Acquisition of The Osprey Management Company Ltd

9 May 2016

K&C REIT plc

("K&C" or the "Company")

Acquisition of The Osprey Management Company Ltd ("Osprey")

K&C REIT plc, the residential real estate investment trust ("REIT") group, is pleased to announce that, on 6 May 2016, the Company agreed to acquire the entire issued share capital of The Osprey Management Company Limited from Ms Susan Hards for an aggregate consideration of £1.6 million (the "Acquisition"). Osprey owns a portfolio of freehold interests in a number of high quality retirement and residential properties in London and southern England. In addition, Osprey provides property management services to the occupants in most of the properties in the freehold portfolio and to other residential and industrial properties. The consideration will be satisfied by a payment of £1.3 million in cash and issuance to the vendor of three million K&C ordinary shares credited as fully paid up at 10p per share.

Highlights of Osprey

· The three core properties in the portfolio have been independently valued at £2.55 million, comprising £1.45 million of freehold value and a further £1.1 million of leasehold value in the three apartments owned by Osprey and occupied by managers of these properties. The latter will require the creation of new leasehold interests as the apartments are held within the freehold envelope

· Pre-tax profit for the past four years, adjusted for non-recurring past directors' costs, is 7.2% per annum of the Acquisition price and 8.8% per annum of the cash element of the consideration

· The Acquisition is well aligned with K&C's investment strategy

· Properties are located in growth areas such as Bromley and Finchley, with sample units independently valued at between £220,000 and £500,000 each

· The Acquisition is expected to provide material NAV enhancement through buying in leases, the increasing value of reversionary interests and the sales of lease extensions

· Independent commentators predict strong and growing demographic demand for retirement housing as this sector of the population increases in number

· Remarketing rights provide a potentially strong income stream

· K&C's existing expertise in providing management services to apartment blocks will strengthen Osprey's management services capability.

Tim James, Managing Director of K&C REIT, commented:

"We are delighted to have the opportunity to add to our property management resources and buy assets in excellent areas in portfolios that can capitalise on K&C's considerable property expertise. We are particularly pleased that, in every way, the Acquisition supports our investment strategy of seeking and acquiring high quality properties held in special purpose vehicles where the owners are seeking an exit. We also look for properties which, by employing the expert long-term management that K&C can deliver, offer our shareholders the opportunity for greater returns.

We feel that Osprey is an ideal proof of our investment strategy."

Contacts:

Notes to Editors:

K&C's objective is to build a substantial residential property portfolio that generates secure income flow for shareholders through the acquisition of SPVs (Special Purpose Vehicles) with inherent historical capital gains. The Directors intend that the group will acquire, develop and manage residential property assets in Central London and other key residential areas in the UK.

Details of the Acquisition

Osprey commenced trading in 1985, originally as part of Speyhawk Retirement Homes Ltd, to manage luxury retirement properties. Today, the business includes a portfolio of freehold interests comprising mainly residential apartment blocks, built to a high standard in the 1980s, with a total of 172 units. The majority of the value of the portfolio lies with three 'core' properties that are located in and around London. The portfolio includes:

· The core properties, three freehold blocks located in West Hampstead and Bromley, comprise 90 leasehold apartments that carry a stipulation that occupants must be not less than 55 and 60 years of age. Sixty-two of these apartments have leases with less than 70 years to expiry. In addition, Osprey owns a freehold apartment used by the manager in each block

· Two freehold residential developments comprising 13 houses and 35 apartments

· One freehold block of 30 apartments and a freehold apartment used by the manager

· All the leasehold properties are on effective full repairing and insuring (FRI) leases.

In four of the owned and managed retirement blocks, Osprey has the exclusive right to earn sales commissions of either 2.5% or 3% from remarketing. Osprey also manages five residential portfolios, comprising 72 flats and 23 houses, and one industrial portfolio of 12 units.

The Acquisition provides a diversified range of revenue streams:

· Service charge management fees

· Ground rents

· Income from lease extensions

· Sales commissions on resales.

In addition, and subject to the Company securing further funding, K&C may seek to acquire certain leasehold interests when they become available for purchase.

Osprey's performance over the four years to 30 September 2015 is set out below. Income fluctuates depending on the volume of lease extensions and sales commissions.

* pre-tax profit has been adjusted to exclude non-continuing costs of existing directors of Osprey

Funding for the Acquisition will be provided by a combination of (i) a new external debt based facility of up to approximately £1.1 million, (ii) £0.1 million via an extension of the Company's existing bank facility and (iii) up to £0.2 million from the Company's cash resources. The Company has a new committed external debt-based facility for the purposes of funding the Acquisition but is also considering an alternative proposal. A further announcement on the terms of the selected facility will be announced in due course as appropriate. Following completion, which is due to occur on 26 May 2016, the Company is expected to have cash resources of approximately £0.4 million.