TIDMPILR
RNS Number : 0557L
Pacific Industrial & Log REIT PLC
14 July 2017
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO
DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL APPLICABLE SECURITIES
LAWS OR REGULATIONS.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY
SECURITIES IN THE COMPANY. THIS ANNOUNCEMENT HAS BEEN ISSUED BY AND
IS THE SOLE RESPONSIBILITY OF THE COMPANY.
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
14 July 2017
Pacific Industrial & Logistics REIT plc
PROPOSED PLACING TO FUND UK LOGISTICS ACQUISITIONS
The Board of Pacific Industrial & Logistics REIT plc (AIM:
PILR) (the "Company") today announces a potential placing of new
Ordinary Shares to raise gross proceeds of up to GBP110 million
(the "Placing") to fund pipeline acquisitions.
Highlights
-- Proposed Placing to raise gross proceeds of up to GBP110
million to finance an identified pipeline of acquisitions.
-- Target deployment of the net proceeds of the Placing within three months of Admission.
-- Pipeline includes three portfolios of well-located regional
and last-mile logistics assets which:
o have been sourced off market;
o are expected to have an aggregate gross acquisition cost of
approximately GBP170 million, reflecting a blended Net Initial
Yield of 7.2 per cent.;
o provide significant potential to grow rents and lengthen
leases over the medium term, in line with the Company's strategy
and supported by market and sub-sector fundamentals; and
o are fully occupied with a WAULT of 5.6 years and a strong tenant base.
-- Acquisitions anticipated to be geared at approximately 40 per
cent. LTV, within the Company's existing borrowing limits.
-- The Placing and acquisitions will support the Company's
near-term growth, diluting certain operating costs and reducing the
total expense ratio, further enhancing its capacity to deliver a
targeted net dividend yield in excess of 6 per cent. per annum and
a total return over the medium term of 10 to 15 per cent. per annum
by reference to the IPO issue price.
-- Last mile industrial and regional logistics real estate
market currently benefits from a number of supportive structural
factors; including strong occupier demand, decline in lettable
space, increased levels of e-commerce activity, affordable rents
with potential for rental increases and availability of
acquisitions for the Company at Net Initial Yields of 6.5 per cent.
to 7.5 per cent.
-- Each member of the Board and the Management Team have
confirmed their intention to participate in the Placing.
Nigel Rich, Non-Executive Chairman of Pacific Industrial &
Logistics REIT plc said:
"Since listing in April 2016, we have delivered on our
objectives by establishing a strong platform of assets that is
delivering significant capital and income growth. Having
successfully deployed the monies raised at IPO and at the
subsequent equity raise, we see a compelling opportunity to
significantly expand the scale of our business through a pipeline
of off-market acquisitions, enhancing the Company's ability to
deliver target returns whilst benefitting Shareholders by reducing
the total expense ratio."
Background to and reasons for the Placing
The Company was formed for the purposes of investing in last
mile and regional logistics properties in the UK with an average
lot size of under GBP10 million, which are located in established
logistics zones and which display, inter alia, the potential for
rental growth and other asset management opportunities. At IPO, the
Company targeted a net dividend yield of 6 per cent. per annum and
a total return over the medium term of between 10 per cent. and 15
per cent. per annum by reference to the IPO issue price.
The Group has raised a total of GBP23.3 million of equity
capital from its IPO and a subsequent capital raise in November
2016. The net proceeds of these capital raises have been deployed,
together with debt finance at an average interest cost of 3.3 per
cent. in the first period of trading, into assets yielding on
average 7.9 per cent. (excluding purchaser costs). This deployment
of capital, coupled with the Group's income enhancing asset
management initiatives, has enabled the Group to deliver a strong
set of results for the period from IPO on 13 April 2016 to 31 March
2017:
-- Overall portfolio valuation up 9.8 per cent. to GBP43.4
million (see the Appendix below for a summary of the Company's
portfolio as at 31 March 2017).
-- The initial portfolio acquired on 14 April 2016 has delivered
a valuation uplift in excess of 17 per cent. and a rental uplift of
8.6 per cent.
-- EPRA EPS of 7.8 pence per Ordinary Share.
-- EPRA NAV per Ordinary Share increased 16 per cent. to 116.1 pence.
-- Aggregate dividends of 6 pence per Ordinary Share.
-- Total Shareholder return of 22.6 per cent.
The Company benefits from a highly-experienced Board and
Management Team with broad industry credentials and connections
which have been built up over several decades. In the period since
IPO, the Company has not only executed a number of successful
property investments but has established a significant pipeline of
potential transactions, all within the Company's investment
objective and investing policy.
The Directors believe that the Placing will have the following
principal benefits for Shareholders:
-- Provide additional capital which will enable the Company to
execute some of its pipeline of potential transactions.
-- Diversify the Company's income stream and asset base by
increasing the number of tenants and properties within the
portfolio upon the capital being deployed.
-- Enhance the Company's position as an institutionally-backed,
entrepreneurial and focused REIT.
-- Enlarge the Company, thereby spreading certain operating
costs over a larger capital base and reducing the Company's total
expense ratio, in turn contributing to the Company's
dividend-paying capacity.
-- Increase the number of Ordinary Shares in issue, which may
provide Shareholders with additional liquidity and the Company with
a more diversified Shareholder base.
Market overview and the Company's positioning
The Directors believe that a number of structural and commercial
factors currently support the attractive opportunity in the last
mile/regional industrial and logistics real estate sub-sectors
targeted by the Company:
-- Strong occupier demand, in particular due to growth in
e-commerce and investment by retailers in their associated supply
chain (it is estimated that for every GBP1 billion([1]) of new
online retail sales, 1.125 million square feet of new distribution
space is required with a current annual average of approximately
4.5m square foot of incremental demand).
-- Supply of lettable space in industrial and logistics real
estate across the UK has declined, being more than one third lower
than the most recent peak of 2009.
-- The planning permission regime in the United Kingdom is not
supporting growth in supply to catch-up with increased demand in
key logistics locations.
-- With high building and land costs there is a lack of
speculative development of new premises.
-- Quality income-producing assets can be acquired at 30 to 70
per cent. of replacement cost.
-- Smaller lot size focus of less than GBP10 million and less
than 250,000 square feet avoids competition with institutional
investors for acquisitions, but tenant quality can be
maintained.
-- Acquisitions can be made in the region of 6.5 to 7.5 per
cent. Net Initial Yields, at affordable rents (in the region of
GBP4.50 to GBP5.50 per square foot), on an overall LTV of 35 to 40
per cent. with a significant margin over financing costs, thus
presenting an attractive income, capital growth and total return
proposition.
-- Despite a structural shortage of lettable space in the
subsector, it remains an active and well-traded market - 2016 saw
some 21.2 million square feet of space taken up in the sub 100,000
square foot bracket alone and greater than GBP3 billion of real
estate transacted.
The Directors believe the Company is the only closed-ended
quoted or listed company in the UK with this sole investment focus,
a competitive advantage which the Directors believe will increase
as the Company grows.
Pipeline Overview([2])
The Company is currently engaged in various stages of
negotiations on potential acquisitions that meet the investment
objective and investing policy.
Within the opportunities currently being considered, the Company
has commenced negotiations on a number of portfolios of
well-located regional logistics assets that are available to
acquire in separate off market transactions. The aggregate gross
acquisition cost of approximately GBP170 million reflects a blended
Net Initial Yield of 7.2 per cent. The Directors believe there is
significant potential to grow rents and lengthen leases over the
medium term. The portfolios have strong existing tenant bases, are
fully occupied, have a WAULT of 5.6 years and offer attractive
reversionary potential.
Portfolio Description Value
1. 9 assets. Capital value GBP45.5 million at
of GBP61 per square 7.3 per cent. NIY
foot. WAULT of 2.7
years. Low average
rents of GBP4.80 per
square foot.
2. 6 assets. Capital value GBP31 million at 7.0
of GBP79 per square per cent. NIY
foot. WAULT of 5.8
years. Low average
warehouse rents of
GBP4.35 per square
foot.
3. 12 assets. Low capital GBP83 million at 7.2
value of GBP71 per per cent. NIY
square foot. WAULT
of 7.1 years. Low local
rents of GBP5.46 per
square foot.
The acquisition of any potential investments by the Company is
subject to, among other things, completion of the Placing,
completion of satisfactory due diligence, successful negotiation of
terms with vendors and the approval of the Directors. There can be
no guarantee that any of the potential investments will be
completed.
Borrowing and gearing policy
The Company will seek to use gearing to enhance returns over the
long-term and, in addition, will seek to fix its borrowing rates.
It is the Directors' current intention to target gearing of no more
than 40 per cent. of gross asset value on new acquisitions and to
therefore reduce the LTV ratio from the 42.4 per cent. level as at
31 March 2017.
The Company has GBP32 million of headroom under its existing
debt facility and is in discussions with a number of lenders in
respect of additional facilities.
Details of the Placing
The Company is proposing to raise gross proceeds of up to GBP110
million by way of the Placing which will be conditional upon, inter
alia, approval by Shareholders.
The Ordinary Shares to be issued pursuant to the Placing will
not be eligible to receive the dividend in respect of the period
from 1 October 2016 to 31 March 2017 of 3.0 pence per Ordinary
Share which was announced by the Company on 23 May 2017 and which
will be paid on or around 28 July 2017 to Shareholders who were on
the register on 2 June 2017. In all other respects, the Ordinary
Shares to be issued pursuant to the Placing will rank pari passu
with the Company's existing Ordinary Share capital by reference to
a record date on or after the date of Admission.
It is expected that details of the Placing including, inter
alia, final size, pricing and the expected timetable of principal
events will be announced on or before 28 July 2017.
Management Arrangements
On 12 June 2017, the Company announced, inter alia, that it
would continue to review the management fee and long-term incentive
arrangements as the Company grows its institutional investor base.
As a result of this process, and subject to completion of the
Placing, the management arrangements will be amended as
follows:
Annual management fee
Under the current management agreement, expenses incurred by the
Manager are recharged to the Company and the Manager also receives
a management fee payable half yearly in arrears. The management fee
is not paid until Shareholders receive an annual dividend yield (by
reference to the IPO issue price) of at least 6.0 per cent.,
following which the Manager receives a percentage of the excess
annual yield as follows:
Annual dividend yield([3]) Manager's share of excess
yield
From 6.0 per cent.
to 7.0 per cent. 20
From 7.0 per cent.
to 8.0 per cent. 25
Greater than 8.0
per cent. 30
On 12 June 2017, the Company announced that, following
discussions between the Board and the Manager, the annual total
running costs of the Group (excluding finance charges, performance
fees, long-term incentive plan charges and direct property costs)
would be capped at GBP650,000 per annum until an equity fundraising
or other such capital event.
Subject to the completion of the Placing, the Company and the
Manager have agreed to a new management fee such that the cost
recharge, the excess of dividend yield management fee and the
annual total running cost cap described above are replaced with a
management fee of 0.95 per cent. per annum of the Group's EPRA NAV,
payable quarterly in arrears.
Existing long term incentive plan
20.0 per cent. of the Company's total return over 8 per cent.
per annum from the date of IPO to 13 July 2017 (being the day
immediately prior to the announcement of the proposed Placing) will
be crystallised and the resulting value will be paid in Ordinary
Shares to Pacific Industrial LLP (an affiliate of the Manager) and
will be subject to a lock-in until the third anniversary of the
IPO.
New long term incentive plan
The new LTIP will have an EPRA NAV element and a share price
element and will be assessed on: (i) 30 September 2020 (the "First
Calculation Date"); and (ii) 30 September 2023 (the "Second
Calculation Date").
The NAV element will be 10 per cent. of the excess of the EPRA
NAV per Ordinary Share return over an annualised 9 per cent.
hurdle([4]) , multiplied by the number of Ordinary Shares in issue
at relevant calculation date. The share price element will be 10
per cent. of the excess of the share price return over an
annualised 9 per cent. hurdle([5]) , multiplied by the number of
Ordinary Shares in issue at the relevant calculation date.
At the First Calculation Date, the share price element and the
EPRA NAV element hurdle shall be calculated by reference to the
Placing price.
At the Second Calculation Date, if a payment has been made at
the First Calculation Date under either element, the hurdle for
that element at the Second Calculation Date shall be re-set to be
based on the prevailing EPRA NAV per Ordinary Share/share price as
at the First Calculation Date (as applicable). If no payment is
made under an element at the First Calculation Date, then the
hurdle for that element shall continue to be calculated by
reference to the Placing price.
If there is a change of control, the LTIP will be assessed by
applying the relevant offer price to the EPRA NAV element and the
share price element calculations at the date of the change of
control.
The LTIP will be paid in shares or, at the Board's discretion,
cash.
For further information on the announcement, please contact:
Pacific Industrial & Logistics
REIT Plc
Richard Moffitt
Sam Tucker +44 (0) 207 591 1600
Canaccord Genuity - Nominated
Adviser, Joint Financial
Adviser and Sole Bookrunner
Corporate Broking
Bruce Garrow / Charlie
Foster / Ben Griffiths
ECM
Antony Isaacs / Sam Lucas +44 (0)20 7523 8000
Kinmont Advisory - Joint
Financial Adviser
Mat Thackery +44 (0)20 7087 9100
Radnor Capital Partners
- Capital Advisory and
Placing Agent
Tom Durie / Joshua Cryer +44 (0)20 3897 1830
FTI Consulting - PR and
IR Advisor
Claire Turvey / Richard
Gotla +44 (0)20 3727 1241
Notes to Editors
About Pacific Industrial & Logistics REIT
Pacific Industrial & Logistics REIT plc is a property
investment company, quoted on the AIM market of the London Stock
Exchange.
The Company has been established to invest in UK based
industrial and logistics properties with a view to delivering
attractive dividends and capital returns to its Shareholders. The
investment strategy is focused on smaller single let industrial and
logistics properties in key geographical locations servicing high
quality tenants. Investment returns will be generated by quality
stock, asset management and a strong occupational market.
DEFINITIONS
The following definitions apply throughout this announcement,
unless the context requires otherwise:
Admission the admission of the Placing Shares to trading on the AIM market of the London Stock
Exchange
Board the board of directors of the Company
Company Pacific Industrial & Logistics REIT plc
EPRA Guidelines the EPRA Best Practices Recommendations Guidelines published by the European Public
Real Estate
Association, as amended from time-to-time
EPRA Earnings the IFRS profit after taxation adjusted to meet EPRA Guidelines by, inter alia,
excluding
investment property revaluations, gains/losses on disposals and changes in the fair
value
of financial instruments
EPRA EPS the EPRA Earnings divided by the diluted number of Ordinary Shares in issue from
time-to-time
EPRA NAV the Company's balance sheet net asset value adjusted to meet EPRA Guidelines by, inter
alia,
excluding the impact of any fair value adjustments to debt and related derivatives
EPRA NAV per Ordinary Share the EPRA NAV divided by the diluted number of Ordinary Shares in issue from
time-to-time
IPO the admission of the entire issued and to be issued Ordinary Share capital of the
Company
to trading on the AIM market of the London Stock Exchange, which took place on 13 April
2016
LTV the ratio of gross debt less cash, short-term deposits and liquid investments to the
aggregate
value of properties and investments
Management Team Richard Moffitt and Christopher Turner
Manager Pacific Capital Partners Limited, a company registered in England and Wales with
company number
02849777, the manager to the Company
Net Initial Yield or NIY annualised current passing rent less non-recoverable property expenses such as empty
rates,
divided by the property valuation plus notional purchasers' costs
Ordinary Shares ordinary shares of GBP0.01 each in the capital of the Company
Placing the placing of new Ordinary Shares, as more particularly described in this Announcement
Shareholders holders of Ordinary Shares
WAULT the average lease term remaining to first break, or expiry, across the portfolio
weighted
by contracted rental income (including rent-frees). The calculation excludes
residential leases
and properties allocated as developments
Appendix - Portfolio as at 31 March 2017
Tenant Location Month Acquisition Net book Size
of acquisition cost value (sq ft)
(GBPm)(1[6]) (GBPm)
Price's Patent
Candles Ltd Bedford Apr 16 2.2 2.4 44,338
Jas Bowman
& Sons Bedford Apr 16 2.7 3.2 39,306
The BSS Group
Ltd Northampton Apr 16 0.8 0.8 13,633
ACO Technologies
Plc Bedford Apr 16 1.7 2.5 38,716
Blackburns
Metals Ltd Bedford Apr 16 1.3 1.8 24,008
Ball and Young
Ltd Bedford Apr 16 1.1 1.6 22,672
Ideal Industries
Ltd Bedford Apr 16 2.9 2.3 42,320
The BSS Group
Ltd Bedford Apr 16 2.3 4.9 59,607
Marshall Thermo
King Ltd Dunstable Apr 16 0.6 0.8 9,452
Winit (UK)
Ltd Bardon Apr 16 6.0 6.1 73,466
Void([7]) Bedford Apr 16 1.4 1.5 21,140
Professional
Fulfilment
Services Ltd Bedford Apr 16 1.4 1.6 21,165
Arqadia Ltd Bedford Apr 16 2.8 3.1 42,707
Tangerine Confectionery
Ltd Chesterfield Jan 17 4.7 5.0 108,194
PUMA United
Kingdom Ltd Leeds Mar 17 6.1 6.1 62,117
Total at 31
March 2017 37.7 43.4 622,841
IMPORTANT NOTICE
The contents of this announcement, which have been prepared and
issued by, and are the sole responsibility of the Company, have
been approved by the Manager solely for the purposes of section
21(2)(b) of the Financial Services and Markets Act 2000
("FSMA").
The information contained in this announcement is for
information purposes only and does not purport to be full or
complete. No reliance may be placed for any purpose on the
information contained in this announcement or its accuracy,
fairness or completeness.
This announcement is directed only at persons in the United
Kingdom who: (a) are Professional Investors (within the meaning of
the Alternative Investment Fund Managers Directive (2011/61/EU))
(b) have professional experience in matters relating to investments
falling within article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005 (the "Order"); (c) fall
within article 49(2)(a) to (d) (high net worth companies,
unincorporated associations, etc) of the Order; or (d) are persons
to whom it may otherwise be lawfully communicated.
This announcement has been issued by, and is the sole
responsibility of, the Company. No undertaking, representation,
warranty or other assurance, express or implied, is made or given
by or on behalf of the Company or any member of the Company's
group, Pacific Investments Management Limited, Canaccord Genuity
Limited ("Canaccord"), Kinmont Limited ("Kinmont") or Radnor
Capital Partners Ltd ("Radnor") or any of their respective
directors, officers, partners, employees, agents or advisers or any
other person as to the accuracy or completeness of the information
or opinions contained in this announcement and no responsibility or
liability is accepted by any of them for any such information or
opinions or for any errors, omissions or misstatements, negligence
or otherwise in this announcement.
Canaccord which is a member of the London Stock Exchange, is
authorised and regulated in the UK by the Financial Conduct
Authority ("FCA") and is acting as nominated adviser, joint
financial adviser and sole bookrunner to the Company. Canaccord is
not acting for, and will not be responsible to, any person other
than the Company for providing the protections afforded to its
customers or for advising any other person on the contents of this
announcement or on any transaction or arrangement referred to in
this announcement. Canaccord's responsibilities as the Company's
nominated adviser under the AIM Rules are owed solely to the London
Stock Exchange and are not owed to the Company, any Director or to
any other person. No representation or warranty, express or
implied, is made by Canaccord as to, and no liability is accepted
by Canaccord in respect of, any of the contents of this
announcement.
Kinmont, is authorised and regulated in the UK by the FCA and is
acting as joint financial adviser to the Company. Kinmont is not
acting for, and will not be responsible to, any person other than
the Company for providing the protections afforded to its customers
or for advising any other person on the contents of this
announcement or on any transaction or arrangement referred to in
this announcement. No representation or warranty, express or
implied, is made by Kinmont as to, and no liability is accepted by
Kinmont in respect of, any of the contents of this
announcement.
Radnor, is authorised and regulated in the UK by the FCA and is
acting as capital adviser and placing agent to the Company. Radnor
is not acting for, and will not be responsible to, any person other
than the Company for providing the protections afforded to its
customers or for advising any other person on the contents of this
announcement or on any transaction or arrangement referred to in
this announcement. No representation or warranty, express or
implied, is made by Radnor as to, and no liability is accepted by
Radnor in respect of, any of the contents of this announcement.
The information in this announcement may not be forwarded or
distributed to any other person and may not be reproduced in any
manner whatsoever. Any forwarding, distribution, reproduction, or
disclosure of this information in whole or in part is unauthorised.
Failure to comply with this directive may result in a violation of
applicable securities laws and regulations of other
jurisdictions.
This announcement contains (or may contain) certain
forward-looking statements with respect to certain of the Company's
current expectations and projections about future events and the
Company's future financial condition and performance. These
statements, which sometimes use words such as "aim", "anticipate",
"believe", "may", "will", "should", "intend", "plan", "assume",
"estimate", "expect' (or the negative thereof) and words of similar
meaning, reflect the Directors' current beliefs and expectations
and involve known and unknown risks, uncertainties and assumptions,
many of which are outside the Company's control and difficult to
predict, that could cause actual results and performance to differ
materially from any expected future results or performance
expressed or implied by the forward-looking statement. The
information contained in this announcement speaks only as of the
date of this announcement and is subject to change without notice
and the Company does not assume any responsibility or obligation
to, and does not intend to, update or revise publicly or review any
of the information contained to this announcement, whether as a
result of new information, future events or otherwise, except to
the extent required by the UK Financial Conduct Authority, the
London Stock Exchange Plc or by applicable law.
The targeted annualised net dividend and annual total return set
out in this Announcement are targets only and not profit forecasts
and there can be no assurance that they will be met or that any
dividend, rental growth or capital growth will be achieved.
The acquisition of any potential investments by the Company is
subject, among other things, to the Company completing satisfactory
due diligence, successful negotiation of terms with vendors and the
approval of the Directors. There can be no guarantee that any of
the potential investments described in this Announcement will be
completed. All information relating to the potential investments
described in this Announcement are indicative, subject to detailed
due diligence and may subsequently change as a result.
[1] JP Morgan (June 2017).
[2] All information relating to the potential investments
described in this Announcement are indicative, subject to detailed
due diligence and may subsequently change as a result.
[3] By reference to the IPO issue price.
[4] Hurdle adjusted for all distributions per share (including
dividends and returns of capital).
[5] Hurdle adjusted for all distributions per share (including
dividends and returns of capital).
[6] All excluding purchaser costs.
[7] Void from 24 March 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IOERJMMTMBJBTAR
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