be fair and reasonable. In providing its advice to the API
Directors, Lazard has taken into account the commercial assessments
of the API Directors. Lazard is providing independent financial
advice to the API Directors for the purposes of Rule 3 of the
Takeover Code.
Accordingly, the API Directors intend to recommend unanimously
that Scheme Shareholders vote in favour of the Scheme at the API
Court Meeting (or, in the event that the Merger is implemented by a
Takeover Offer, to accept such Takeover Offer) and that API
Shareholders vote in favour of the API Resolution to be proposed at
the API General Meeting as the API Directors have irrevocably
undertaken to do in respect of their own beneficial holdings of, in
aggregate, 295,092 API Shares, representing approximately 0.08 per
cent. of the issued ordinary share capital of API on the Latest
Practicable Date.
In order to allot and issue the New CREI Shares, CREI will be
required to seek the approval of CREI Shareholders of the CREI
Resolution at the CREI General Meeting. The Merger is accordingly
conditional on the approval of the CREI Shareholders of the CREI
Resolution at the CREI General Meeting.
The CREI Directors consider the Merger to be in the best
interests of CREI Shareholders as a whole and intend unanimously to
recommend that CREI Shareholders vote in favour of the CREI
Resolution to be proposed at the CREI General Meeting, as those
CREI Directors, together with certain of Ian Mattioli's close
relatives and related trusts, who hold CREI Shares have irrevocably
undertaken to do in respect of their own holdings of, in aggregate,
6,204,817 CREI Shares, representing approximately 1.41 per cent. of
the issued ordinary share capital of CREI on the Latest Practicable
Date.
Background to, and Reasons for, the API directors'
Recommendation
API has consistently sought to meet shareholders' objectives by
investing in good quality assets that have the potential to provide
an above market level of total return as well as an attractive
level of income that has scope to grow. API has achieved this
through successful capital rotation and active asset management
resulting in an attractive portfolio, with industrial assets
constituting 48% of the portfolio by ERV as at 31 December
2023.
Over the last 18 months, however, API along with other
diversified investment trusts has had to contend with the
significant challenges facing the real estate sector as a whole,
with rising inflation leading to a substantial increase in interest
rates to levels not seen since before the Global Financial Crisis.
This in turn has impacted investor sentiment, real estate capital
values, transaction volumes and equity market liquidity,
notwithstanding operational robustness in many sub-sectors of the
market, including those to which API has significant exposure.
In API's case, these challenges have been compounded by the
relatively small scale of the company and in particular the need to
refinance its debt facility (consisting of a term loan and
revolving credit facility) in late 2022, ahead of the previous
maturity date in April 2023, at a time when politically induced
gilt market volatility was at its height . API currently pays an
annualised dividend of 4 pence per share which is not covered by
EPRA earnings, with cover of approximately 80% for the last
reported quarter ended 30 September 2023. In recognition of these
challenges, and the impact on API's share price and discount to
EPRA NTA per share, the API Board elected to undertake a
comprehensive review of API's strategic options in Q3 2023 with the
objective of potentially delivering an uplift in value for API
Shareholders, as well as increased share liquidity and an enhanced
and fully covered dividend for API Shareholders.
Having assessed a wide range of potential strategic options in
detail, the API Board believes that there is a strong strategic and
financial rationale for a combination with CREI, noting in
particular:
That based on the Closing Price per CREI Share, the exchange
ratio represents a premium of approximately 29.4% to API's Closing
Price, 23.0% to API's 1-month volume-weighted average price and
26.5% to API's 3-month volume-weighted average price as at the
Latest Practicable Date;
API Shareholders are expected to experience an annualised uplift
in dividends of 7.3% (based on the Exchange Ratio and CREI's target
dividend of 5.5 pence per share) with the dividend being fully
covered;
CREI's and API's shared income-focused approach to investing in
diversified UK commercial property, the complementary nature of
their two portfolios, similar sectoral weightings and
sustainability credentials;
The enhanced capital structure of the Combined Group and its
superior ability to address future refinancing events as a
consequence;
The opportunity for API Shareholders to remain invested, with
ongoing exposure to API's attractive portfolio and its growth
prospects through holding shares in the Combined Group;
The superior valuation at which CREI's shares have historically
traded relative to API's, with an average discount to EPRA NTA per
share of approximately 11% over the last year, compared to
approximately 37% for API, and approximately 10% over the last 3
years compared to approximately 29% for API;
The anticipated increase in share liquidity by virtue of the
Combined Group's enhanced scale, potential index weightings and
broader appeal to investors;
The strong track record of Custodian Capital, as demonstrated by
CREI's total shareholder returns over time relative to peers;
and
The commitment of the CREI Board to strong corporate governance,
including through the appointment of two API Directors and the
transition to a fully independent board following the integration
of the two companies.
In summary, the API Board is firmly of the view that a
combination with CREI represents an attractive opportunity for API
Shareholders to benefit from a significant premium and enhanced
share liquidity and dividend income through continued investment in
a differentiated REIT of improved scale.
Accordingly, following careful consideration, the API Directors
unanimously intend to recommend the Merger to API Shareholders.
Background to, and Reasons for, the CREI DIRECTORS'
Recommendation
The CREI Board believes there is a compelling strategic and
financial rationale for the Merger. The CREI Board views API's
portfolio as complementary to the CREI portfolio based on API's
similar property strategy and CREI's current sector and
geographical weightings. The Merger will result in a substantially
larger portfolio generating the scale to support a larger weighting
in key indices and broaden appeal to investors.
CREI and API have both pursued an income-focused investment
strategy, exploiting the mispricing of good secondary and smaller
lot size properties to drive higher income returns, without adding
property specific or concentration risk. The combined portfolio
resulting from the Merger will support the strategies sought by
shareholders on both registers in a larger, more liquid, and
broadly diversified portfolio.
The Merger is expected to result in material cost savings,
including a reduction in management fees (resulting in lower
ongoing charges as a percentage of NTA), the removal of duplicated
corporate expenses and other potential operational efficiencies,
which together with CREI's progressive dividend policy, is expected
to improve total shareholder returns. This transaction will further
enhance the ability of the Combined Group to grow and address
future refinancing events with a stronger and more resilient
balance sheet.
Consequently, the CREI Board believes that the Merger is of
benefit to the existing CREI Shareholders as it will grow and
diversify the CREI portfolio while reducing key costs as a
proportion of net asset value and driving total shareholder
returns.
Accordingly, following careful consideration, the CREI Directors
unanimously intend to recommend that CREI Shareholders vote in
favour of the CREI Resolution at the CREI General Meeting.
Irrevocable undertakings and letter of intent
CREI has received irrevocable undertakings from each of the API
Directors who are interested in API Shares to vote in favour of the
Scheme at the Court Meeting and vote in favour of the API
Resolution at the API General Meeting (or, in the event that the
Merger is implemented by way of a Takeover Offer, to accept or
procure acceptance of the Takeover Offer), in respect of, in
aggregate 295,092 API Shares representing approximately 0.08 per
cent. of the issued share capital of API as at the Latest
Practicable Date.
CREI has also received a letter of intent to vote in favour of
the Scheme at the Court Meeting and in favour of the API Resolution
at the API General Meeting (or, in the event that the Merger is
implemented by way of Takeover Offer, to accept or procure
acceptance of the Takeover Offer), from Brooks Macdonald Asset
Management in respect of 11,376,425 API Shares representing
approximately 2.98 per cent. of the issued share capital of API as
at the Latest Practicable Date.
In total, therefore, CREI has received irrevocable undertakings
and a letter of intent, including those irrevocable undertakings
from all API Directors, in respect of 11,671,517 API Shares in
aggregate, representing approximately 3.06 per cent. of the issued
ordinary share capital of API as at the Latest Practicable
Date.
In connection with the CREI General Meeting, those CREI
Directors, together with certain of Ian Mattioli's close relatives
and related trusts, that hold CREI Shares have irrevocably
undertaken to vote in favour of the CREI Resolution at the CREI
General Meeting in respect of 6,204,817 CREI Shares in aggregate,
representing approximately 1.41 per cent. of the issued ordinary
share capital of CREI as at the Latest Practicable Date.
Further details of these irrevocable undertakings and letters of
intent are set out in Appendix 3 to this Announcement.
INFORMATION ON crei
CREI , established in 2014, is a UK real estate investment trust
with a portfolio comprising high quality properties predominantly
let to institutional grade tenants throughout the UK, principally
characterised by properties with individual values of less than
GBP10 million at acquisition. CREI seeks to provide investors with
an attractive level of income and the potential for capital growth
from a portfolio with strong environmental credentials, striving to
be the REIT of choice for private and institutional investors
seeking high and stable dividends from well diversified UK real
estate. In line with CREI's published growth strategy, its
investment policy has been amended to specify that CREI is
committed to seeking further growth, which may involve strategic
property portfolio acquisitions and corporate consolidation, such
transactions potentially including public and private companies,
holding companies and special purpose vehicles.
CREI 's portfolio was valued at GBP602 million as at 31 December
2023 with an EPRA Topped-Up Net Initial Yield of 6.2%, a
reversionary yield of 7.8%, a 41% weighting by ERV to industrial
assets and Rolled-Forward Unaudited EPRA NTA of GBP413 million or
93.7 pence per CREI share. As at the Latest Practicable Date, CREI
had a market capitalisation of GBP351 million. CREI is externally
managed by Custodian Capital, a property management and investment
business which is regulated by the FCA.
A fundamental element of CREI's strategy is to target smaller
sized properties, principally characterised by properties with
individual values of less than GBP10 million at acquisition, to
capture the yield advantage available relative to larger sized
properties. In the period from 2010 - 2023, data sourced from
PropertyData(2) shows that there is a transaction yield advantage
of approximately 150 basis points between properties with
individual values below GBP10 million versus properties with
individual values above GBP10 million, compared to a yield
advantage of approximately 60 basis points between 2000 - 2010. The
CREI Board believes that this implied increase in yield
differential since 2010 is not entirely reflective of a rise in
risk associated with smaller properties but also due to a change in
the supply and demand dynamics in the market. The CREI Board
believes these dynamics are principally because of an increase in
strategies that pursue larger sized properties, which has resulted
in a reduction in the associated yields, which has coincided with
those same investors reducing their exposure to smaller sized
properties and thus increasing the supply of such assets and
associated yields.
Custodian Capital is a wholly-owned subsidiary of Mattioli
Woods, the specialist wealth management and employee benefits
business, with in excess of GBP15 billion of assets under
management, administration or advice. CREI entered the UK REIT
regime on 27 March 2014. As a consequence of CREI continuing to be
a REIT and meeting the relevant conditions, it should not be
subject to UK corporation tax on the profits (income and capital
gains) derived from its investment in its property portfolio and
while CREI remains within the UK REIT regime, the disposal of any
properties currently held by it and used within its property rental
business should continue to be tax exempt.
(2) Average transaction yields between Q1 2010 - Q1 2023 as per
PropertyData.
Information on API
API, established in 2003, is a UK real estate investment trust
investing in a diversified portfolio of UK commercial properties in
the industrial, office, retail and "other" sectors with the
objective of providing shareholders with an attractive level of
income together with the prospect of income and capital growth.
API's portfolio was valued at GBP439 million as at 31 December
2023 with an EPRA Topped-Up Net Initial Yield of 5.4%, a
reversionary yield of 7.3%, a 48% weighting by ERV to industrial
assets and Rolled-Forward Unaudited EPRA NTA of GBP299 million or
78.5 pence per API share. As at the Latest Practicable Date, API
had a market capitalisation of GBP183 million.
intentions for the combined Group
Property strategy
With effect from completion of the Merger, Custodian Capital
will provide investment management, administrative and advisory
services to the Combined Group. Custodian Capital expects to
continue each company's ongoing programme of asset disposals,
subject to prevailing sector specific market conditions at the time
of such disposals, to fund ongoing capital expenditure programmes
and reduce the quantum of variable rate debt in the Combined Group.
Ongoing capital expenditure is essential to the rental performance
of the portfolio of the Combined Group and will be prioritised over
new acquisitions, in part to meet target environmental
commitments.
Board composition and governance arrangements
Following completion of the Merger, it is expected that Jill May
and Sarah Slater will join the CREI Board as non-executive
directors. The CREI Board believes that these appointments will
deliver an appropriately balanced board, with the complementary
experience and skills necessary to drive the Combined Group forward
following the Merger and to provide good continuity for API
Shareholders. Post-Merger, the CREI Board will therefore comprise:
David MacLellan, Elizabeth McMeikan, Hazel Adam, Malcolm Cooper,
Chris Ireland, Ian Mattioli MBE, Jill May and Sarah Slater.
Following the integration of the API portfolio, the CREI Board
expects to conduct a review of its succession plan, assessing its
composition and size to ensure an appropriate combination of
skills, experience, diversity and knowledge.
As part of that review, Ian Mattioli MBE has informed the CREI
Board of his intention to retire as a director of CREI at the
annual general meeting prior to the conclusion of the Transition
Period, which will result in a fully independent board. The CREI
Board values Ian Mattioli MBE as a founding director of CREI and a
representative of individual private clients of Custodian Capital's
parent company, Mattioli Woods (the "MW Clients"). The MW Clients
currently represent approximately 65 per cent. of the CREI
shareholder register by value(3) and Ian's intention reflects the
fact that this proportion is expected to reduce substantially as a
consequence of the Merger. The CREI Board has high regard for Ian's
insight and expertise, and it is expected that he will continue to
serve a valuable role for CREI in his capacity as chair of
Custodian Capital, Chief Executive Officer of Mattioli Woods and an
ongoing representative of MW Clients, including attendance at board
meetings as part of the senior management team of Custodian
Capital. Ian Mattioli MBE and his family own 6.1 million CREI
Shares (representing approximately 1.4 per cent. of the CREI
shareholder register by value as at the Latest Practicable Date)
and intend to remain long-term shareholders of the Combined
Group.
CREI intends to delist API and to surrender API 's registration
as an authorised closed-ended collective investment scheme
regulated by the GFSC following the Effective Date. Consequently,
API will not require listed company governance structures and
accordingly, it is intended that the API Directors will cease to be
directors of API and its subsidiaries (as applicable) with effect
from completion of the Merger.
As CREI intends to cancel API 's admission to trading on the
London Stock Exchange following completion of the Merger, certain
functions which exist in relation to API 's status as a publicly
traded company will no longer be required or will be reduced in
size, reflecting the new structure within the Combined Group.
(3) Based on shareholder registers as at 31 December 2023,
shares held by Mattioli Woods on behalf of discretionary managed
portfolios operated on behalf of its clients represented 3.5 per
cent. and 6.4 per cent. of the CREI and API shareholder registers
by value, respectively.
Management and employees
The API Group does not have any employees and therefore does not
operate any pension scheme, nor does it have any arrangements in
place for any employee involvement in its capital. API has no place
of business that will be affected by the Merger, fixed assets
(other than its property portfolio), research and development
function or headquarters. CREI has no intention to change these
features of the API Group, or to introduce any management
incentivisation arrangements for the Combined Group following
completion of the Merger. It is expected that API's existing
investment management agreement (which includes provisions for an
orderly handover) will be terminated.
Management arrangements and fees for the Combined Group
With effect from completion of the Merger, it has been agreed
between CREI and Custodian Capital that:
-- Custodian Capital will waive its management fee in relation
to the NAV attributable to API for the first nine months following
completion of the Merger;
-- there will be a reduction in the management fees payable by
CREI to Custodian Capital for the duration of the Transition
Period. This will be implemented through the consolidation of the
first two fee tiers into one fee tier, such that the consolidated
fee tier will be calculated as a fee of 0.75 per cent. in respect
of the NAV of the Combined Group which is less than or equal to
GBP500 million (rather than a fee of 0.90 per cent. in respect of
NAV up to GBP200 million and 0.75 per cent. up to GBP500
million);
-- in recognition of the waiver and reduction of fees, the CREI
Board has agreed to an extension of the term of Custodian Capital's
appointment as investment manager which will continue from the
Effective Date with either party able to serve 12 months' written
notice to terminate the management arrangements for the Combined
Group, save that such notice may not be served prior to the
conclusion of the Transition Period; and
-- in connection with Custodian Capital's additional work on the
Merger, CREI shall pay Custodian Capital a one-off project fee of
GBP350,000 (exclusive of VAT), which shall reduce to GBP75,000
(exclusive of VAT) if the Merger does not become Effective.
These changes are documented in the Amended and Restated
Investment Management Agreement, the terms of which shall take
effect from the Effective Date.
The CREI Board believes that the terms of the Amended and
Restated Investment Management Agreement will promote management
stability and ensure that Custodian Capital is appropriately
incentivised to continue to invest in its capabilities for the
benefit of the Combined Group.
The entry by CREI into the Amended and Restated Investment
Management Agreement falls within Listing Rule 11.1.10R (smaller
related party transactions) and therefore CREI Shareholders are not
required to approve these amendments.
At the end of the Transition Period, the CREI Management
Engagement Committee intends to conduct its regular review of the
terms of Custodian Capital's appointment to ensure that the terms
comply with market and industry practice and remain in the best
interests of the shareholders of the Combined Group.
Listing and registered office
Following the Effective Date, CREI will remain listed on the
Premium segment of the Official List and admitted to trading on the
Main Market. The registered office of CREI will remain in
Leicester.
REIT status
Both the CREI Group and the API Group fall within the UK REIT
regime and benefit from the tax efficiencies provided by that
regime. The Combined Group is expected to fall within the UK REIT
regime and the relevant tax measures will continue to apply to the
Combined Group.
Trading facilities
It is intended that dealings in, and registration of transfers
of, API Shares (other than the registration of the transfer of the
Scheme Shares to CREI pursuant to the Scheme) will be suspended
shortly before the Effective Date at a time to be set out in the
Scheme Document. It is further intended that applications will be
made to the London Stock Exchange to cancel trading in the API
Shares on the Main Market, and to the Financial Conduct Authority
to cancel the listing of the API Shares on the Official List, in
each case with effect from or shortly following the Effective Date.
Further details about the de-listing and cancellation of trading of
the API Shares can be found in paragraph 14 of this
Announcement.
No statements in this paragraph 10 are "post-offer undertakings"
for the purposes of Rule 19.5 of the Takeover Code.
Offer Related Arrangements
Confidentiality Agreement
On 10 July 2023, API and CREI entered into a confidentiality
agreement in relation to the Merger (the "Confidentiality
Agreement"), pursuant to which, amongst other things, CREI and API
gave certain mutual undertakings to: (a) subject to certain
exceptions, keep information relating to each other and the Merger
confidential and not to disclose it to third parties; and (b) use
such confidential information only in the consideration and
evaluation of CREI 's and API 's respective businesses in relation
to a possible acquisition of the entire issued and to be issued
share capital of API , or of all or a material part of the assets
or undertaking of API , or any transaction having substantially
equivalent effect to the same (the "Purpose"). These
confidentiality obligations will remain in force until the earlier
of 24 months from 10 July 2023 and completion of any transaction
within the meaning of the Purpose, which would include the Merger.
In the Confidentiality Agreement, CREI and API also give customary
standstill undertakings in relation to each of themselves and their
concert parties, all of which cease to apply upon the release of
this Announcement.
Dividends
Expected timetable for the Merger
The boards of CREI and API will retain their current dividend
policies for the period to the Effective Date.
CREI and API have agreed that:
-- API Shareholders will be entitled to receive and retain a
quarterly final dividend of up to 1.0 penny per API Share in
respect of the quarter ended 31 December 2023 (the "API Q4
Dividend"); and
-- CREI Shareholders will be entitled to receive and retain a
quarterly interim dividend of up to 1.375 pence per CREI Share in
respect of the quarter ended 31 December 2023 (the " CREI Q3
Dividend ").
The API Q4 Dividend and the CREI Q3 Dividend will each be
declared on, and paid by reference to, a date falling prior to the
Effective Date, consistent with their respective past practices as
to timing and amount of such dividends. Payment of the API Q4
Dividend and the CREI Q3 Dividend is expected to occur in late
February 2024. Further announcements will be made by the boards of
CREI and API in due course.
It is currently expected that the Merger will become Effective
in early April 2024. The New CREI Shares will be issued credited as
fully paid-up and will rank pari passu in all respects with the
CREI Shares in issue at the time the New CREI Shares are issued,
including the right to receive and retain dividends and other
distributions declared, made or paid by reference to a record date
on or after the Effective Date. Accordingly, based on the expected
timetable for the Merger to become Effective, Scheme Shareholders,
assuming the Scheme Shareholder has retained their New CREI Shares,
would receive the quarterly final dividend to be declared by CREI
in respect of the quarter ended 31 March 2024 (the "CREI Q4
Dividend").
Delay to the expected timetable for the Merger
If, however, the timetable for the Merger is delayed such that
the Merger will become Effective after the expected date (but prior
to the Long Stop Date), CREI and API have agreed that API
Shareholders will be entitled to receive and retain any quarterly
interim dividend declared by API in respect of the quarter ended 31
March 2024 (the "API Q1 Dividend") and CREI Shareholders will be
entitled to receive and retain any CREI Q4 Dividend declared by
CREI, in each case, to be declared consistent with their respective
past practices as to timing and amount of such dividends.
Amendments to the Exchange Ratio
The Exchange Ratio will be adjusted:
(a) in the event that either CREI or API announces, declares,
makes or pays any one or more dividends or other distributions
prior to the Merger becoming Effective that is or are, in
aggregate, in excess of: (i) 1.375 pence per CREI Share in respect
of the CREI Q3 Dividend and, if the ex dividend date falls prior to
the Merger becoming Effective, 1.375 pence per CREI Share in
respect of the CREI Q4 Dividend; or (ii) 1.0 penny per API Share in
respect of the API Q4 Dividend and, if the ex-dividend date falls
prior to the Merger becoming Effective, 1.0 penny per API Share in
respect of the API Q1 Dividend (the amount of such excess in each
case being the "Excess"), in which event the adjustment to the
Exchange Ratio shall be to take account of the Excess; and/or
(b) in the event that (i) the API Q1 Dividend is not covered by
the income earned in the relevant quarter (the "API Q1 Uncovered
Dividend Portion"), or (ii) the CREI Q4 Dividend is not covered by
the income earned in the relevant quarter (the " CREI Q4 Uncovered
Dividend Portion "), in which event the adjustment to the Exchange
Ratio shall be to take account of the API Q1 Uncovered Dividend
Portion and/or the CREI Q4 Uncovered Dividend Portion; and/or
(c) if, at the time of completion of the Merger, either CREI or
API has announced, declared, made or paid the CREI Q4 Dividend or
the API Q1 Dividend, respectively, but the other has not announced,
declared, made or paid its corresponding dividend (a "Dividend
Discrepancy"), in which case the adjustment to the Exchange Ratio
shall be to take account of the Dividend Discrepancy.
In the event that any adjustment to the Exchange Ratio is
required pursuant to (a), (b) and/or (c) above, such adjustment
will be made by reference to the relevant Rolled-Forward Unaudited
EPRA NTA(s) as at 31 December 2023. Any adjustment to the Exchange
Ratio shall be the subject of an announcement and, for the
avoidance of doubt, shall not be regarded as constituting any
revision or variation of the terms of the Scheme or the Merger. To
the extent that a dividend or distribution has been declared but
not paid prior to the Effective Date, and such dividend or
distribution is cancelled, then the Exchange Ratio shall not be
subject to change in accordance with this paragraph.
Following completion of the Merger, the Combined Group intends
to focus on maintaining CREI 's dividend yield and dividend cover
going forward. On the basis of market conditions as at the date of
this Announcement, CREI is targeting a dividend per share of at
least 5.5 pence per CREI Share for the year ending 31 March 2024,
and CREI's aim is to grow its dividend on a sustainable basis as
earnings grow through capturing the available rental growth in the
combined portfolio's reversionary potential.
The dividends referred to above are not intended as a profit
forecast or estimate for CREI or API for any period and no
statement in this Announcement should be interpreted to mean that
earnings or earnings per CREI Share or per API Share for the
current or future financial years would necessarily match or exceed
the historical published earnings or earnings per CREI Share or per
API Share.
Scheme Process
It is intended that the Merger will be effected by means of a
Court-sanctioned scheme of arrangement between API and the Scheme
Shareholders under Part VIII of the Companies Law, further details
of which are contained in this Announcement and full details of
which will be set out in the Scheme Document to be published by API
in due course. The procedure involves, among other things, an
application by API to the Court to sanction the Scheme, in
consideration for which Scheme Shareholders who are on the register
of members at the Scheme Record Time will receive the New CREI
Shares on the basis of the Exchange Ratio as set out in paragraph 1
above. The purpose of the Scheme is to provide for CREI to become
the holder of the entire issued ordinary share capital of API .
The New CREI Shares will be issued in registered form, credited
as fully paid, and will be capable of being held in both
certificated and uncertificated form. They will rank pari passu in
all respects with the existing CREI Shares, including the rights to
receive all dividends and other distributions (if any) declared,
paid or made by CREI by reference to a record date falling after
the Effective Date.
Fractions of New CREI Shares will not be allotted or issued
pursuant to the Scheme and entitlements of Scheme Shareholders will
be rounded down to the nearest whole number of New CREI Shares. All
fractional entitlements to New CREI Shares will be aggregated and
sold in the market as soon as practicable after the Effective Date.
The net proceeds of such sale (after deduction of all expenses and
commissions incurred in connection with the sale) will be
distributed by CREI in due proportions to Scheme Shareholders who
would otherwise have been entitled to such fractions, save that
individual entitlements to amounts of less than GBP5 will be
retained for the benefit of the Combined Group.
The Merger will be subject to the Conditions and the further
terms referred to in Appendix 1 to this Announcement and the full
terms and conditions to be set out in the Scheme Document, and will
only become Effective if, among other things, the following events
occur on or before 11:59 p.m. (London time) on the Long Stop Date
(or such later date as CREI and API may, with the consent of the
Panel, agree and, if required, the Court may allow):
approval of the Scheme by a majority in number of the Scheme
Shareholders who are present and voting (and entitled to vote),
either in person or by proxy, at the API Court Meeting or at any
adjournment thereof and who represent not less than 75 per cent. of
the voting rights of such Scheme Shareholders;
the API Resolution is passed at the API General Meeting or at
any adjournment thereof by the requisite majority of votes validly
cast on the API Resolution, whether in person or by proxy;
the CREI Resolution is passed at the CREI General Meeting or at
any adjournment thereof by the requisite majority;
the FCA having acknowledged to CREI or its agent (and such
acknowledgement not having been withdrawn) that the application for
the admission of the New CREI Shares to the Official List with a
Premium segment listing has been approved and (after satisfaction
of any conditions to which such approval is expressed to be
subject) will become effective as soon as a dealing notice has been
issued by the FCA and any listing conditions having been
satisfied;
the London Stock Exchange having acknowledged to CREI or its
agent (and such acknowledgement not having been withdrawn) that the
New CREI Shares will be admitted to trading on the Main Market;
following the API Meetings, the Scheme is sanctioned by the
Court (without modification, or with modification on terms agreed
by CREI and API); and
the Scheme becoming Effective by no later than 11.59 p.m. on the
Long Stop Date.
The Scheme will become Effective at the time and date to be
stated in the Scheme Court Order. Upon the Scheme becoming
Effective: (i) it will be binding on all Scheme Shareholders,
irrespective of whether or not they attended or voted at the API
Meetings (and if they attended and voted, whether or not they voted
in favour); and (ii) share certificates in respect of API Shares
will cease to be valid and entitlements to API Shares held within
the CREST system will be cancelled.
The API Resolution to be proposed at the API General Meeting
will, amongst other matters, provide that the Articles be amended
to incorporate provisions requiring any API Shares issued after the
Scheme Record Time (other than to CREI and/or its nominees) to be
automatically transferred to CREI on the same terms as the Merger
(other than terms as to timings and formalities). The provisions of
the Articles (as amended) will avoid any person (other than CREI
and its nominees) holding API Shares after the Effective Date.
The Scheme will lapse and the Merger will not take place if:
either the API Court Meeting or the API General Meeting are not
held on or before the 22nd day after the expected date of such API
Meetings, to be set out in the Scheme Document in due course (or
such later date as may be agreed between CREI and API with the
consent of the Panel (and that the Court may allow if
required));
the Sanction Hearing is not held on or before the 22nd day after
the expected date of the Sanction Hearing, to be set out in the
Scheme Document in due course (or such later date as may be agreed
between CREI and API with the consent of the Panel (and that the
Court may allow if required));
the Scheme does not become Effective on or before 11:59 p.m.
(London time) on the Long Stop Date,
provided, however, that the deadlines for the timing of the API
Court Meeting, the API General Meeting and the Sanction Hearing, to
be set out in the Scheme Document in due course, may be waived by
CREI , and the Long Stop Date may be extended by agreement in
writing between CREI and API (with the Panel's consent and as the
Court may allow, if such consent and/or approval is/are required).
If any of the dates and/or times in the Scheme Document change, the
revised dates and/or times will be notified to API Shareholders by
announcement through a Regulatory Information Service, with such
announcement being made available on API 's website at
www.abrdnpit.co.uk .
The Scheme Document will include full details of the Scheme,
together with notices of the API Court Meeting and the API General
Meeting and the expected timetable, and will specify the action to
be taken by Scheme Shareholders. It is expected that the Scheme
Document, together with the Forms of Proxy, will be published as
soon as practicable and in any event within 28 days of the date of
this Announcement (or such later date as may be agreed by CREI and
API with the consent of the Panel).
Subject, amongst other things, to the satisfaction or waiver of
the Conditions, it is expected that the Scheme will become
Effective in early April 2024. The Scheme will be governed by
Guernsey law and will be subject to the jurisdiction of the Court.
The Scheme will be subject to the applicable requirements of the
Takeover Code, the Panel, the London Stock Exchange and the
FCA.
CREI has reserved the right to elect, subject to the consent of
the Panel, for the Merger to be implemented by way of a Takeover
Offer. In this event, the Takeover Offer will be implemented on the
same terms, so far as applicable, as those which would apply to the
Scheme. If CREI does elect to implement the Merger by way of a
Takeover Offer, and if sufficient acceptances of such Takeover
Offer are received and/or sufficient API Shares are otherwise
acquired, it is the intention of CREI to apply the provisions of
Part XVIII of the Companies Law to acquire compulsorily any
outstanding API Shares to which such Merger relates.
Delisting OF API SHARES
Prior to the Scheme becoming Effective, it is intended that API
will make an application to the FCA for the cancellation of the
listing of API Shares on the Official List, and to the London Stock
Exchange to cancel the admission to trading of the API Shares on
the Main Market, in each case to take effect from or shortly after
the Effective Date.
It is expected that the last day of dealings in API Shares on
the Main Market will be the Business Day immediately prior to the
Sanction Hearing and no transfers will be registered after 6.00
p.m. (London time) on that date.
Following the Scheme becoming Effective. CREI (and/or its
nominee(s)) will acquire the Scheme Shares fully paid and free from
all liens, equitable interests, charges, encumbrances and other
third party rights of any nature whatsoever and together with all
rights attaching to them including the right to receive and retain
all dividends and distributions (if any) declared after the
Effective Date.
Admission of, and commencement of dealings in, the New CREI
Shares
Applications will be made to the FCA and to the London Stock
Exchange, respectively, for the New CREI Shares to be issued in
consideration for the Merger to be admitted to the premium listing
segment of the Official list and to be admitted to trading on the
Main Market.
It is expected that Admission will become effective and that
unconditional dealings in the New CREI Shares will commence on the
London Stock Exchange, at 8.00 a.m. (London time) on the first
Business Day following the date on which the Scheme becomes
Effective.
Details of how API Shareholders can hold, access and trade in
CREI Shares will be set out in the Scheme Document. API
Shareholders resident in the United Kingdom will be able to hold
their CREI Shares through any of the ways currently available to
CREI Shareholders, including through an intermediary of their own
choice should they wish to do so.
CREI Shareholder Approval
The Merger will be conditional on, among other things, the CREI
Resolution being passed by the requisite majority of CREI
Shareholders at the CREI General Meeting.
CREI is required to publish a prospectus in connection with the
admission of the New CREI Shares. Accordingly, CREI will prepare
the Combined Circular and Prospectus which will contain a notice
convening the CREI General Meeting and information relating to,
amongst other things, the Combined Group and the New CREI
Shares.
It is expected that the Combined Circular and Prospectus will be
published and posted to CREI Shareholders at the same time as the
Scheme Document is posted to API Shareholders. The Combined
Circular and Prospectus will be made available by CREI on its
website at www.custodianreit.com and by API on its website at
www.abrdnpit.co.uk . API and CREI urge API Shareholders to read the
Scheme Document and the Combined Circular and Prospectus carefully
as each will contain important information relating to the Merger.
API Shareholders are also advised to read the Combined Circular and
Prospectus, as it will contain important information relating to
the New CREI Shares. Any vote, decision in respect of or other
response to the Merger (or the Scheme, if applicable) should only
be made on the basis of the information contained in the Scheme
Document and the Combined Circular and Prospectus.
Disclosure of Interests
Except for the irrevocable undertakings referred to in paragraph
7 above and save as otherwise disclosed in this Announcement, as at
the close of business on the Latest Practicable Date, neither CREI
nor any of the CREI Directors, nor, so far as CREI is aware, any
person acting in concert (within the meaning of the Takeover Code)
with CREI :
has any interest in, or right to subscribe for, any relevant
securities of API; nor
has any short position in API Shares, including any short
position under a derivative, any agreement to sell, any delivery
obligation or right to require another person to purchase or take
delivery of relevant securities of API; nor
has borrowed or lent any relevant securities of API or entered
into any financial collateral arrangements relating to relevant
securities of API; nor
is party to any dealing arrangement of the kind referred to in
Note 11 on the definition of acting in concert in the Takeover Code
in relation to relevant securities of API.
An "interest in" securities for these purposes arises, in
summary, when a person has long economic exposure, whether absolute
or conditional, to changes in the price of securities (and a person
who only has a short position in securities is not treated as
interested in those securities). In particular, a person will be
treated as having an 'interest' by virtue of the ownership, voting
rights or control of securities, or by virtue of any agreement to
purchase, option in respect of, or derivative referenced to
securities.
In the interests of secrecy prior to this Announcement, it has
not been practicable for CREI to make enquiries of all of its
concert parties in advance of the release of this Announcement.
Therefore, if CREI becomes aware, following the making of such
enquiries, that any of CREI 's concert parties have any additional
interests in relevant securities of API , all relevant details in
respect of API 's concert parties will be included CREI 's Opening
Position Disclosure in accordance with the Takeover Code.
Consents
Each of Deutsche Numis, Lazard and Winterflood has given and not
withdrawn their consent to the publication of this Announcement
with the inclusion herein of the references to their names in the
form and context in which they appear.
RSM UK Corporate Finance LLP has given and not withdrawn its
consent to the inclusion in this Announcement of its report on the
Custodian Quantified Financial Benefits Statement, with the
inclusion herein to the references to its name and, where
applicable, report in the form and context in which it is
included.
Each of Knight Frank and Savills has given and not withdrawn its
consent to the publication of its valuation report(s) in this
Announcement with the inclusion herein to the references to its
name and, where applicable, report in the form and context in which
it is included.
Documents published on a website
In accordance with Rule 26.2 of the Takeover Code, copies of the
following documents will, to the extent not already published
there, by no later than 12.00 noon on the Business Day following
the date of this Announcement, be published on CREI 's website at
www.custodianreit.com and API 's website at www.abrdnpit.co.uk
during the Offer Period:
this Announcement;
the irrevocable undertakings and a letter of intent referred to
in paragraph 7 above and summarised in Appendix 3 to this
Announcement;
the Confidentiality Agreement referred to in paragraph 11
above;
the consent letters from each of Deutsche Numis, Lazard,
Winterflood, Knight Frank and Savills referred to in paragraph 18
above;
the Knight Frank valuation report in respect of certain
properties comprising the CREI portfolio as set out in Part A of
Appendix 4 of this Announcement;
the Savills valuation report in respect of certain properties
comprising the CREI portfolio as set out in Part B of Appendix 4 of
this Announcement; and
the Knight Frank valuation report in respect of the API
portfolio as set out in Part C of Appendix 4 of this
Announcement.
The contents of CREI 's website and API 's website, and any
website accessible from hyperlinks, are not incorporated into and
do not form part of this Announcement.
General
Appendix 2 to this Announcement contains bases and sources of
certain information contained in this Announcement. Details of
irrevocable undertakings and the letter of intent received are set
out in Appendix 3. Property valuation reports for CREI and API
(each as at 31 December 2023) pursuant to Rule 29 of the Takeover
Code are set out in Appendix 4. Certain terms used in this
Announcement are defined in Appendix 6.
In the event that the assets within either CREI 's or API 's
property portfolios were to be sold at the valuations contained in
the valuation reports set out in Appendix 4 to this Announcement,
any gains realised on such disposals may be subject to taxation in
the UK and/or (in the case of API ) Guernsey.
Generally, disposals by a UK REIT of assets located in the UK
held for the purpose of a property rental business should be exempt
from UK corporation tax, however there are specific rules which can
result in assets held as part of the property rental business being
subject to tax on disposal, for example when a property is
materially developed and sold within three years of completion of
that development. In connection with the Merger it is not
contemplated that the aforementioned liability to taxation will
crystallise.
For the purposes of Rule 29.5 of the Takeover Code, the CREI
Board confirms that each of Knight Frank and Savills has confirmed
to it that an updated valuation of CREI 's property portfolio as at
the date of this Announcement would not be materially different
from the valuation given by each of Knight Frank and Savills as at
31 December 2023 and contained in Knight Frank's and Savills'
valuation reports respectively, set out in Appendix 4 to this
Announcement.
For the purposes of Rule 29.5 of the Takeover Code, the API
Board confirms that Knight Frank has confirmed to it that an
updated valuation of API 's property portfolio as at the date of
this Announcement would not be materially different from the
valuation given by Knight Frank as at 31 December 2023 and
contained in Knight Frank's valuation report set out in Appendix 4
to this Announcement.
For the purposes of Rule 28 of the Takeover Code, the Quantified
Financial Benefits Statement is the responsibility of CREI and the
CREI Directors. Appendix 5 to this Announcement sets out the
Quantified Financial Benefits Statement relating to cost savings
and synergies arising out of the Merger and provides underlying
information and bases of belief. Appendix 5 also includes reports
from CREI 's reporting accountant, RSM UK Corporate Finance LLP,
and its financial adviser Deutsche Numis in connection with the
Quantified Financial Benefits Statement, as required pursuant to
Rule 28.1(a) of the Takeover Code, and provides underlying
information and bases for the accountant's and advisers' respective
reports.
This Announcement does not constitute an offer for sale of any
securities or an invitation to purchase or subscribe for any
securities. API Shareholders are advised to read carefully the
Scheme Document and related Forms of Proxy once they have been
dispatched.
A pre-recorded video briefing in relation to the Merger,
presented by Richard Shepherd-Cross of Custodian Capital, is
available on CREI's website at www.custodianreit.com .
Enquiries
Custodian Property Income REIT plc (CREI)
David MacLellan (Chair)
via Deutsche Numis
Deutsche Numis (Financial Adviser and Corporate
Broker to CREI)
Nathan Brown
Stuart Ord
Alexander Kladov
George Shiel +44 20 7260 1000
FTI Consulting (Financial PR Adviser to CREI)
Richard Sunderland
Andrew Davis
Oliver Parsons +44 20 3727 1000
abrdn Property Income Trust Limited (API)
James Clifton-Brown (Chair)
via Winterflood
Lazard (Financial Adviser to API)
Patrick Long
Jolyon Coates +44 20 7187 2000
Winterflood (Corporate Broker to API)
Neil Langford +44 20 3100 0160
Stephenson Harwood LLP is acting as English legal adviser to
CREI in connection with the Merger.
Addleshaw Goddard LLP is acting as English legal adviser to API
in connection with the Merger.
Important notices
Numis Securities Limited (which is trading for these purposes as
Deutsche Numis) (" Deutsche Numis "), which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom,
is acting exclusively for CREI and for no one else in connection
with the Merger and/or any other matter referred to in this
Announcement and will neither regard any other person as its client
nor be responsible to anyone other than CREI for providing the
protections afforded to its clients or for providing advice in
connection with the Merger, the contents of this Announcement, or
any other matters referred to in this Announcement. Neither
Deutsche Numis nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct, indirect,
consequential, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of Deutsche Numis in
connection with this Announcement, any statement or other matter or
arrangement referred to herein or otherwise.
Lazard & Co., Limited (" Lazard "), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority,
is acting exclusively as financial adviser to API and no one else
in connection with the matters set out in this Announcement and
will not be responsible to anyone other than API for providing the
protections afforded to clients of Lazard nor for providing advice
in relation to the matters set out in this Announcement. Neither
Lazard nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Lazard in connection with this
Announcement, any statement contained herein or otherwise.
Winterflood Securities Limited ("Winterflood"), which is
authorised and regulated by the Financial Conduct Authority in the
United Kingdom, is acting exclusively for API and no-one else in
connection with the matters set out in this Announcement and will
not be responsible to anyone other than API for providing the
protections afforded to customers of Winterflood or for providing
advice in relation to the matters set out in this Announcement.
Neither Winterflood nor any of its affiliates owes or accepts any
duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise)
to any person who is not a client of Winterflood in connection with
this Announcement, any statement contained herein or otherwise.
Further information
This Announcement is for information purposes only and is not
intended to and does not constitute, or form part of an offer,
invitation or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of any
securities, or the solicitation of any vote or approval in any
jurisdiction, pursuant to the Merger or otherwise, nor shall there
be any sale, issuance or transfer of securities of API in any
jurisdiction in contravention of applicable law. The Merger will be
made solely pursuant to the terms of the Scheme Document (or, if
the Merger is implemented by way of a Takeover Offer, the Offer
Document), which will contain the full terms and conditions of the
Merger, including details of how API Shareholders may vote in
respect of the Merger. Any vote, approval, decision in respect of,
or other response to, the Merger should be made only on the basis
of the information contained in the Scheme Document and the
Combined Circular and Prospectus (or any other document by which
the Merger is made by way of a Takeover Offer).
CREI will prepare the Combined Circular and Prospectus,
containing information on the New CREI Shares and the Combined
Group. CREI and API urge API Shareholders to read the Scheme
Document and the Combined Circular and Prospectus carefully when
they become available because they will contain important
information in relation to the Merger, the New CREI Shares and the
Combined Group.
The statements contained in this Announcement are made as at the
date of this Announcement, unless some other time is specified in
relation to them, and the release of this Announcement shall not
give rise to any implication that there has been no change in the
facts set out in this Announcement since such date. This
Announcement does not constitute a prospectus or prospectus
equivalent document.
No person should construe the contents of this Announcement as
legal, financial or tax advice. If you are in any doubt about the
contents of this Announcement or the action you should take, you
are recommended to seek your own independent financial advice
immediately from your stockbroker, bank manager, solicitor,
accountant or from an independent financial adviser duly authorised
under FSMA if you are resident in the United Kingdom, or another
appropriately authorised independent financial adviser, if you are
in a territory outside the United Kingdom.
Neither the GFSC nor the States of Guernsey take any
responsibility for the financial soundness of API or for the
correctness of any of the statements made or opinions expressed
with regard to it.
Overseas Shareholders
This Announcement has been prepared for the purpose of complying
with Guernsey law, English law, the Takeover Code, the Market Abuse
Regulation, the Disclosure Guidance and Transparency Rules and the
Listing Rules and information disclosed may not be the same as that
which would have been disclosed if this Announcement had been
prepared in accordance with the laws of jurisdictions outside the
United Kingdom or Guernsey. Nothing in this Announcement should be
relied on for any other purpose.
The release, publication or distribution of this Announcement in
or into certain jurisdictions other than the United Kingdom or
Guernsey may be restricted by the laws and/or regulations of those
jurisdictions and therefore persons into whose possession this
Announcement comes who are subject to the laws and/or regulations
of any jurisdiction other than the United Kingdom or Guernsey
should inform themselves about and observe any such applicable laws
and/or regulations in their jurisdiction. In particular, the
ability of persons who are not resident in the United Kingdom or
Guernsey to vote their Scheme Shares or API Shares (as applicable)
with respect to the Scheme at the API Court Meeting or the API
Resolution at the API General Meeting, or to appoint another person
as proxy to vote at the API Court Meeting or the API General
Meeting on their behalf, may be affected by the laws of the
relevant jurisdiction in which they are located. Further details in
relation to Overseas Shareholders will be contained in the Scheme
Document. Any failure to comply with any such restrictions may
constitute a violation of the securities laws of any such
jurisdiction. To the fullest extent permitted by applicable law,
the companies and persons involved in the Merger disclaim any
responsibility or liability for the violation of such restrictions
by any person.
Unless otherwise determined by CREI or required by the Takeover
Code, and permitted by applicable law and regulation, the Merger
will not be made available, in whole or in part, directly or
indirectly, in, into or from a Restricted Jurisdiction where to do
so would violate the laws in that jurisdiction and no person may
vote in favour of the Merger by any such use, means,
instrumentality or from within a Restricted Jurisdiction or any
other jurisdiction if to do so would constitute a violation of the
laws of that jurisdiction. Copies of this Announcement and any
formal documentation relating to the Merger are not being, and must
not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in or into or from any Restricted Jurisdiction
and persons receiving such documents (including custodians,
nominees and trustees) must not mail or otherwise forward,
distribute or send them in or into or from any Restricted
Jurisdiction. Doing so may render invalid any related purported
vote in respect of the Merger. If the Merger is implemented by way
of a Takeover Offer (unless otherwise permitted by applicable law
and regulation), the Takeover Offer may not be made directly or
indirectly, in or into, or by the use of mails or any means or
instrumentality (including, but not limited to, facsimile, e-mail
or other electronic transmission, telex or telephone) of interstate
or foreign commerce of, or of any facility of a national, state or
other securities exchange of any Restricted Jurisdiction and the
Takeover Offer may not be capable of acceptance by any such use,
means, instrumentality or facilities.
Further details in relation to Overseas Shareholders will be
contained in the Scheme Document.
Forward-looking statements
This Announcement (including information incorporated by
reference into this Announcement), oral statements made regarding
the Merger, and other information published by CREI and API contain
statements about CREI, API and/or the Combined Group that are or
may be deemed to be "forward-looking statements". All statements
other than statements of historical facts included in this
Announcement, may be forward-looking statements. Forward-looking
statements are prospective in nature and are not based on
historical facts, but rather on current expectations and
projections of CREI and API about future events, and are therefore
subject to risks and uncertainties which could cause actual results
to differ materially from the future results expressed or implied
by the forward-looking statements.
The forward-looking statements contained in this Announcement
include statements relating to the expected effects of the Merger
on CREI and API, the expected timing and scope of the Merger and
other statements other than historical facts. Often, but not
always, forward-looking statements can be identified by the use of
forward-looking words such as "plans", "expects" or "does not
expect", "is expected", "is subject to", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases
or statements that certain actions, events or results "may",
"could", "should", "would", "might" or "will" be taken, occur or be
achieved. Forward looking statements include statements relating to
the following: (i) future capital expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial
condition, dividend policy, losses and future prospects; and (ii)
business and management strategies and the expansion and growth of
CREI's or API's or the Combined Group's operations and potential
synergies resulting from the Merger.
Although CREI and API believe that the expectations reflected in
such forward-looking statements are reasonable, neither CREI nor
API can give assurance that such expectations will prove to be
correct. By their nature, forward-looking statements involve risk
and uncertainty because they relate to events and depend on
circumstances that will occur in the future.
There are a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by such forward-looking statements. These factors include,
but are not limited to: the ability to complete the Merger; the
ability to obtain requisite regulatory and shareholder approvals
and the satisfaction of other Conditions on the proposed terms;
changes in the global political, economic, business and competitive
environments and in market and regulatory forces; changes in future
exchange and interest rates; changes in tax rates; future business
combinations or disposals; changes in general economic and business
conditions; changes in the behaviour of other market participants;
the anticipated benefits from the Merger not being realised as a
result of changes in general economic and market conditions in the
countries in which CREI and API operate; weak, volatile or illiquid
capital and/or credit markets; changes in the degree of competition
in the geographic and business areas in which CREI and API operate;
and changes in laws or in supervisory expectations or requirements.
Other unknown or unpredictable factors could cause actual results
to differ materially from those expected, estimated or projected in
the forward-looking statements. If any one or more of these risks
or uncertainties materialises or if any one or more of the
assumptions proves incorrect, actual results may differ materially
from those expected, estimated or projected. Such forward-looking
statements should therefore be construed in the light of such
factors.
Neither CREI nor API, nor any of their respective associates or
directors, officers or advisers, provides any representation,
assurance or guarantee that the occurrence of the events expressed
or implied in any forward-looking statements in this Announcement
will actually occur. Given the risks and uncertainties, you are
cautioned not to place any reliance on these forward-looking
statements. Other than in accordance with their legal or regulatory
obligations, neither CREI nor API is under any obligation, and each
of CREI and API expressly disclaim any intention or obligation, to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Disclosure requirements of the Takeover Code
Under Rule 8.3(a) of the Takeover Code, any person who is
interested in 1 per cent. or more of any class of relevant
securities of an offeree company or of any securities exchange
offeror (being any offeror other than an offeror in respect of
which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following
the commencement of the offer period and, if later, following the
announcement in which any securities exchange offeror is first
identified. An Opening Position Disclosure must contain details of
the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree
company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be
made by no later than 3.30 p.m. (London time) on the 10th Business
Day following the commencement of the offer period and, if
appropriate, by no later than 3.30 p.m. (London time) on the 10(th)
Business Day following the announcement in which any securities
exchange offeror is first identified. Relevant persons who deal in
the relevant securities of the offeree company or of a securities
exchange offeror prior to the deadline for making an Opening
Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Takeover Code, any person who is, or
becomes, interested in 1% or more of any class of relevant
securities of the offeree company or of any securities exchange
offeror must make a Dealing Disclosure if the person deals in any
relevant securities of the offeree company or of any securities
exchange offeror. A Dealing Disclosure must contain details of the
dealing concerned and of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of
(i) the offeree company and (ii) any securities exchange
offeror(s), save to the extent that these details have previously
been disclosed under Rule 8. A Dealing Disclosure by a person to
whom Rule 8.3(b) applies must be made by no later than 3.30 p.m.
(London time) on the Business Day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Quantified Financial Benefits Statement
Statements of estimated cost savings and synergies relate to
future actions and circumstances which, by their nature, involve
risks, uncertainties and contingencies. As a result, the cost
savings and synergies referred to may not be achieved, may be
achieved later or sooner than estimated, or those achieved could be
materially different from those estimated. Neither the Quantified
Financial Benefits Statement nor any other statement in this
Announcement should be construed as a profit forecast or
interpreted to mean that the Combined Group's earnings in the first
full year following the Effective Date, or in any subsequent
period, would necessarily match or be greater than or be less than
those of CREI or API for the relevant preceding financial period or
any other period. For the purposes of Rule 28 of the Takeover Code,
the Quantified Financial Benefits Statement contained in this
Announcement is the responsibility of CREI and the CREI
Directors.
No profit forecasts or estimates
No statement in this Announcement is intended as a profit
forecast or profit estimate for any period and no statement in this
Announcement should be interpreted to mean that earnings or
earnings per share for CREI or API for the current or future
financial years would necessarily match or exceed the historical
published earnings or earnings per share for CREI or API.
Rounding
Certain figures included in this Announcement have been
subjected to rounding adjustments. Accordingly, figures shown for
the same category presented in different tables may vary slightly
and figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures that precede them.
Publication on a website
In accordance with Rule 26.1 of the Takeover Code, a copy of
this Announcement will be made available, subject to certain
restrictions relating to persons resident in Restricted
Jurisdictions, on CREI's website at www.custodianreit.com and API's
website at www.abrdnpit.co.uk by no later than 12 noon (London
time) on the first Business Day following the date of this
Announcement.
For the avoidance of doubt, neither the contents of these
websites nor the contents of any websites accessible from any
hyperlinks is incorporated into or forms part of this
Announcement.
Requesting hard copy documents
In accordance with Rule 30.3 of the Takeover Code, API
Shareholders may request a hard copy of this Announcement (and any
information incorporated by reference in this Announcement), free
of charge, by contacting Northern Trust during business hours on
01481 745001 (from within the United Kingdom) and +44 (0) 1481
745001 (from outside the United Kingdom) or by submitting a request
in writing to The Company Secretary, at team_api@ntrs.com. Calls
are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines will be open between 9.00 a.m.
to 5.30 p.m., Monday to Friday excluding public holidays in England
and Wales.
For persons who receive a copy of this Announcement in
electronic form or via a website notification, a hard copy of this
Announcement will not be sent unless so requested. Such persons may
also request that all future documents, announcements and
information to be sent to them in relation to the Merger should be
in hard copy form.
Scheme Process
In accordance with Section 5 of Appendix 7 of the Takeover Code,
API will announce through a Regulatory Information Service key
events in the Scheme process including the outcomes of the API
Meetings and the Sanction Hearing.
Unless otherwise consented to by the Court and the Panel, any
modification or revision to the Scheme will be made no later than
the date which is 14 days prior to the API Meetings (or any later
date to which such meetings are adjourned). In accordance with
Section 11 of Appendix 7 of the Takeover Code, if the Scheme lapses
or is withdrawn all documents of title and other documents lodged
will be returned as soon as practicable and in any event within 14
days of such lapsing or withdrawal.
Information relating to API Shareholders
Please be aware that addresses, electronic addresses and certain
other information provided by API Shareholders, persons with
information rights and other relevant persons for the receipt of
communications from API may be provided to CREI during the Offer
Period as required under Section 4 of Appendix 4 to the Takeover
Code to comply with Rule 2.11(c) of the Takeover Code.
Rule 2.9 of the Takeover Code
For the purposes of Rule 2.9 of the Takeover Code, CREI confirms
that, as at the close of business on the Latest Practicable Date,
it had in issue 440,850,398 ordinary shares of one penny which
carry voting rights of one vote per share and are admitted to
trading on the London Stock Exchange with ISIN GB00BJFLFT45.
For the purposes of Rule 2.9 of the Takeover Code, API confirms
that, as at the close of business on the Latest Practicable Date,
it had in issue 381,218,977 ordinary shares of one penny each
(excluding any shares held in treasury) which carry voting rights
of one vote per share and are admitted to trading on the London
Stock Exchange with ISIN GB0033875286 .
Appendix 1
CONDITIONS TO AND CERTAIN FURTHER TERMS OF THE MERGER
Part A
Conditions to the Scheme and Merger
1. The Merger will be conditional upon the Scheme becoming
unconditional and becoming Effective, subject to the provisions of
the Takeover Code, by no later than 11:59 p.m. (London time) on the
Long Stop Date or such later date as CREI and API may, with the
consent of the Panel, agree and (if required) the Court may
allow.
Conditions of the Scheme
2. The Scheme will be conditional upon:
(a)
(i) its approval by a majority in number representing 75 per
cent. or more of the voting rights of those Scheme Shareholders (or
the relevant class or classes thereof) who are on the register of
members of API at the Voting Record Time, and who are present and
vote, whether in person or by proxy, at the API Court Meeting and
at any separate class meeting which may be required by the Court,
or, in each case, at any adjournment of any such meeting; and
(ii) such API Court Meeting and any separate class meeting which
may be required by the Court or any adjournment of any such meeting
being held on or before the 22 (nd) day after the expected date of
the API Court Meeting to be set out in the Scheme Document (or such
later date (if any) as may be agreed between CREI and API with the
consent of the Panel and (if required) that the Court may
allow);
(b)
(i) the API Resolution being duly passed by the requisite
majority or majorities of API Shareholders at the API General
Meeting (or any adjournment thereof); and
(ii) the API General Meeting, or any adjournment of that
meeting, being held on or before the 22 (nd) day after the expected
date of the API General Meeting to be set out in the Scheme
Document (or such later date (if any) as may be agreed between CREI
and API with the consent of the Panel and (if required) that the
Court may allow); and
(c)
(i) the sanction of the Scheme by the Court (with or without
modification, but subject to any such modification being on terms
acceptable to CREI and API); and
(ii) the Sanction Hearing being held on or before the 22 (nd)
day after the expected date of the Sanction Hearing to be set out
either in (X) the Scheme Document (or such later date (if any) as
may be agreed between CREI and API with the consent of the Panel
and, if required, that the Court may allow); or (Y) in the event
that such expected date remains unknown at the time of publication
of the Scheme Document and the Scheme Document identifies any date
as indicative only, in any update announcement issued through a
Regulatory Information Service pursuant to paragraph 6(a) of
Appendix 7 of the Takeover Code (or such later date (if any) as may
be agreed between CREI and API, with the consent of the Panel and
(if required) that the Court may allow);
General Conditions
3. In addition, subject to: (i) the terms of Part B of this
Appendix 1; and (ii) the requirements of the Panel, CREI and API
have agreed that the Merger will be conditional upon the following
Conditions and, accordingly, the necessary actions to make the
Scheme Effective will not be taken unless the following Conditions
(as amended if appropriate) have been satisfied or, where relevant,
waived prior to the Scheme being sanctioned by the Court:
(a) the CREI Resolution being duly passed by the requisite
majority at the CREI General Meeting (or at any adjournment
thereof) provided that the CREI General Meeting may not be
adjourned beyond the 22 (nd) day after the expected date of the
CREI General Meeting to be set out in the Combined Circular and
Prospectus in due course (or such later date (if any) as may be
agreed between CREI and API, with the consent of the Panel);
(b) the FCA having acknowledged to CREI or its agent (and such
acknowledgement not having been withdrawn) that the application for
the admission of the New CREI Shares to the Official List with a
premium listing has been approved and (after satisfaction of any
conditions to which such approval is expressed to be subject
("Listing Conditions")) that admission will become effective as
soon as a dealing notice has been issued by the FCA and any Listing
Conditions having been satisfied;
(c) the London Stock Exchange having acknowledged to CREI or its
agent (and such acknowledgement not having been withdrawn) that the
New CREI Shares will be admitted to trading on the Main Market
;
(d) all material notifications, filings and/or applications
which are deemed necessary by CREI and API having been made, all
necessary waiting and other time periods (including any extensions
of such waiting and other time periods) under any applicable
legislation or regulation of any relevant jurisdiction having
expired, lapsed or been terminated (as appropriate) and all
statutory or regulatory obligations in any relevant jurisdiction
having been complied with, in each case in connection with the
Merger or the acquisition or proposed acquisition by any member of
the Wider CREI Group of any shares or other securities in, or
control of, any member of the Wider API Group;
(e) all Authorisations which are deemed necessary by CREI and
API in any relevant jurisdiction for or in respect of the Merger
(or its implementation) or the acquisition, or proposed
acquisition, of any shares or other securities (or the equivalent)
in, or control of, API or any other member of the Wider API Group
by CREI or any member of the Wider CREI Group, having been
obtained, in terms and in a form reasonably satisfactory to CREI
and API from all appropriate Third Parties or from any persons or
bodies with whom any member of the Wider CREI Group or any other
member of the Wider API Group has entered into contractual
arrangements, and all such Authorisations, together with all
Authorisations deemed necessary by CREI and API for any member of
the Wider CREI Group and any member of the Wider API Group to carry
on its business, remaining in full force and effect and all filings
necessary for such purpose having been made, and there being no
notice or other intimation of any intention to revoke, suspend,
restrict, modify or not to renew any of the same;
General regulatory
(f) all Authorisations which are necessary in any relevant
jurisdiction for or in respect of the Merger (or its
implementation) or the acquisition, or proposed acquisition, of any
shares or other securities (or the equivalent) in, or control of,
API or any other member of the Wider API Group by CREI or any
member of the Wider CREI Group, having been obtained, in terms and
in a form reasonably satisfactory to CREI and API from all
appropriate Third Parties or from any persons or bodies with whom
any member of the Wider CREI Group or any member of the Wider API
Group has entered into contractual arrangements, and all such
Authorisations, together with all Authorisations necessary for any
member of the Wider CREI Group and Wider API Group to carry on its
business, remaining in full force and effect and all filings
necessary for such purpose having been made, and there being no
notice or other intimation of any intention to revoke, suspend,
restrict, modify or not to renew any of the same that, in any case
to an extent which is or would be material in the context of the
Wider API Group and/or the Wider CREI Group taken as a whole or in
the context of the Merger:
require, prevent or materially delay any divestiture, or alter
the terms envisaged for any proposed divestiture, by any member of
the Wider CREI Group or any member of the Wider API Group of all or
any part of their respective businesses, assets or property, or
impose any limitation on the ability of all or any of them to
conduct their respective businesses (or any part thereof) or to
own, control or manage any of their respective assets or properties
(or any part thereof);
require, prevent or materially delay any divestiture, or alter
the terms envisaged for any proposed divestiture, by any member of
the Wider CREI Group, of any shares or other securities (or the
equivalent) in API or any member of the Wider API Group;
impose any limitation on, or result in a material delay in, the
ability of any member of the Wider CREI Group, directly or
indirectly, to acquire, hold or to exercise effectively all or any
rights of ownership in respect of shares or other securities (or
the equivalent) in any member of the Wider API Group or the Wider
CREI Group or on the ability of any member of the Wider API Group
or any member of the Wider CREI Group, directly or indirectly, to
hold or to exercise effectively all or any rights of ownership in
respect of shares or other securities (or the equivalent) in, or to
exercise voting or management control over, any such member;
make the Merger, its implementation or the acquisition or
proposed acquisition of any shares or other securities (or the
equivalent) in, or control or management of API or any member of
the Wider API Group by CREI or any member of the Wider CREI Group
void, unenforceable and/or illegal under the laws of any
jurisdiction, or otherwise, directly or indirectly, prevent or
prohibit, restrain, restrict, delay or otherwise interfere with the
implementation of the same, or impose additional adverse conditions
or obligations with respect to, or otherwise challenge, impede,
interfere with the Merger (or its implementation) or such
acquisition, or require material amendment to the terms of the
Merger or the acquisition of any shares or other securities (or the
equivalent) in, or control or management of, API by any member of
the Wider CREI Group;
require (save as envisaged in the implementation of the Merger)
any member of the Wider CREI Group or any member of the API Group
to acquire, or to offer to acquire, any shares or other securities
(or the equivalent) in, or any interest in any of the assets owned
by, any member of the Wider CREI Group or any member of the API
Group owned by any Third Party, or to sell or offer to sell any
shares or other securities (or their equivalent) or any interest in
any of the assets owned by any member of the Wider CREI Group or
the Wider API Group;
limit the ability of any member of the Wider CREI Group or the
Wider API Group to conduct, integrate or co-ordinate its business,
or any part of it, with all or any part of the businesses of any
other members of the Wider CREI Group and/or the Wider API
Group;
result in any member of the Wider CREI Group or any member of
the Wider API Group ceasing to be able to carry on business under
any name under which it presently carries on business; or
otherwise materially adversely affect any or all of the
business, assets, profits or prospects of any member of the Wider
CREI Group or of any member of the Wider API Group,
and all applicable waiting and other time periods (including any
extensions thereof) during which any such antitrust regulator or
Third Party could decide to take, institute, implement or threaten
any such action, proceeding, suit, investigation, enquiry or
reference or take any other step under the laws of any relevant
jurisdiction in respect of the Merger or the acquisition of any API
Shares or otherwise intervene having expired, lapsed or been
terminated (as the case may be);
Certain matters arising as a result of any arrangement,
agreement etc.
(g) save as Disclosed, there being no provision of any
agreement, arrangement, lease, licence, permit, franchise or other
instrument to which any member of the Wider API Group or the Wider
CREI Group is a party, or by or to which any such member, or any of
its assets, is or are or may be bound, entitled or subject to, or
any event or circumstance, which, in each case as a consequence of
the Merger (or its implementation) or the proposed acquisition by
CREI or any member of the Wider CREI Group, or otherwise of any
shares or other securities (or the equivalent) in, or control or
management of, API or any member of the Wider API Group, would or
might reasonably be expected to result in any of the following, in
any case to an extent which is or would be material in the context
of the Wider API Group and/or the Wider CREI Group taken as a whole
or in the context of the Merger:
(i) any monies borrowed by, or any other indebtedness or
liabilities (actual or contingent) of, or any grant available to,
any member of the Wider API Group or the Wider CREI Group, being or
becoming repayable or capable of being declared repayable
immediately or earlier than their or its stated maturity date or
repayment date, or the ability of any such member to borrow monies
or incur any indebtedness being withdrawn or inhibited, or being
capable of becoming or being withdrawn or inhibited;
(ii) any asset or interest of any member of the Wider API Group
or the Wider CREI Group, or any asset the use of which is enjoyed
by any member of the Wider API Group or the Wider CREI Group, being
or falling to be disposed of or charged or ceasing to be available
to any member of the Wider API Group or the Wider CREI Group, or
any right arising under which any such asset or interest could be
required to be disposed of or charged or could cease to be
available to any member of the Wider API Group or the Wider CREI
Group, otherwise than in the ordinary course of business;
(iii) the creation or enforcement of any mortgage, charge or
other security interest over the whole or any part of the business,
property, assets or interest of any member of the Wider API Group
or the Wider CREI Group, or any such mortgage, charge, encumbrance
or other security interest (wherever and whenever created, arising
or having arisen) bring enforced or becoming enforceable;
(iv) any arrangement, agreement, lease, licence, permit,
franchise or other instrument, or the rights, liabilities,
obligations or interests of any member of the Wider API Group or
the Wider CREI Group, thereunder, being, terminated, adversely
modified or adversely affected or any adverse action being taken or
arising thereunder or any onerous obligation or liability arising
thereunder;
(v) the rights, liabilities, obligations or interests of any
member of the Wider API Group or the Wider CREI Group, in, or the
business of any such member with, any person, firm, company or body
(or any arrangement or arrangements relating to any such interest
or business) being terminated, adversely modified or affected other
than as directed, requested and/or required by CREI or API (as
applicable);
(vi) the value of, or the financial or trading position or
profits of, any member of the Wider API Group or the Wider CREI
Group, being prejudiced or adversely affected; or
(vii) the creation or acceleration of any liability (actual or
contingent) by any member of the Wider API Group or the Wider CREI
Group, other than trade creditors or other liabilities incurred in
the ordinary course of business or in connection with the
Merger.
Certain events occurring since 31 December 2022
(h) save as Disclosed, no member of the Wider API Group having since 31 December 2022:
(i) issued or agreed to issue, or authorised or proposed or
announced its intention to authorise or propose the issue of,
additional shares of any class, or securities (or the equivalent)
or securities convertible into, or exchangeable for, or rights,
warrants or options to subscribe for or acquire, any such shares,
securities (or the equivalent) or convertible securities, or
transferred or sold or agreed to transfer or sell or authorised or
proposed the transfer or sale of API Shares out of treasury,
except, where relevant, as between API and wholly-owned
subsidiaries of API or between the wholly-owned subsidiaries of
API;
(ii) recommended, declared, paid or made, or proposed to
recommend, declare, pay or make, any bonus, dividend or other
distribution (whether payable in cash or otherwise) other than the
Permitted Dividends or any dividends or other distributions
(whether payable in cash or otherwise) lawfully paid or made by any
wholly-owned subsidiary of API to API or any of their respective
wholly-owned subsidiaries;
(iii) except for transactions between API and its respective
wholly-owned subsidiaries, or between such wholly-owned
subsidiaries of API, implemented, effected, authorised or proposed,
or announced its intention to implement, effect, authorise or
propose, any acquisition of any body corporate, partnership or
business, merger, demerger, reconstruction, amalgamation, scheme,
commitment or offer or disposal of assets or shares or loan capital
(or the equivalent thereof);
(iv) undertaken:
(A) a conversion under Part V of the Companies Law;
(B) an amalgamation under Part VI of the Companies Law;
(C) a migration under Part VII of the Companies Law; or
(D) an arrangement or reconstruction (other than the Scheme)
under Part VIII of the Companies Law;
(v) except for transactions between API and its respective
wholly-owned subsidiaries, or between such wholly-owned
subsidiaries of API, acquired or disposed of or transferred,
mortgaged, charged or created any security interest over any
material asset (including shares in any undertaking and trade
investments) or any right, title or interest in any asset, or
authorised, proposed or announced any intention to do the same;
(vi) except for transactions between API and its respective
wholly-owned subsidiaries, or between such wholly-owned
subsidiaries of API, issued, authorised or proposed or announced an
intention to authorise or propose the issue of, or made any change
in or to the terms of, any debentures or other trade credit
incurred in the ordinary course of business, or become subject to
any contingent liability or incurred or increased any indebtedness
or other liability (actual or contingent), which is material in the
context of the Wider API Group taken as a whole;
(vii) entered into, varied, authorised, proposed, or announced
an intention to enter into or vary, any contract, arrangement,
agreement, transaction or commitment (whether in respect of capital
expenditure or otherwise) which is of a long term, unusual or
onerous nature or magnitude, or which is or which involves or could
involve an obligation of a nature or magnitude which is or could
reasonably be expected to be restrictive on the business of any
member of the Wider API Group which, taken together with any other
such transaction, arrangement, agreement, contract or commitment,
is material in the context of the Wider API Group taken as a
whole;
(viii) entered into, or materially varied the terms of, or made
any offer (which remains open for acceptance) to enter into or vary
the terms of, any contract, service agreement, commitment or
arrangement with any director of any member of the Wider API
Group;
(ix) purchased, redeemed or repaid, or announced any proposal to
purchase, redeem or repay, any of its own shares or other
securities (or the equivalent) or reduced or made any other change
to any part of its share capital;
(x) except in the ordinary course of business, waived, settled,
abandoned or compromised any claim which is material in the context
of the Wider API Group taken as a whole;
(xi) made any material alteration to its memorandum or articles
of incorporation or other incorporation documents, in each case
other than in connection with the implementation of the Merger;
(xii) terminated or varied the terms of any agreement or
arrangement between any member of the Wider API Group and any other
person in a manner which would, or might reasonably be expected to,
have a material adverse effect on the financial position or
prospects of the Wider API Group taken as a whole other than as
directed, required and/or requested by CREI;
(xiii) put in place any pension schemes for its directors or
their dependants, or made or agreed or consented to any change
to:
(A) the terms of the trust deeds and rules constituting the
pension scheme(s) (if any) established by any member of the Wider
API Group for its directors or their dependants;
(B) the contributions payable to any such scheme(s) or to the
benefits which accrue, or to the pensions which are payable,
thereunder;
(C) the basis on which qualification for, or accrual or
entitlement to, such benefits or pensions are calculated or
determined; or
(D) the basis upon which the liabilities (including pensions) of
such pension schemes are funded, valued, made, agreed or consented
to;
(xiv) been unable, or admitted in writing that it is unable, to
pay its debts or commenced negotiations with one or more of its
creditors with a view to rescheduling or restructuring any of its
indebtedness, or having stopped or suspended (or threatened to stop
or suspend) payment of its debts generally or ceased or threatened
to cease carrying on all or a substantial part of its business;
(xv) taken or proposed any steps or corporate action or had any
legal proceedings instituted or threatened against it in relation
to the suspension of payments, a moratorium of any indebtedness,
its winding-up (voluntary or otherwise), dissolution,
reorganisation or for the appointment of a receiver, administrator,
manager, administrative receiver, trustee or similar officer of all
or any of its assets or revenues or any analogous or equivalent
steps or proceedings in any jurisdiction or appointed any analogous
person in any jurisdiction or had any such person appointed;
(xvi) entered into, implemented or authorised the entry into,
any joint venture, asset or profit sharing arrangement, partnership
or merger of business or corporate entities;
(xvii) entered into any agreement, arrangement, commitment or
contract or passed any resolution or made any offer (which remains
open for acceptance) with respect to or announced an intention to,
or to propose to, effect any of the transactions, matters or events
referred to in this Condition 3(h); or
(xviii) taken (or agreed or proposed to take) any action which
requires, or would require, the consent of the Panel or the
approval of API Shareholders at a general meeting of API in
accordance with, or as contemplated by, Rule 21.1 of the Takeover
Code;
No adverse change
(i) save as Disclosed since 31 December 2022:
(i) no adverse change or deterioration having occurred in the
business, assets, financial or trading position or profits or
prospects or operational performance of the Wider API Group or
Wider CREI Group taken as a whole, in each case to an extent which
is or could be material in the context of the Wider API Group
and/or the Wider CREI Group taken as a whole;
(ii) no litigation, arbitration proceedings, prosecution or
other legal proceedings having been threatened, announced or
instituted by or against or remaining outstanding against or in
respect of, any member of the Wider API Group or Wider CREI Group
or to which any member of the Wider API Group or Wider CREI Group
is or may become a party (whether as a plaintiff, defendant or
otherwise) having been instituted, announced, implemented or
threatened in writing by or against or remaining outstanding in
respect of any member of the Wider API Group or Wider CREI Group
which in any such case is or might reasonably be expected to have a
material adverse effect on the Wider API Group or Wider CREI Group
taken as a whole;
(iii) no contingent or other liability of any member of the
Wider API Group or Wider CREI Group having arisen or become
apparent to any member of the Wider CREI Group or Wider API Group,
or increased, which is reasonably likely to affect adversely the
business, assets, financial or trading position or profits or
prospects of any member of the Wider API Group or Wider CREI Group,
which in any case is material in the context of the Wider API Group
and/or the Wider CREI Group taken as a whole;
(iv) no member of the Wider API Group or Wider CREI Group having
conducted its business in breach of any applicable laws and
regulations and which in any case is material in the context of the
Wider API Group and/or the Wider CREI Group taken as a whole;
and
(v) no steps having been taken and no omissions having been made
which are reasonably likely to result in the withdrawal,
cancellation, termination or modification of any licence or permit
held by any member of the Wider API Group or Wider CREI Group which
is necessary for the proper carrying on of its business and which
in any case is material in the context of the Wider API Group
and/or the Wider CREI Group taken as a whole;
No discovery of certain matters
(j) save as Disclosed, CREI or API not having discovered that
(in each case to an extent which is or could be material in the
context of the Wider API Group and/or Wider CREI Group taken as a
whole or material in the context of the Merger):
(i) any financial, business or other information concerning the
Wider API Group or Wider CREI Group publicly announced before the
date of this Announcement or disclosed, whether publicly or
otherwise, at any time to any member of the Wider CREI Group or
Wider API Group by or on behalf of any member of the Wider API
Group or Wider CREI Group is materially misleading, contains any
material misrepresentation of fact, or omits to state a fact
necessary to make any information contained therein not
misleading;
(ii) any member of the Wider API Group or Wider CREI Group is
subject to any liability (contingent or otherwise), other than in
the ordinary course of business;
(iii) any information which affects the import of any
information disclosed at any time by or on behalf of any member of
the Wider API Group or Wider CREI Group;
(iv) any past or present member of the Wider API Group or Wider
CREI Group has failed to comply with any applicable legislation or
regulations or common law of any jurisdiction or any notice, order
or requirement of any Third Party or any Authorisations relating to
the use, treatment, handling, storage, carriage, disposal,
spillage, release, discharge, leak or emission of any waste or
hazardous or harmful substance or any substance likely to impair
the environment (including property) or harm human health or animal
health or otherwise relating to environmental matters or the health
and safety of humans, which non-compliance would be likely to give
rise to any material liability including any penalty for
non-compliance (whether actual or contingent) on the part of any
member of the Wider API Group; or
(v) there is or has been a disposal, discharge, spillage,
accumulation, release, leak, emission or the migration, production,
supply, treatment, storage, transport or use of any waste or
hazardous or harmful substance or any substance likely to impair
the environment (including any property) or harm human or animal
health which (whether or not giving rise to non-compliance with any
law or regulation), would be likely to give rise to any material
liability (whether actual or contingent) on the part of any member
of the Wider API Group or Wider CREI Group;
(vi) there is or is reasonably likely to be any obligation or
liability (whether actual or contingent) or requirement to make
good, remediate, repair, reinstate or clean up any property or
controlled waters, currently or previously owned, occupied,
operated or made use of or controlled by any past or present member
of the Wider API Group (or on its behalf) or the Wider CREI Group
(or on its behalf), or in which any such member may have or
previously have had or be deemed to have had an interest, under any
environmental legislation, common law, regulation, notice,
circular, Authorisation or order of any Third Party in any
jurisdiction or to contribute to the cost thereof or associated
therewith or indemnify any person in relation thereto;
Anti-corruption and sanctions
(k) CREI and API not having discovered:
(i) any:
(A) past or present member, director or officer of the Wider API
Group or Wider CREI Group is or has at any time engaged in any
activity, practice or conduct which would constitute an offence
under the Bribery Act 2010, the US Foreign Corrupt Practices Act of
1977, the Prevention of Corruption (Bailiwick of Guernsey) Law 2003
or any other applicable anti-corruption or anti-bribery
legislation, rule or regulation applicable to the Wider API Group
or the Wider CREI Group or any other law, rule or regulation
concerning improper payments or kickbacks; or
(B) person that performs or has performed services for or on
behalf of the Wider API Group or the Wider CREI Group is or has at
any time engaged in any activity, practice or conduct in connection
with the performance of such services which would constitute an
offence under the Bribery Act 2010, the US Foreign Corrupt
Practices Act of 1977, the Prevention of Corruption (Bailiwick of
Guernsey) Law 2003 or any other applicable anti-corruption or
anti-bribery legislation, rule or regulation applicable to the
Wider API Group or any other law, rule or regulation concerning
improper payments or kickbacks;
(ii) any asset of any member of the Wider API Group or Wider
CREI Group constitutes criminal property as defined by section
340(3) of the Proceeds of Crime Act 2002 (but disregarding
paragraph (b) of that definition) or proceeds of crime under any
other applicable law, rule or regulation concerning money
laundering or proceeds of crime or any member of the Wider API
Group or Wider CREI Group is found to have engaged in activities
constituting money laundering;
(iii) any past or present member, director or officer of the
Wider API Group or Wider CREI Group, or any other person for whom
any such person may be liable or responsible, is or has engaged in
any conduct or business which would violate any economic sanctions
or dealt with, made any investments in, made any funds or assets
available to or received any funds or assets from: (a) any
government, entity or individual in respect of which US, UK or
European Union persons, or persons operating in those territories,
are prohibited from engaging in activities or doing business, or
from receiving or making available funds or economic resources, by
applicable US, UK or European Union laws or regulations, including
the economic sanctions administered by the United States Office of
Foreign Assets Control, or HM Treasury & Customs in the United
Kingdom; or (b) any government, entity or individual targeted by
any of the economic sanctions of the United Nations, the United
States, the UK or the European Union or any of their respective
member states;
(iv) any past or present member, director or officer of the
Wider API Group or Wider CREI Group, or any other person for whom
any such person may be liable or responsible:
(A) has engaged in conduct which would violate any relevant
anti-terrorism laws, rules, or regulations, including but not
limited to the U.S. Anti-Terrorism Act;
(B) has engaged in conduct which would violate any relevant
anti-boycott law, rule or regulation or any applicable export
controls, including but not limited to the Export Administration
Regulations administered and enforced by the U.S. Department of
Commerce or the International Traffic in Arms Regulations
administered and enforced by the U.S. Department of State;
(C) has engaged in conduct which would violate any relevant
laws, rules or regulations concerning human rights, including but
not limited to any law, rule or regulation concerning false
imprisonment, torture or other cruel and unusual punishment or
child labour;
(D) is debarred or otherwise rendered ineligible to bid for or
to perform contracts for or with any government, governmental
instrumentality or international organisation or found to have
violated any applicable law, rule or regulation concerning
government contracting or public procurement; or
(v) any member of the Wider API Group or Wider CREI Group has or
is engaged in any transaction which would cause CREI or any member
of the Wider CREI Group (including the Wider API Group) to be in
breach of any applicable law or regulation upon its acquisition of
API, including but not limited to the economic sanctions of the
United States Office of Foreign Assets Control or HM Treasury &
Customs in the UK, or any government, entity or individual targeted
by any of the economic sanctions of the United Nations, the United
States, the UK the European Union or any of its member states.
Part B
Certain further terms of the Merger
1. Conditions 2(a), 2(b) and 3(a) to 3(k) (inclusive) of Part A
of this Appendix 1 must each be fulfilled or (if capable of waiver)
waived, no later than 11:59 p.m. (London time) on the date
immediately preceding the date of the Sanction Hearing (or such
later date as CREI , API and the Panel and, if required, the Court
may allow), failing which the Merger will lapse, or if the Merger
is implemented by way of Takeover Offer, no later than as permitted
by the Panel.
2. To the extent permitted by law and subject to the
requirements of the Panel in accordance with the Takeover Code,
each of CREI and API reserves the right, in its sole discretion, to
waive in whole or in part all or any of the Conditions set out in
part A above, and to proceed with the Sanction Hearing prior to the
fulfilment, satisfaction or waiver of any of the Conditions, except
Conditions 1, 2(a)(i), 2(b)(i) and 2(c)(i), which cannot be waived.
If any of Conditions 2(a)(ii), 2(b)(ii) or 2(c)(ii) is not
satisfied by the relevant deadline specified in the relevant
Condition, CREI will make an announcement by 8.00 a.m. (London
time) on the Business Day following such deadline confirming
whether it has invoked the relevant Condition, waived the relevant
deadlines or agreed with API to extend the relevant deadline.
3. The Merger will lapse if the Scheme does not become Effective
by no later than 11.59 p.m. (London time) on the Long Stop
Date.
4. If CREI is required by the Panel to make a Takeover Offer for
API Shares under the provisions of Rule 9 of the Takeover Code,
CREI may make such alterations to any of the above Conditions and
terms of the Merger as are necessary in order to comply with the
provisions of that Rule.
5. Each of CREI and API shall be under no obligation to waive
(if capable of waiver), to determine to be or remain satisfied, or
to treat as fulfilled any of the Conditions by a date earlier than
the latest date specified for the fulfilment or waiver thereof,
notwithstanding that the other Conditions may, at such earlier
date, have been waived or fulfilled and that there are, at such
earlier date, no circumstances indicating that any of such
Conditions may not be capable of satisfaction or fulfilment.
6. The API Shares will be acquired under the Scheme, fully paid
and free from all liens, equities, charges, encumbrances, options,
rights of pre-emption and any other third party rights and
interests of any nature whatsoever and together with all rights now
or hereafter attaching or accruing to them, including, without
limitation, voting rights and the right to receive and retain in
full all dividends and other distributions (if any) declared, made
or paid, on or after the date of this Announcement, save for the
Permitted Dividends.
7. The Exchange Ratio will be adjusted :
7.1. in the event that either CREI or API announces, declares,
makes or pays any one or more dividends or other distributions
prior to the Merger becoming Effective that is or are, in
aggregate, in excess of: (i) 1.375 pence per CREI Share in respect
of the CREI Q3 Dividend and, if the ex dividend date falls prior to
the Merger becoming Effective, 1.375 pence per CREI Share in
respect of the CREI Q4 Dividend; or (ii) 1.0 penny per API Share in
respect of the API Q4 Dividend and, if the ex-dividend date falls
prior to the Merger becoming Effective, 1.0 penny per API Share in
respect of the API Q1 Dividend (the amount of such excess in each
case being the "Excess"), in which event the adjustment to the
Exchange Ratio shall be to take account of the Excess; and/or
7.2. in the event that (i) the API Q1 Dividend is not covered by
the income earned in the relevant quarter (the "API Q1 Uncovered
Dividend Portion"), or (ii) the CREI Q4 Dividend is not covered by
the income earned in the relevant quarter (the "CREI Q4 Uncovered
Dividend Portion"), in which event the adjustment to the Exchange
Ratio shall be to take account of the API Q1 Uncovered Dividend
Portion and/or the CREI Q4 Uncovered Dividend Portion ; and/or
7.3. if, at the time of completion of the Merger, either CREI or
API has announced, declared, made or paid the CREI Q4 Dividend or
the API Q1 Dividend, respectively, but the other has not announced,
declared, made or paid its corresponding dividend (a "Dividend
Discrepancy"), in which case the adjustment to the Exchange Ratio
shall be to take account of the Dividend Discrepancy.
In the event that any adjustment to the Exchange Ratio is
required pursuant to paragraph 7.1, 7.2 and/or 7.3 of this Part B
above, such adjustment will be made by reference to the relevant
Rolled-Forward Unaudited EPRA NTA(s) as at 31 December 2023. Any
adjustment to the Exchange Ratio referred to in this paragraph 7
shall be the subject of an announcement and, for the avoidance of
doubt, shall not be regarded as constituting any revision or
variation of the terms of the Scheme or the Merger. To the extent
that a dividend or distribution has been declared but not paid
prior to the Effective Date, and such dividend or distribution is
cancelled, then the Exchange Ratio shall not be subject to change
in accordance with this paragraph.
8. Under Rule 13.5(a) of the Takeover Code, CREI may only invoke
a Condition so as to cause the Merger not to proceed, to lapse or
to be withdrawn with the consent of the Panel. The Panel will
normally only give its consent if the circumstances which give rise
to the right to invoke the Condition are of material significance
to CREI in the context of the Merger. This will be judged by
reference to the facts of each case at the time that the relevant
circumstances arise. The Conditions set out in Conditions 1 and 2
of Part A above (and any Takeover Offer Acceptance Condition (as
defined below) adopted on the basis specified in paragraphs 4 or 10
of this Part B) are not subject to this provision of the Takeover
Code. Any Condition that is subject to Rule 13.5(a) may be waived
by CREI .
9. Under Rule 13.6 of the Takeover Code, API may not invoke, or
permit CREI to invoke a Condition unless the circumstances which
give rise to the right to invoke the Condition are of material
significance to the shareholders of API in the context of the
Merger This will be judged by reference to the facts of each case
at the time that the relevant circumstances arise. The Conditions
set out in Conditions 1 and 2 of Part A above (and any Takeover
Offer Acceptance Condition (as defined below) adopted on the basis
specified in paragraphs 4 or 10 of this Part B) are not subject to
this provision of the Takeover Code. Any Condition that is subject
to Rule 13.6 may be waived by API.
10. CREI reserves the right to elect to implement the Merger by
way of a Takeover Offer as an alternative to the Scheme (subject to
the Panel's consent (where necessary)). In such event, the Merger
will be implemented on the same terms and conditions (subject to
appropriate amendments including (without limitation) the inclusion
of an acceptance condition set at 90 per cent. of the API Shares to
which the Takeover Offer relates (or such lower percentage (being
more than 50 per cent.) of the issued share capital of API as CREI
may, subject to the rules of the Takeover Code and with the consent
of the Panel, decide) as those which would apply to the Scheme
(each a "Takeover Offer Acceptance Condition"). Further, if
sufficient acceptances of the Takeover Offer are received and/or
sufficient API Shares are otherwise acquired, it is the intention
of CREI to apply the provisions of Part XVIII of the Companies Law
to compulsorily acquire any outstanding API Shares to which such
Takeover Offer relates.
11. The availability of the Merger to API Shareholders who are
not resident in the United Kingdom or Guernsey may be affected by
the laws of the relevant jurisdictions in which they are located or
of which they are citizens. Persons who are not resident in the
United Kingdom or Guernsey should inform themselves about and
observe any applicable legal or regulatory requirements of their
jurisdictions. Further information in relation to overseas
shareholders will be contained in the Scheme Document.
12. The Merger is not being made, directly or indirectly, in,
into or from, or by use of the mails of, or by any means of
instrumentality (including, but not limited to, facsimile, e-mail
or other electronic transmission, telex or telephone) of interstate
or foreign commerce of, or of any facility of a national, state or
other securities exchange of, any Restricted Jurisdiction where to
do so would violate the laws of that jurisdiction.
13. The Merger and the Scheme will be governed by the laws of
Guernsey and be subject to the jurisdiction of the Court and to the
conditions and further terms set out in this Appendix 1 and the
full terms and conditions to be set out in the Scheme Document. The
Merger will also be subject to the applicable requirements of the
Companies Law, the Court (as a result of API being incorporated in
Guernsey), the GFSC, the FCA, the London Stock Exchange and the
Takeover Code.
14. Each of the Conditions shall be regarded as a separate
Condition and shall not be limited by reference to any other
Condition.
Appendix 2
SOURCES OF INFORMATION AND BASES OF CALCULATIONS
Unless otherwise stated, the following constitute the sources of
information and bases of calculations in this Announcement:
1. Property portfolio and valuation information relating to CREI
is from the valuation reports as at 31 December 2023 produced by
Knight Frank and Savills as set out in Appendix 4 to this
Announcement.
2. Property portfolio and valuation information relating to API
is from the valuation report as at 31 December 2023 produced by
Knight Frank as set out in Appendix 4 to this Announcement.
3. Financial information relating to CREI has been extracted or
derived (without adjustment) from the unaudited management accounts
for CREI as at 30 September 2023 and CREI's RNS announcement on 31
October 2023 "Second quarter trading update shows rental growth
supporting fully covered dividends and stable values".
4. Financial information relating to API has been extracted or
derived (without adjustment) from the unaudited management accounts
for API as at 30 September 2023 and API's RNS announcement on 7
November 2023 "Unaudited Net Asset Value as at 30 September
2023".
5. All Closing Prices for the API Shares and the CREI Shares are
derived from the Daily Official List as at 18 January 2024 (being
the Latest Practicable Date).
6. All volume-weighted average prices are derived from data
provided by Bloomberg for the relevant time periods.
7. API 's issued share capital consists of 381,218,977 API
Shares as at the Latest Practicable Date, with no outstanding
options or rights to convertible securities.
8. CREI's issued share capital consists of 440,850,398 CREI
Shares as at the Latest Practicable Date, with no outstanding
options or rights to convertible securities.
9. The average discount to EPRA NTA per share is based on the
daily Closing Price and the EPRA NTA per share (or EPRA NAV per
share, prior to the introduction of EPRA NTA) as at the last
quarterly balance sheet date on any given day.
10. CREI's Rolled-Forward Unaudited EPRA NTA as at 31 December
2023 has been calculated as follows:
Rolled-Forward
Unaudited
EPRA NTA EPRA NTA
as at 30 Adjustment as at 31
GBP'000 unless September Adjustment for 31 December December
stated 2023 for Disposals(2) 2023 Valuation(3) 2023
Property value(1) 609,150 (550) (6,830) 601,770
----------- ------------------ ------------------- ---------------
Cash 6,697 - - 6,697
----------- ------------------ ------------------- ---------------
Bank loans (183,689) 529 (3,047) (186,207)
----------- ------------------ ------------------- ---------------
Other net liabilities (9,378) - - (9,378)
----------- ------------------ ------------------- ---------------
EPRA NTA(4) 422,780 (21) (9,877) 412,882
----------- ------------------ ------------------- ---------------
Total diluted shares
('000) 440,850 440,850
----------- ------------------ ------------------- ---------------
EPRA NTA per share
(pence) 95.9 93.7
----------- ------------------ ------------------- ---------------
(Notes:)
(1) Investment property value represents the market value as per
Knight Frank / Savills valuation of the CREI portfolio.
(2) Represents proceeds from the disposal of CREI's interest in
Chesham (announced by CREI on 13 November 2023).
(3) 31 December 2023 revaluation adjustment for the market
valuation of investment properties as per Knight Frank / Savills
valuation, adjusted for estimated capital expenditure of GBP3
million.
(4) The CREI Directors confirm that the aggregate of other
movements in EPRA NTA between 30 September 2023 and 31 December
2023 is not material.
11. API 's Rolled-Forward Unaudited EPRA NTA as at 31 December
2023 has been calculated as follows:
Rolled-Forward
Unaudited
EPRA NTA EPRA NTA
as at 30 Adjustment as at 31
GBP'000 unless September Adjustment for 31 December December
stated 2023 for Disposals(4) 2023 Valuation(5) 2023
Property value(1) 449,629 (6,550) (3,894) 439,185
----------- ------------------ ------------------- ---------------
Cash 5,742 - - 5,742
----------- ------------------ ------------------- ---------------
Bank loans (139,310) 6,126 (7,272) (140,456)
----------- ------------------ ------------------- ---------------
Other net liabilities(2) (5,301) - - (5,301)
----------- ------------------ ------------------- ---------------
EPRA NTA(3) 310,760 (424) (11,166) 299,170
----------- ------------------ ------------------- ---------------
Total diluted shares
('000) 381,219 381,219
----------- ------------------ ------------------- ---------------
EPRA NTA per share
(pence) 81.5 78.5
----------- ------------------ ------------------- ---------------
(Notes:)
(1) Consists of investment property, land and lease incentives
as per the Knight Frank valuation of the API portfolio.
(2) Consists of other assets / (liabilities) and the EPRA
adjustment (which removes the fair value of derivatives).
(3) The API Directors confirm that the aggregate of other
movements in EPRA NTA between 30 September 2023 and 31 December
2023 is not material.
(4) Represents the change in property value and net proceeds
associated with the disposal of the Cullen Square asset (announced
by API on 20 December 2023).
(5) 31 December 2023 revaluation adjustment for the market
valuation of investment properties as per Knight Frank valuation of
the API portfolio, adjusted for estimated capital expenditure of
GBP7 million.
Appendix 3
DETAILS OF IRREVOCABLE UNDERTAKINGS AND LETTER OF INTENT
Part 1: Irrevocable undertakings and letter of intent in respect
of API Shares
API Directors' Irrevocable Undertakings
The following API Directors who hold API Shares have given
irrevocable undertakings to vote in favour of the Scheme at the API
Court Meeting and the API Resolution at the API General Meeting in
respect of their own beneficial holdings of API Shares (or those
API Shares over which they have control):
Name Total number Percentage of API Shares in
of API Shares issue on the Latest Practicable
Date (%)
API Directors
Jill May 128,592 0.03
Michael Balfour 125,000 0.03
James Clifton-Brown 21,500 0.01
Sarah Slater 20,000 0.01
Notes:
1. The percentages in the table above have been rounded up to two decimal places.
The undertakings provided by the API Directors will cease to be
binding if:
-- the Scheme Document or, if the Merger is implemented by way
of a Takeover Offer, the Offer Document (as applicable) has not
been posted to API Shareholders within 28 days of the issue of this
Announcement (or within such longer period as CREI and API, with
the consent of the Panel, may agree);
-- in the event that the Merger proceeds by way of a Scheme, any
resolution to be proposed at the API Court Meeting and the API
General Meeting is not approved by the requisite majority of API
Shareholders;
-- CREI announces, with the consent of the Panel and before the
Scheme Document or Offer Document (as applicable) is published,
that it does not intend to proceed with the Merger;
-- the Scheme, or Takeover Offer (as applicable) has not become
Effective, or become or been declared unconditional in all respects
(as the case may be), on or before the Long Stop Date (or such
later time or date as agreed between API and CREI with the approval
of the Court and/or the Panel, if required);
-- the Scheme or Offer, as applicable, lapses or is withdrawn in accordance with its terms; or
-- any competing offer for the entire issued and to be issued
share capital of API becomes or is declared unconditional (if
implemented by way of a takeover offer) or, if proceeding by way of
a scheme of arrangement, becomes effective in accordance with its
terms; or
-- any event occurs or becomes known to CREI or Deutsche Numis
before despatch of the Scheme Document or the Offer Document (as
the case may be) as a result of which the Panel requires or agrees
that CREI need not proceed with the Merger.
API Shareholder Letter of Intent
Name Total number Percentage of API Shares in
of API Shares issue on the Latest Practicable
Date (%)
Brooks Macdonald Asset
Management 11,376,425 2.98
Part 2: Irrevocable undertakings in respect of CREI Shares
The following CREI Directors, together with certain of Ian
Mattioli's close relatives and related trusts, who hold CREI Shares
have given irrevocable undertakings to vote in favour of the CREI
Resolution at the CREI General Meeting in respect of their own
beneficial holdings of CREI Shares (or those CREI Shares over which
they have control):
Name Total number Percentage of CREI Shares in
of CREI Shares issue on the Latest Practicable
Date (%)
Elizabeth McMeikan 20,400 0.00
Chris Ireland 50,345 0.01
Malcolm Cooper 45,000 0.01
Hazel Adam 19,566 0.00
Ian Mattioli MBE 1,370,552 0.31
MW Trustees Limited 1,715,339 0.39
Clare Mattioli 837,554 0.19
Laura Mattioli 1,493,457 0.34
Alexandra Dariani 652,604 0.15
Notes:
1. The CREI Shares referred to in the table above are held via
nominees. In each case, the CREI Shareholder has undertaken to vote
himself/herself, or to procure the exercise of the votes attaching
to his/her CREI Shares, in favour of the CREI Resolution.
2. MW Trustees Limited is a trustee for certain family trusts in
respect of which Ian Mattioli MBE and members of his family are
beneficiaries.
3. The irrevocable undertakings provided by Ian Mattioli MBE and
Clare Mattioli both include 100,000 CREI Shares held by the Ian and
Clare Mattioli Charitable Trust. However, for the purposes of
disclosure in this Announcement these 100,000 CREI Shares have been
counted as part of Ian Mattioli MBE's irrevocable undertaking
only.
4. The percentages in the table above have been rounded up to two decimal places.
These undertakings will cease to be binding if:
-- the Merger terminates, lapses or is withdrawn in accordance with its terms; or
-- the Scheme has not become effective, or the Takeover Offer
has not been declared unconditional in all respects (as the case
may be), in accordance with the requirements of the Takeover Code
by 6.00 p.m. on the Long Stop Date or such later time or date as
agreed between API and CREI with the approval of the Court and/or
the Panel, if required.
Appendix 4
VALUATION REPORTS
Part A | Knight Frank Valuation Report in respect of CREI
Valuation Report.
Custodian Portfolio
Prepared for Custodian Property Income REIT plc.
Valuation date: 31 December 2023
Important Notice to all readers of this report
Unless you are the Client named within this report, or have been
explicitly identified by us as a party to whom we owe a duty of
care and who is entitled to rely on this report, Knight Frank LLP
does not owe or assume any duty of care to you in respect of the
contents of this report and you are not entitled to rely upon it.
Date of issue: 19 January
2024
(each an "Addressee" and together the "Addressees") Our Ref: I: 1140121
Dear Sirs
Valuation Report in respect of the properties of Custodian
Property Income REIT Plc as at 31 December 2023 for inclusion in a
Rule 2.7 Announcement, Scheme Document and Combined Prospectus and
Circular ("Valuation Report")
Further to your instructions, we are pleased to provide our
Valuation Report in respect of the properties ("Properties") set
out in Appendix 1 (List of Properties) below in connection with the
Client's all-share offer for the entire issued and to be issued
share capital of API (the "Acquisition"). If you have any queries
regarding this Valuation Report, please let us know as soon as
possible.
Signed for and on behalf of Knight Frank LLP
Kevin Morris MRICS Indi Sidhu MRICS
RICS Registered Valuer RICS Registered Valuer
Partner, Valuation & Advisory Associate, Valuation & Advisory
kevin.morris@knightfrank .com indi.sidhu@knightfrank .com
T +44 121 233 6451 T +44 121 233 6414
M +44 7747 007 580 M +44 7793 283284
Contents
1. About this report ..................................................................................................................... 5
Engagement of Knight Frank LLP
...........................................................................................
5
Status and experience of valuer
.............................................................................................
5
Conflicts of Interest: Declaration and Disclosures
..................................................................
5
Independence
........................................................................................................................
6
Use of this Valuation
.............................................................................................................
6
Limitations on liability
............................................................................................................
8
Scope of work
......................................................................................................................
9
2. Valuation ................................................................................................................................. 11
Methodology
.......................................................................................................................
11
Valuation bases
...................................................................................................................
11
Market Value
.......................................................................................................................
11
Responsibility
......................................................................................................................
13
Consent
..............................................................................................................................
13
Appendices
Appendix 1 List of Properties
About this report
Engagement of Knight Frank LLP
This Valuation Report sets out our valuation, as at 31 December
2023 ("valuation date"), of the Properties ("Valuation"). This
Valuation Report has been prepared in accordance with our Terms of
Engagement letter dated 15 January 2024 addressed to the
Addressees, and our General Terms of Business for Valuation
Services (together the "Agreement").
Client
We have been instructed to prepare this Valuation Report by
Custodian Property Income REIT plc.. However as set out above, this
Valuation Report has also been addressed to abrdn Property Income
Trust Limited, Lazard & Co., Limited and Numis Securities
Limited.
Valuation standards
The Valuation has been undertaken in accordance with and
complies with: (a) the current editions of RICS Valuation - Global
Standards, which incorporate the International Valuation Standards,
and the RICS UK National Supplement. References to the "Red Book"
refer to either or both of these documents, as applicable; (b) Rule
29 of the City Code on Takeovers and Mergers (the "Code") as issued
by the UK Panel on Takeovers and Mergers; (c) paragraphs 128-130 of
the Financial Conduct Authority ("FCA") Primary Market Technical
Note 619.1 (the "FCA Technical Note"); and (d) Rules 5.4.5 and
5.4.6 of the UK Prospectus Regulation Rules published by the FCA
and item 2.7 of Annex 4 to the UK Prospectus Regulation Rules.
The Properties have been valued by a valuer who is qualified for
the purposes of the Valuation in accordance with Rule 29 of the
Code. For the purposes of this Valuation Report, "UK Prospectus
Regulation Rules" shall mean the prospectus regulation rules made
by the FCA for the purposes of part 6 of the Financial Services and
Markets Act 2000.
Status and experience of valuer
Valuer and expertise
The valuers, on behalf of Knight Frank LLP, with the
responsibility for this Valuation Report are Indi Sidhu MRICS ("
Lead Valuer") and Kevin Morris MRICS, RICS Registered Valuers.
Parts of the Valuation have been undertaken by additional valuers
as listed on our file.
We confirm that the Lead Valuer and any additional valuers who
value the Properties meet the requirements of the Red Book and Rule
29.3(a)(iii) of the Code in having sufficient current knowledge of
the particular market and the skills and understanding to undertake
the Valuation and prepare this Valuation Report competently and,
are appropriately qualified for the purposes of the Valuation as
required by Rule 29.3(a)(ii) of the Code, and are independent of
the parties to the offer as required by Rule 29.3(a)(i) of the
Code.
We confirm that we are not aware of any reason why we would not
satisfy the requirements of Rule 29.3(a)(i) of the Code.
Conflicts of Interest: Declaration and Disclosures
For the purposes of Directive 2011/61/EU and/or any implementing
legislation, laws or regulations thereof ( including, but not
limited to, the Alternative Investment Fund Manager's Regulations
2013) ("AIFMD") we act as the Client's valuation advisers but are
not acting as "External Valuer" (as defined therein). Our role is
limited to providing property valuation services in accordance with
the Red Book under the terms of the Agreement; we shall not perform
the valuation function referred to in Article 19 of AIFMD for the
Client, and, we are not responsible for making the final
determination of the value of the Properties nor for the
calculation of the Net Asset Value of the Client.
We confirm that the valuer and additional valuers meet the
requirements of the Red Book, having sufficient current knowledge
of the particular market and the skills and understanding to
undertake the Valuation competently.
We confirm that we have no material interest in the Client and
we have acted as an External Valuer for the purpose of valuing the
Properties pursuant to the terms of our letter of engagement dated
15 January 2024;
This Valuation Report has been vetted as part of Knight Frank
LLP's quality assurance procedures.
We recognise and support the RICS Rules of Conduct and have
procedures for identifying conflicts of interest.
Independence
As set out in paragraph 1.8 , Knight Frank LLP currently values
the Properties, for financial reporting purposes, on behalf of the
Client. The total fees for this assignment, earned by Knight Frank
LLP (or other companies forming part of the same group of companies
within the UK) from the Client (or other companies within the UK)
is less than 5.0% of the total UK revenues. It is not anticipated
that there will be a material increase in the proportion of the
fees payable, or likely to be payable, by the Client.
Use of this Valuation
Purpose of valuation
The Valuation and this Valuation Report are each provided solely
for the purpose of:
(A) inclusion in an announcement proposed to be made by the
Client and API pursuant to Rule 2.7 of the Code in connection
Acquisition (the "Rule 2.7 Announcement");
(B) inclusion in a scheme circular to be published by API in
connection with the Acquisition (the "Scheme Document");
(C) inclusion in a combined prospectus and circular to be
published by the Client in connection with the Acquisition and the
issue and allotment of new shares in the capital of the Client
pursuant to the terms of the Acquisition (the "Combined Prospectus
and Circular");
(D) inclusion and/or reference to it in any other announcements,
documents and/or supplementary documents required to be released by
the Client and/or API pursuant to the Code and which directly
relate to the Acquisition (each a "Code Document"); and
(E) publication on the Client's website and API's website in
accordance with the requirements of the Code and the UK Prospectus
Regulation Rules,
(together, the "Purpose").
Reliance
This Valuation Report has been prepared for the Addressees only.
Notwithstanding the General Terms, we acknowledge that this
Valuation Report will also be used for the Purpose set out
above.
Save for: (a) the Addressees; and (b) any responsibility arising
under the Code and/or the UK Prospectus Regulation Rules to any
person as and to the extent there provided, in accordance with
Clauses 3 & 4 of the General Terms and to the fullest extent
permitted by law, we do not assume any responsibility and will not
accept any liability to any other person for any loss suffered by
any such other person as a result of, arising out of, or in
accordance with this Valuation Report or our statement, required by
and given solely for the purposes of complying with the UK
Prospectus Regulation Rules and Rule 29 of the Code.
Disclosure & publication
As stated in the Agreement, this Valuation Report is
confidential to the Addressees and must not be disclosed to any
person other than for the Purpose without our express written
consent. Other than for the Purpose, neither the whole, nor any
part of this Valuation Report nor any reference thereto may be
included in any prospectus, listing particulars, published
document, circular or statement nor published in any way without
our prior written approval of the form or context in which it may
appear.
Notwithstanding paragraph 1.17 above, this Valuation Report may
be disclosed as set out below:
Subject to the terms and conditions (but disregarding for these
purposes clauses 4.3 to 4.6 (inclusive) of the General Terms) of
the Agreement and our approval of the form and context thereof, we
hereby confirm that we will authorise and consent to the disclosure
of this Valuation Report:
i. as may be required by any applicable court of competent
jurisdiction or other competent judicial or governmental body or
any applicable law or regulation or pursuant to government action,
regulatory requirement or request;
ii. to each Addressee's affiliates and each Addressee's
affiliates' respective directors, officers, employees, agents,
professional advisers, insurers, auditors and bankers that need to
see the Valuation in connection with the Purpose including
Custodian Capital Limited in its capacity as the Fund Manager;
iii. in the case of each of Numis Securities Limited and Lazard
& Co., Limited, in seeking to establish a defence or otherwise
in connection with any actual or threatened legal or regulatory
proceedings or investigation relating to the matters set out in
this Letter or claims that may be brought against them arising from
their roles as sponsor and/or financial advisers to the Client
and/or API;
iv. in investor presentations and other investor education
materials prepared in connection with the Acquisition, and in any
private discussions with Investors or other third parties in
connection with the Acquisition; and
v. for the Purpose.
It is a condition of such disclosure that each party in receipt
of this Valuation Report that is not an Addressee agrees and
acknowledges that this Valuation Report cannot be relied upon by
them, and we do not accept any responsibility, duty of care or
liability to them, whether in contract, tort (including
negligence), misrepresentation or otherwise in respect of the
Valuation and the information it contains. For the avoidance of
doubt, nothing in the preceding sentence shall affect our
responsibility, for the purposes of Rule 5.3.2R(2)(f) of the UK
Prospectus Regulation Rules, for the information contained in this
Valuation Report.
This Valuation Report complies with Rule 29 of the Code and we
understand that the publication or reproduction by the Client
and/or API of this Valuation Report and/or the information
contained herein as required by Rules 26 and 29 of the Code is
necessary, including in the Rule 2.7 Announcement, the Scheme
Document and any Code Document.
For the purpose of the Code, we accept responsibility for the
information within this Valuation Report and have ensured that the
information contained in this Valuation Report is, to the best of
our knowledge (having taken all reasonable care to ensure that such
is the case), in accordance with the facts and contains no omission
likely to affect its import.
We confirm that this Valuation Report complies with Rules 5.4.5G
and 5.4.6G of the UK Prospectus Regulation Rules and paragraphs 128
to 130 of the FCA Technical Note.
We confirm that the information contained in the Combined
Prospectus and Circular or any supplementary prospectus and/or
circular (as the case may be) which is extracted from this
Valuation Report is accurate, balanced and complete and is not
misleading or inconsistent with this Valuation Report as prepared
by us and has been properly extracted, derived or computed from
this Valuation Report.
The Addressees agree and acknowledge that we shall have no
liability for any error, omission or inaccuracy in this Valuation
Report to the extent resulting from our reliance on information
provided by or on behalf of the Addressees unless otherwise stated.
Notwithstanding the above, we highlight the restricted nature of
this instruction, in accordance with the Red Book; as a result the
reliance that can be placed on the Valuation is limited.
Verification
We recommend that before any financial transaction is entered
into based upon the Valuation, you obtain verification of any
third-party information contained within this Valuation Report and
the validity of the assumptions we have adopted.
We would advise you that whilst we have valued the Properties
reflecting current market conditions, there are certain risks which
may be, or may become, uninsurable. Before undertaking any
financial transaction based upon this Valuation, you should satisfy
yourselves as to the current insurance cover and the risks that may
be involved should an uninsured loss occur.
Limitations on liability
Knight Frank LLP's total liability for any direct loss or damage
(whether caused by negligence or breach of contract or otherwise)
arising out of or in connection with this Valuation is limited in
accordance with the terms of the Agreement. Knight Frank LLP
accepts no liability for any indirect or consequential loss or for
loss of profits.
We confirm that we hold adequate and appropriate PII cover for
this instruction.
No claim arising out of or in connection with this Valuation may
be brought against any member, employee, partner or consultant of
Knight Frank LLP. Those individuals will not have a personal duty
of care to any party and any claim for losses must be brought
against Knight Frank LLP.
Nothing in this Valuation shall exclude or limit our liability
in respect of fraud or for death or personal injury caused by our
negligence or for any other liability to the extent that such
liability may not be excluded or limited as a matter of law.
Scope of work
Information to be relied upon
We will rely on the information previously provided to us by
you, or by third parties in respect of the 30 Septem ber 2023
valuation and will assume it to be correct for the purposes of the
Valuation unless you inform us otherwise, subject only to any
valuation that we have agreed to undertake.
Where we express an opinion in respect of (or which depends
upon) legal issues, any such opinion must be verified by your legal
advisors before any Valuation can be relied upon.
We are instructed to rely on floor areas and tenancy information
provided by the Client. We have not read lease agreements nor
verify accordance between tenancy schedule and lease terms.
Knight Frank LLP cannot be held liable as regards the legal
description of the Properties, its use, non-compliance with
statutory requirements, technological and natural risks, the areas
taken into account, the existence of concealed defects, presence of
asbestos, adverse ground condition, presence of soil contamination,
presence of insects, noxious animals or plants, rot, or deleterious
materials, etc. This Valuation Report comments on the above on the
basis of Technical or Environmental reports, if provided.
Inspections
In our ongoing role as External Valuers, we are instructed to
carry out an external and internal inspection of the Properties,
and the Valuation has been prepared in accordance with our previous
inspections of the Properties. Our internal inspections of all the
Properties have been undertaken within the last twelve months.
Information Provided
In this Valuation Report we have been provided with information
by the Client, its advisors and other third parties. We have relied
upon this information as being materially correct in all
aspects.
In the absence of any documents or information provided, we have
had to rely solely upon our own enquiries as outlined in this
Valuation Report.
We have assumed there to be good and marketable titles to the
properties. We have made oral enquiries where appropriate and have
taken account, insofar as we are aware, of unusual outgoings,
planning proposals and onerous restrictions or local authority
intentions which affect the properties. However, this information
has been provided to us on the basis that it should not be relied
upon.
We have been supplied with details of tenure and tenancies and
have valued on the basis that there are no undisclosed matters
which would affect our valuation.
We have not undertaken any building surveys or environmental
audits and are therefore unable to report that the Properties are
free of any structural fault, rot, infestation or defects of any
other nature, including inherent weaknesses due to the use in
construction of materials now suspect. No tests were carried out on
any of the technical services. However, we have reflected any
apparent wants of repair in our opinion of value as
appropriate.
We have made oral enquiries where appropriate and have taken
account, insofar as we are aware, of unusual outgoings, planning
proposals and onerous restrictions or local authority intentions
which affect the Properties.
We have assumed, except where we have been informed to the
contrary, that there are no adverse ground or soil conditions or
environmental contaminations which would affect the present or
future use of the Properties and that the load bearing qualities of
the site of each property are sufficient to support the buildings
constructed or to be constructed thereon.
The Properties have been valued individually, not as part of a
portfolio.
Valuation
Methodology
The Valuation has been undertaken using appropriate valuation
methodology and our professional judgement.
Comparative method
In undertaking the Valuation, we have made our assessment on the
basis of a collation and analysis of appropriate comparable
transactions, together with evidence of demand within the vicinity
of the subject properties. With the benefit of such transactions we
have then applied these to the properties, taking into account
size, location, aspect and other material factors.
Investment method
The Valuation has been carried out using the comparative and
investment methods. In undertaking the Valuation, we have made our
assessment on the basis of a collation and analysis of appropriate
comparable investment and rental transactions, together with
evidence of demand within the vicinity of the subject properties.
With the benefit of such transactions we have then applied these to
the Properties, taking into account size, location, terms, covenant
and other material factors.
Valuation bases
The basis of value for the Valuation as required by the Code is
Market Value and therefore these valuations have been prepared on a
Market Value basis.
Market Value
Market Value is defined within RICS Valuation - Global Standards
as:
"The estimated amount for which an asset or liability should
exchange on the valuation date between a willing buyer and a
willing seller in an arm's length transaction after proper
marketing and where the parties had each acted knowledgeably,
prudently and without compulsion."
Portfolios
In a valuation of a property portfolio, we have valued the
individual properties separately and we have assumed that the
individual properties have been marketed in an orderly way.
Market Value
Market Value
We are of the opinion that the aggregate Market Value of the
freehold, feuhold, ownership and leasehold properties, as at the
valuation date is:
GBP319,830,000 (Three Hundred and Nineteen Million, Eight
Hundred and Thirty Thousand Pounds)
The tenure of the Properties held by the Client as at 31
December 2023 comprises the following:
No. of Properties Market Value
Freehold 64 GBP275,500,000
Leasehold 14 GBP44,330,000
Total 78 GBP319,830,000
------------------ ---------------
Our opinions of value are summarised in the table below:
Weighting by
Valuation value
31 December 2023 31 December 2023
GBP'000 %
Industrial GBP162,500 50.81%
==================== ===================
RW GBP82,375 25.76%
==================== ===================
Other GBP30,940 9.67%
==================== ===================
Office GBP30,875 9.65%
==================== ===================
High Street GBP13,140 4.11%
==================== ===================
Total GBP319,830 100%
==================== ===================
Source: Knight Frank
Weighting by
Valuation value
31 December 2023 31 December 2023
Location GBP'000 %
West Midlands GBP54,065 16.90%
==================== ===================
North West GBP62,125 19.42%
==================== ===================
South East GBP31,200 9.76%
==================== ===================
East Midlands GBP54,825 17.14%
==================== ===================
South West GBP46,265 14.47%
==================== ===================
North East GBP23,425 7.32%
==================== ===================
Scotland GBP41,100 12.85%
==================== ===================
Eastern GBP3,575 1.12%
==================== ===================
Wales GBP3,250 1.02%
==================== ===================
Total GBP319,830 100%
==================== ===================
For the purposes of Rule 29.5 of the Code, we confirm that in
our opinion the current valuation of the Properties as at the date
of this Valuation Report would not be materially different from the
valuation of the Properties as at the valuation date.
However we bring to your attention the potential material change
in the portfolio in so far as Osprey House, Pegasus Business Park,
Castle Donnington DE74 2UZ is currently under offer and is likely
to be sold early in calendar year 2024. This property is therefore
included within this Valuation Report but could soon be removed
from the portfolio.
We are not aware, as a result of our role as an External Valuer
of the Properties of any matter which would materially affect the
Market Value of the Properties which is not disclosed in this
Valuation Report (subject to the assumptions set out in this
Valuation Report) and we are not aware of any matter in relation to
this Valuation Report that we believe should be and has not yet
been brought to the attention of the Addressees.
For the purposes of paragraph 130(vi) of the FCA Technical Note,
we are required to explain any differences between the valuation
figure in this Valuation Report and the equivalent figure reported
in the Client's latest published annual or consolidated accounts.
The Company's properties were valued as at 31 March 2023 for the
annual report valuation of the Company. The difference between the
31 March 2023 valuation and this Valuation is attributed to changes
in the market value of the Properties and the acquisition and
disposal of assets between that date and the date of this
report.
Responsibility
For the purposes of the Code, we are responsible for this
Valuation Report and accept responsibility for the information
contained in this Valuation Report and confirm that to the best of
our knowledge (having taken all reasonable care to ensure this is
the case), the information contained in this Valuation Report is in
accordance with the facts and contains no omissions likely to
affect its import. This Valuation Report complies with and is
prepared in accordance with, and on the basis of, the Code. We
authorise its contents for the purposes of Rule 29 of the Code.
We accept responsibility (including for the purpose of Rule
5.3.2R(2)(f) of the UK Prospectus Regulation Rules) for the
information contained in this Valuation Report and to the best of
our knowledge, the information contained in this Valuation Report
is in accordance with the facts and the Valuation Report makes no
omission likely to affect its import.
Consent
Knight Frank LLP has given and has not withdrawn its consent to
the inclusion of this Valuation Report in the Rule 2.7
Announcement, the Scheme Document and in the Combined Prospectus
and Circular that is to be reviewed and approved by the FCA, and to
the publication and reproduction of this Valuation Report in
accordance with the Purpose.
We consent to the inclusion of the Valuation and this Valuation
Report and any extracts or references thereto in the Combined
Prospectus and Circular or any supplementary prospectus and/or
circular (as the case may be) and the reference to our name in the
form and context in which they are included in the Combined
Prospectus and Circular or any supplementary prospectus and/or
circular (as the case may be) (subject to us first approving the
form and context in which our Valuation Report will appear).
Appendix 1 List of Properties
Feuhold Menzies - Aberdeen, 6 Abbotswell Road R00-173 15/02/2023
West Tullos Ind Estate, Aberdeen,
AB12 3AB
============ =================================================== ========= ============
Freehold Unit 2, Snipe Retail Park, Ash, Ashton-under-Lyne R00-150 02/02/2023
============ =================================================== ========= ============
Freehold Southam Road, Banbury, OX16 2R R00-115 14/03/2023
============ =================================================== ========= ============
Freehold Part of Plot S, Stratton Bus Park, R00-051 25/04/2023
Biggleswade
============ =================================================== ========= ============
Long Lease Unit 10, Albert Reach, Bristol, Bristol R00-091 12/04/2023
============ =================================================== ========= ============
Freehold Unit 1, Centrum 100, Burton, D, Burton R00-137 01/02/2023
============ =================================================== ========= ============
Freehold Unit A, Wellington Road Retail Park, R00-155 17/11/2023
Burton
============ =================================================== ========= ============
Freehold 55 Westburn Drive, Cambuslang R00-087 28/02/2023
============ =================================================== ========= ============
Freehold 90 Queen Street, Cardiff R00-154 21/07/2023
============ =================================================== ========= ============
Freehold Unit 1 St Nicholas Gate Retail, Carlisle R00-159 14/02/2023
============ =================================================== ========= ============
Osprey House, Pegasus Business Park,
Castle Donnington,
Long Lease DE74 2UZ R00-120 21/02/2023
============ =================================================== ========= ============
Freehold Unit 1, Willowbridge Way, Wakefield, R00-049 02/02/2023
Castleford
============ =================================================== ========= ============
Long Lease Wienerberger House, Royal Bus, Cheadle R00-121 28/02/2023
============ =================================================== ========= ============
Long Lease Container Components, Holmewood Industrial R00-206 23/11/2022
Park, Chesterfield
============ =================================================== ========= ============
Freehold Orchard Business Park, Coventry R00-032 10/01/2023
============ =================================================== ========= ============
Freehold Homebase, Holt Road, Cromer R00-198 23/11/2022
============ =================================================== ========= ============
Freehold Unit 7, Badby Park, Daventry R00-136 28/07/2023
============ =================================================== ========= ============
Freehold DFS Droitwich, Roman Way Retail Park, R00-204 19/01/2023
Droitwich, WR9 9AY
============ =================================================== ========= ============
Feuhold 47B George St, Edinburgh, EH2 R00-007 16/11/2022
============ =================================================== ========= ============
Freehold Opus Aspect, Chester Road, Erdington R00-047 09/02/2023
============ =================================================== ========= ============
Long Lease 2 Campsie Drive, Glasgow Airport, R00-100 01/11/2022
Glasgow
============ =================================================== ========= ============
Freehold Unit 1 & 2, Eastern Avenue, Gloucester R00-142 13/02/2023
============ =================================================== ========= ============
Ownership Thornbridge Distribution Centre, Grangemouth R00-200 14/02/2023
============ =================================================== ========= ============
Freehold GF Yellow Wing GW House Grove Park, R00-035 28/01/2023
Leicester, LE19 1SY
============ =================================================== ========= ============
Freehold Market Street, Guildford, GU1 4LB R00-109 09/02/2023
============ =================================================== ========= ============
Freehold 1 Livingstone Boulevard, Hamilton, R00-052 01/02/2023
G72 0BP
============ =================================================== ========= ============
Long Lease Harrison Court Hilton Industrial Est, R00-182 25/04/2023
Hilton, DE65 5UR
============ =================================================== ========= ============
Freehold Telford Way, Kettering, NN16 8UN R00-093 19/01/2023
============ =================================================== ========= ============
Freehold Penrhyn Court, Knowsley R00-184 19/01/2023
============ =================================================== ========= ============
Freehold The Old Knutsford Library, Brook Street, R00-004 21/02/2023
Knutsford, WA16 8BN
============ =================================================== ========= ============
Freehold Units A and B, National Court, Leeds, R00-084 17/11/2023
LS10 1PS
============ =================================================== ========= ============
Freehold 489 Aylestone Road, Leicester R00-061 07/06/2023
============ =================================================== ========= ============
Freehold Stephenson Road, Lincoln, LN6 3QU R00-101 07/06/2023
============ =================================================== ========= ============
Freehold Total Fitness, Whisby Road, Lincoln, R00-163 09/02/2023
LN6 3TA
============ =================================================== ========= ============
Feuhold East Avenue, Linwood R00-175 19/01/2023
============ =================================================== ========= ============
Long Lease Units 1 - 4, The Beat, Liverpool R00-138 19/01/2023
============ =================================================== ========= ============
Freehold 2 Todd Square, Houstoun Estate Livingston R00-153 02/12/2022
============ =================================================== ========= ============
Freehold VW Loughborough R00-172 02/02/2023
============ =================================================== ========= ============
Long Lease Unit 4, The Furrows, The Furrows Merlin R00-041 18/01/2023
Park Trafford Park
Manchester, M32 0SZ
============ =================================================== ========= ============
Freehold 60 Fountain Street, Manchester, M2 R00-186 28/04/2023
2FE
============ =================================================== ========= ============
Freehold DFS Measham, Tamworth Road, Measham, R00-205 09/02/2023
DE12 7DU
============ =================================================== ========= ============
Feuhold 5 Brittain Way, Motherwell R00-207 19/01/2023
============ =================================================== ========= ============
Feuhold Menzies, 1 Claylands Road, Newbridge R00-174 21/02/2023
- Edinburgh
============ =================================================== ========= ============
Freehold Unit D1, Loscoe Close, Normanton, R00-094 05/09/2023
WF6 1TW
============ =================================================== ========= ============
Freehold Starbucks, The Portal Queens Drive, R00-181 16/01/2023
Nottingham, NG2 1AL
============ =================================================== ========= ============
Freehold 1 Dunsil Road, Moorgreen Industrial R00-199 17/11/2023
Park Newthorpe, Nottingham, NG16 3TN
============ =================================================== ========= ============
Freehold Springfield Road Retail Park, Hucknall R00-202 23/11/2022
Lane, Bulwell,
Nottingham
============ =================================================== ========= ============
Freehold DX Parcel Depot, Harrington Way, Nuneaton R00-053 10/02/2023
============ =================================================== ========= ============
Freehold Willow Court Minns Business Park, R00-183 25/10/2023
Oxford
============ =================================================== ========= ============
Freehold Unit A, Coypool Road, Plymouth R00-145 24/10/2022
============ =================================================== ========= ============
Freehold AGO, Harbour Road, Portishead, Bristol, R00-039 24/10/2022
BS20 7AJ
============ =================================================== ========= ============
Freehold Phase II, Mustad Way Portishead R00-079 25/10/2022
============ =================================================== ========= ============
Freehold 226-238 Commercial Road, Portsmouth R00-110 17/11/2022
============ =================================================== ========= ============
Freehold Alto House, Ravensbank Drive, Redditch R00-072 25/10/2022
============ =================================================== ========= ============
Freehold Parkwood Health & Fitness, Salisbury R00-151 02/02/2023
============ =================================================== ========= ============
Freehold Synergy Health, Sheffield Parkway, R00-020 02/02/2023
Sheffield,
S9 4WU
============ =================================================== ========= ============
Freehold Parkway 1 Business Centre, Sheffield R00-126 02/02/2023
============ =================================================== ========= ============
Freehold Foundry House, Sheffield R00-168 10/11/2022
============ =================================================== ========= ============
Freehold 28 & 29A Pride Hill, Shrewsbury R00-062 02/12/2022
============ =================================================== ========= ============
Long Lease Audi Shrewsbury R00-166 02/12/2022
============ =================================================== ========= ============
Long Lease TJ Vickers Shrewsbury R00-164 31/01/2023
============ =================================================== ========= ============
Long Lease 19-23 Palmerston Road, South Sea, R00-065 25/10/2022
Portsmouth
============ =================================================== ========= ============
Freehold Unit E, DHL, Estuary Commerce Park, R00-054 19/01/2023
Speke, L24 8RF
============ =================================================== ========= ============
Freehold County Road Retail Park, Swindon R00-123 11/10/2022
============ =================================================== ========= ============
Freehold 302 Relay Park, Tamworth R00-118 23/11/2022
============ =================================================== ========= ============
Freehold Sainsbury's, Anthony Road, Torpoint, R00-078 25/10/2023
PL11 2JW
============ =================================================== ========= ============
Long Lease Unit 1 & 5, Abbey Sands, Torquay, R00-103 25/10/2022
TQ2 5FB
============ =================================================== ========= ============
Freehold Unit 1, Leacroft Road, Warrington, R00-112 10/02/2023
WA3 6PJ
============ =================================================== ========= ============
Freehold 1 Chesford Grange, Warrington, WA1 R00-070 10/02/2023
4RQ
============ =================================================== ========= ============
Long Lease The Dome Roundabout, NW Avenue, Watford R00-027 01/02/2023
============ =================================================== ========= ============
Freehold Hawthorns Business Park, Halford Lane, R00-124 17/11/2022
West Bromwich, B66 1BB
============ =================================================== ========= ============
Freehold 26 Kings Hill Avenue, Kings Hill, R00-113 28/01/2023
West Malling, ME19 4AE
============ =================================================== ========= ============
Freehold Unit 1 Jubilee Close Retail Park, R00-171 11/10/2023
Weymouth
============ =================================================== ========= ============
Freehold 127-128 High Street, Winchester, SO23 R00-201 23/11/2023
9AX
============ =================================================== ========= ============
Freehold Unit One, Road One, Winsford, CW7 R00-122 24/01/2023
2RL
============ =================================================== ========= ============
Freehold Menzies Distribution Centre, George R00-187 21/02/2023
Cayley, Clifton, York
============ =================================================== ========= ============
Freehold Units 1&2, Clifton Moor Retail Park, R00-203 21/02/2023
York
============ =================================================== ========= ============
Part B | Savills Valuation Report in respect of CREI
Project Utah
Report and Valuation
19 January 2024
--
Contents
1. Valuation Report
1.1. Addressees
1.2. Project Name
1.3. Instructions and Purpose of Valuation
1.4. Terms of Reference
1.5. Conflicts of Interest
1.6. Date of Valuation and Changes to Value since the Valuation Date
1.7. Valuer Details
1.8. Basis of Valuation
1.9. Market Conditions
1.10. Market Value
1.11. Confidentiality
1.12. Portfolio Valuation General Assumptions and Conditions
1.13. Reliance
1.14. Signatories
1.15. Date of Report
2. Schedule of Properties
3. Portfolio Valuation General Assumptions and Conditions
Valuation Report
Addressees Custodian Property Income REIT plc ("Custodian
REIT")
1 New Walk Place
Leicester
LE1 6RU
Numis Securities Limited ("Deutsche Numis")
45 Gresham Street
London
EC2V 7BF
abrdn Property Income Trust Limited ("API")
PO Box 255
Trafalgar Court, Les Banques
St Peter Port
Guernsey
Lazard & Co Limited ("Lazard")
50 Stratton Street
London
W1J 8LL
FAO: Alex Nix
Project Name Project Utah
Instructions and In accordance with our instructions received
Purpose from Custodian Property Income REIT plc ("Custodian
of Valuation REIT") and our terms of engagement dated 15 January
2024 with Custodian REIT, we have undertaken
valuations (the "Valuations") of the freehold
and leasehold interests in the properties described
in Schedule 2 (the "Properties" and each being
a "Property") (together, the "Portfolio") in
connection with a recommended all-share offer
by Custodian REIT for API (the "Transaction").
Custodian REIT has expressly instructed us not
to disclose certain information which is considered
commercially sensitive, namely the individual
values of the properties.
This report (the "Report") has been prepared
in accordance with the RICS Valuation - Global
Standards (incorporating the IVSC International
Valuation Standards) effective from 31 January
2022 together with the UK National Supplement
effective 14 January 2019, together the "Red
Book". The Report has been prepared in accordance
with and complies with: (a) the requirements
of Rule 29 of the City Code on Takeovers and
Mergers (the "Code"); (b) Rules 5.4.5G and 5.4.6G
of the prospectus regulation rules made by the
Financial Conduct Authority ("FCA") for the purposes
of Part 6 of the Financial Services and Markets
Act 2000 (the "Prospectus Regulation Rules");
and (c) paragraphs 128-130 of the FCA Primary
Market Technical Note 619.1 (the "FCA Technical
Note"). We understand that this Report is required
for: (i) inclusion in an announcement proposed
to be made by Custodian REIT and API pursuant
to Rule 2.7 of the Code in connection the "Transaction
(the "Announcement");(ii) inclusion in a scheme
circular to be published by API in connection
with the Transaction (the "Scheme Document");
(iii) inclusion in a combined prospectus and
circular to be published by Custodian REIT in
connection with the Transaction and the issue
and allotment of new shares in the capital of
Custodian REIT pursuant to the terms of the Transaction
(the "Combined Prospectus and Circular"); (iv).inclusion
and/or reference to it in any other announcements,
documents and/or supplementary documents required
to be released by Custodian REIT and/or API pursuant
to the Code and which directly relate to the
Transaction (each a "Code Document"); and (v)
publication on Custodian REIT's website and API's
website in accordance with the requirements of
the Code and the Prospectus Regulation Rules
Terms of Reference The Portfolio comprises 80 Properties, fifteen
of which are held on a leasehold basis, whilst
the remainder are held on a freehold / heritable
basis. The Properties are all held for investment
purposes and are located throughout the UK. The
properties have been inspected within the last
12 months. All the Properties are identified
on the attached schedule at Section 2 of this
Report.
Custodian REIT has provided us with floor areas
for the Properties, which we understand were
calculated in accordance with the current RICS
Property Measurement and upon which we have relied.
We have not remeasured the office properties
in the portfolio in accordance with International
Property Measurement Standard (IPMS) 3 - Offices
and therefore our Valuations are based on Net
Internal Areas as defined in the RICS Property
Measurement. We have been provided with legal
documents for the Properties and tenancy schedules
provided by Custodian REIT In addition to this,
we have received updates from Custodian REIT
specialist advisors. We confirm that we have
considered sustainability features relevant to
the Properties and the implications these could
have on our Valuations.
Conflicts of In accordance with the RICS professional statement
Interest on Conflicts of Interest (1(st) Edition, March
2017), we are not aware of any conflict of interest
preventing us from providing you with an independent
valuation of the properties in accordance with
the RICS Red Book. We confirm that we undertake
valuations of the Properties on behalf of Custodian
REIT for accounts purposes on a quarterly basis,
the last of which was as at 30 September 2023.
We confirm we are acting as an "external valuer"
as defined in the RICS Red Book.
Date of Valuation Our opinions of value are as at Valuation Date
and (the "Valuation Date") . T he importance of the
Changes to Value Valuation Date must be stressed as property values
since can change over a relatively short period. We
the Valuation Date note the following between the Valuation Date
and the date of this Report:
* 1 Pride Place, Pride Park, Derby sold on 5 January
2024.
* Milton Keynes - Massmould, Bradbourne Drive, Milton
Keynes is under offer and expected to complete in
January 2024.
These properties have been included in this Report.
However, we note that the Pride Park, Derby property
has now been removed from the portfolio and the
Milton Keynes - Massmould property could soon
be removed from the portfolio.
For the purposes of Rule 29.5 of the Code, and
with the exception of the sale of the two above
properties, we confirm that there is no material
difference between the values of the remaining
properties stated in this Report and the values
that would be stated were the Valuation Date
the date of this Report. Nor do we believe that
market conditions have changed sufficiently to
materially alter the Valuations reported as at
the Valuation Date. As a result, we confirm for
the purpose of Rule 29.5 of the Code and paragraph
130(iv) of the FCA Technical Note that an updated
valuation as at the date of this Report would
not be materially different from the Valuations
as at the Valuation Date.
Valuer Details These Valuations have been prepared by a number
of valuers under the supervision of Tom Priest
MRICS and James Daffern MRICS (the "Lead Valuers"),
both of whom are RICS Registered Valuers. We
confirm that the Lead Valuers are appropriately
qualified for the purposes of the Valuation as
required by Rule 29.3(a)(ii) of the Code, meet
the requirements of the Red Book and Rule 29.3(a)(iii)
of the Code in having sufficient current knowledge
of the relevant markets and the necessary skills
and understanding to undertake the Valuations
competently in accordance with Rule 29 of the
Code and Rules 5.4.5G and 5.4.6G of the Prospectus
Regulation Rules. We confirm that the Lead Valuers
are independent of the parties to the Transaction
as required by Rule 29.3(a)(i) of the Code, and
confirm that we are not aware of any reason why
we would not satisfy the requirements of Rule
29.3(a)(i) of the Code.
We are required by RICS regulations to disclose
the following:
* Tom Priest MRICS and James Daffern MRICS commenced
supervision of the Valuation of this Portfolio in
June 2021, when Savills (UK) Limited was instructed
to provide quarterly valuations;
* In the financial year ending 31 December 2023, the
total fees earned from the Addressees, and connected
parties, was less than 5% of Savills (UK) Limited's
turnover.
Basis of Valuation Our Valuations have been prepared on the basis
of Market Value, the definition of which is as
follows:
"The estimated amount for which an asset or
liability should exchange on the valuation date
between a willing buyer and a willing seller
in an arm's length transaction after proper marketing
and where the parties had each acted knowledgeably,
prudently and without compulsion."
Our Valuations have been arrived at predominantly
by reference to market evidence for comparable
property. We have made no allowance for any Capital
Gains Tax or other taxation liability that might
arise upon a sale of the property, nor have we
allowed for any adjustment to any of the properties'
income streams to take into account any tax liabilities
that may arise. Our Valuations are exclusive
of VAT (if applicable). We have excluded from
our Valuations any additional value attributable
to goodwill, or to fixtures and fittings which
are only of value in situ to the present occupiers.
No allowance has been made for rights, obligations
or liabilities arising in relation to fixed plant
and machinery, and it has been assumed that all
fixed plant and machinery and the installation
thereof complies with the relevant EEC legislation,
insofar that the latter is applicable.
We have made no variation from standard assumptions.
Market Conditions The UK economy continues to grapple with inflationary
pressures amid sluggish economic growth. In the
first quarter of 2023, the UK witnessed a modest
expansion, leading the IMF to upgrade their forecasts
and dismiss the possibility of a recession this
year. To combat inflation, the Bank of England
has been consistently raising interest rates,
reaching a high of 5.25% in August 2023. However,
the potential for further increases cannot be
ruled out. As a result, borrowing costs have
increased, surpassing prime yields.
The commercial real estate market felt the impact
of these developments and experienced a sharp
correction in prices. Many sales have been withdrawn
as vendors' price expectations were not met,
while buyers have adopted an opportunistic pricing
approach. Real estate lenders are exercising
caution when it comes to financing new lending
opportunities, except for the most exceptional
assets and sponsors.
Consequently, transactional volumes and liquidity
have significantly declined, leading to a scarcity
of comparable evidence to inform the valuation
process. Market sentiment has gained increased
importance in making informed assessments, given
the limited availability of data. Notably, a
divided market is emerging, differentiating "best
in class" properties from those facing challenges
due to locational factors and the overall quality
of the real estate. Stakeholders in the market,
including occupiers, investors, and lenders,
are attaching heightened significance to environmental,
social, and governance (ESG) considerations and
the associated costs, in their decision making.
While there is still liquidity in the market,
ongoing geopolitical uncertainties, economic
challenges, and the cost and accessibility of
debt finance are expected to further impact pricing
in certain sectors. As a result, the potential
for future value erosion cannot be discounted,
particularly for properties outside prime markets
where more significant declines are anticipated.
It is therefore important to recognise that our
valuations have been prepared against the backdrop
outlined above. Moreover, investor behaviour
can change quickly during such periods of heightened
volatility. As such, the conclusions set out
in this report are only valid at the valuation
date and we would recommend that the value of
the properties are kept under regular review.
For the avoidance of doubt, our valuations are
not reported as being subject to 'material valuation
uncertainty' as defined in the RICS Valuation
- Global Standards.
Market Value We are of the opinion that the aggregate Market
Value of the Properties in the Portfolio, as
at 31 December 2023, is: TOTAL GBP281,940,000
(TWO HUNDRED AND EIGHTY ONE MILLION NINE HUNDRED
AND FORTY THOUSAND POUNDS)
The total valuation figure reported is the aggregate
total of the individual Properties and not necessarily
a figure that could be achieved if the Portfolio
was sold as a single holding. Our Valuations
include standard purchaser's costs but do not
include costs of realisation.
For the purposes of paragraph 130(vi) of the
FCA Technical Note, we are required to comment
on any differences between the valuation figure
in this Report and the valuation figures reported
in Custodian REIT's latest published annual or
consolidated accounts.
For the purposes of paragraph 130(vi) of the
FCA Technical Note, we are required to comment
on any differences between the valuation figure
in this Report and the valuation figures reported
in Custodian REIT's latest published annual or
consolidated accounts. The Company's properties
were valued as at 31 March 2023 for the annual
report valuation of the Company. The difference
between the 31 March 2023 valuation and this
Valuation is attributed to changes in the market
value of the Properties and the disposal of assets
between that date and the date of this Report.
The Market Value of the Properties split by property
type (based on Custodian REIT categorisations)
is as follows: Valuation 31 Valuation 31
December 2023 December 2023
(GBPm) (%)
Retail GBP25,540,000 9.06%
---------------- ---------------
Retail Warehouse GBP43,775,000 15.53%
---------------- ---------------
Offices GBP34,925,000 12.39%
---------------- ---------------
Industrial GBP143,325,000 50.84%
---------------- ---------------
Other GBP34,375,000 12.19%
---------------- ---------------
Total GBP281,940,000 100%
---------------- ---------------
The Market Value of the Properties split by region
(based on Custodian REIT categorisations) is
as follows: Valuation 31 Valuation 31
December 2023 December 2023
(GBPm) (%)
East Anglia GBP16,130,000 5.72%
---------------- ---------------
East Midlands GBP35,900,000 12.73%
---------------- ---------------
North East GBP31,950,000 11.33%
---------------- ---------------
North West GBP41,640,000 14.77%
---------------- ---------------
Scotland GBP35,470,000 12.58%
---------------- ---------------
South East GBP47,750,000 16.94%
---------------- ---------------
South West GBP16,850,000 5.98%
---------------- ---------------
Wales GBP1,850,000 0.66%
---------------- ---------------
West Midlands GBP54,400,000 19.29%
---------------- ---------------
Total GBP281,940,000 100%
---------------- ---------------
The tenure of the Properties held by Custodian
REIT as at the Valuation Date comprises the following: No. of Properties Market Value
Freehold 65 GBP243,565,000
------------------ ---------------
Leasehold 15 GBP38,375,000
------------------ ---------------
Total 80 281,940,000
------------------ ---------------
--
Confidentiality In accordance with the recommendations of the
RICS, this Report is provided solely for the
purpose stated in this Report. It is confidential
to and for the use only of the parties to whom
it is addressed, and no responsibility is accepted
to any third party for the whole nor any part
of its contents. Any such parties rely upon this
Report at their own risk. Save as referred to
in this Report neither the whole nor any part
of this Report or any reference to it may be
included now, or at any time in the future, in
any published document, circular or statement,
nor published, referred to or used in any way
without our written approval of the form and
context in which it may appear.
Notwithstanding the above, we understand that
the Report is for inclusion in the Announcement,
Scheme Document and the Combined Prospectus and
Circular and any further documents or announcements
to be published by Custodian REIT and/or API
in accordance with the Transaction. We consent
to the publication and reproduction of the Report
as required (including in the Announcement, the
Scheme Document and the Combined Prospectus and
Circular) subject to the provisions of our Terms
of Engagement.
Portfolio Valuation All valuation advice has been carried out on
General Assumptions the basis of the General Assumptions and Conditions
and Conditions set out in Section 3.
Reliance This Report is addressed to and capable of being
relied upon by:
* Custodian REIT
* Deutsche Numis
* API
* Lazard
(together, the Addressees) provided that, in
relying on this Report, each of the Addressees
acknowledges and agrees that our liability under
or in connection with this report to any one,
or more, or all of the Addressees and any other
party who becomes entitled to rely on the report
is limited to GBP20,000,000 (Twenty Million Pounds)
in the aggregate (the "Aggregate Limit"). Further
and without prejudice to the above, our maximum
liability with respect to any single property
contained in this report shall be limited to
an amount equal to 20% (twenty percent) of the
reported Value of that property (the "Per Property
Limit"). For the avoidance of doubt, the Per
Property Limit is not in addition to the Aggregate
Limit, rather, where claims relate to multiple
properties, the Per Property Limit for each Property
will apply until the Aggregate Limit is reached,
above which we will have no further liability.
Notwithstanding the above, we acknowledge that
this Report will also be for the use of the shareholders
of Custodian REIT and API for the specific Purpose
set out in this Valuation.
This Report is subject to the terms and conditions
set out in our Terms of Engagement dated 15 January
2024.
Responsibility For the purposes of the Code, we are responsible
for this Report and accept responsibility for
the information contained in this Report and
confirm that to the best of our knowledge (having
taken all reasonable care to ensure that such
is the case), the information contained in this
Report is in accordance with the facts and contains
no omissions likely to affect its import. This
Report complies with, and is prepared in accordance
with, and on the basis of, the Code. We authorise
its contents for the purpose of Rule 29 of the
Code. We understand that the publication or reproduction
by Custodian REIT and/or API of this Report and/or
the information contained herein as required
by Rules 26 and 29 of the Code is necessary,
including in the Announcement, the Scheme Document
and any other announcements, documents and/or
supplementary documents required to be released
by Custodian REIT and/or API pursuant to the
Code and which directly relate to the Transaction.
We accept responsibility (including for the purpose
of Rule 5.3.2R(2)(f) of the UK Prospectus Regulation
Rules) for the information contained in this
Report and to the best of our knowledge, the
information contained in this Report is in accordance
with the facts and this Report makes no omission
likely to affect its import.
We confirm that we are not aware, as a result
of our role as an External Valuer of the Properties
of any matter which would affect the Market Value
of the properties which is not disclosed in this
Report (subject to any assumptions set out in
this Report) in order to make this Report materially
accurate and not misleading and we are not aware
of any matter in relation to this Report that
we believe should be and has not yet been brought
to the attention of the Addressees of this Report.
Signatories Tom Priest MRICS James Daffern MRICS
RICS Registered Valuer RICS Registered Valuer
Director Director
For and on behalf of Savills Advisory Services
Limited, a subsidiary of Savills Plc
Regulated by RICS
Registered in England No. 06215875
Registered Office: 33 Margaret Street, London,
W1G 0JD
Date of Report 19 January 2024
Schedule of Properties
======================
1 Pride Place, Pride 24/05/2023
Pride Park Park, Derby, DE24 8QR Freehold
------------------------- ------------------------------ --------------- -----------
Units E/F, Bardon, Coalville, 01/06/2023
Bardon LE67 1FL Freehold
------------------------- ------------------------------ --------------- -----------
Unit M3, RD Park, BS11 24/05/2023
Avonmouth 0QL - Ref:1100-CU197 Freehold
------------------------- ------------------------------ --------------- -----------
Unit 2 Sheffield, 3 04/08/2023
Sheffield Europa Drive, S9 1XT Long Leasehold
------------------------- ------------------------------ --------------- -----------
Triangle Retail Triangle Retail Park 09/06/2023
Park (HUT 341), Lubbesthorpe Long Leasehold
------------------------- ------------------------------ --------------- -----------
Counterpoint, Crewe, 10/02/2023
Crewe CW1 6EH Freehold
------------------------- ------------------------------ --------------- -----------
Oldbury Brades Road, Oldbury Freehold 04/06/2023
------------------------- ------------------------------ --------------- -----------
Lancaster Way, Ermine 16/10/2023
Ermine Business Business Park, PE29
Park 6XU Freehold
------------------------- ------------------------------ --------------- -----------
37/38 Frederick St, 04/06/2023
Jewellery Quarter, B1
Jewellery Quarter 3HH Long Leasehold
------------------------- ------------------------------ --------------- -----------
109 Commercial Road, 20/10/2023
Portsmouth Portsmouth, PO Freehold
------------------------- ------------------------------ --------------- -----------
105-107 Brighton Road, 13/05/2023
Redhill Redhill, RH1 6PS Freehold
------------------------- ------------------------------ --------------- -----------
98 Argyle Street, Glasgow, 31/05/2023
Glasgow G2 9BQ Freehold
------------------------- ------------------------------ --------------- -----------
GF Bath, Bluecoat House, 02/08/2023
Bath Bath, BA1 1EY Long Leasehold
------------------------- ------------------------------ --------------- -----------
PSL, Unit C Estuary 26/05/2023
Speke - PSL Commerce Park, L24 8RF Long Leasehold
------------------------- ------------------------------ --------------- -----------
Castleford - MKM Castleford - MKM Freehold 01/06/2023
------------------------- ------------------------------ --------------- -----------
2 Long Wyre Street, 27/06/2023
Colchester Colchester Freehold
------------------------- ------------------------------ --------------- -----------
54 Above Bar Street, 07/02/2023
Southampton Southampton Long Leasehold
------------------------- ------------------------------ --------------- -----------
46/50a High Street, 24/10/2023
High Wycombe Frogmoor, High Wycombe Freehold
------------------------- ------------------------------ --------------- -----------
Staples Unit, Milton 28/02/2023
Milton Keynes Keynes, MK9 1AN Freehold
------------------------- ------------------------------ --------------- -----------
3 Carriage Way, White 01/06/2023
Doncaster Rose Way, DN4 5NT Freehold
------------------------- ------------------------------ --------------- -----------
Beechings Way, Gillingham, 22/06/2023
Gillingham ME8 6PS Long Leasehold
------------------------- ------------------------------ --------------- -----------
Leeds - Cardinal 9 Manor Road, Leeds, 01/06/2023
House LS11 9AH Freehold
------------------------- ------------------------------ --------------- -----------
40 David Street, Leeds, 01/06/2023
Leeds - David Street LS11 5QJ Freehold
------------------------- ------------------------------ --------------- -----------
Milton Keynes - Bradbourne Drive, Milton 28/02/2023
Massmould Keynes, MK7 8AT Freehold
------------------------- ------------------------------ --------------- -----------
Zeus Building, Unit 10/02/2023
Salford - Zeus 4, Salford, M27 8UJ Freehold
------------------------- ------------------------------ --------------- -----------
Discovery Retail Park, 19/05/2023
Grantham London Road Freehold
------------------------- ------------------------------ --------------- -----------
Unit 2, Langage Science 30/07/2023
Plymouth Park, PL7 5BQ Freehold
------------------------- ------------------------------ --------------- -----------
Glasgow - West 250 West George St, 31/05/2023
George St Lower Ground Floor Freehold
------------------------- ------------------------------ --------------- -----------
Unit B, Centre 31, Foxbridge 01/06/2023
Normanton Way, WF6 1TN Freehold
------------------------- ------------------------------ --------------- -----------
Unit 16, Ashby Park, 09/06/2023
Ashby LE65 1JF Freehold
------------------------- ------------------------------ --------------- -----------
Warwick - Tournament Warwick - Tournament 01/06/2023
Fields Fields Freehold
------------------------- ------------------------------ --------------- -----------
6 Eastgate Row South, 11/11/2023
Chester - Eastgate CH1 1LF Freehold
------------------------- ------------------------------ --------------- -----------
21/21A Invincible Road, 01/11/2023
Farnborough Farnborough, GU14 7QU Long Leasehold
------------------------- ------------------------------ --------------- -----------
37 Market Place, St 29/03/2023
St Albans Albans, AL3 5DL Freehold
------------------------- ------------------------------ --------------- -----------
61 East Street, Taunton, 28/09/2023
Taunton TA1 3LX Freehold
------------------------- ------------------------------ --------------- -----------
Kingswood Lakeside, 04/06/2023
Cannock Cannock, WS11 8LD Freehold
------------------------- ------------------------------ --------------- -----------
Birmingham - Lancaster 05/07/2023
House Lancaster House, Birmingham Freehold
------------------------- ------------------------------ --------------- -----------
Cromer House, Caxton 29/03/2023
Way, Stevenage, SG1
Stevenage 2DF Freehold
------------------------- ------------------------------ --------------- -----------
Crewe - Phoenix Phoenix Leisure Park, 29/05/2023
Leisure Park Crewe, CW1 3AJ Freehold
------------------------- ------------------------------ --------------- -----------
High Street/Trinity 27/06/2023
Colchester Square, Colchester Freehold
------------------------- ------------------------------ --------------- -----------
Redditch - Ravensbank Ravens Eight, Redditch, 01/06/2023
Business Park B98 9EX Freehold
------------------------- ------------------------------ --------------- -----------
Unit 2, Gazelle Close, 01/04/2023
Winnersh Reading, RG41 5HH Freehold
------------------------- ------------------------------ --------------- -----------
Unit 1, St Catherines 25/05/2023
Perth Leisure Park, PH1 5XA Freehold
------------------------- ------------------------------ --------------- -----------
Chester 4 Eastgate Row Freehold 11/11/2023
------------------------- ------------------------------ --------------- -----------
Warrington - Life Unit 4 Kingsland Grange, 05/06/2023
Tech Warrington, WA1 4KW Freehold
------------------------- ------------------------------ --------------- -----------
Irlam Wharf Road, Irlam, 26/05/2023
Irlam, Manchester M44 5PN Freehold
------------------------- ------------------------------ --------------- -----------
Units 18-39 Holly Lane 09/06/2023
Atherstone Ind Est CV9 2QX Long Leasehold
------------------------- ------------------------------ --------------- -----------
Kettering - Venture Unit 2200, Kettering 09/06/2023
Business Park Venture Park, NN15 6XR Freehold
------------------------- ------------------------------ --------------- -----------
Leighton Buzzard Vimy Road, LU7 1ER Freehold 16/10/2023
------------------------- ------------------------------ --------------- -----------
Bedford - Telford Window Ware Unit, Telford 03/06/2023
Way Way, MK42 0PQ Freehold
------------------------- ------------------------------ --------------- -----------
George Eastham Avenue, 03/05/2023
Stoke Stoke Freehold
------------------------- ------------------------------ --------------- -----------
Pride Hill, Shrewsbury, 29/06/2023
Shrewsbury SY1 1DN Freehold
------------------------- ------------------------------ --------------- -----------
Chester Ernest/Lakeland 10 Eastgate Street Freehold 11/11/2023
------------------------- ------------------------------ --------------- -----------
Units 5 & 6 Centurion 28/03/2023
York Park, Y030 4WW Freehold
------------------------- ------------------------------ --------------- -----------
Warburtons Unit, Acess 24/05/2023
Langley Mill 26, Langley Mill Freehold
------------------------- ------------------------------ --------------- -----------
Plot L, Woodrow, Eurocentral, 31/05/2023
Eurocentral ML1 4YG Freehold
------------------------- ------------------------------ --------------- -----------
Unit A, Wells Green 09/06/2023
Sheldon Retail Park, B26 3JA Freehold
------------------------- ------------------------------ --------------- -----------
Plymouth - Transit Unit A, Transit Way, 30/07/2023
Way Plymouth Freehold
------------------------- ------------------------------ --------------- -----------
Maypole Druids Lane, Maypole Freehold 01/06/2023
------------------------- ------------------------------ --------------- -----------
55&56 High St&4/5 St 18/11/2023
Worcester Swithin's St -0257-CU264 Freehold
------------------------- ------------------------------ --------------- -----------
Beaumont Way, Beaumont 09/06/2023
Leicester - Matalan Leys, Leicester Long Leasehold
------------------------- ------------------------------ --------------- -----------
401 Princesway, Team 11/05/2023
Team Valley Valley Trading Estate Long Leasehold
------------------------- ------------------------------ --------------- -----------
4 Rosehall Road, Bellshill 31/05/2023
Bellshill Industrial Estate Freehold
------------------------- ------------------------------ --------------- -----------
1 Lowman Way, Hilton, 03/06/2023
Hilton - Derby Derby, DE65 5LJ Freehold
------------------------- ------------------------------ --------------- -----------
Ground Floor, The Grove, 18/11/2023
Stratford Stratford, E15 1EL Long Leasehold
------------------------- ------------------------------ --------------- -----------
Unit 1, Evesham Shopping 02/06/2023
Evesham Centre, Worcester Rd Freehold
------------------------- ------------------------------ --------------- -----------
Bluestem Road, Ransomes 22/02/2023
Ipswich - Menzies Europark, IP3 9RR Freehold
------------------------- ------------------------------ --------------- -----------
Memorial Way, Broadlands 22/02/2023
Norwich - Menzies Business Park Freehold
------------------------- ------------------------------ --------------- -----------
Mill Stream Way, Central 04/07/2023
Swansea - Menzies Business Park Long Leasehold
------------------------- ------------------------------ --------------- -----------
Units 1-3 Campbell Centre, 30/09/2023
Weybridge - Menzies Avro Way Freehold
------------------------- ------------------------------ --------------- -----------
Lockheed Close,Preston 25/05/2023
Dundee - Menzies Farm Industrial Estate Freehold
------------------------- ------------------------------ --------------- -----------
Mayflower House, Team 11/05/2023
Valley Trading Estate,
Mayflower House Gateshead Long Leasehold
------------------------- ------------------------------ --------------- -----------
Duloch Park, Dumfermline, 25/05/2023
Duloch Park KY11 4QX Freehold
------------------------- ------------------------------ --------------- -----------
Monteith House, 11 George 25/05/2023
Monteith House Square, Glasgow Freehold
------------------------- ------------------------------ --------------- -----------
Lakeside 5500 Lakeside 5500, Cheadle Long Leasehold 26/05/2023
------------------------- ------------------------------ --------------- -----------
Arthur House, Chorlton 26/05/2023
Arthur House, Manchester Street, Manchester Freehold
------------------------- ------------------------------ --------------- -----------
108 Eastern Avenue Retail 02/06/2023
Gloucester Park, Gloucester Freehold
------------------------- ------------------------------ --------------- -----------
Lochside House Lochside House, Edinburgh Freehold 01/06/2023
------------------------- ------------------------------ --------------- -----------
Burnside Industrial Burnside Industrial 25/05/2023
Centre Centre, Aberdeen Freehold
------------------------- ------------------------------ --------------- -----------
Kew Retail Park Kew Retail Park, Southport Freehold 05/07/2023
------------------------- ------------------------------ --------------- -----------
Portfolio Valuation General Assumptions and Conditions
======================================================
General Assumptions
Our reports and valuations are carried out on the basis of the
following General Assumptions:
Tenure and Tenancies
That the properties are not subject to any unusual or especially
onerous restrictions, encumbrances or outgoings contained in the
Freehold Title. We will not inspect the Title Deeds or Land
Registry Certificate and shall rely upon information provided by
you or your solicitor relating to both tenure and tenancy data.
Should there be any mortgages or charges, we have assumed that the
Properties would be sold free of them.
Condition and Repair
That the buildings are structurally sound, and that there are no
structural, latent or other material defects, including rot and
inherently dangerous or unsuitable materials or techniques, whether
in parts of the building we have inspected or not, that would cause
us to make allowance by way of capital repair. Our inspection of
the properties and this report do not constitute a building survey.
Our Valuation is on the basis that a building survey would not
reveal material defects or cause us to alter our Valuation
materially.
That in the construction or alteration of the building no use
was made of any deleterious or hazardous materials or techniques,
such as high alumina cement, calcium chloride additives, woodwool
slabs used as permanent shuttering and the like (other than those
points referred to above). We will not carry out any investigations
into these matters.
That the properties are not adversely affected, nor is likely to
become adversely affected, by any highway, town planning or other
schemes or proposals, and that there are no matters adversely
affecting value that might be revealed by a local search, replies
to usual enquiries, or by any statutory notice.
That the buildings have been constructed and is used in
accordance with all statutory and bye-law requirements, and that
there are no breaches of planning control. Likewise, that any
future construction or use will be lawful.
That the properties are connected or capable of being connected
without undue expense, to the public services of gas, electricity,
water, telephones and sewerage. Sewers, mains services and roads
giving access to the Properties have been adopted, and any lease
provides rights of access and egress over all communal estate
roadways, pathways, corridors, stairways and the use of communal
grounds, parking areas and other facilities.
Environmental Risks
That the properties have not suffered any land contamination in
the past, nor is it likely to become so contaminated in the
foreseeable future. We have not carried out any soil tests or made
any other investigations in this respect, and we cannot assess the
likelihood of any such contamination.
That there are no adverse site or soil conditions, that the
properties are not adversely affected by the Town and Country
Planning (Assessment of Environmental Effects) Regulations 1988,
that the ground does not contain any archaeological remains, nor
that there is any other matter that would cause us to make any
allowance for exceptional delay or site or construction costs in
our valuation.
That the properties are free from environmental hazards,
including infestation from invasive plants such as Japanese
Knotweed. This assumption is made in recognition of the fact that
identifying Japanese knotweed is problematic and cannot be
guaranteed. This is partly because during the early stages of its
annual life cycle some of the classic visual characteristics are
not distinctive and during the winter months the plant sheds its
leaves and suffers die back. It is also possible that Japanese
knotweed has received a herbicide-based treatment which has removed
all visible above ground signs but may not have killed the below
ground rhizome (root) which, in turn, may lead to new growth and
the spread of the plant in time.
Floor Areas
That any floor areas provided by a third party and assigned to
Savills (UK) Limited, have been measured in accordance with the
current RICS Property Measurement. This is the basis on which we
will carry out measured surveys as instructed.
Development Opportunity
In situations where a property is in the course of development,
we reflect its physical condition and the costs remaining to be
spent at the valuation date. We have considered the cost estimates
provided by the professional advisors involved in the project.
In the case of properties where we have been asked to value the
site under the special assumption that the properties will be
developed, there are no adverse site or soil conditions, that the
properties are not adversely affected by the Town and Country
Planning (Environmental Impact Assessment) Regulations 2017 that
the ground does not contain any archaeological remains, nor that
there is any other matter that would cause us to make any allowance
for exceptional delay or site or construction costs in our
Valuation.
General Conditions
Our reports and valuations are carried out on the basis of the
following General Conditions:
1. We have not made any allowance for any Capital Gains Tax or
other taxation liability that might arise upon a sale of the
properties. No allowance has been made for any expenses of
realisation.
2. Our valuations are exclusive of VAT (if applicable).
3. Excluded from our valuations is any additional value
attributable to goodwill, or to fixtures and fittings which are
only of value in situ to the present occupier.
4. Our valuations are prepared in accordance with the latest
edition of the RICS Valuation - Professional Standards ("the Red
Book") on the basis of Market Value, unless instructed otherwise.
Any such deviation is expressly stated in our terms of
engagement.
5. Each property has been valued individually and no allowance
has been made, either positive or negative, should it form part of
a larger disposal. The total stated is the aggregate of the
individual Market Values.
6. No allowance has been made for rights, obligations or
liabilities arising under the Defective Premises Act 1972, and it
has been assumed that all fixed plant and machinery and the
installation thereof complies with the relevant UK and EEU
legislation, insofar that the latter is applicable.
7. That we have been supplied with all information likely to
have an effect on the value of the properties and that the
information supplied to us and summarised in this report is both
complete and correct.
8. Our valuations are based on market evidence which has come
into our possession from numerous sources. That from other agents
and valuers is given in good faith but without liability. It is
often provided in verbal form. Some comes from databases such as
the Land Registry or computer databases to which Savills
subscribes. In all cases, other than where we have had a direct
involvement with the transactions, we are unable to warrant that
the information on which we have relied is correct although we
believe it to be so.
9. The files which we hold relating to all of our property
valuations may be subject to monitor and audit by the RICS under
its conduct and disciplinary regulations.
Tom Priest MRICS James Daffern MRICS
Director Director
+44 (0) 2920 368941 +44 (0) 121 200 4578
tpriest@savills.com James.daffern@savills.com
Part C | Knight Frank Valuation Report in respect of API
abrdn Property Income Trust Limited ("API")
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Lazard & Co., Limited
50 Stratton Street
London
W1J 8LL
Custodian Property Income REIT plc ("Custodian")
1 New Walk Place
Leicester
Leicestershire
LE1 6RU
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
(each an "Addressee" and together the "Addressees")
Date of issue: 19 January 2024
Dear Sir/Madam,
abrdn Property Income Trust Limited
Valuation as at 31 December 2023
Under the terms of the Engagement Letter dated 16 January 2024
("Engagement Letter") we have valued the freehold and leasehold
properties as listed below ("Properties"), as at 31 December 2023,
for the purposes set out below.
The Valuation and this Valuation Report are each provided solely
for the purpose (the "Purpose") of:
a) inclusion in any announcement (including an announcement made
under Rule 2.7 of the City Code on Takeovers and Mergers (the
"Code")), scheme document, offer document, response circular or any
other document or supplementary circular (the "Code Documentation",
and "Code Document" shall mean any one of them) that may be
published or made available by API or Custodian in connection with
a possible offer or offer for API or merger by API with another
party in accordance with the Code (the "Proposed Transaction") and
any further document which API or Custodian is required to publish
under the Code; and
b) (i) publication on API's website; and (ii) the website of any
other party required in accordance with the Code.
Basis of Valuation
Our valuation has been undertaken by us as qualified valuers and
in accordance with the current edition of RICS Valuation - Global
Standards, which incorporate the International Valuation Standards.
References to the "Red Book" refer to either or both of these
documents, as applicable. As required by the Red Book, some key
matters relating to this instruction are set out below.
The valuation (as defined in the General Terms) and this
Valuation Report, each as applicable to the Purpose (as defined
above), together with and Code Documentation (as defined above)
comply with Rule 29 of the Code as issued by The Takeover Panel. We
understand that the publication or reproduction by API or Custodian
of this Valuation Report and/or the information contained herein as
required by Rules 26 and 29 of the Code will be necessary,
including in any Code Document.
The properties have been valued individually on the basis of
Market Value which is set out in the RICS Valuation - Professional
Standards VPS 4 (4) as follows:
"The estimated amount for which an asset or liability should
exchange on the valuation date between a willing buyer and a
willing seller in an arm's length transaction, after proper
marketing and where the parties had each acted knowledgeably,
prudently and without compulsion."
In our opinion the adoption of the required Market Value basis
does not result in any material difference in the value reported
from that derived under the definition of Fair Value in accordance
with the RICS Valuation - Professional Standards VPS4 (1.5) Fair
Value and VPGA 1 Valuations for Inclusion in financial statements
which adopt the definition of Fair Value adopted by the
International Accounting Standards Board:
"The price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date."
Valuation Methodology
The basis for the Valuation as required by the Code is Market
Value as defined in the Red Book. Additionally, in relation to any
Properties comprising land being developed or with immediate
development potential (as referred to in Note 3 to Rule 29.4 of the
Code), this Valuation Report includes (in relation to those
Properties) the additional matters set out in Note 3 to Rule
29.4
Our valuation has been undertaken using appropriate valuation
methodology and our professional judgement.
The Valuer's opinion of Market Value was primarily derived using
recent comparable market transactions on arm's length terms, where
available, and appropriate valuation techniques (the Investment
Method (as defined in the RICS Red Book)).
The Properties have been valued individually and not as part of
a portfolio. Disposal as a portfolio, or by other prudent lotting,
may result in either a premium or discount, depending upon market
conditions. Our report does not seek to address this.
Valuation
The Properties have been categorised as investment properties in
accordance with the individual values ascribed.
We are of the opinion that the aggregate of the Market Values of
the Freehold, Heritable and Long Leasehold interests in the
Properties, as at 31 December 2023 was:
GBP 439,185,037
(Four Hundred and Thirty Nine Million, One Hundred and Eighty
Five Thousand and Thirty Seven Pounds)
Taxation and Costs
No account has been taken in our valuations for any liability
for tax (including Value Added Tax) on either the rental income, or
the notional sale prices, or any gains which may be realised on
disposal.
We have made a deduction from our valuations to reflect notional
purchasers' acquisition costs in accordance with normal
practice.
Our valuation reflects full liability for UK Stamp Duty as
applicable at the valuation date.
Valuation Assumptions
As agreed with API, our valuations are based on information
provided by them, upon which we have relied, and which has not been
verified by us. Our assumptions (as defined in the RICS Red Book)
relating to this information are set out below.
Our valuations assume that the Properties have good and
marketable titles and are free of any undisclosed onerous burdens,
outgoings or restrictions.
We have not inspected title deeds to the Properties, although
copies of leases and other relevant documentation relating to
individual properties, where made available to us, have been fully
considered, together with other information supplied to us by API.
We have assumed that this information is comprehensive and
correct.
When considering the covenant strength of individual tenants we
have not carried out credit enquiries but have reflected in our
valuations our general understanding of purchasers' likely
perceptions of tenants' financial status.
Our valuations are based on measurements which have been
provided by API. We have assumed that these measurements have been
undertaken in accordance with the current RICS Code of Measuring
Practice.
The adoption of IPMS (International Property Measurement
Standards), for the office sector, became mandatory with effect
from 1st January 2016 for all RICS members replacing NIA (Net
Internal Area) as set out under the current Code of Measurement
Practice (Sixth Edition). It has been agreed with API that until
the new definition of measurement has been adopted by the leasing
market, rental analysis for the office sector will continue to be
shown on a net internal area basis. As or when buildings are
re-measured, we will present our analysis on a dual basis, namely
IPMS and NIA.
Minimum Energy Efficiency Standards are the standards set out by
the Government for let properties in England and Wales. Buildings
that have an EPC rating of F and G must be brought up to standard
before they are let subject to some conditions, exemptions and
relief. This commenced from 1 April 2018 for all new lettings and
they apply to all continuing lettings from 1 April 2020 for
domestic buildings and from 2023 for non-domestic buildings.
There is currently no standard approach to either the provision
or the interpretation of ESG-related data and property
benchmarking. In arriving at our opinion of value, we have
therefore interpreted the information available to us as we
consider market participants would reflect this.
For Scottish properties, the Assessment of Energy Performance of
Non-Domestic Buildings (Scotland) Regulations 2016 came into force
in Scotland in 2016 and does not incorporate a "ban" on new
lettings. Owners are encouraged to carry out improvements, or
improve efficiency through monitoring emissions from a building via
creating an Action Plan. The Action Plan procedure will apply to
the sale or letting of larger buildings, with a floor area
>1,000 sq m. This only applies to buildings that are subject to
a new sale or lease and buildings constructed to building standards
applicable from March 2002, or otherwise meeting those standards,
are exempt.
Where we have been provided with the EPC rating, we have taken
into account any capital expenditure that API have provided to us
to improve the demise to meet the standards, to enable the property
to be let.
Town Planning and Highways
We have made oral enquiries of the appropriate Town Planning and
Highways Authorities in respect of matters affecting the
properties, where considered appropriate, although this information
was provided to us on the basis that it should not be relied
upon.
We have assumed that each of the properties has been
constructed, or is being constructed, and occupied or used in
accordance with the appropriate consents and that there are no
outstanding statutory notices.
We have not seen planning consents and, except where advised to
the contrary, have assumed that the properties have been erected
and are being occupied and used in accordance with all requisite
consents and that there are no outstanding statutory notices.
Repairs
We have not carried out building surveys on the portfolio and
are therefore unable to report that the properties are free from
any structural fault, rot, infestation or defects of any other
nature, including inherent weaknesses due to the use in
construction of materials now suspect. No tests were carried out on
any of the technical services.
Other than as referred to below, we have assumed that there are
no adverse ground or soil conditions and that the load bearing
qualities of the sites of each property are sufficient to support
the buildings constructed or to be constructed thereon.
Environmental
We have not carried out any investigation into past or present
uses of either the properties or any neighbouring land to establish
whether there is any potential for contamination from these uses or
sites to the subject properties. We understand that the fund has
established procedures for inspections of newly acquired properties
to be carried out with particular reference to environmental
matters, and that any such matters identified receive appropriate
attention.
Unless we have been provided with information to the contrary,
we have assumed that the properties are not, nor are likely to be,
affected by land contamination and that there are no ground
conditions which would affect the present or future uses of the
properties.
Where we have received, from the fund, evidence regarding
contamination we have reflected this in our valuations but unless
otherwise stated have assumed that the cost of any decontamination
work would be immaterial thereto. Should it be established
subsequently that contamination exists at any of the properties or
on any neighbouring land or that the properties have been or are
being put to a contaminative use this might reduce the values now
reported.
In all cases, we have assumed that, unless notified by API to
the contrary, there have not been any material changes to the
information provided by them.
Inspections
We confirm the Properties have been inspected within the last 12
months.
Compliance and Independence
We confirm that Knight Frank LLP meets the requirements of API
in the role of External Valuer (as defined in the RICS Red Book),
having been appointed in September 2015. In accordance with VPS3 of
the Red Book, the valuers on behalf of Knight Frank LLP, with the
responsibility for this report is Emily Miller MRICS, RICS
Registered Valuer (the "Lead Valuer"). Parts of this valuation have
been undertaken by additional valuers as listed on our file.
We confirm that the valuers and additional valuers meet the
requirements of the Red Book, having sufficient current knowledge
of the particular market and the skills and understanding to
undertake the valuation competently.
Additionally, the Lead Valuer and any additional valuers who
value the Properties are qualified for the purposes of the
Valuation as required by Rule 29.3(a)(ii) of the Code and have
sufficient current knowledge of the property market and the
necessary skills to prepare this Valuation Report as required by
Rule 29.3(a)(iii) of the Code.
Further, we confirm that in relation to Knight Frank LLP's
preceding financial year the proportion of the total fees paid by
the fund to the total fee income of Knight Frank LLP was less than
5%.
Under the Terms of Engagement letter dated 30 September 2015,
Knight Frank prepared a Valuation Report on the Portfolio, for
which a fee was payable, for inclusions in a public prospectus in
connection with a placing and open offer of ordinary shares to be
traded on the London Stock Exchange.
We recognise and support the RICS Rules of Conduct and have
procedures for identifying conflicts of interest. We are providing
an objective and unbiased valuation.
We confirm that we do have a material connection or involvement
giving rise to a potential conflict of interest, as set out
below:
-- we have valued the Properties for API within the last two years for accounts purposes
We have previously disclosed this to API and API have confirmed
that notwithstanding this matter that it is content for us to
proceed with this instruction. We confirm that we have had no
previous material interest in API or material connection or
involvement with any of the Properties other than as set out above,
and accordingly are in a position to provide an objective and
unbiased valuation.
Accordingly, we confirm that: (i) we are not aware of any reason
why we would not satisfy the requirements of Rule 29.3(a)(i) of the
Code; and (ii) during the term of the engagement, we shall not do
anything that could reasonably be expected to cause us not to
satisfy the requirements of Rule 29.3(a)(i) of the Code.
General
For the purposes of Rule 29.5 of the Code, we confirm that there
is no material difference between the values stated in this
Valuation Report and the values that would be stated were the
Valuation Date the date of this Rule 2.7 Announcement.
Knight Frank has given and has not withdrawn its consent to the
inclusion of this Valuation Report in this Rule 2.7 Announcement
published by the Client and Custodian in the form and context in
which it is included.
For the purposes of the Code, we are responsible for this
Valuation Report and accept responsibility for the information
contained in this Valuation Report and confirm that to the best of
our knowledge (having taken all reasonable care to ensure that such
is the case), the information contained in this Valuation Report is
in accordance with the facts and contains no omissions likely to
affect its import. This Valuation Report complies with, and is
prepared in accordance with, and on the basis of, the Code. We
authorise its contents for the purpose of Rule 29 of the Code.
Knight Frank has given and has not withdrawn its consent to the
inclusion of this Valuation Report in the Rule 2.7
Announcement.
This Valuation Report and our valuations therein have been
prepared on the basis that there has been full disclosure of all
relevant information and facts which may affect them.
Save for (a) the addressees and (b) any responsibility to any
person arising under Rule 29.4 of the Code, to the fullest extent
permitted by law, we do not assume any responsibility and will not
accept any liability to any other person for any loss suffered by
any such person as a result of, or arising out of, or in accordance
with this Valuation Report or our statement required by and given
solely for the purposes of complying with Rule 29.4 of the
Code.
Save as set out below, neither the whole or any part of the
valuation report nor any reference thereto may be included in any
published document, circular or statement nor published in any way
whatsoever whether in hard copy or electronically (including on any
web-site) without our prior written approval of the form and
context in which it may appear, except as set out below.
This Valuation Report will be included in the relevant Code
Documentation to be published by API or Custodian. We will review
the sections of the relevant Code Documentation relating to the
Valuation and this Valuation Report and the Addressees agree not to
publish any Code Document containing this Valuation Report until
they have received a consent letter (in the form set out in Annex 2
of our engagement letter) from us. We further hereby consent to
this Valuation Report being made available on API's website (and
the website of any other party referred to in any Code Document) in
accordance with the Code.
Knight Frank has given and not withdrawn its consent to the
inclusion of this Valuation Report in the Code Documentation
published by API or Custodian in the form and context in which it
is included.
For the purposes of the Code, we are responsible for this
Valuation Report and accept responsibility for the information
contained in this Valuation Report and confirm that to the best of
our knowledge (having taken all reasonable care to ensure that such
in the case), the information contained in this Valuation Report is
in accordance with the facts and contains no omissions likely to
affect its import.
Yours faithfully
Emily M Miller BSc (Hons) MRICS Matthew O Dichler MSc MRICS
RICS Registered Valuer RICS Registered Valuer
Partner, Valuation & Advisory Partner, Valuation & Advisory
For and on behalf of Knight Frank LLP For and on behalf of
Knight Frank LLP
Appendix I
Schedules of Investment Properties
Property Address Property reference
Ocean Trade Centre, Aberdeen C5285
===================
Badentoy North, Aberdeen C5768
===================
Unit 14 Interlink Park, Bardon C5201
===================
21 Gavin Way, Birmingham C5538
===================
3 Elliot Way, Birmingham C5726
===================
Unit 4 Easter Park, Bolton C5172
===================
Garanor Way, Bristol B5675
===================
Kings Business Park, Bristol C5714
===================
3 Earlstrees Road, Corby C5676
===================
Bastion Point, Dover B5673
===================
2 Brunel Way, Fareham C5583
===================
85 Fullarton Drive, Glasgow C5746
===================
Unit 4 Monkton Business Park, Hebburn C5587
===================
Villiers Road, Knowsley C5787
===================
Mount Farm, Milton Keynes C5534
===================
Walton Summit, Preston B5680
===================
Symphony, Rotherham C5507
===================
Cosford Lane, Rugby B5677
===================
Tempsford Road, Sandy C5742
===================
Whitehorse Business Park, Shellingford C5734
===================
Stadium Way, St. Helens C5783
===================
Tetron 141, Swadlincote C5512
===================
Tetron 93, Swadlincote C5525
===================
Opus 9, Warrington B5681
===================
Rainhill Road, Washington C5715
===================
Property Address Property reference
Alston Road, Washington C5784
===================
54 Hagley Road, Birmingham C5763
===================
One Station Square, Bracknell C5730
===================
Explorer, Crawley C5427
===================
160 Causewayside, Edinburgh C5767
===================
Monck Street, London C5394
===================
15 Basinghall Street, London C5747
===================
101 Princess Street, Manchester C5721
===================
The Pinnacle, Reading C5719
===================
82-84 Eden Streety, Kingston-upon-Thames B5686
===================
Howard Town Retail Park, Glossop C5517
===================
B&Q, Halesowen C5773
===================
Victoria Shopping Park, Hednesford B5683
===================
Olympian Way, Leyland C5477
===================
The Point Retail Park, Rochdale B5685
===================
Morrisons, Welwyn Garden City C5788
===================
Grand National Leisure Park, Aintree C5737
===================
Building 3000 Birmingham Business Park, C5750
Birmingham
===================
Hollywood Green, London C5113
===================
Far Ralia, Newtonmore C5782
===================
Motor Point, Yarm Road, Stockton-on-Tees C5786
===================
Appendix 5
CREI QUANTIFIED FINANCIAL BENEFITS STATEMENT
Part A
Paragraph 3 of this Announcement contains statements of the
estimated cost savings and synergies expected to arise from the
Merger (together, the "Quantified Financial Benefits
Statement").
A copy of the Quantified Financial Benefits Statement is set out
below:
The CREI Directors, having reviewed and analysed the potential
cost savings of the Combined Group, as well as taking into account
factors they can influence, believe the Combined Group can deliver
shareholder value through the expected realisation of
approximately:
GBP1.0 million of pre-tax recurring run-rate cost synergies by
the end of the first year following the Effective Date (the
"Recurring Cost Synergies"); and
GBP2.1 million of additional non-recurring pre-tax cost
synergies during the Transition Period (the "Transition Period Cost
Synergies").
The Recurring Cost Synergies are expected to be realised
principally from:
Management fees: unification of investment management under
Custodian Capital, delivering an estimated GBP0.5 million of
annualised run-rate cost synergies derived from lower management
and administrative fees charged on the API investment properties
(the "Management Fee Savings"); and
Corporate and administrative: rationalisation of duplicated
listing, administration and operational expenses delivering at
least an estimated GBP0.5 million of annualised run rate cost
synergies.
The additional Transition Period Cost Synergies are expected to
be realised principally from:
Amended management fee tiers: reduction in the management fees
payable by CREI to Custodian Capital for the Transition Period
delivering an estimated GBP0.3 million of annualised run rate cost
synergies (GBP0.6 million total estimated cost synergies) through
the consolidation of the first two fee tiers into one fee tier,
such that the consolidated fee tier will be calculated as a fee of
0.75 per cent. in respect of the NAV of the Combined Group which is
less than or equal to GBP500 million (rather than a fee of 0.90 per
cent. in respect of NAV up to GBP200 million and 0.75 per cent. up
to GBP500 million) (the "Amended Management Fee Tier Savings");
and
Partial management fee waiver: Custodian Capital has agreed to
waive its management fee in relation to the NAV attributable to API
for the first nine months following completion of the Merger (the
"Partial Management Fee Waiver Savings"), delivering an estimated
GBP1.5 million of cost synergies in the first year following the
Effective Date.
In order to achieve the Management Fee Savings, the Amended
Management Fee Tier Savings and the Partial Management Fee Waiver
Savings, it is estimated that API will incur one-off costs of
between GBP1.5 million and GBP2.0 million in connection with the
termination of the API Investment Management Agreement. These costs
will be incurred within the first year following the Effective Date
and have been reflected as a cost to API within the Exchange Ratio.
The CREI Directors expect that any costs incurred in the
realisation of the other cost synergies will be immaterial.
Other potential adverse effects of the Merger have been
considered and were determined by the CREI Directors to be
immaterial for the analysis.
The identified cost savings will accrue as a direct result of
the Merger and would not be achieved on a standalone basis.
These statements relating to identified cost savings and
estimated savings relate to future actions or circumstances which
by their nature involve risks, uncertainties and contingencies. As
a consequence, the identified synergies and estimated savings
referred to may not be achieved, may be achieved later or sooner
than estimated, or those achieved could be materially different
from those estimated.
Bases of belief and principal assumptions
Following initial discussion regarding the Merger, a team of
Custodian Capital staff has evaluated and assessed the potential
synergies available arising from the Merger.
The team which comprises senior Custodian Capital personnel,
worked to identify, challenge, and quantify potential synergies as
well as the potential costs to achieve and timing of such
synergies. The Custodian Capital team has performed a bottom-up
analysis of costs included in the API financial information and has
sought to include in the synergy analysis those costs which the
team believes will be either reduced or eliminated from within the
Combined Group.
The Management Fee Savings and Amended Management Fee Tier
savings are based on applying Custodian Capital's tiered fee
structure, including the proposed amended fee tiers in the
Transition Period, and assumptions regarding the pro forma NAV of
the Combined Group. The Partial Management Fee Waiver is based upon
excluding the NAV attributable to API from the pro forma NAV of the
Combined Group in calculating fees payable to Custodian Capital for
the first nine months following the Effective Date.
In general, the synergy assumptions related to the corporate and
administrative synergies have in turn been risk adjusted,
exercising a degree of prudence in the calculation of the estimated
synergy benefits set out above.
The cost bases used as the basis for the quantified financial
benefits exercise are the CREI and API full year expenses for the
twelve-month period to 30 September 2023, and the independent CREI
and API property valuations as at 31 December 2023.
The CREI Directors have, in addition, made the following
assumptions:
The value of the Combined Group property portfolio remaining at
or above the 31 December 2023 independent property valuation of
GBP1.0 billion.
CREI retains its status as a UK-REIT.
There will be no material impact on the underlying operations of
either CREI or API or their ability to continue to conduct their
businesses.
There will be no material change to macroeconomic, political,
regulatory or legal conditions in the markets or regions in which
CREI or API operate that will materially impact on the
implementation or costs to achieve the proposed cost savings.
There will be no change in tax legislation or tax rates or other
legislation in the UK or Guernsey that could materially impact the
ability to achieve any benefits.
Reports
As required by Rule 28.1(a) of the Takeover Code, RSM UK
Corporate Finance LLP , as reporting accountants to CREI , and
Deutsche Numis, as financial advisers to CREI , have provided the
opinions required under that Rule. Copies of these reports are
included at Parts B and C of this Appendix 5. Each of RSM UK
Corporate Finance LLP , and Deutsche Numis has given and not
withdrawn its consent to the publication of its report in this
Announcement in the form and context in which it is included.
These statements are not intended as a profit forecast and
should not be interpreted as such. These statements of estimated
synergies relate to future actions and circumstances which, by
their nature, involve risks, uncertainties and contingencies. As a
result, the estimated synergies referred to may not be achieved, or
may be achieved later or sooner than estimated, or those achieved
could be materially different from those estimated. Neither the
Quantified Financial Benefits Statement nor any other statement in
this Announcement should be construed as a profit forecast or
interpreted to mean that CREI 's earnings in the first full year
following the Effective Date, or in any subsequent period, will
necessarily match or be greater than or be less than those
of CREI or API for the relevant preceding financial period or any other period.
Due to the scale of the Combined Group, there may be additional
changes to the Combined Group's operations. As a result, and given
the fact that the changes relate to the future, the resulting
synergies may be materially greater or less than those
estimated.
Part B
REPORT FROM RSM UK CORPORATE FINANCE LLP ON CREI QUANTIFIED
FINANCIAL BENEFITS STATEMENT
RSM UK Corporate Finance LLP
25 Farringdon Street
London
EC4A 4AB
United Kingdom
T +44 (0)20 3201 8000
rsmuk.com
The Directors
Custodian Property Income REIT plc
1 New Walk Place
Leicester
LE1 6RU
The Directors
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
19 January 2024
To the Directors of Numis Securities Limited and Custodian
Property Income REIT plc,
Report on Quantified Financial Benefits Statement by Custodian
Property Income REIT plc (the "Company") and its subsidiary
undertakings (the "Group")
We report on the quantified financial benefits statement (the
"Statement") by the directors of the Company (the " Directors ")
included in Part A of Appendix 5 (CREI Quantified Financial
Benefits Statement) of the Rule 2.7 Announcement dated 19 January
2024 to the effect that:
The CREI Directors, having reviewed and analysed the potential
cost savings of the Combined Group, as well as taking into account
factors they can influence, believe the Combined Group can deliver
shareholder value through the expected realisation of
approximately:
-- GBP1.0 million of pre-tax recurring run-rate cost synergies
by the end of the first year following the Effective Date (the
"Recurring Cost Synergies"); and
-- GBP2.1 million of additional non-recurring pre-tax cost
synergies during the Transition Period (the "Transition Period Cost
Synergies").
The Recurring Cost Synergies are expected to be realised
principally from:
-- Management fees: unification of investment management under
Custodian Capital, delivering an estimated GBP0.5 million of
annualised run-rate cost synergies derived from lower management
and administrative fees charged on the API investment properties
(the "Management Fee Savings"); and
-- Corporate and administrative: rationalisation of duplicated
listing, administration and operational expenses delivering at
least an estimated GBP0.5 million of annualised run rate cost
synergies.
The additional Transition Period Cost Synergies are expected to
be realised principally from:
-- Amended management fee tiers: reduction in the management
fees payable by CREI to Custodian Capital for the Transition Period
delivering an estimated GBP0.3 million of annualised run rate cost
synergies (GBP0.6 million total estimated cost synergies) through
the consolidation of the first two fee tiers into one fee tier,
such that the consolidated fee tier will be calculated as a fee of
0.75 per cent. in respect of the NAV of the Combined Group which is
less than or equal to GBP500 million (rather than a fee of 0.90 per
cent. in respect of NAV up to GBP200 million and 0.75 per cent. up
to GBP500 million) (the "Amended Management Fee Tier Savings");
and
-- Partial management fee waiver: Custodian Capital has agreed
to waive its management fee in relation to the NAV attributable to
the API portfolio for the first nine months following completion of
the Merger (the "Partial Management Fee Waiver Savings") delivering
an estimated GBP1.5 million of cost synergies in the first year
following the Effective Date.
In order to achieve the Management Fee Savings, the Amended
Management Fee Tier Savings and the Partial Management Fee Waiver
Savings, it is estimated that API will incur one-off costs of
between GBP1.5 million and GBP2.0 million in connection with the
termination of the API Investment Management Agreement. These costs
will be incurred within the first year following the Effective Date
and have been reflected as a cost to API within the Exchange Ratio.
The CREI Directors expect that any costs incurred in the
realisation of the other cost synergies will be immaterial.
Other potential adverse effects of the Merger have been
considered and were determined by the CREI Directors to be
immaterial for the analysis.
The identified cost savings will accrue as a direct result of
the Merger and would not be achieved on a standalone basis.
These statements relating to identified cost savings and
estimated savings relate to future actions or circumstances which
by their nature involve risks, uncertainties and contingencies. As
a consequence, the identified synergies and estimated savings
referred to may not be achieved, may be achieved later or sooner
than estimated, or those achieved could be materially different
from those estimated.
Opinion
In our opinion, the Statement has been properly compiled on the
basis stated.
The Statement has been made in the context of the disclosures in
Part A of Appendix 5 of the Rule 2.7 Announcement setting out the
basis of the Directors' belief (including the principal assumptions
and sources of information) supporting the Statement and their
analysis and explanation of the underlying constituent
elements.
This report is required by Rule 28.1(a) of the City Code on
Takeovers and Mergers (the "Takeover Code") and is given for the
purpose of complying with that requirement and for no other
purpose.
Responsibilities
It is the responsibility of the Directors to prepare the
Statement in accordance with the requirements of Rule 28 of the
Takeover Code.
It is our responsibility to form our opinion, as required by
Rule 28.1(a)(i) of the Takeover Code, as to whether the Statement
has been properly compiled on the basis stated and to report that
opinion to you.
Save for any responsibility which we may have to those persons
to whom this report is expressly addressed and for any
responsibility arising under Rule 28.1(a)(i) of the Takeover Code
to any person as and to the extent therein provided, to the fullest
extent permitted by law we do not assume any responsibility and
will not accept any liability to any other person for any loss
suffered by any such other person as a result of, arising out of,
or in connection with this report or our statement, required by and
given solely for the purposes of complying with Rule 23.2 of the
Takeover Code, consenting to its inclusion in the Rule 2.7
Announcement.
Basis of preparation of the Statement
The Statement has been prepared on the basis stated in Part A of
Appendix 5 of the Rule 2.7 Announcement.
Basis of opinion
We conducted our work in accordance with the Standards for
Investment Reporting issued by the Financial Reporting Council in
the United Kingdom. We are independent in accordance with relevant
ethical requirements. In the United Kingdom this is the FRC's
Ethical Standard as applied to Investment Circular Reporting
Engagements, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We have discussed the Statement, together with the underlying
plans (relevant bases of belief/including sources of information
and assumptions), with the Directors and Numis Securities Limited.
Our work did not involve any independent examination of any of the
financial or other information underlying the Statement.
We planned and performed our work so as to obtain the
information and explanations we considered necessary in order to
provide us with reasonable assurance that the Statement has been
properly compiled on the basis stated.
We do not express any opinion as to the achievability of the
benefits identified by the Directors in the Statement.
Since the Statement and the assumptions on which it is based
relate to the future and may therefore be affected by unforeseen
events, we express no opinion as to whether the actual benefits
achieved will correspond to those anticipated in the Statement and
the differences may be material.
Yours faithfully,
RSM UK Corporate Finance LLP
Part C
REPORT FROM DEUTSCHE NUMIS ON CREI QUANTIFIED FINANCIAL BENEFITS
STATEMENT
The Board of Directors
Custodian Property Income REIT plc
1 New Walk Place
Leicester
LE1 6RU
19 January 2024
Dear the Board of Directors
Recommended All-Share Merger of Custodian Property Income REIT
plc ("CREI") and abrdn Property Income Trust Limited ("API") -
Quantified Financial Benefits Statement made by CREI
We refer to the Quantified Financial Benefits Statement, the
bases of belief thereof and the notes thereto (together, the
"Statement") made by CREI as set out in Part A of Appendix 5 to the
announcement dated 19 January 2024 of which this letter forms part
(the "Announcement"), for which the board of directors of CREI (the
"CREI Board") are solely responsible under Rule 28.3 of the City
Code on Takeovers and Mergers (the "Code").
We have discussed the Statement (including the assumptions and
sources of information referred to therein), with the CREI Board
and those officers and employees of CREI who developed the
underlying plans as well as with RSM UK Corporate Finance LLP
("RSM"). The Statement is subject to uncertainty as described in
the Announcement and our work did not involve an independent
examination of any of the financial or other information underlying
the Statement.
We have also reviewed the work carried out by RSM and have
discussed with them the opinion set out in Part B of Appendix 5 to
the Announcement addressed to yourselves and ourselves on this
matter and the accounting policies and bases of calculation for the
Statement.
We have relied upon the accuracy and completeness of all the
financial and other information provided to us by, or on behalf of,
CREI, or otherwise discussed with or reviewed by us, and we have
assumed such accuracy and completeness for the purposes of
providing this letter.
We do not express any opinion as to the achievability of the
quantified financial benefits identified by the CREI Board.
This letter is provided to you solely in connection with Rule
28.1(a)(ii) of the Code and for no other purpose. We accept no
responsibility to CREI or its shareholders or any person
(including, without limitation, the board and shareholders of API)
other than the CREI Board in respect of the contents of this
letter. We are acting exclusively as financial adviser to CREI and
no one else in connection with the transaction between CREI and API
referred to in the Announcement and it was solely for the purpose
of complying with Rule 28.1(a)(ii) of the Code that CREI requested
us to prepare this letter relating to the Statement. No person
other than the CREI Board can rely on the contents of, or the work
undertaken in connection with, this letter, and to the fullest
extent permitted by law, we exclude all liability (whether in
contract, tort or otherwise) to any other person, in respect of
this letter, its contents, or the work undertaken in connection
with this letter, or any of the results or conclusions that can be
derived from this letter or any written or oral information
provided in connection with this letter, and any such liability is
expressly disclaimed except to the extent that such liability
cannot be excluded by law.
On the basis of the foregoing, we consider that the Statement,
for which you as the CREI Board are solely responsible, for the
purposes of the Code has been prepared with due care and
consideration.
Yours faithfully
Deutsche Numis
Appendix 6
DEFINITIONS
The following definitions apply throughout this Announcement
unless the context requires otherwise:
Admission admission of the New CREI Shares
to be issued pursuant to the Merger
(i) to trading on the Main Market
becoming effective in accordance
with the LSE Admission Standards;
and (ii) to listing on the Premium
segment of the Official List becoming
effective in accordance with the
Listing Rules;
Amended and Restated Investment the amended and restated investment
Management Agreement management agreement dated 19 January
2024, together with the side letter
thereto also dated 19 January 2024,
between CREI and Custodian Capital,
the terms of which shall take effect
from the Effective Date;
Amended Management Fee Tier has the meaning given to it in
Savings paragraph 3 of this Announcement;
Announcement this announcement, made in accordance
with Rule 2.7 of the Takeover Code;
API abrdn Property Income Trust Limited,
a non-cellular company limited
by shares, incorporated in Guernsey
with registration number 41352;
API Articles the articles of incorporation of
API from time to time;
API Board the board of API Directors as at
the date of this Announcement;
API Court Meeting the meeting or meetings of the
Scheme Shareholders to be convened
pursuant to an order of the Court
pursuant to section 107 of the
Companies Law for the purpose of
considering and, if thought fit,
approving the Scheme (with or without
modification), including any adjournment,
postponement or reconvention of
any such meeting, notice of which
shall be contained in the Scheme
Document;
API Directors the directors of API as at the
date of this Announcement;
API General Meeting the extraordinary general meeting
of API Shareholders to be convened
in connection with the Scheme to
consider and, if thought fit, to
approve the API Resolution (with
or without amendment), including
any adjournment, postponement or
reconvening thereof;
API Group API and its subsidiaries and subsidiary
undertakings from time to time;
API Investment Management Agreement the investment management agreement
dated 10 December 2018 between
API and the API Investment Manager;
API Investment Manager or abrdn abrdn Fund Managers Limited, a
Fund Managers private limited company with company
number 00740118;
API Meetings the API Court Meeting and the API
General Meeting;
API Q1 Dividend has the meaning given to it in
paragraph 12 of this Announcement;
API Q4 Dividend has the meaning given to it in
paragraph 12 of this Announcement;
API Q1 Uncovered Dividend Portion has the meaning given to it in
paragraph 12 of this Announcement;
API Resolution the resolution to be proposed at
the API General Meeting necessary
to implement the Scheme, including
a resolution authorising the API
Board to take all actions as they
may consider necessary or appropriate
to give effect to the Scheme, a
resolution to amend the API Articles
by the adoption and inclusion of
a new article under which any API
Shares issued or transferred after
the Scheme Record Time (other than
to CREI and/or its nominees) shall
be automatically transferred to
CREI (and, where applicable, for
consideration to be paid to the
transferee or to the original recipient
of the API Shares so transferred
or issued) on the same terms as
the Merger (other than terms as
to timings and formalities);
API Shareholders the registered holders of API Shares
from time to time;
API Shares ordinary shares of GBP0.01 each
in the capital of API;
Business Day any day (excluding any Saturday
or Sunday or any public holiday
in England or Guernsey) on which
banks in the City of London and
Guernsey are generally open for
business;
CBRE CBRE Limited;
Closing Price the closing middle market price
of an API Share or CREI Share (as
applicable) as derived from the
Daily Official List on any particular
date;
Combined Circular and Prospectus the combined circular and prospectus
to be published by CREI and to
be sent to CREI Shareholders outlining,
amongst other things, the Merger
and containing the notice convening
the CREI General Meeting and information
on CREI , the Combined Group and
the New CREI Shares;
Combined Group the CREI Group as enlarged by the
API Group following completion
of the Merger;
Companies Act the UK Companies Act 2006, as amended
from time to time;
Companies Law the Companies (Guernsey) Law, 2008
(as amended);
Conditions the conditions to the Merger, as
set out in Appendix 1 to this Announcement
and to be set out in the Scheme
Document;
Confidentiality Agreement the confidentiality agreement entered
into between CREI and API in relation
to the Merger dated 10 July 2023,
a summary of which is set out in
paragraph 11 of this Announcement;
Core Core real estate, which is considered
to generally offer the lowest risk
and target returns, referring to
real estate requiring little asset
management and fully let on long
leases;
Core-plus Core-plus real estate, which is
considered to generally offer low-to-moderate
risk and target returns, typically
referring to high quality and well-occupied
properties but also providing asset
management opportunities;
Court the Royal Court of Guernsey;
CREI Custodian Property Income REIT
plc, a public limited company incorporated
in England and Wales with company
number 08863271;
CREI Board the board of directors of CREI
as at the date of this Announcement;
CREI Directors the directors of CREI as at the
date of this Announcement;
CREI Existing Investment Management the investment management agreement
Agreement dated 22 June 2020 between CREI
and Custodian Capital, as amended
by a side letter dated 8 June 2023;
CREI General Meeting the general meeting of CREI to
be convened by the CREI Board to
approve the CREI Resolution and
currently expected to be held in
February 2024;
CREI Group CREI and its subsidiaries and subsidiary
undertakings from time to time;
CREI Q3 Dividend has the meaning given to it in
paragraph 12 of this Announcement;
CREI Q4 Dividend has the meaning given to it in
paragraph 12 of this Announcement;
CREI Q4 Uncovered Dividend has the meaning given to it in
Portion paragraph 12 of this Announcement;
CREI Resolution the ordinary resolution to be proposed
at the CREI General Meeting to
approve the issue of the New CREI
Shares in connection with the Merger;
CREI Shareholders the holders of CREI Shares;
CREI Shares ordinary shares of GBP0.01 each
in the capital of CREI and, as
the context may require, may include
Existing CREI Shares and New CREI
Shares;
CREST the CREST system (as defined in
the CREST Regulations) in accordance
with which securities may be held
and transferred in uncertificated
form;
CREST Regulations the Uncertificated Securities (Guernsey)
Regulations 2009 (SI 2009 No. 48);
Custodian Capital Custodian Capital Limited, a private
limited company incorporated in
England and Wales with company
number 06504305;
Daily Official List the daily official list of the
London Stock Exchange;
Dealing Disclosure an announcement pursuant to Rule
8 of the Takeover Code containing
details of dealings in interests
in relevant securities of a party
to an offer;
Disclosed in respect of API, information
disclosed by, or on behalf of,
API (i) in API's annual report
and audited financial statements
for the financial year ended 31
December 2022, (ii) in the interim
results of API for the six month
period ended 30 June 2023, (iii)
in this Announcement; (iv) in any
other announcement to a Regulatory
Information Service by, or on behalf
of, API before the publication
of this Announcement; and/or (v)
as otherwise fairly disclosed in
writing to CREI or its officers,
employees, agents or professional
advisers prior to the date of this
Announcement by, or on behalf of,
API or its officers, employees,
agents or professional advisers
(in their capacity as such), including
in the virtual data room, prior
to 5.00 p.m. on 16 January 2024,
operated on behalf of API and which
CREI and its advisers are able
to access in respect of the Merger;
and
in respect of CREI, (a) information
disclosed by, or on behalf of,
CREI (i) in CREI's annual report
and audited financial statements
for the 12 months ended 31 March
2023, (ii) in the interim results
of CREI or the six month period
ended 30 September 2023, (iii)
in this Announcement, (iv) in any
other announcement to a Regulatory
Information Service by, or on behalf
of, API before the publication
of this Announcement; and/or (v)
as otherwise fairly disclosed in
writing to API or its officers,
employees, agents or professional
advisers prior to the date of this
Announcement by, or on behalf of,
CREI or its officers, employees,
agents or professional advisers
(in their capacity as such), including
in the virtual data room, prior
to 5.00 p.m. on 16 January 2024,
operated on behalf of CREI and
which API and its advisers are
able to access in respect of the
Merger;
Dividend Discrepancy has the meaning given to it in
paragraph 12 of this Announcement;
Effective either:
(a) if the Merger is implemented
by way of the Scheme, the Scheme
having become effective pursuant
to its terms; or
(b) if the Merger is implemented
by way of a Takeover Offer, means
the Takeover Offer having been
declared or having become unconditional
in accordance with the requirements
of the Takeover Code;
Effective Date the date on which the Merger becomes
Effective;
EPC environmental performance certificate
EPRA European Public Real Estate Association;
EPRA Guidance the EPRA Best Practices Recommendations
Guidelines October 2019;
EPRA Topped-Up Net Initial the current annualised rent, net
Yield of costs, adjusted for the expiration
of rent free periods and other
unexpired lease incentives, expressed
as a percentage of capital value
(adding notional purchasers costs),
calculated in line with EPRA guidance;
ERV estimated rental value;
Excess has the meaning given to it in
paragraph 12 of this Announcement;
Exchange Ratio 0.78 New CREI Shares for each API
Share;
Excluded Shares any API Shares:
(a) registered in the name of,
or beneficially owned by, CREI
or any member of the Wider CREI
Group or their respective nominees;
or
(b) held by API as treasury shares
(within the meaning of the Companies
Law);
Existing CREI Shares the 440,850,398 existing CREI Shares
in issue as at the date of this
Announcement;
FCA the Financial Conduct Authority;
Forms of Proxy the forms of proxy in connection
with each of the API Court Meeting
and the API General Meeting, which
shall accompany the Scheme Document;
FSMA the Financial Services and Markets
Act 2000, as amended from time
to time;
GFSC the Guernsey Financial Services
Commission;
Guernsey the Island of Guernsey;
ISIN the International Securities Identification
Number;
Knight Frank Knight Frank LLP;
Listing Rules the listing rules, made by the
FCA under Part 6 of FSMA, as amended
from time to time;
Latest Practicable Date 18 January 2024 (being the last
Business Day prior to the date
of this Announcement);
London Stock Exchange London Stock Exchange plc;
Long Stop Date 30 April 2024, or such later date
as may be agreed in writing between
CREI and API (with the Panel's
consent and as the Court may allow,
if such consent and/or approval
is/are required);
LTV loan-to-value: the outstanding
amount of a loan as a percentage
of property value;
Main Market the London Stock Exchange's main
market for listed securities;
Management Fee Savings has the meaning given to it in
paragraph 3 of this Announcement;
Mattioli Woods Custodian Capital's parent company,
Mattioli Woods plc, a public limited
company incorporated in England
and Wales with company number 03140521;
Merger the recommended offer to be made
by CREI to acquire the entire issued
ordinary share capital of API to
be effected by means of the Scheme
(or, if CREI so elects and subject
to the Panel's consent, a Takeover
Offer) on the terms and subject
to the conditions set out in Appendix
1 to this Announcement;
MW Clients the individual private clients
of Mattioli Woods;
NAV net asset value;
New CREI Shares the new CREI Shares proposed to
be issued ad allotted as fully
paid to the Scheme Shareholders
in connection with the Scheme;
NTA net tangible assets;
Offer Document if (with the consent of the Panel,
as applicable) CREI elects to implement
the Merger by way of a Takeover
Offer, the document to be sent
to API Shareholders which will
contain, inter alia, the terms
and conditions of the Takeover
Offer;
Offer Period the offer period (as defined in
the Takeover Code) relating to
API commencing on the date of this
Announcement and ending on the
earlier of the Effective Date and/or
the date on which the Scheme lapses
or is withdrawn (or such other
date as the Panel may decide);
Official List the Official List of the FCA;
Overseas Shareholders Scheme Shareholders who are resident
in, ordinarily resident in, or
citizens of, jurisdictions outside
the United Kingdom;
Panel the Panel on Takeovers and Mergers;
Partial Management Fee Waiver has the meaning given to it in
Savings paragraph 3 of this Announcement;
Permitted Dividends each of the API Q4 Dividend and
API Q1 Dividend, that are declared
on the terms and subject to the
criteria set out in paragraph 12
of this Announcement;
Recurring Cost Synergies has the meaning given to it in
paragraph 3 of this Announcement;
Regulatory Information Service any information service authorised
from time to time by the FCA for
the purpose of disseminating regulatory
announcements;
REIT a company or group to which Part
12 of the CTA 2010 applies (including,
where relevant, a REIT Group);
Restricted Jurisdiction any jurisdiction where local laws
or regulations may result in a
significant risk of civil, regulatory
or criminal exposure if information
concerning the Merger is sent or
made available to API Shareholders
in that jurisdiction;
Rolled-Forward Unaudited EPRA the rolled-forward, unaudited EPRA
NTA NTA of each of CREI and API as
at 31 December 2023, as more specifically
shown in paragraphs 10 and 11 of
Appendix 2 to this Announcement;
Sanction Hearing the Court hearing at which API
will seek an order sanctioning
the Scheme for the purposes of
section 110 of the Companies Law;
Scheme the proposed scheme of arrangement
under Part VIII of the Companies
Law between API and Scheme Shareholders
to implement the Merger, with or
subject to any modification, addition
or condition approved or imposed
by the Court and agreed to by API
and CREI;
Scheme Court Order the order of the Court sanctioning
the Scheme;
Scheme Document the document to be dispatched to
API Shareholders containing, amongst
other things, the full terms and
conditions of the Scheme, an explanatory
statement in compliance with section
108 of the Companies Law, and the
notices convening the API Court
Meeting and the API General Meeting;
Scheme Record Time the time and date specified as
such in the Scheme Document, expected
to be 6.00 p.m. on the Business
Day immediately prior to the Effective
Date, or such later time as CREI
and API may agree;
Scheme Shareholders holders of Scheme Shares;
Scheme Shares all API Shares:
(a) in issue at the date of the
Scheme Document and which remain
in issue at the Scheme Record Time;
(b) (if any) issued after the date
of the Scheme Document and prior
to the Voting Record Time and which
remain in issue at the Scheme Record
Time; and
(c) (if any) issued at or after
the Voting Record Time and prior
to the Scheme Record Time in respect
of which the original or any subsequent
holder thereof is bound by the
Scheme, or shall by such time have
agreed in writing to be bound by
the Scheme and which remain in
issue at the Scheme Record Time,
but excluding any Excluded Shares;
Substantial Interest a direct or indirect interest in
20 per cent. or more of the voting
equity share capital of an undertaking;
Takeover Code the City Code on Takeovers and
Mergers, as issued from time to
time by or on behalf of the Panel;
Takeover Offer should the Merger be implemented
by way of a takeover offer (which
shall be an offer for the purposes
of Part XVIII of the Companies
Law), the offer to be made by or
on behalf of CREI to acquire the
entire issued ordinary share capital
of API and, where the context requires,
any subsequent revision, variation,
extension or renewal of such offer;
Transition Period Cost Synergies has the meaning given to it in
paragraph 3 of this Announcement;
UK or United Kingdom the United Kingdom of Great Britain
and Northern Ireland;
uncertificated or in uncertificated a share or other security title
form to which is recorded in the relevant
register of the share or security
as being held in uncertificated
form, in CREST, and title to which,
by virtue of the CREST Regulations
may be transferred by means of
CREST;
US or United States the United States of America, its
territories and possessions, any
state of the United States of America
and the District of Columbia;
Voting Record Time the time and date specified as
such in the Scheme Document by
reference to which entitlement
to vote at the API Court Meeting
will be determined;
Wider CREI Group CREI, its subsidiary undertakings
and associated undertakings (including
any joint venture, partnership,
firm or company) in which CREI
and/or such undertakings (aggregating
their interests) have a Substantial
Interest; and
Wider API Group API, its subsidiary undertakings
and associated undertakings (including
any joint venture, partnership,
firm or company) in which API and/or
such undertakings (aggregating
their interests) have a Substantial
Interest.
All references to time in this Announcement are to London (UK)
time unless otherwise stated.
All references to "pounds", "pounds Sterling", "Sterling",
"GBP", "pence", "penny" and "p" are to the lawful currency of the
United Kingdom.
A reference to "includes" shall mean "includes without
limitation", and references to "including" and any other similar
term shall be construed accordingly.
For the purposes of this Announcement, "subsidiary", "subsidiary
undertaking", "undertaking" and "equity share capital" have the
meanings given by the Companies Act.
All references to a statutory provision or law or to any order
or regulation shall be construed as a reference to that provision,
law, order or regulation as extended, modified, replaced or
re-enacted from time to time and all statutory instruments,
regulations and orders from time to time made thereunder or
deriving validity therefrom.
This information is provided by RNS, the news service of the
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