Re Joint Venture

23 Oct 2006 11:15

Safeland PLC23 October 2006 SAFELAND PLC Establishment of property management joint venture Safeland plc ("Safeland"), the property trading and investment company announcestoday that it has entered into joint venture arrangements with Electra PartnersLLP ("Electra Partners") whereby Safeland and funds under management by ElectraPartners will invest through a Jersey property unit trust ('the Fund') in incomeproducing UK property investments where value can be added by active management. Safeland and funds managed by Electra Partners are contributing up to £1m and£15m respectively, which together with senior debt facilities from Barclays Bankplc, will allow the Fund to invest up to £50m in suitable properties. Safelandwill be responsible for identifying investment opportunities and for managingthe properties over a seven year term. It is intended that the Fund will be expanded with further investment from otherthird party investors once the investment programme has been established. Safeland will be remunerated via a management fee, equating to 0.8% of the costof the properties, with a floor during first two years of £250,000 per annum. Safeland will also receive a performance related carried interest based on aratcheted share of the Fund's profit depending on the amount by which the Fundinvestors' internal rate of return exceeds 10%, subject to a total return hurdleof 1.3 times their investment. To meet third party investor requirements there are a number of stipulations.Safeland must appoint an appropriately experienced third key executive to workalongside Larry Lipman and Paul Davis. Members of the management team will bepersonally incentivised by allocating 25% of Safeland's carried interest tothem. Of that total, 9% will be allocated to Larry Lipman and 8% to each of PaulDavis and the third executive. Approval will be required to replace any of theoriginal three executives should they leave for any reason when they may losetheir right to the share of the carried interest allocated to them. The Directors of Safeland (other than Larry Lipman and Paul Davis who arepersonally interested in the allocation of the carried interest to be receivedby Safeland), who have consulted with Insinger de Beaufort, consider that theterms of the transaction are fair and reasonable insofar as shareholders areconcerned. In addition to normal events of termination, the joint venture arrangementscould be terminated if Larry Lipman ceases to be an executive of Safeland forany reason other than death or incapacity or if he together with his familyinterests cease to control Safeland. At present the Lipman family areinterested in (65%) of the issued ordinary shares of Safeland. Upon terminationof the joint venture arrangements in those circumstances Safeland would lose notonly the right to manage the Fund, but may also lose the right to the carriedinterest in the Fund Whilst the joint venture arrangements subsist, Safeland is precluded fromproviding similar management services to any other third party where this mayadversely affect the Fund's assets. Further, during the Fund's initial 2 yearinvestment period, Safeland can not provide similar management services to anyother third party with investments in properties or itself purchase propertieswhich are valued at £2 million or more without the properties first beingoffered to the Fund. The Board is satisfied that these arrangements will overall be beneficial toSafeland. Larry Lipman, Managing Director of Safeland said: "The establishment of this venture allows us to rapidly expand Safeland'sability to acquire property with lower capital cost to the business. We arevery pleased to be working with Electra Partners. We believe that with thecombination of Electra Partners' support and our track record in identifying andmanaging investment properties we will be able to make the Safeland businesseven more successful." This Fund sees the continuation of the relationship with Electra Partners thatwas started with the launch of a focused managed workspace fund with Bizspaceplc, a company that was demerged from Safeland in May 2000 and sold to Highcrossin July 2006 for £82m. Bizspace at the date of sale was managing 64 propertiesand whose portfolio had grown over 60% since inception ENDS For further information please contact: Safeland plcLarry Lipman, Managing DirectorTel: 020 8815 1600www.Safeland.co.uk About Electra Partners LLP Electra Partners is an independent private equity fund management group with£800m under management. Electra Partners has accumulated considerable expertiseand built a strong track record in private equity investments, includingproperty, for which it maintains a specialist management team. Its principalinvestment client is Electra Private Equity PLC whose assets it, or itspredecessor Electra Partners Limited, has managed for over 15 years, as well asa number of other funds during that time. This information is provided by RNS The company news service from the London Stock Exchange