3 Dec 2008 07:00
3 December 2008
Dawnay, Day Treveria PLC
("Treveria" or the "Company")
NEW MANAGEMENT ARRANGEMENTS
Treveria, the property investment company focused on German retail, announces today the termination of its management agreements with the Dawnay, Day Group ("DDG") and a revised strategy.
Highlights:
Decision made that the internalisation of the asset management function is in the best interests of its shareholders
Following consultation with its major shareholders the Board has decided not to raise additional equity at this stage but to focus on prudent cash and debt management across Treveria and its subsidiaries (the "Group")
Ongoing focus on the intensive management of the Group's €2.2 billion portfolio which currently generates c. €155 million of gross rental income per annum
Appointment of new internal asset manager Treveria Asset Management Limited ("TAM") to replace Dawnay, Day Treveria Real Estate Asset Management Limited ("DDTREAM")
Cushman & Wakefield LLP ("C&W") appointed to replace Dawnay, Day Property Investment GmbH ("DDPI")
Proposed change of name to "Treveria plc"
Proposed changes to the Board.
Commenting, Ian Henderson, Chairman of Treveria, said:
"The new arrangements set out in today's announcement are structured to provide the best opportunity to rebuild shareholder value over the medium term. Management links with the Dawnay, Day Group are now severed and continuity in the key personnel has been ensured. We look forward to continuing to work with our existing team led by Damian Wisniewski, Director of Finance, and Chris Kingham, Director of Property, with David Hunter as the non-executive Chairman of TAM, and to starting what I am sure will be a successful working relationship with Cushman & Wakefield.
"Since the Board announced a strategic review in June we have considered a number of options and opportunities presented to us. The conclusion we have reached is that the most appropriate course of action is to focus on the management of our existing portfolio by internalising the asset management team and managing our balance sheet prudently, whilst ensuring we utilise our cash resources carefully.
"We remain confident that the portfolio offers the potential to deliver long term value. We have good quality well-located assets, which produce recurring income and provide significant asset management opportunities. We are glad that the unsettling period caused by the financial difficulties at the Dawnay Day Group is behind us and look forward to focusing on the important task of managing our assets to ensure we can extract value from them over the medium term."
Strategic Review
In the Interim Statement dated 29 September 2008, the Board announced that it was considering a possible injection of new equity into the business with a preferred third party. This would have been linked to the award of an external management contract. Further analysis of this proposition was conducted and a number of permutations and combinations have been considered. Feedback has also been received from shareholders.
The Board has now concluded:
it is most appropriate to focus on management of the existing portfolio by internalising the asset management team rather than appointing an external third party asset manager; and
given the current share price, a capital injection at this point in time will not be in the interests of shareholders and it will be more appropriate to concentrate on managing the Group's existing balance sheet prudently.
The Group has an extensive portfolio that was independently valued at €2.2 billion at 30 June 2008 and has significant recurring cash flow. In addition, Treveria has over €75 million of cash at the parent company level.
Therefore, the Board has decided to focus on internalisation and cautious balance sheet management. Most of the Group's debt facilities are close to the upper limit of their respective loan to value covenants and the Board expects to engage in a constructive dialogue with its creditors to find workable solutions in the event that market conditions deteriorate further. Major shareholders have indicated that they are supportive of this strategy.
Appointment of TAM as the new internal asset manager
Since DDG encountered its well documented financial difficulties earlier in the year, Treveria has been reviewing its options for alternative asset management operations. The Board has decided that the best course of action is for the Group to adopt an internal asset management structure. In this respect, TAM, a wholly owned subsidiary of Treveria, has assumed the asset management duties currently performed by DDTREAM. TAM was initially set up to secure employment for the employees who worked for DDTREAM who were made redundant as part of the wider DDG restructuring.
This new internalised asset management arrangement is expected to be more efficient than the existing DDTREAM contract.
Under the arrangement, employees currently involved in the day to day management of Treveria's portfolio who are still employed by DDG will be transferred to TAM, providing important continuity. It is the Board's intention to put in place new incentive arrangements for TAM employees.
The Portfolio Management Agreement between Treveria and DDTREAM, under which the Group paid 0.4% of the gross asset value of the portfolio to the asset manager, will be terminated for the payment of €1 million (which equates to approximately one and a half months' notice).
Appointment of Cushman & Wakefield as new property manager
The Group has appointed C&W as exclusive property manager for an initial three year period, replacing DDPI. As part of these negotiations, the Company will pay DDPI approximately €1 million (which equates approximately to the fee DDPI would have received if the contracted three months' notice of termination had been given).
The management fee payable to C&W will be 3% of annual net rental income for an initial period of three years. In order to provide security to C&W to recruit the existing DDPI team, these fees are guaranteed over the first three years at €5 million in the first year, reducing to €4.5 million in year two and €4 million in year three. In addition, the Group has guaranteed letting fees over these three years.
It is expected that the annual running costs to the Group of the new asset and property management arrangements (including internal staff costs) will be less than the existing costs payable to DDG (including DDPI).
Change of name
The Board also proposes that the Company changes its name to "Treveria plc". This reflects Treveria's new independence from DDG, following the termination of the management contracts. Shareholder approval is required for this change to become effective and therefore a circular convening an extraordinary general meeting to consider and pass the appropriate resolution will be posted in due course. It is also the intention to remove the Dawnay Day name from all the relevant Treveria subsidiaries in due course.
Appointment of German Property Director and Director Indemnity
Various changes will be required to the boards of the Company's subsidiaries following the reorganisation of the asset and property management functions. Dieter Vanagtmael has been appointed director and Martin Matern has been appointed on an interim basis as a director of the Company's German property-owning subsidiaries. Mr Vanagtmael is also a director of TAM.
In connection with the appointment of Mr Matern, the Company has agreed to provide an indemnity which, under the AIM Rules, is treated as a related party transaction. The indemnity is in respect of third party claims against Mr Matern as director (other than those arising from fraudulent, criminal or intentional acts) to the extent not otherwise recovered under D&O insurance. The Company's potential liability under the indemnity is capped at €5 million. The Board considers, having consulted with the Company's NOMAD, Citigroup Global Markets U.K. Equity Limited, that the terms of the indemnity are fair and reasonable insofar as the Company's shareholders are concerned.
Board Changes
Following the appointment of C&W as the property manager, Martin Bruehl, the Managing Partner for C&W in Germany, has agreed to resign from the Board with immediate effect. Additionally, following the conclusion of the strategic review and the stabilisation of the management structure, Manfred Maus has also indicated his desire to retire from the Board.
The Board would like to thank both Mr Bruehl and Mr Maus for their contribution to Treveria, and in particular, for their help during this particularly destabilising period.
The Board has also decided to recruit new directors to widen the expertise and insight at Board level. A number of potential candidates are being considered including some names proposed by the Company's key shareholders. These will be reviewed by the Board and a further announcement made in due course. Once these new appointments are made, Manfred Maus is expected to retire from the board.
For further information:
| Treveria Asset Management Limited Damian Wisniewski / Chris Kingham / David Hunter | +44 (0)20 7667 1413 |
| JPMorgan Cazenove Bronson Albery | +44 (0)20 7588 2828 |
| Citigroup (NOMAD to the Company) Alex Carter | +44 (0)20 7986 4000 |
| Financial Dynamics Stephanie Highett / Richard Sunderland | +44 (0)20 7831 3113 |