INL.L Regulatory News (INL)

2 July 2018

KCR Residential REIT Plc

("KCR" or "the Company")

£8.4 million of acquisitions from Inland Homes under strategic relationship agreement

-New build apartment block in Southampton and Inland Commercial Ltd-

Further to the announcement on 21 June 2018, KCR Residential REIT Plc ("KCR") is pleased to announce that it has completed the agreement for lease of Block B, Chapel Riverside ("Block B"), a new build apartment block in Southampton, and has acquired the entire share capital of Inland Commercial Ltd, a special purpose vehicle ("SPV"), from Inland Homes Plc ("Inland"), the leading brownfield regeneration specialist and housebuilder with a focus on the South and South-East of England.

The transactions are the first agreed between the two companies following the May announcement of the establishment of a strategic relationship to support the delivery of high quality, low-to-mid-priced housing for rent. The agreement gives KCR right of first refusal over an initial identified pipeline of Inland assets, in return for Inland receiving a combination of cash and equity in KCR.

Block B is a new-build apartment block consisting of 27 two-bedroom apartments and 28 dedicated car parking spaces. It forms part of Inland's major Chapel Riverside redevelopment project in Southampton, Hampshire, being undertaken in partnership with Southampton City Council. It is located on the waterfront in a prominent location on the west bank of the River Itchen, within walking distance of Ocean Village and the city centre. Block B is being developed by Inland's construction arm, Inland Partnerships, and is scheduled for completion and hand over to KCR in August 2018.

On completion, KCR will be granted a 999-year long-leasehold interest at a peppercorn rent for a total consideration of £5.82 million. KCR estimates the rental value of Block B at £276,000 per annum, generating a projected gross annual yield on consideration of 4.74%. The consideration is payable in tranches with the final payment due in October 2018.

Inland Commercial Ltd owns two new-build supermarket properties, one freehold and one long leasehold, that support major residential developments in the South East. The supermarkets are let on 15-year leases to Co-op (from August 2016) and Sainsburys (from April 2017) and are located in Leighton Buzzard and West Drayton respectively. The rents are index linked to the RPI and the leases are on effective full repairing and insuring terms.

The total consideration of £2.56 million includes £1.32m of Metro Bank debt already within the SPV. The portfolio generates an annual income of £133,750 and delivers an annual yield on consideration of 5.2%. The consideration for the equity of the SPV will be settled in shares and or cash in such combination to be determined by 31 July 2018.

Dominic White, the chief executive of KCR, commented: 

"We are extremely pleased to announce the completion of our first two transactions under the terms of our strategic relationship with Inland Homes.

"The Chapel Riverside acquisition is a significant residential development that is in line with KCR's acquisition strategy. Inland's Chapel Riverside development is an impressive new landmark in a prime location in a city with strong growth ambitions, excellent transport links and access to high quality leisure and retail facilities.

"The supermarket properties support two large modern residential developments in the South East. As well as being let long term to high quality tenants, the investments generate a strong and growing 5.2% yield that is linked to inflation."

Stephen Wicks, chief executive of Inland Homes, added: 

"We continue to realise shareholder value from portfolio disposals, the proceeds of which will be reinvested across our exciting programme of both regeneration and residential development activity. At the same time, having formed the strategic relationship with KCR in May, we are pleased to be delivering on the stated strategy so soon after and alongside this fast growing and ambitious business."

-Ends-

Contacts:

Notes to Editors:

KCR's objective is to build a substantial UK low-to-mid-priced residential property portfolio that generates both secure income flow and increasing net asset value for shareholders. KCR acquires blocks of studio, one-and two-bed apartments that are close to transport links, shopping and leisure.