Greenwich Transactions

LXB Retail Properties Plc

Transactions involving investment properties at Greenwich

LXB Retail Properties Plc ('LXB' or 'the Group') the real estate investment company announces agreements with various parties relating to agreed and conditional sales of investments, the grant of an option to acquire another investment, and advanced legal negotiations for the sale of a further investment. In aggregate, these transactions involve the majority of the Group's interests in the Royal Borough of Greenwich.

The Group has made several investments in the Greenwich area since its IPO in October 2009, starting with the acquisition of 2 retail units on Bugsby's Way in January 2010. Since then LXB has achieved significant improvements in the planning position allowing a number of new investment properties to be brought forward. These include new stores for M&S and Sainsbury's, which together with some adjacent retail 'pods', will provide c236,000 sq ft of new retail space (c82,000 sq ft on mezzanine) ('Maritime'). Planning consent was also achieved for a 45,000 sq ft hotel and retail scheme adjacent to Maritime ('the Hotel'), and for a 77,000 sq ft retail scheme opposite Maritime on the north side of Bugsby's Way ('Brocklebank'). Brocklebank is the site of the new 21,500 sq ft Wickes unit and is intended to accommodate another c80,000 sq ft of fashion led retail space. In addition the Group owns Stone Lake Retail Park ('Stone Lake') which, apart from one vacant unit, is let to a variety of retailers. As part of the arrangements for the new letting to Sainsbury's, the Group is committed to acquire the retailer's existing 55,000 sq ft store at Greenwich Peninsula ('Peninsula') when the new store opens at Maritime.

On 14 June 2013, the Group entered into legal agreements with a number of parties relating to Maritime, Stone Lake, and Brocklebank and was in solicitors' hands concerning Peninsula.

Maritime

A client of Aberdeen Asset Management ('AAM') has exchanged contracts to acquire the Group's investment in Maritime for £58m, conditional on fulfilment of certain planning and leasing related matters. These are all in hand and expected to be satisfied by autumn 2013, at which point the purchase will be unconditional. In addition, the buyer will fund the development costs with LXB retaining responsibility for overseeing the development and for letting the retail pods. In the event that the pods are not let within an agreed timeframe, the Group will be liable to compensate the buyer; the maximum exposure here is considered to be £3m. This agreement reflects an underlying yield of 5% for the M&S and 4.5% for the Sainsbury's.

Stone Lake and Brocklebank

Another client of AAM has exchanged contracts to purchase Stone Lake (unconditionally) and the new Wickes (conditional on delivery of certain title conditions). The same buyer has signed an option to acquire the remainder of the Brocklebank investment which is exercisable on satisfaction of further planning and letting conditions.

The purchase price for Stone Lake is £32.95m; £30.95m is payable on completion which is expected to occur before the end of June 2013 and £2m is deferred pending satisfaction of certain planning and letting conditions relating to the wider Brocklebank scheme.

The conditions which will enable completion of the Wickes transaction are expected to be satisfied before the end of August 2013. The purchase price is £6.39m, £6.05m of which is payable on completion; £0.34m is deferred on the same basis as the Stone Lake retention.

Assuming all conditionality is met, these arrangements equate to a yield of 6.5% on Stone Lake and 5.25% on Brocklebank (including the Wickes).

The option gives the buyer the opportunity to acquire the remainder of Brocklebank for an anticipated £50.6m on practical completion of the development, dependent on the layout and potential phasing of the scheme. The option terms allow the buyer to acquire interests in phases as they are completed and it is anticipated that, subject to planning being received, payment for the first phase will be received in 2015.

Peninsula

Under the terms of the letting of the new Sainsbury's at Maritime, the Group committed to purchase the existing store for £16m (plus costs). The intention was to create a new investment property to trade alongside the sizeable B&Q at a successful retail park. The Group has received an offer to acquire its interest in the existing Sainsbury's, conditional on the buyer achieving a satisfactory planning consent. Commercial terms are agreed and both parties' solicitors are instructed. The Group expects to exchange contracts in June 2013 at which point LXB will be relieved of its £16m future cash obligation in connection with the existing Sainsbury's and may become entitled to a further payment dependent on the planning consent achieved. It is anticipated that a planning application will be made in autumn 2013 and, if it is approved, this transaction will become unconditional in the first half of 2014.

Financial Impact

The aggregate result of these transactions, should the conditions be satisfied and the Peninsula transaction proceed, will be to crystallise total surplus of £41m with a pleasing return on cost of 26.5% and permit a return of capital of up to £103m over the coming 18 months.

Apart from Stone Lake and the Wickes, both of which are part financed by the Deutsche Hypo facility, all of these assets are ungeared. Including break costs on the associated hedge, the amount needed to release the Deutsche Hypo security is c£21.4m, leaving £5m of Deutsche Hypo lending secured on the Homebase at Biggleswade. The Group may decide to further reduce the Deutsche Hypo facility.

Remaining interests at Greenwich

These transactions, if all completed, will represent a significant reduction in the Group's investments at Greenwich. Thereafter, the interests remaining in the portfolio will be the Hotel and Valley House which had an aggregate value of £3.8m in the balance sheet at 31 March 2013.

Commenting on these agreements, Tim Walton CEO of LXB Adviser LLP said:

"LXB has significantly improved the value of its investments in Greenwich since acquiring the sites and these transactions represent an excellent result for the Group, delivering a return on costs of 26.5%. We believe that the transactions are testament to the quality of our portfolio and our ability to deliver Shareholder returns in the short to medium term."

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