SIR.L Regulatory News (SIR)

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

3 March 2016

Secure Income REIT Plc

Proposed secondary placing of ordinary shares

Further to its announcement on 9 February 2016, the Board of Secure Income REIT Plc (the "Company", and together with its subsidiaries, the "Group"), the specialist long term income REIT, is pleased to announce a proposed secondary placing of ordinary shares in the Company (the "Placing Shares") to institutional investors (the "Placing"). The Placing is expected to be for a minimum of 77,514,511 ordinary shares representing 43 per cent of the issued share capital of the Company.

The Company has separately announced today its preliminary results for the twelve months ended 31 December 2015.

Business highlights

Benefits of the Placing

The Board has concluded that a substantial placing of the Company's existing shares currently held by the Selling Shareholders to a wider shareholder base at this time would:

Placing highlights

The Placing will comprise an offer of existing Ordinary Shares. In the event that the number of Ordinary Shares applied for under the Placing exceeds the expected minimum of 77,514,511, the Company has undertakings from the Selling Shareholders to increase the number of Ordinary Shares made available, up to a maximum of 110,735,013, representing 61% of the Company's issued Ordinary Shares. No new Ordinary Shares will be issued by the Company pursuant to the Placing.

The Placing will be managed by Goldman Sachs International ("Goldman Sachs") and Stifel Nicolaus Europe Limited ("Stifel"), acting as joint global co-ordinators and joint bookrunners (the "Joint Bookrunners"), as agents for the Selling Shareholders. The size of the Placing and the Placing Price will be announced at the close of the bookbuilding period.

It is expected that the books for the Placing will open on 14 March 2016 and pricing will take place on 22 March 2016. These dates may be accelerated or delayed by the Joint Bookrunners at their discretion. The final number of Placing Shares to be placed will be established at the close of the bookbuild process, and the results of the Placing will be announced as soon as practicable thereafter.

Shares will be offered to (i) certain institutional and professional investors in the United Kingdom and elsewhere outside the United States in reliance on Regulation S and in accordance with other applicable laws, and (ii) in the United States only to qualified institutional buyers, as defined in Rule 144A, in reliance on Rule 144A or another exemption from the registration requirements of the Securities Act.

PIHL Property LLP ("PIHL") holds the majority of the Prestbury Team's investment in the Company. Subject to the completion of the Placing, PIHL has committed to renewing the lock-in arrangements that it entered into at the time of the IPO, restricting the sale of its remaining Ordinary Shares for at least 12 months from the completion of the Placing and with phased releases through to the second anniversary of completion of the Placing. Notwithstanding the formal lock-in arrangements, the Prestbury Team has in any case stated its intention to retain a long term holding in the Company. The Prestbury Team's minimum 18 per cent shareholding following the Placing will put its holding among the largest held by any management team in the quoted UK real estate sector. The balance of the Prestbury Team's investment in the Company is held by Prestbury Incentives Limited which holds shares that will be subject to lock-ins under the terms of the Investment Advisory Agreement for terms with phased release dates between 30 September 2016 and 30 September 2018. The Selling Shareholders' remaining Ordinary Shares, apart from those held by PIHL and Prestbury Incentives Limited, will be subject to restrictions on sale for 180 days following completion of the Placing.

None of the Independent Directors are selling Ordinary Shares in the Placing and each has renewed the lock-in arrangements that were effected by them at the time of the IPO.

Commenting on the Placing, Martin Moore, Chairman of the Company, said:

"Since listing in June 2014 we have successfully completed a number of significant initiatives to advance our aim of creating a REIT which pays a progressive dividend to shareholders derived from income generated by high quality real estate assets let on long leases and offering inflation protection. These initiatives have comprised two asset sales, including Madame Tussauds London, for over £380 million in aggregate, allowing us to reduce the Company's levels of debt, as well as a debt refinancing of over £900 million to reduce finance costs and significantly extend the term of debt expiry, which was the final catalyst for the introduction of a dividend.

"Today's announcement of the proposed Placing marks the start of the next phase of Secure Income REIT's evolution - that of expansion. By reconfiguring and widening the Company's shareholder-base, which will still include a fully aligned manager in Prestbury, we provide ourselves with the flexibility and institutional support to actively seek and execute significant portfolio or asset acquisition opportunities that match the Board's ambitious plans for growth."

Placing statistics

Expected timetable of principal events

Each of the times and dates below is subject to change without further notice. References to a time of day are to London time.

Copies of the Company's Disclosure Document, to be published in due course, will be made available on the Company's website at www.SecureIncomeREIT.co.uk.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Further information on Secure Income REIT

The Company is a UK REIT specialising in long term, secure income from real estate investments offering inflation protection. The Directors believe that the Company's investment strategy, which is designed to satisfy investors' growing requirements for high quality, safe, inflation protected income returns, combined with the Company's tax efficient REIT status and carefully managed capital structure, which the Directors believe is appropriately geared, will allow the Company to produce attractive, growing and sustainable total returns to Shareholders, including a cash dividend, payable quarterly.

Portfolio of investments

The Group owns a freehold portfolio of 26 key operating real estate assets with a weighted average unexpired lease term of over 23 years, independently valued at £1.35 billion as at 31 December 2015, reflecting a net initial property yield of 5.3 per cent.

All properties owned by the Group are fully let and substantial international businesses, considered by the Board to be financially strong, guarantee 100 per cent of the Group's rental income. Annual passing rent at 31 December 2015 stands at £76.3 million, secured on:

The Portfolio includes two of the three most visited theme parks in the UK, Alton Towers and Thorpe Park, 19 private hospitals in England and central London's only private psychiatric hospital.

All rental income is subject to fixed or RPI linked annual upwards only rent reviews.

An analysis of IPD monthly data for the 29 years to December 2015 demonstrates that income returns comprise some 78 per cent of total returns from investment in the UK commercial real estate market over that period. The Directors believe that commercial property rents in the UK market have struggled to keep pace with inflation and that lease lengths have declined, with only seven per cent of new leases granted in 2015 exceeding 15 years. Against the background of a scarcity of both long leases and leases offering inflation protection, the Company has:

During 2015 the Group has transformed its capital structure by way of two significant asset sales and a complete replacement of the credit facilities that were in place at the time of the Company's IPO. Together these actions have:

Restart Numbering Applied

Strong and aligned management team and Board

The Company has an experienced non-executive Board chaired by Martin Moore (CEO of M&G Real Estate Limited (previously Prudential Property Investment Managers Limited) from 1996 to 2012 and past President of the British Property Federation), with three further independent Directors comprising Leslie Ferrar (currently non-executive Chairman of The Risk Advisory Group; a non-executive member of the HMRC Risk and Audit Committee; and a member of the Audit Committee for the Sovereign Grant), Jonathan Lane (Senior Adviser to Morgan Stanley and Chairman of EMEA Real Estate Investment Banking) and Ian Marcus (Chairman of the Bank of England's Commercial Property Forum and former Managing Director and Chairman of Credit Suisse's European Real Estate Investment Banking division). The Board also includes three directors from the Prestbury Team: Nick Leslau, Mike Brown and Sandy Gumm.

The Company is advised by Prestbury Investments LLP ("Prestbury"), which is controlled by Nick Leslau and Mike Brown. The Prestbury Team comprises Nick Leslau, Mike Brown, Tim Evans, Ben Walford (all of whom are Chartered Surveyors) and Sandy Gumm (a Chartered Accountant), a team of property and finance professionals who between them have extensive experience in the UK real estate market built over more than 30 years, and have a track record of having successfully created value for shareholders through previous economic cycles, including significant outperformance of the UK commercial real estate market during the recessions of the early 1990s and late 2000s.

The Prestbury Group is significantly invested in the Company, providing strong alignment with all Shareholders' interests. Following completion of the Placing it will hold at least 18 per cent of the Company's shares, among the largest management holdings in the quoted UK real estate sector.

Investment strategy

The Company invests in long term, secure income streams from real estate investments. A long term income stream is considered by the Board to be one with (or a portfolio with) a weighted average term to maturity in excess of 15 years at the time of acquisition. Security of income is assessed with reference to both the extent of rent cover from underlying earnings, the credit strength of tenants and (where relevant) guarantors and the reversionary potential of the assets.

The Portfolio is considered by the Board to offer attractive geared returns from high quality real estate, with financially strong tenants which have well established brands in industry sectors with strong defensive characteristics. The Board has a firm intention to build on the Group's substantial Portfolio to deliver an attractive proposition for investors, offering:

Investment opportunity and growth aspirations

The Board believes that there are many opportunities to deliver growth through transactions that create increased Total Shareholder Return and intends to expand the Company's portfolio through acquisitions, the availability of which has tended in the past to improve through volatile markets such as those currently prevailing.

The Board and the Prestbury Team have a broad range of sector experience and skills and, consequently, the growth strategy is not sector specific. The Board's focus is on delivery of Total Shareholder Returns derived from long term income streams, without sector bias in asset selection.

The Board considers that there are opportunities to grow the business from sources such as:

Restart Numbering Applied

The Board intends to finance future acquisitions through a combination of well structured and secure debt finance together with equity issues, subject to the support of Shareholders on a deal specific basis. The Board intends to finance future acquisitions with leverage on any new portfolio not exceeding a 50 per cent loan to value ratio.

The Group's listed REIT status creates an advantage, as compared with non-REITs, for the Company to pursue its growth strategy in pricing acquisitions where the seller needs to manage capital gains tax liabilities on exit. In these cases other non-REIT purchasers are likely to be unwilling or unable to take on inherent capital gains tax liabilities whereas in most scenarios the Company would be indifferent to inherent tax liabilities.

The experience of the Board and Prestbury is predominantly in the UK market which, together with the tax advantages of the UK REIT structure generally not extending to other jurisdictions, means that UK assets are more likely to be the focus of acquisitions. However, opportunities in other jurisdictions may offer attractive post tax risk and currency risk adjusted returns and if so they will be considered.

The Board's ambition is that in due course the Company will join the EPRA index and also, when appropriate, move to the Main Market of the London Stock Exchange. The Board believes that in growing the Company's portfolio and improving liquidity in the Company's Ordinary Shares, whilst financing acquisitions using leverage at a rate that is lower than the Group's current leverage rate, it will be likely that the Company's overall cost of capital will decline.

Distribution policy

The UK REIT rules require that the Company distributes at least 90 per cent of the Group's qualifying net income from its tax exempt property business within 12 months of each financial year end, or otherwise suffer a tax penalty. The Directors' intention is to distribute at least 90 per cent of qualifying earnings, which should equate to approximately one times earnings cover. The Board intends to initiate cash distributions to Shareholders in August 2016 at an annualised 11.75 pence per Ordinary Share (reflecting a 4.2 per cent yield at 31 December 2015 EPRA NAV) paid quarterly. In future, the Board expects the annual upwards only rental uplifts, in combination with the predictable administrative expenses and the fixed cost of debt, will enable the Company to increase its distributions annually in line with geared net earnings.

Background to and reasons for the Placing

The Selling Shareholders have had interests in the current investment portfolio for over eight years, having acquired their interests in 2007 within an investment fund established in 2006 with a ten year life. At the time these investments were made, conversion to REIT status or exit via a sale to a REIT was identified as a preferred outcome, but at that time REIT conversion required payment of a conversion charge of 2% of gross asset value, and there was a requirement for shares to be widely held from the date of conversion such that the REIT parent company was not a "close company". The costs of conversion and the significant dilution in ownership required to qualify as a REIT at that time together with the exceptionally turbulent market conditions in the years following the financial crisis of 2008 delayed the possibility of such an exit. In 2013 the REIT rules changed, eliminating the conversion charge and allowing closely held companies a three year grace period within which to become widely held. Following these changes, the Company listed in June 2014, with only a very small amount of equity issued at that time, amounting to approximately five per cent of the Company's Issued Share Capital. The Group then elected into the REIT Regime.

At the time of listing, the Company's secured debt had approximately three years' term to maturity and a significant majority of the Company's Ordinary Shares continued to be held by its original investors. The Board's view was that the best option for the Company was to materially extend the Group's debt maturities before widening the shareholder base to support its growth aspirations. In order to facilitate that process, during the course of 2015 two of the Group's investment properties were sold for aggregate gross proceeds in excess of £380 million, the proceeds of which were used to reduce gearing, and the Group's debt facilities were refinanced, significantly reducing interest costs, improving debt terms and extending the weighted average term to maturity of the debt to over eight years. The first debt expiry was, prior to the refinancing, May 2017 and, as a result of the new facility arrangements, is now October 2022. Following the refinancing, the Board has confirmed an intention to initiate quarterly cash distributions to Shareholders from August 2016, made possible by improved cash flow through reduced interest costs and loan amortisation.

The Board believes that, following the execution of its strategy to extend debt maturities and commence cash distributions, the Company has created a structure that is more appealing to the wider institutional investor market and has therefore been in discussions with the Selling Shareholders about how to widen the Company's shareholder base, create more liquidity in its shares and implement the growth phase of its strategy.

Consequently, the Selling Shareholders have undertaken to the Company that they will make available for sale up to 110,735,013 Ordinary Shares representing up to 61.4% of the Issued Share Capital in a co-ordinated Placing, subject to satisfaction of certain conditions, including achieving a satisfactory price pursuant to a bookbuilding process. The Selling Shareholders have also undertaken not to deal in the Company's shares, other than for the purposes of the Placing until 29 April 2016 or completion of the Placing. Selling commissions will be borne by the Selling Shareholders. The Company will incur professional and other costs amounting to approximately £2 million in respect of the Placing.

The Prestbury Group will be selling a minority of its shares but has stated that it is committed to a long term holding of its remaining interest in the Company which, valued at the Group's EPRA Net Asset Value at 31 December 2015, represents an investment of over £90 million and approximately 18% of the Company, making it one of the largest management holdings in the quoted UK real estate sector.

DEFINITIONS

"Board" means the board of directors of the Company;

"EPRA NAV" means a measure of net asset value designed by EPRA to present fair value of a company on a long term basis, by excluding items such as interest rate derivatives that are held for long term benefit, net of deferred tax;

"Group" means the Company and its subsidiaries and subsidiary undertakings from time to time (as defined in section 606 of CTA 2010);

"Healthcare Portfolio" means the Ramsay Healthcare Portfolio and the Nightingale Psychiatric Hospital in central London;

"Investment Advisory Agreement" means the investment advisory agreement dated 30 May 2014 and made between the Company, Prestbury and Gallium (as amended);

"IPO" means the admission of the Ordinary Shares to trading on AIM;

 "Issued Share Capital" means the issued share capital of the Company as at the date of this document, being 180,344,228 Ordinary Shares;

"Leisure Portfolio" means the six leisure real estate assets owned by the Group and let to Merlin;

"Merlin" means Merlin Entertainments Plc and its group entities

"Net LTV" means the loan to value ration calculated on the gross loan amount and any other secured liabilities, less cash balances;

"Ordinary Shares" means ordinary shares of 10 pence each in the capital of the Company;

"Placing" means the proposed secondary placing of Ordinary Shares at the Placing Price pursuant to the Placing;

"Placing Price" means the price of the Placing Shares to be determined following the bookbuilding process;

"Placing Shares" means the number of Ordinary Shares that each Selling Shareholder agrees to sell or such lesser number as shall be agreed between the Selling Shareholders and the Joint Bookrunners following completion of the bookbuilding process;

"Portfolio" means the property portfolio held by the Company as at the date of this document, comprising the Healthcare Portfolio and the Leisure Portfolio;

"Prestbury Group" means a group of entities under the common ownership of Nick Leslau and Nigel Wray and others and any person connected to them (including the Prestbury Team);

"Prestbury Team" means Mike Brown, Tim Evans, Sandy Gumm, Nick Leslau and Ben Walford;

"Ramsay" means Ramsay Health Care Limited and its group entities

"Ramsay Healthcare Portfolio" means the 19 healthcare real estate assets let to Ramsay Health Care Limited;

"REIT" means a group or company which has elected for real estate investment trust status under Part 12 of the UK Corporation Tax Act 2010;

"REIT Regime" means the REIT regime applicable in the UK;

"Regulation S" means Regulation S under the US Securities Act;

"Securities Act" or "US Securities Act" means the United States Securities Act of 1933 (as amended);

"Selling Shareholders" means PIHL Property LLP, West Coast Capital Prestven Investments Limited, West Coast Capital Investments Limited, West Coast Capital (Retail Parks) Limited, Prestonfield P1 Limited, Prestonfield P2 Limited, Prestonfield P3 Limited, Bluetouch Investments (Malta) Limited, Brookstone Limited and Prestbury Incentives Limited;

"Shareholder" means a holder of Ordinary Shares;

"Total Shareholder Return" means the total of growth in EPRA NAV per Ordinary Share plus distributions per Ordinary Share over a period of time, usually expressed as a percentage.

Important Information

The content of this announcement has been prepared by and is the sole responsibility of the Company.

This announcement is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this announcement or any of its contents.

The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy, fairness or completeness.

This announcement does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or other securities of the Company in any jurisdiction, including the United States, Canada, Japan, South Africa or Australia or in any jurisdiction in which such offer or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. The Placing and the distribution of this announcement and other information in connection with the Placing in certain jurisdictions may be restricted by law and persons into whose possession this announcement, any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this announcement nor any part of it nor the fact of its distribution shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

The Placing timetable, including the publication of a Disclosure Document, may be influenced by a range of circumstances, including market conditions. There is no guarantee that a Disclosure Document will be published or that the Placing will occur and you should not base your financial decisions on the Company's intentions in relation to the Placing at this stage. Acquiring investments to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments. This announcement does not constitute a recommendation concerning the Placing. The value of the Company's shares can decrease as well as increase. Potential investors should consult a professional adviser as to the suitability of the Placing for the person concerned. Past performance cannot be relied upon as a guide to future performance.

This announcement is not for distribution, directly or indirectly, in whole or in part, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Canada, Japan, South Africa or Australia or any other jurisdiction where it is unlawful to distribute this announcement. In particular, this announcement is not an offer of securities for sale in the United States. The securities proposed to be sold have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or under any securities laws of any State or other jurisdiction of the United States, and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the securities referred to herein in any jurisdiction, including in the United States, Canada, Japan, South Africa or Australia. The securities referred to herein have not been registered under the applicable securities laws of Canada, Japan, South Africa or Australia and, subject to certain exceptions, may not be offered or sold within Canada, Japan, South Africa or Australia or to any national, resident or citizen of Canada, Japan, South Africa or Australia.

The announcement contains forward-looking statements. These statements relate to the future prospects, developments and business strategies of the Company. Forward-looking statements are identified by the use of such terms as "believe", "could", "envisage", "estimate", "potential", "intend", "may", "plan", "will" or variations or similar expressions, or the negative thereof. The forward-looking statements contained in the announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. If one or more of these risks or uncertainties materialise, or if underlying assumptions prove incorrect, the Company's actual results may vary materially from those expected, estimated or projected. Given these risks and uncertainties, certain of which are beyond the Company's control, potential investors should not place any reliance on forward-looking statements. These forward-looking statements speak only as at the date of the announcement. Except as required by law, the Company undertakes no obligation to publicly release any update or revisions to the forward-looking statements contained in the announcement to reflect any change in events, conditions or circumstances on which any such statements are based after the time they are made.

Goldman Sachs, which is authorised in the United Kingdom by the Prudential Regulatory Authority (the "PRA") and regulated in the United Kingdom by the Financial Conduct Authority (the "FCA") and the PRA, is acting as joint global coordinator and joint bookrunner in connection with the matters referred to herein, and will not be responsible to anyone other than the Company and the Selling Shareholders for providing the protections afforded to its clients, nor for providing advice in relation to the contents of the announcement or any transaction or arrangement referred to herein.

Stifel, which is authorised and regulated in the United Kingdom by the FCA, is acting as joint global coordinator, joint bookrunner and nominated adviser connection with the matters referred to herein, and will not be responsible to anyone other than the Company and the Selling Shareholders for providing the protections afforded to its clients, nor for providing advice in relation to the contents of the Presentation or any transaction or arrangement referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on Goldman Sachs or Stifel by the FSMA or the regulatory regime established thereunder, neither Goldman Sachs nor Stifel accepts any responsibility whatsoever, and makes no representation or warranty, express or implied, in relation to the contents of the announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on behalf of it, the Company, the directors, the Company's investment adviser or any other person in connection with the Company, the Placing, the shares or the matters referred to herein, and nothing in this announcement is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Each of Goldman Sachs and Stifel accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of the announcement or any such statement.

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.