TAP.L Regulatory News (TAP)

19 Jan 2006 07:01

Teesland Advantage Property Inc Tst19 January 2006 Teesland Advantage Property Income Trust Limited (the "Company") Placing of 71 million C Shares at 100p and proposed acquisition of TOPP Holdings Limited On 9 December 2005 the Company announced that it was in negotiations to acquirea portfolio of properties (the "Acquisition") and that the Acquisition would befunded by, inter alia, an issue of equity. The Company is today publishing a Prospectus and Circular containing detailedproposals to raise £71 million by means of a placing of C Shares and to acquireTOPP Holdings Limited ("TOPP"), the owner of the property portfolio to bepurchased pursuant to the Acquisition. Introduction The Company has entered into an agreement with Teesland Holdings plc to acquirethe entire issued share capital of TOPP and thereby acquire indirect ownershipof the property portfolio (the "TOPP Portfolio"), for a consideration of £1.00.In addition, the Company has agreed to procure the repayment of TOPP's loan fromTeesland Holdings plc amounting to approximately £5.4 million. The Company also announces proposals to raise £71 million by means of aninstitutional placing of C Shares by KBC Peel Hunt Ltd (the "Placing"). ThePlacing is fully underwritten. The proceeds of the Placing will be utilised topay the consideration for the Acquisition, to repay TOPP's loan from TeeslandHoldings plc referred to above and to repay approximately £38 million of TOPP'sbank facility which is currently funding the TOPP Portfolio. Background The Company was incorporated on 16 June 2004 and on 8 February 2005 its OrdinaryShares were admitted to listing on the Official Lists of the UK ListingAuthority and Channel Islands Stock Exchange with the objective of providingShareholders with an attractive level of income together with the potential forincome and capital growth from investing in a diversified portfolio ofcommercial property in the United Kingdom and the Channel Islands. Since that date, the net asset total return (the percentage change in net assetvalue plus dividends paid during the relevant period) of the Company's OrdinaryShares has been approximately 11.0 per cent. (measured from 8 February 2005 to30 September 2005). In addition, the Ordinary Shares have traded consistentlyabove their issue price of 100p per Ordinary Share during this period. The Board has concluded that it is now an appropriate time to seek to raiseadditional capital for the Company in order to expand and diversify theCompany's asset base and to reweight the Property Portfolio towards assetmanagement opportunities and areas of the property market which Teesland AssetManagement Limited (the "Property Fund Adviser") believes will improveanticipated returns for investors. The primary rationale for the raising of additional capital is to grow theCompany and improve anticipated long-term returns for Shareholders. The proceedsof the Placing will be used for, inter alia, the Acquisition which will resultin the properties in the TOPP Portfolio being added to the existing propertyportfolio held by the Company. The Property Fund Adviser believes theAcquisition will improve anticipated returns for Shareholders both by way ofpotential dividend growth through rental increases and potential net asset valuegrowth. Investment Rationale The proceeds of the Placing will be used for, inter alia, the Acquisition andthe acquisition of additional properties. The Property Fund Adviser believes theexpansion of the Property Portfolio will enhance the future performanceprospects for the Company through increased diversification and allow theCompany to target: • properties with a higher initial income than the current IPD monthlyyield of 5.52 per cent.; • sub-sectors of the market which are considered to perform better thanthe market average; • properties with asset management opportunities to create above marketreturns; and • opportunistic acquisitions sourced by the Property Fund Adviser. Acquisition of the TOPP Portfolio The Company has entered into an agreement with Teesland Holdings plc (a sistercompany of the Property Fund Adviser), which is conditional on, amongst otherthings, the approval of Shareholders being obtained for the Acquisition and onadmission of the C Shares to the Official Lists of the UK Listing Authority andChannel Islands Stock Exchange, ("Admission") to acquire the entire issued sharecapital of TOPP (and thereby acquire indirect ownership of the TOPP Portfolio)for a consideration of £1.00. In addition the Company has agreed at completionof the Acquisition to repay TOPP's loan from Teesland Holdings plc amounting toapproximately £5.4 million. The proceeds of the Placing will be utilised to pay the consideration for theAcquisition, to repay TOPP's loan from Teesland Holdings plc referred to aboveand to repay in part a bank facility currently funding the TOPP Portfolio. Anybalance will continue to be held in cash, cash-equivalents, gilts or other shortterm money market instruments pending investment in properties. TOPP entered into a bank facility (the "GMAC Facililty") with GMAC CommercialBank Europe Plc ("GMAC") under which GMAC agreed to provide a facility of up to£76,750,000 to TOPP for a term of 364 days. This facility has been fully drawndown. On completion of the Acquisition, which is conditional on, amongst other things,the consent of Shareholders being obtained to the Placing and the Acquisitionand on Admission, TOPP intends to exercise its right under the GMAC Facility,subject to the satisfaction of certain conditions precedent set out in the GMACFacility, to repay part of the GMAC Faciltiy and convert it into a new facilitywith GMAC at a reduced amount of £38,410,000 available to TOPP until 18 January2013. The £38,410,000 facility would initially be fully drawn down. TOPP has hedged £31 million, at a fixed rate of 4.59 per cent. until 18 January2013, with GMAC. Information on the TOPP Portfolio There are 33 properties in the TOPP Portfolio with an average capital value ofapproximately £2.4 million. The TOPP Portfolio currently provides an estimatedincome yield of 6.25 per cent. taking into account the consideration payable andthe estimated property acquisition costs. The average unexpired lease term(weighted by current rental income) is approximately 5.1 years and all theleases provide for upwards only rent reviews or uplifts fixed to RPI increases,or are of certain duration. The Directors believe that the TOPP Portfolioprovides a stable capital base with the prospect for both capital and incomegrowth. The TOPP Portfolio has been externally professionally valued, as at 31 December2005, at £79,215,000, after deducting assumed full market acquisition costs of5.7625 per cent. The valuation report is set out in full in the Prospectus. C Shares The Company is proposing to effect the capital raising exercise by way of anissue of C Shares. The net proceeds of the Placing are expected to beapproximately £69.5 million. Once the proceeds of the Placing have been at least50 per cent. invested, which is expected to be shortly after completion of theAcquisition, the C Shares will convert into Ordinary Shares on the basis of aconversion ratio, which will reflect the proportion which the net assetsattributable to each C Share bears to the net assets attributable to eachexisting Ordinary Share at the time of calculation (the "Conversion Time"),expected to be in February 2006. The net assets attributable to the C Shareswill be calculated having deducted the full costs of the Placing and aproportion of the liabilities incurred as a result of the Acquisition("Acquisition Liabilities") and a proportion of the acquisition costs of anyfurther new properties acquired with the proceeds of the Placing prior to theConversion Time. In calculating the net assets attributable to the Ordinary Shares, a fullaccrual for dividends declared but not yet paid shall be made together with adeduction for a proportion of the Acquisition Liabilities and a proportion ofthe acquisition costs attributable to any further new properties acquired withthe proceeds of the Placing. In calculating the net asset value of a C Share, noaccount shall be taken of any income accruing for the benefit of C Shares in theperiod prior to Conversion. Fractions of Ordinary Shares arising on conversion from C Shares will not beallocated to holders of C Shares but will be aggregated and sold for the benefitof the Company. Further details on the C Share conversion mechanics are set outin the Prospectus. The Placing is designed to overcome the potential disadvantages for bothexisting and new investors which would arise out of a conventional fixed priceissue of further Ordinary Shares for cash. In particular: • the assets from time to time representing the proceeds of the Placingwill be accounted for as a distinct pool of assets until the Calculation Time,by which time it is expected they will have been at least 50 per cent. investedin accordance with the Company's investment policy. As a result, holders ofexisting Ordinary Shares will not be exposed to a portfolio containing asubstantial proportion of uninvested cash; • the Net Asset Value of the existing Ordinary Shares will not bediluted by the expenses associated with the Placing which will be borne by theassets attributable to the C Shares; and • the basis upon which the C Shares will convert into Ordinary Shares issuch that the number of Ordinary Shares to which holders of C Shares will becomeentitled will reflect the value of the assets attributable to the C Shares ascompared to the value of the remainder of the Company's assets. As a result,neither the Net Asset Value attributable to the existing Ordinary Shares nor theNet Asset Value attributable to the C Shares will be adversely affected byConversion. Extraordinary General Meeting Teesland Holdings plc is deemed under the Listing Rules to be a related party ofthe Company because Teesland Asset Management Limited is the Company's propertyfund adviser and both Teesland Asset Management Limited and Teesland Holdingsplc are subsidiaries of Teesland plc. Given the size of TOPP relative to theCompany and the fact that TOPP is intended to be acquired from a related party,the Acquisition is subject to the approval of the Company's shareholders ingeneral meeting. An Extraordinary General Meeting of the Company is being convened for 9.30 a.m.on 6 February 2006 at which shareholders will be asked to consider an ordinaryresolution to approve the Acquisition and a special resolution to, inter alia,increase the authorised share capital to enable the Placing to be effected. Expected Timetable Latest time and date for receipt of Forms of Proxy for the Extraordinary General Meeting 9.30 a.m. on 4 February 2006 Extraordinary General Meeting of the Company 9.30 a.m. on 6 February 2006 Admission of the C Shares to the Official List 7 February 2006 Dealings in C Shares commence 8.00 a.m. on 7 February 2006 Crediting of CREST stock accounts in respect of the C Shares 8.00 a.m. on 7 February 2006 Share certificates in respect of the C Shares despatched (if applicable and assuming no prior conversion of the C Shares) By 16 February 2006 Enquiries: Darren Fennell / Brett Robinson, Teesland plc: 020 7659 6666 Jeremy Carey, Tavistock Communications Limited: 020 7920 3150 David Davies / Nick Maslen, KBC Peel Hunt Ltd: 020 7418 8900 19 January 2006 End This information is provided by RNS The company news service from the London Stock Exchange