Empiric Regulatory News (ESP)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, CANADA, JAPAN, AUSTRALIA OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT OR ANY COPY OF IT.

8 August 2014

Empiric Student Property plc

("ESP" or the "Company")

Development of Willowbank Primary School, Glasgow

And

Related party transaction

The Board of Empiric Student Property plc (LSE: ESP) is pleased to announce that London Cornwall Property Partners Limited ("LCPP"), acting on behalf of the Company, has concluded missives (equivalent to exchange of contracts under English law) with Glasgow City Council (the "Council") in relation to the acquisition of the former Willowbank Primary School, on Willowbank Crescent, Glasgow ("Willowbank"). Completion of the acquisition of Willowbank will be subject to receipt of planning approval and listed building consent to redevelop the building into direct-let premium student accommodation. 

LCPP is a company controlled by Timothy Attlee and Paul Hadaway, executive directors of ESP. It has been agreed that Willowbank will be transferred from LCPP to Empiric (Glasgow) Limited shortly after completion of the purchase. LCPP will receive no economic benefit from its role in the transaction.

The Willowbank site will be developed through Empiric (Glasgow) Limited, via a 50:50 joint venture arrangement with Revcap Advisors Limited ("Revcap"). The development is targeted to be completed in time for the start of the 2016/2017 academic year. The purchase price for the site is £1,825,000 exclusive of VAT.

A planning application will be submitted for the development of a scheme comprising approximately 158 beds in a mix of studio, two and three bed apartments. An agreed overage payment is payable in the event that planning consent is obtained for bedrooms in excess of 158 bedrooms.

The Company has now committed to the two development projects envisaged at the time of its IPO, the other being Brunswick House in Southampton.

Paul Hadaway, Chief Executive of Empiric Student Property plc, commented:

"Willowbank Crescent is a super-prime location in the West End of Glasgow situated between the city centre and the University of Glasgow. In due course, the development of the site will be in conjunction with Revcap and we look forward completing this development in time for the 2016/17 academic year."

Related party transaction

Due to the original offer to acquire Willowbank having been submitted by LCPP, and approved by the Council's committee, prior to the establishment and launch of ESP, the Council required missives to be concluded with LCPP rather than ESP (or a group company). The property will initially be acquired by LCPP (funded by, and acting on behalf of, Empiric (Glasgow) Limited) and then transferred to Empiric (Glasgow) Limited shortly following acquisition, with no benefit to LCPP. LCPP, ESP and Empiric (Glasgow) Limited have, in addition, entered into a fronting agreement (the "Fronting Agreement") pursuant to the terms of which LCPP has agreed, amongst other things, to hold LCPP's interest under the missives on trust for Empiric (Glasgow) Limited, to comply with its instructions in relation to the missives and to transfer title to the property to Empiric (Glasgow) Limited. It is agreed and acknowledged by the parties to the Fronting Agreement that LCPP shall not be entitled, and is not intended, to receive any financial benefit on its own behalf from the Fronting Agreement or its holding of title at any time to the property.

As a condition of concluding missives with LCPP, the Council has required ESP to enter into a guarantee (the "Guarantee") in favour of the Council, pursuant to the terms of which ESP will guarantee the payment and development obligations of LCPP in relation to the Willowbank scheme, in all cases up to an aggregate maximum capped amount of £4,000,000. The Guarantee will continue to apply post-settlement unless any transferee of the Willowbank site can satisfy a covenant test for discharge which is contained in the Guarantee. In addition, it has been agreed that in all cases, the total aggregate direct and indirect financial exposure of ESP to LCPP (whether potential or actual) and whether under the Guarantee and/or the terms of the Fronting Agreement (via its interest from time to time in Empiric (Glasgow) Limited) shall not at any time exceed £4,000,000.

As LCPP is a "related party" for the purposes of Chapter 11 of the UKLA Listing Rules, the entry into of (i) the Guarantee between ESP and the Council for the benefit of LCPP, and (ii) the Fronting Agreement between ESP, Empiric (Glasgow) Limited and LCPP together constitutes a related party transaction. Due to the maximum exposure of ESP under the terms of the Guarantee and/or the Fronting Agreement being capped, the entry into of the Guarantee represents a smaller related party transaction for ESP for the purposes of Listing Rule 11.1.10 R. For the avoidance of doubt, the obligations of the Company under the Guarantee and the Fronting Agreement are substantially the same obligations that the Company would incur if it was in a position to conclude missives with the Council itself.

For further information on the Company, please see the website at www.espreit.co.uk or contact:

Notes:

Empiric Student Property plc (incorporated in England & Wales) is an internally managed real estate investment trust ("REIT") investing in modern, premium, student accommodation, with a focus on quality and with assets generally in prime city centre locations in top university cities in the UK. The Company listed on the premium listing segment of the Official List of the Financial Conduct Authority and was admitted to trading on the main market for listed securities of the London Stock Exchange on 30 June 2014.