Panther Securities Regulatory News (PNS)

23 March 2017

Panther Securities PLC

(the "Company")

Lease surrender, inequality of rateable value assessments and Chairman's ramblings on housing

The Company is pleased to announce that it has received £1,995,000 payment, conditional on vacant possession amongst other things, to accept a surrender on 24 March 2017, four years before the end of term, of the lease on our industrial unit at Heybridge, Maldon, Essex. The rental forgone is £500,000 p.a.

This Maldon property contains approaching 200,000 sq ft of mainly high bay brick built single storey warehouse and industrial space on a freehold site of 9.5 acres in a sought after location adjoining the Chelmer and Blackwater canal in the Heybridge Basin area. The local Council have new proposals for this area, which will probably be beneficial to us in the long term. We intend to refurbish and restore the property where required and in due course, offer out for letting at what we expect to be a higher rent than previously received.

A contract for the sale of the upper part of 49-53 High Street, Croydon has been entered into, with a sale price of £800,000 and a 10% non-refundable deposit has now been received. Completion is due on 31 May 2017. The upper part of 6,500 sq ft of offices had permission for conversion to 6/8 flats and has been vacant for some time. We retain the ground floor retail units, one let to Sainsburys and with one under offer.

We have a number of other sites with residential planning permission and also some on which permission is being sought. One in Wickford, mentioned previously in reports to shareholders, is being offered for sale and following a number of interested parties making offers we are hopeful an acceptable offer will crystallise shortly.

As the number of sites upon which we are seeking planning permission could potentially produce a total approaching 800 residential units, I feel some ramblings reflecting the recent White Paper on housing are appropriate and follow on at the end of this statement.

I have written a number of times previously about the current rating revaluation and this still requires further comment.

Rateable values are based on the rental value of the property concerned. The rental value is correlated to the turnover and profits that can be derived from the property. As a general rule if a property's turnover goes down its rental value goes down.

Harrods and Selfridges are two of the finest Department Stores in the United Kingdom, if not the world. Anyone who has the good fortune and small fortune to be able to visit to buy from their respective stores in Knightsbridge and Oxford Street, two of the most prestigious and expensive retail positions in London, will be delighted and impressed.

Their rateable value assessments between 2010 and the new 2017 assessment assessed as at 2015 have increased massively by 57% for Harrods and 53% for Selfridges. Whilst sympathy is in order, one must consider that in that period Harrods' turnover rose by 52% and Selfridges' rose by 38% and presumably their profit rose proportionally.

Because they are based in central London, I would bet a fiver to a wine gum that their turnover since the Brexit vote will likely have risen disproportionally higher still, due to the devaluation of the pound in our British pocket, which made it cheaper for tourists in their hoards to arrive and spend in the United Kingdom and in particular Central London.

Of course, to suddenly spring a massive tax rise on these icons and many others has to be handled carefully and thus, a phasing arrangement to soften this increase was put in place. But, of course, governments do not like losing income from soft targets such as property users/owners, so to compensate for the loss of instant increases the Government phased in the decreases due to those whose rateable value has fallen and because they have no idea about businesses, they phase in reductions on those with rateable values over £100,000 from 4.1% to 5.9%, which I view as derisory.

Even then, these parsimonious reductions are not as stated, because those over £100,000 rateable value also have to pay a levy possibly 1.5% towards assisting small businesses and all rates payable are adjusted annually upwards for inflation probably about 3% next year i.e. 4.5% upwards against 4.1% downwards (so I believe that as usual "government departments" are using statistics to fib to the general public).

Most shareholders will know we are closely connected to the Beales department store group, who have twenty trading stores, of which the Group owns the freehold of eleven. None of the Beales stores are located in Central London.

The turnover of the Beales stores over the 2010-2015 period has probably fallen by at least 20-25% and thus, the total rateable values have been reassessed to reflect this. A reduction of £780,000 in the group's total rateable value , which in theory, produces a reduction of £370,000 per annum in Beales' actual real money cash payments to the Treasury. However, because of the daft phasing arrangements, the reduction will only be £58,000 per annum, which is about one eighth of the extra cost of the minimum wage foisted upon them.

Thus, one could conclude that Beales, which is a well-loved department store, in each of its locations but sadly loss making as a group, is subsidising Harrods and Selfridges by £312,000 per annum, whilst each of them are probably making massive profits. To top it all, both Harrods and Selfridges are foreign owned so these profits can go abroad.

I do not believe even Baldrick of Black Adder fame could devise such a cunningly stupid plan. Unfortunately, we are not in his era, when this crass stupidity would lead to heads rolling down the scaffold.

RAMBLINGS ON A WHITE PAPER

If Mr Timpson finds time to read the latest White Paper on Housing, I suspect he will be very jealous - why you may ask? Well, it contains more cobblers than his 1000 shoe repair shops.

I have read it and although I feel it may have one or two useful points contained in its 100 pages, I do not believe that these points will translate into helpful government policy. If I had prepared a report on the housing situation, I would have started as follows:-

We have a housing crisis because our Governments over the last 15 years have encouraged 3,000,000 extra people to come and live on our small island, when our Housebuilders could only cope with the nation's existing population's growth.

The log jam in the supply of land (which is plentiful) is again caused by three separate reasons…. ownership structure….. planning requirements and the insatiable greed of Local Authorities.

Shortly after the Second World War, compulsory acquisition of land was implemented. During the last war (1939-45), central government found it necessary to requisition properties for its needs during this war. Having obtained a taste for the benefits of acquisition by compulsion, numerous acts to consolidate compulsory acquisition ability have been made since this time and thus, I believe that the following happened.

Local Authorities compulsorily acquire land way beyond their needs.

With other people's money.

From people who did not want to sell.

For social improvement works.

Which few people wanted.

At a cost that the people paying cannot afford.

Very many schemes did not proceed.

Even though authorised by bureaucrats.

Who had little idea of what was involved.

Who, soon after, retired on fat pensions.

And often moved to a high paying job.

In another bureaucratic government organisation.

Leaving it to new bureaucrats.

To deal with the land blockage they had created.

These newbies had no idea what the land was required for.

Who then dispose of sites in the most politically correct way.

Thus not getting good value.

But only on very long leases.

That had very restrictive covenants.

To businesses that then had to pay enormous property taxes.

Irrelevant to profit generated from the particular property.

Who then either did well and wanted to move.

Or more likely needed to raise capital to pay off debts.

And then found that they needed a planning permission to get best value for their site.

The Planning Officer then put many hurdles in the way.

Forcing owners to provide a huge amount of irrelevant but expensive information.

Even though the Council already knew most of the information.

"Then act, as slowly as possible, often taking over 2 years to be ready to submit the application to the council for planning permission".

And then:

Ask for a contract to be signed on short notice agreeing to a huge payment that they have suddenly demanded to recommend for planning permission, at the next Council meeting.

Or they will refuse to submit the application for permission or change recommendation to refusal.

When the blackmail has been agreed and permission granted, a separate department of the Council who request as the freehold land owner, with a financial interest of negligible value, wish for another huge chunk of money to revise those old lease clauses to allow the permitted scheme to proceed.

They then take six months or more to explain their own detailed requirements and even longer to provide a suggested legal agreement.

By then, you are cowed into submission to agree to their proposals.

And they will shortly require an extra payment called C.I.L. (the "Completely Idiotic Levy" in my view), thus making all schemes unviable.

And to top it all, the latest white papers suggest remedies that will make matters worse.

I am not sure if I am living in George Orwell's "Brave New World" or Lewis Carroll's "Alice in Wonderland".

The big surprise is that any houses get built at all.

Andrew Perloff

Chairman

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