Thg Regulatory News (THG)

22 May 2013

TERRACE HILL GROUP PLC

("Terrace Hill" or the "Group" or the "Company")

TERRACE HILL ACQUIRES REMAINING RESIDENTIAL ASSETS OF TERRACE HILL RESIDENTIAL PLC

Terrace Hill Group PLC (AIM: THG), a leading UK property development and investment group, announces that it has acquired all the remaining residential assets of Terrace Hill Residential PLC (THR), its residential investment joint venture in which it owns a 49% interest, for the sum of £5.3 million (the "Transaction"). The balance of the interest in THR is beneficially owned by the Chairman of the Group. The purchase was funded by a bank loan of £4.6 million and cash from the Group's own resources.

The assets consist of 47 units in Scotland, Manchester, Bristol and Minehead and currently generate an annual income of approximately £0.3 million. The Group intends to dispose of these units on a piecemeal basis to owner occupiers, continuing the process adopted by THR prior to the Group's purchase. The purchase price of £5.3 million represents the current open market value of the assets as determined by independent third party valuers. Following this transaction, the Group's net gearing (including on a look through basis) is expected to be approximately 35%.

The Group agreed to acquire these assets in order that it could reach a negotiated settlement with the lender to THR as regards its guarantee exposure to that lender. At 30 September 2012, the Group had provided £6.0 million in respect of its guarantee exposure and as a consequence of the terms agreed with the lender to THR, this guarantee exposure is now fixed at the reduced amount of £4.2 million leading to a release of £1.8 million in the Group's accounts. The £4.2 million liability payment in respect of the guarantee has been funded by way of a 13 month term bank loan.

Arrangements with the Chairman

The Group has agreed with the Chairman that any net profit or loss arising on the disposal of these properties will be shared equally with him, continuing the same profit or loss sharing that would have arisen if the properties had not been acquired by the Group.

In addition, as agreed in 2010 and as previously disclosed, the Group agreed to pay to the Chairman a fee of 4.41% on the amount by which his guarantee to THR's lender had exceeded the amount of the Group's guarantee. The amount accrued in the Group's accounts under this agreement was £0.6 million and the Group and the Chairman have agreed that the accrued amount will be used to part fund payments by the Chairman in respect of his liability to THR's lender under the guarantee arrangements.

The Transaction is deemed to be a Related Party Transaction under Rule 13 of the AIM Rules for Companies. The Directors of the Company, with the exception of Robert Adair who is party to the Transaction, consider that, having consulted with Oriel Securities Limited, the Company's Nominated Adviser, the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned. In providing advice to the Directors, Oriel Securities Limited has taken into account the commercial assessment of the Directors.

Philip Leech, Chief Executive at Terrace Hill, commented: "Following the sale of the majority of our residential assets to Places for People in February 2013 we are very pleased to have purchased the remaining assets of THR which facilitates a favourable negotiated settlement with the lender to THR on the guarantee. The remaining properties are continuing to be sold on a piecemeal basis to owner occupiers which we expect to complete within 15 months."

-Ends-

For further information, please visit www.terracehill.co.uk or contact:

Terrace Hill Tel: 020 7631 1666Philip Leech/Jon Austen

FTI Consulting Tel: 020 7831 3113Richard Sunderland/Will Henderson /Faye Walters

terracehill@fticonsulting.com 

Oriel Securities (Nominated Adviser) Tel: 020 7710 7600

Gareth Price

Mark Young

Notes to editors:

Terrace Hill Group

Terrace Hill Group PLC is a regionally based UK property development and investment group quoted on AIM.

Formed in 1986, the Company has five offices located in London, Glasgow, Teesside, Bristol and Manchester.