FRM.L Regulatory News (FRM)

30 Nov 2006 12:59

Formation Group PLC30 November 2006 Formation Group plc Property Development Project Formation Group plc ("Formation" or the "Company") announces that, in accordancewith its strategy of creating tailored property investment products for high networth individuals, developed in conjunction with David Kennedy, a majorshareholder of the Company, it has entered into an agreement to advance ashort-term loan of £2m (the "Loan") to Rocquefort Properties Limited ("Rocquefort"), a company incorporated in Guernsey which is owned by trusts ofwhich David Kennedy is a beneficiary. The purpose of the Loan, which is repayable within 90 days of the date of theloan agreement and carries interest at a rate of 2% per annum, is to enableRocquefort to acquire land situated in Commercial Road, Aldgate, London for thepurposes of a residential and commercial property development project. The siteis in close proximity to the City of London and on a major traffic artery intoLondon. Planning permission has been obtained for the demolition of theexisting derelict buildings and for the development of a mixed use complexincluding both residential and commercial units and extending to 165,765 sq. ft. The total cost of the project is estimated at approximately £34 million. Individual investors, including clients of the Company's asset managementdivision, Kingsbridge Asset Management, will be able to participate in theinvestment opportunity via Whitechapel Property Fund ("Whitechapel").Whitechapel will be a newly established vehicle designed to enable individualinvestors to participate in this scheme. Investors in Whitechapel will be provided with an underwritten return of 10% perannum compounded, on their investment over a period of between two and fouryears. Formation and a Guernsey Trust have agreed to underwrite this returnshould the project not build out as planned. Should this arise, Formation'smaximum liability would be £3.9 million. In return for this Formation will beentitled to a material percentage share of any residual profits earned byRocquefort on conclusion of the redevelopment scheme. Formation's Loan to Rocquefort will be repaid from funds received by Rocquefortas a result of an issue of loan notes to Whitechapel. David Kennedy owns 24.20 per cent. of the issued ordinary share capital of theCompany (excluding shares held as treasury shares). The provision of the Loan byFormation is therefore classified as a related party transaction under the AIMRules. The directors of Formation consider, having consulted with WH IrelandLimited, the Company's nominated adviser, that the terms of the transaction arefair and reasonable insofar as its shareholders are concerned. Neil Rodford commented "We are pleased to be able to complete our first bespoke property relatedtransaction. We believe this provides an excellent opportunity for our wealthmanagement clients. Our wealth management clients have historically invested in the propertydevelopment arena. However, this opportunity allows them to access the market ata higher level of the supply chain." For further information, please contact: Neil Rodford, Formation Group plc Tel: 01625 539832 David Youngman, WH Ireland Limited Tel: 0161 832 2174Katie Tzouliadis, Biddicks Tel: 020 7448 1000 About Formation Group plc Formation Group Plc provides a range of specialist services to high net worthindividuals and organisations in the sports marketing and entertainment sector.Clients include professional athletes and services include wealth management &professional services, bespoke property investments and representation. www.formationgroupplc.com This information is provided by RNS The company news service from the London Stock Exchange