REG - Circle Property PLC - Disposal and Notice of GM
14/02/2022 07:00
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RNS Number : 5102B Circle Property PLC 14 February 2022
14 February 2022
Circle Property Plc
("Circle", the "Company" or the "Group")
Proposed £34.5 million Disposal of Kents Hill Park Conference Centre,
Related Party Transaction
and
Notice of General Meeting
Circle Property Plc (AIM: CRC), which invests in, develops and actively
manages well-located regional office assets, is pleased to announce that the
trustees of the Circle Property Unit Trust (of which 100 per cent. of the
units are owned by the Company), having sought advice from the Company's
management and having received a recommendation for the unitholder to enter
into the contract for sale, have conditionally exchanged contracts to sell
Kents Hill Park Conference Centre ("Kents Hill Park CC"), the Group's largest
asset, to LXI Property Holdings 4 Limited (a subsidiary of LXI REIT plc, a
REIT listed on the Main Market of the London Stock Exchange, the "Buyer") for
a cash consideration of £34.5 million (the "Disposal").
Under AIM Rule 15, the sale consideration for the Disposal, when aggregated
with the sale consideration for the other disposals completed by the Company
in the previous twelve months, exceeds 75 per cent. compared with the
Company's market capitalisation. The Disposal is therefore conditional on the
consent of Shareholders at the General Meeting.
The Company will be posting a circular today to Shareholders including, inter
alia, details of the Disposal, revised executive incentive arrangements and
notice of a General Meeting to be convened at the offices of Charles Russell
Speechlys LLP, 5 Fleet Place, London EC4M 7RD at 10.00 a.m. on 9 March 2022
(the "Circular"). The Circular will be available shortly from the Company's
website at:
https://www.circleproperty.co.uk/investors/reports-and-presentations/2022
(https://www.circleproperty.co.uk/investors/reports-and-presentations/2022) .
Unless otherwise stated, terms used in this announcement have the same
meanings as given to them in the Circular.
Highlights
Kents Hill Disposal
· The Company has exchanged contracts on its largest
asset, Kents Hill Park CC for £34.5 million. The asset is being sold 1.5 per
cent. ahead of the last reported book value (30 September 2021: £34 million)
delivering an IRR of 21 per cent. since the Company's admission to AIM in
2016;
· Kents Hill Park comprises offices and a conference
centre, fully let to Compass Contract Services Limited, part of FTSE 100
listed Compass Group. Kents Hill Park was acquired by the Company in December
2013 for £11 million;
· Under the Company's ownership, Kents Hill Park has
benefited from significant active asset management including several lease
re-gears, refurbishment of multiple buildings within the park including K1, K2
and K3, redevelopment of the site and lease variations to incorporate fixed
annual RPI uplifts.
Background to the Disposal and Recent Disposals
· Since IPO, the Company has always strived to deliver
attractive returns to shareholders via its active asset management approach;
· The Company successfully divested out of retail and
other sub-sectors to focus exclusively on regional offices. All asset
disposals to date, have been at premium to book values due to management's
added value approach;
· The proceeds of these sales were recycled into
refurbishment and redevelopment projects, as well as selective new assets, for
example, Concorde Park, Maidenhead acquired in August 2019 for £14.6 million;
· More recently, the Board has been focused on reducing
gearing, and where opportunistic sales could be made, has selectively divested
assets which have benefited from management's added value strategy;
· The proceeds from the Disposal will be utilised to
further reduce the Company's gearing. Following Completion, the Board has
resolved to utilise 50 per cent. of the proceeds to reduce debt, leaving an
outstanding amount under the Company's facility of approximately £21.4
million;
· Consequently, post all disposals, the Company's LTV
will have decreased from 46.6 per cent. (30 September 2021) to 29.4 per
cent;
· Furthermore, post the completion of the Disposal, the
pro-forma unaudited net asset value ("NAV") per share (based on 30 September
2021 book values for the remaining assets in the Group's portfolio) is
estimated to be £2.77.
Shareholder Approval and Future Strategy
· Following completion of the Disposal, the Company will
remain an operating company developing, investing in and actively managing the
remainder of its portfolio of 10 regional property assets, valued at
approximately £76 million (as at 30 September 2021) compared with a current
market capitalisation of approximately £58 million;
· Since admission to AIM, the Company has suffered from
limited liquidity in its shares and the share price has remained at a
significant discount to the Company's NAV;
· Notwithstanding the strong financial and operational
performance of the Company since IPO, and strategic execution, the structural
discount in the Company's share price relative to its NAV persists;
· The Board has therefore determined to continue to make
targeted asset sales in an orderly manner over an extended period of two to
three years, if not sooner;
· In line with this strategy, the Company's Remuneration
Committee has agreed revised executive incentive arrangements for John Arnold,
Chief Executive Officer and Edward Olins, Chief Operating Officer, classified
as a related party transaction under AIM Rule 13, detailed below and in the
Circular;
· In summary, basic salaries will remain the same, the
discretionary bonus currently capped at 100 per cent. of salary will be
reduced by 30 per cent. and subject to KPIs relating to NAV and earnings, and
certain existing and future LTIP awards will be replaced with a cash incentive
payment based on how quickly, and for what quantum, assets are sold;
· The Board has strong conviction in the value of the
Company's assets, its management and its business plan, as well as in the
regional offices sector more generally;
· The Board intends to return the remaining proceeds of
the Disposal and future asset sales to Shareholders in as orderly and
efficient manner as possible. The Board will update Shareholders in due course
as to the timing and mechanism, but it is anticipated that a minimum of two
returns of capital will be made and will likely include a tender offer and/or
share buyback, the first of which is expected to occur within 12 months of
completion of the Disposal;
· The Directors consider the Disposal to be in the best
interests of the Company and its Shareholders as a whole. Accordingly, the
Directors unanimously recommend that the Shareholders vote in favour of the
Resolutions to be proposed at the General Meeting;
· The Directors intend to vote in favour of their own
respective beneficial holdings of 4,399,276 representing approximately 15.55
per cent. of the Company's issued share capital.
Circle Property's Chairman, Ian Henderson, said:
"We are delighted to report this significant transaction for the Company
today. It is aligned to our strategy of targeted asset sales and delivering
premium returns on our quality regional commercial offices portfolio. We have
a proven track record of crystallising value from our assets, which is
reflected by the Group's total shareholder return of 114.3% since IPO in
February 2016.
Our intention is to return the proceeds of the Disposal and any future asset
sales to our Shareholders in an orderly manner, alongside further reducing the
Group's LTV. Notwithstanding the strong financial and operational performance
of the Company since IPO, the discount in the Company's share price relative
to its NAV persists, and therefore the Company will, following completion of
the Disposal, continue to selectively divest assets in the best interests of
Shareholders."
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the EU
Market Abuse Regulation (2014/596) which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, as amended and supplemented from time to
time.
Circle Property Plc +44 (0)20 7930 8503
John Arnold, CEO
Edward Olins, COO
Cenkos Securities plc +44 (0)20 7397 8900
Katy Birkin
Mark Connelly
Radnor Capital +44 (0)20 3897 1830
Joshua Cryer
Iain Daly
Camarco +44 (0)20 3757 4992
Ginny Pulbrook
Toby Strong
1. Introduction
The Company announces that the trustees of the Circle Property Unit Trust (of
which 100 per cent. of the units are owned by the Company), having sought
advice from the Company's management and having received a recommendation for
the unitholder to enter into the contract for sale, have conditionally
exchanged contracts to sell Kents Hill Park Conference Centre ("Kents Hill
Park CC"), the Group's largest asset, to LXI Property Holdings 4 Limited (a
subsidiary of LXI REIT plc, a REIT listed on the Main Market of the London
Stock Exchange) (the "Buyer") (the "Disposal"). The sale price of £34.5
million represents a 1.5% increase on the 30 September 2021 valuation of £34
million, delivering an IRR of 21% since the Company's admission to AIM in
2016, with completion of the Disposal expected to take place on 25 March 2022,
subject to Shareholder approval.
Kents Hill Park CC comprises a conference, hotel and fitness centre, fully let
to Compass Contract Services (UK) Limited, providing 159,872 sq ft of
accommodation with an unexpired lease term of 19.5 years and total rent
passing of approximately £1.73 million per annum (£10.83 psf overall). Kents
Hill Park CC, together with Kents Hill Business Park was acquired by the
Company in December 2013 for approximately £11 million and the profit before
tax for the year ended 31 March 2021 attributable to Kents Hill Park CC was
£1.3 million.
50 per cent. of the proceeds from the Disposal (subject to Completion) will be
utilised, in line with the Board's previously announced strategy, to reduce
the Company's gearing from the current level, with the balance being held as
Group cash.
2. Background to, and reasons for, the Disposal
The portfolio held by the Group consisted of 16 commercial property
investments and developments in the UK with a value of £73.9 million on
admission to AIM in February 2016. As stated in the Company's admission
document, the Company's approach is to have a diversified exposure to UK
commercial real estate. The executive Directors advise the Board on asset
management strategies to optimise and enhance value, and originate, appraise
and present investment proposals in accordance with the investment process and
objectives of the Group from time to time. The Board is advised on, amongst
others, investment strategy, asset purchases and sales, portfolio/asset
management and financing.
Circle looks at all sectors and locations within the UK where assets can be
acquired at or close to vacant possession values. In order to achieve lettings
swiftly and ahead of competition, properties may be let at "soft"/below market
rents, yet still produce attractive initial yields. Property let on
short-dated leases or part vacant properties are considered where the initial
income covers the interest costs. In addition, vacant property may be acquired
or development opportunities undertaken where the location is deemed to
justify the risk profile.
Previous Disposals and Acquisition of Concorde Park, Maidenhead
Following admission to AIM, the Company has made certain non-core, strategic
asset disposals, primarily in order to remove its exposure to the retail
market. The proceeds of these sales were recycled into the Company's
refurbishment and redevelopment pipeline as well as towards the purchase of
Concorde Park, Maidenhead in August 2019, a south east office park for £14.6
million. Following these activities, the Company's portfolio is exclusively
focused on regional offices.
As initially reported in the Company's final results for the year ended 31
March 2020 announced in September 2020, the Board stated that it remained
committed to reduce gearing from the level at that time by opportunistic sales
and that the Company had a number of assets that have benefited from an active
management approach and added value following redevelopment, lease
restructures or renewals which the Board expected to be highly sought after.
The following selective sales were made in 2021:
Asset Date of disposal Date property acquired by Circle Consideration paid Sale Consideration (£m) Book Value Premium to Book Value
(£m)
(£m)
Power House, Davy Avenue, Milton Keynes March 2021 September 2006 4.475 3.55 3.25 9.23%
135 Aztec West, Bristol September 2021 December 2015 2.068 3.961 1.55 62%*
One Castle Park, Bristol December 2021 November 2012 4.165 20 19.25 3.9%
141 Moorgate, London December 2021 (exchange of contracts, subject to completion) September 2006 3.735** 3.6** 2.85** 27.3%
* premium stated post refurbishment cost. 156% increase pre-refurbishment cost
** representing 51.04% of the total consideration paid, total sale
consideration and total book value, respectively, due to the Company as head
lessee
Financing
The Company has a financing facility in place with RBS and HSBC for £100
million. The senior revolving facility is for £60 million (of which the
Company had drawn £62.3 million) with an "accordion" option for a further
£40 million (the "Facility").
Following completion of the disposal of One Castle Park, Bristol on 16
December 2021, £18 million of the sale proceeds were used to repay a
proportion of the Facility. Following this repayment, the Group's LTV is
36.9% (excluding cash at bank) with a Group cash balance of £7.6 million,
reflecting a net LTV of 29.9%. The total amount drawn down under the Facility
is currently £40.544 million.
Disposal and Future Strategy
The Company announced today that the trustees of the Circle Property Unit
Trust (of which 100 per cent. of the units are owned by the Company), having
sought advice from the Company's management and having received a
recommendation for the unitholder to enter into the contract for sale, have
conditionally exchanged contracts to sell Kents Hill Park CC, the Group's
largest asset, to LXI Property Holdings 4 Limited (a subsidiary of LXI REIT
plc, a REIT listed on the Main Market of the London Stock Exchange). The sale
price of £34.5 million represents a 1.5% increase on the 30 September 2021
valuation of £34 million, delivering an IRR of 21% since the Company's
admission to AIM in 2016, with Completion expected to take place on 25 March
2022, subject to Shareholder approval. 50 per cent. of the proceeds from the
Disposal (subject to Completion) will be utilised to reduce the Company's
gearing with the balance being held as Group cash.
Following Completion, the Board has resolved to repay £17.25 million (being
50 per cent. of the proceeds of the Disposal) of the Facility which will
result in the principal outstanding under the Facility reducing to
approximately £21.48 million. On Completion, the Group's LTV will reduce to
29.4% (excluding cash at bank) with the Group expected to have a cash balance
of approximately £24.7 million.
Kents Hill Park CC comprises a conference, hotel and fitness centre, fully let
to Compass Contract Services (UK) Limited, providing 159,872 sq ft of
accommodation with an unexpired lease term of 19.5 years and total rent
passing of approximately £1.73 million per annum (£10.83 psf overall). Kents
Hill Park CC was acquired by the Company together with Kents Hill Business
Park in December 2013 for £11 million and the profit before tax for the year
ended 31 March 2021 attributable to Kents Hill Park CC was £1.3 million.
Under AIM Rule 15, the sale consideration for the Disposal, when aggregated
with the sale consideration for the other disposals completed by the Company
in the previous twelve months detailed above, exceeds 75% compared with the
Company's market capitalisation. The Disposal is therefore conditional on the
consent of Shareholders at the General Meeting.
Following Completion of the Disposal, the Company will remain an operating
company investing in, developing and actively managing, the remainder of its
portfolio of 10 regional commercial property investment and development assets
in the UK it owns, valued at approximately £76 million as at 30 September
2021 compared with a current market capitalisation of approximately £58
million.
Since admission to AIM, the Company has suffered from limited liquidity in the
Ordinary Shares and the share price has remained at a significant discount to
the Company's net asset value ("NAV"). The closing mid-market price of the
Ordinary Shares on 11 February 2022 (being the latest practicable date prior
to publication of this announcement) was £2.05, a 25.18 per cent. discount to
an unaudited estimated NAV per share as at 30 September 2021 of £2.74.
Following Completion, the Company's pro-forma unaudited NAV per share is
estimated to be £2.77.
The Board has therefore decided to continue to make targeted asset sales in an
orderly manner over a period of two to three years (if not sooner). In line
with this strategy, the Company's Remuneration Committee has agreed revised
executive incentive arrangements for John Arnold, Chief Executive Officer and
Edward Olins, Chief Operating Officer as detailed below in paragraph 5.
In addition, the Company will continue to achieve lettings at estimated rental
values and will complete scheduled developments including at K3 Kents Hill,
Milton Keynes (scheduled for completion in Summer 2022) as well as other
refurbishments and fit-outs as necessary.
The Company has delivered total shareholder returns (calculated as to NAV
growth plus dividends) of 114.3% since IPO in February 2016 and the Company's
share price since IPO has increased by 41.83% versus the FTSE AIM All Share
Index, which has increased over the same period by 19.20%.
The Board remains committed to maximising returns and delivering value to
Shareholders, and as such, the Board will evaluate and determine returns of
capital to Shareholders using a combination of existing cash resources and the
proceeds of any future asset sales including from the Disposal. The Board
expects that a minimum of two returns of capital will be made to Shareholders,
the structure of which has yet to be decided by the Board but is likely to
include a tender offer and/or share buyback, the first of which is expected to
occur within 12 months of the date of the Disposal.
3. Property Portfolio
Following Completion, the Company will be the beneficial owner of the
following 10 regional commercial property investment and development assets in
the UK:
Property Ownership Valuation as at 30 September 2021 (£m)
710 & 720 Waterside Drive, Aztec West, Bristol Freehold 4.15
Concorde Park, Maidenhead Freehold 16.8
Park House, 300 Pavilion Drive, Northampton Business Park Freehold 5.85
Victory House, 400 Pavilion Drive, Northampton Freehold 3.2
Cheltenham House, 14-16 Temple Street, Birmingham Freehold 4.5
Elizabeth House, London Road, Staines Freehold 3.0
Kents Hill Business Park, Kents Hill, Milton Keynes (K1, K2, K3 - Offices) Freehold 13.4
36 Great Charles Street, Birmingham Freehold 4.9
Somerset House, Temple Street, Birmingham Freehold 17.35
141 Moorgate, London* Leasehold 2.85
76
* exchanged contracts December 2021, subject to completion expected in Q1 2022
4. Details of the Disposal
The trustees of the Circle Property Unit Trust (of which 100 per cent. of the
units are owned by the Company), having sought advice from the Company's
management and having received a recommendation for the unitholder to enter
into the contract for sale, have entered into a binding conditional sale and
purchase agreement ("SPA") with LXI Property Holdings 4 Limited (the "Buyer")
for the sale of Kents Hill Park CC. The Disposal is conditional only on the
passing of Resolution 1 at the General Meeting.
Under the SPA, the Consideration for the Disposal will be £34.5 million, to
be satisfied in cash at Completion.
Under the SPA, the Long Stop Date for receipt by the Company of Shareholder
approval pursuant to the passing of Resolution 1 is 21 March 2022, with an
expected date for Completion of 25 March 2022. A deposit of £0.5 million has
been paid by the Buyer.
5. Executive Remuneration Arrangements and Related Party Transaction
Existing Remuneration Arrangements
John Arnold, Chief Executive Officer and Edward Olins, Chief Operating Officer
(each an "Executive" and together, the "Executives") are employed by the
Company under service agreements dated 11 February 2016.
The existing remuneration arrangements for the Executives are as follows:
· Basic Salary: John Arnold's annual basic salary is £215,378
and Edward Olins' basic salary is £193,840.
· Annual Discretionary Bonus: The Executives are entitled to an
annual discretionary bonus capped at 100% of basic salary which is subject to
assessment against the meeting of key performance indicators ("KPIs")
comprising the net asset value, earnings (EBITDA) and a progressive dividend
policy, each evenly weighted.
· LTIP Awards: The Executives are both eligible for annual
awards under the Circle Property plc 2016 Long Term Incentive Plan ("LTIP") in
the form of conditional rights or nil cost options to acquire Ordinary Shares,
the quantum of which is capped at 200% of basic salary per year. The LTIPs are
subject to a three-year vesting period subject to the performance of the Group
with reference to two performance conditions, the Group's total shareholder
return ("TSR") and a fixed hurdle rate for NAV, each accounting for 50% of the
award. TSR is a comparison of share price plus dividends paid against a
bespoke basket of peer group quoted companies and REITs. The NAV target will
not be met if under 8% and if the NAV return is 14% or above then the NAV
vesting criteria will be met in full. Where the NAV increase falls between 8%
and 14% the award will vest on a straight-line basis between 50% and 100%.
Revised Remuneration Arrangements
As part of the strategy to make targeted asset sales, it is intended that the
Executives' remuneration will be amended as follows:
· Basic Salary: The annual basic salary of both John Arnold and
Edward Olins will remain as set out above.
· Annual Discretionary Bonus: The Executives will be entitled
to a reduced annual discretionary bonus capped at 70% of salary (a reduction
of 30%) which is subject to meeting key performance indicators ("KPIs")
regarding NAV and earnings (EBITDA).
• LTIP Awards: The Remuneration Committee of the Board has
agreed under the revised remuneration arrangements, that previous awards of
nil cost options granted to the Executives pursuant to the LTIP, as set out in
the table below, will be treated as follows:
o Already vested LTIP awards (i.e. 2016 LTIP, 2017 LTIP and 2018 LTIP
Awards as set out in the table below) shall continue to exist under the
existing terms of the LTIP and related awards deeds.
o The Board shall exercise its discretion to determine that unvested LTIP
awards granted in 2019 and 2020 shall vest to a limited extent (as set out in
the table below), subject to performance periods, and will lapse to the extent
not vested.
o The Board shall exercise its discretion to determine that unvested LTIP
awards granted in 2021 shall lapse in full.
o No further awards shall be granted under the LTIP in 2022 or going
forwards.
Assuming the Company continued with its current strategy of investing in and
developing properties (rather than targeted asset sales), the approximate
total value of forfeited bonus payments and awards under the LTIP total
approximately £1.8 million for John Arnold and approximately £1.6 million
for Edward Olins.
Year Grant date Award Price No. of shares granted No. of shares granted Performance period start date Performance period end date Percentage of shares vested/ estimated to vest No. of Ordinary Shares vested/estimated to vest No. of Ordinary Shares vested/estimated to vest Date vested
John Arnold Edward Olins John Arnold Edward Olins
2016 LTIP 11-Feb-16 £1.49 134,229 120,805 1-Apr-16 31-Mar-19 87.50% 117,450 105,705 20-Aug-19
2017 LTIP 20-Aug-19 £1.49 137,584 123,826 1-Apr-17 31-Mar-20 87.50% 120,386 108,347 16-Oct-20
2018 LTIP 20-Aug-19 £1.49 141,023 126,921 1-Apr-18 31-Mar-21 100.00% 141,023 126,921 14-May-21
2019 LTIP 20-Aug-19 £1.84 234,107 210,697 1-Apr-19 31-Mar-22 Two thirds of original 43.75% 68,281 61,453 N/A
2020 LTIP 16-Oct-20 £1.84 234,107 210,697 1-Apr-20 31-Mar-23 One third of original 25.00% 19,509 17,558 N/A
2021 LTIP 07-Jul-21 £1.84 234,107 210,697 1-Apr-21 31-Mar-24 N/A N/A N/A N/A
· Incentive Payment: To compensate the Executives for the retrospective
reduction of LTIPs in 2019 and 2020, the lapsing of LTIPs for 2021 and no
further issues of awards under the LTIP in 2022 or going forwards, under the
detailed rules of the proposed 2022 Incentive Plan and the definitions set
out below, the Executives will each also be eligible to receive a cash
Incentive Payment worth up to £2.5 million per Executive.
In summary:
· The Incentive Payment is subject to a maximum overall cap of £2.5
million per Executive. The size of the Incentive Payment depends on how
quickly, and for what quantum, the Assets are sold.
· No more than one Incentive Payment shall be paid to each Executive
and the Executive shall never be eligible to receive an Incentive Payment
under both Scenario 1 and Scenario 2 below.
· Subject always to and included within that overall cap, the Company
shall also bear the cost of the Executives' National Insurance contributions
on any Incentive Payment.
· Scenario 1: If the Assets are sold for less than their 31 March 2021
valuation then the maximum incentive payment ("MIP") an Executive may receive
is £750,000. This diminishes to £562,500 if the Assets are sold after 31
March 2023, and no Incentive Payment at all would be paid if less than 90% of
the Assets are sold after 31 March 2024. The size of the Incentive Payment
also diminishes in direct proportion with the aggregate proceeds of sale.
Where the proceeds of sale are 80% of the 31 March 2021 valuation of the
Assets, no Incentive Payment would be payable.
· Scenario 2: If the Assets are sold for more than their 31 March 2021
valuation then the Incentive Payment is instead calculated as a lump sum plus
a percentage of the Overage. The lump sum is either £750,000 or £562,500
and the percentage is 20% or 25% of the Overage (subject always to the cap on
the aggregate sum). No Incentive Payment would be made unless 90% of the
Assets (by value) had been sold by 31 March 2024.
Further details of the revised executive remuneration arrangements are set out
below.
The remuneration arrangements described above could be deemed to fall outside
of usual remuneration parameters and are therefore classified as a related
party transaction under AIM Rule 13. The Directors (excluding John Arnold and
Edward Olins), having consulted with the Company's nominated adviser, Cenkos,
believe that the terms of the new incentive arrangements are fair and
reasonable insofar as Shareholders are concerned.
6. Current Trading and Prospects
The development at K3 Kents Hill is proceeding well and the Company has
already received strong tenant interest. The development will cost
approximately £2.45 million funded through the Company's cash resources and
the project is now scheduled for completion in Summer 2022. This targeted
spend will deliver an attractive space which the Directors are confident will
achieve a good rental income. Moreover, the completed high-spec, modern
fit-outs at Concorde Park, Maidenhead and 36 Great Charles Street, Birmingham
are beginning to register increasing levels of tenant interest, with higher
levels of viewings and requests for landlords' letting proposals.
The Company has been able to maintain exceptionally high rental recovery in
excess of 90% during the six months ended 30 September 2021. Rent collection
for the current quarter ended 31 March 2022 stands at 76 per cent. and, with
agreed monthly payments, this figure increases to 79 per cent. of rent due.
Conversations and negotiations around rental arrears continue and the Board is
confident of a positive outcome, particularly as office attendance and usage
increases. The majority of the Group's tenants remain firmly of the view that
the office plays a central part in the running of their respective businesses.
Whilst having the flexibility to work some of the time from home can be
advantageous in certain circumstances, dependent upon the individual and the
nature of the work, the view remains that team building, collaboration,
creativity, employee assessment, mentoring and training is most effective
within an office environment. Given all of this, and reflected in the Group's
solid financial metrics, the Board remains of the view that whilst working
patterns may adapt, the office is very much here to stay.
On 29 November 2021, the Board declared an interim dividend of 3.5p, which was
paid on 14 January 2022 to shareholders on the register on 10 December 2021,
with an ex-dividend date of 9 December 2021. This dividend was an increase of
40% on 2020's COVID-19 impacted interim dividend of 2.5p and importantly, 6%
ahead of 2019's interim dividend of 3.3p.
7. General Meeting
COVID-19
Whilst Shareholder participation at the General Meeting is important to the
Board of Directors, the Board fully complies with the current Government
recommendations in relation to COVID-19 and therefore Shareholders should
consider whether or not it is appropriate for them to attend the General
Meeting in person.
Resolution 1 (to approve the Disposal) is being proposed as an ordinary
resolution and will require approval by a simple majority of those votes cast
(by persons present in person or by proxy) at the General Meeting for
Resolution 1 to be passed.
Resolution 2 (to approve the Company making market purchases of Ordinary
Shares) is proposed as a special resolution and will require approval by 75
per cent. of those votes cast (by persons present in person or by proxy) at
the General Meeting for Resolution 2 to be passed.
Completion of the Disposal is conditional, inter alia, on the Shareholders
passing Resolution 1 being proposed at the General Meeting. If the
Shareholders do not pass Resolution 1, completion of the Disposal will not
proceed.
8. Recommendation and Voting Intentions
The Disposal constitutes a fundamental change of the Company's business for
the purposes of Rule 15 of the AIM Rules and is therefore subject to the
approval of the Shareholders at the General Meeting.
The Directors consider the Disposal to be in the best interests of the Company
and its Shareholders as a whole. Accordingly, the Directors unanimously
recommend that the Shareholders vote in favour of the Resolutions to be
proposed at the General Meeting, as the Directors intend to do in respect of
their own beneficial holdings of 4,399,276 Ordinary Shares representing
approximately 15.55 per cent. of the Company's existing Ordinary Shares.
FURTHER DETAILS ON REVISED EXECUTIVE REMUNERATION ARRANGEMENTS
1 SCENARIO 1: Collective Sales less than or equal to Value
Figure
1.1 In the event that the Collective Sales Figure is less than the
Value Figure, the gross Maximum Incentive Payment ("MIP") for which each
Executive shall be eligible shall be calculated in accordance with the
provisions of this Scenario 1.
1.2 The MIP for which each Executive may be eligible shall
diminish as time elapses, as follows:
1.2.1 If the Relevant Date falls between 1 April 2021 and 31 March 2023
(inclusive), the MIP shall be £750,000;
1.2.2 If the Relevant Date falls between 1 April 2023 and 31 March 2024,
the MIP shall be £562,500;
1.2.3 If the Relevant Date falls on or after 1 April 2024 (or never
occurs), the MIP shall be nil, and each Executive shall not be eligible to
receive an Incentive Payment.
1.3 The proportion of the applicable MIP which each Executive
shall be eligible to receive as an Incentive Payment shall depend upon the
Collective Sales Figure and shall be calculated as follows:
1.3.1 Where the Collective Sales Figure is less than 80% of the Value
Figure, no Incentive Payment shall be payable to each Executive.
1.3.2 Where the Collective Sales Figure is 80% of the Value Figure, an
Incentive Payment of £200,000 shall be payable to each Executive. Where the
Collective Sales Figure exceeds 80% of the Value Figure, this Incentive
Payment shall increase proportionately on a straight line basis up to the
point at which the Collective Sales Figure is 100% of the Value Figure. If
the Collective Sales Figure is equal to 100% of the Value Figure, each
Executive would be eligible to receive an Incentive Payment equal to 100% of
the applicable MIP. By way of illustration, example calculations are at
Appendix 1.
1.4 Where the Collective Sales Figure is greater than the
Value Figure, Scenario 1 shall not apply and the provisions of Scenario 2
shall instead apply.
1.5 The MIP payable to each Executive under this Scenario 1
in any circumstance is £750,000.
2 Scenario 2: Collective Sales greater than Value
Figure
2.1 Where the Collective Sales Figure is greater than the
Value Figure, the Incentive Payment for which each Executive shall be eligible
shall be calculated as a lump sum plus a percentage of the Overage, in
accordance with the following provisions of this Scenario 2:
2.1.1 Where the Relevant Date falls between 1 April 2021 and 31 March
2023 (inclusive), the gross Incentive Payment for each Executive shall be
equal to £750,000 plus 25% of the Overage;
2.1.2 Where the Relevant Date falls between 1 April 2023 and 31 March
2024 (inclusive), the gross Incentive Payment for each Executive shall be
equal to £562,500 plus 20% of the Overage;
2.1.3 Where the Relevant Date falls on or after 1 April 2024 (or never
occurs), no Incentive Payment shall be payable to each Executive.
2.2 If the Collective Sales Figure is equal to or less than
the Value Figure, this Scenario 2 shall not apply and the provisions of
Scenario 1 shall instead apply.
2.3 The gross Incentive Payment, if any, (together with any
NICS Payment) due to each Executive under this Scenario 2 shall be subject
always to an aggregate overall cap of £2.5 million and to the other
provisions of the 2022 Incentive Plan.
DEFINITIONS
Additional Figure: the total of the full purchase
prices of all New Assets (together with any related purchase incentives, legal
and professional fees and taxes)
Assets: the
Original Assets together with the New Assets
Collective Sales Figure: the total aggregate proceeds of sale
received by the Company in cleared funds in respect of sales of Assets which
have been sold unconditionally by the Company after 31 March 2021, less costs
and capital expenditure on improving any of the Assets after 31 March 2021; in
each case as determined by RemCo
Incentive Payment: a payment to each Executive under the
incentive plan
March 2021 Valuation: £135.4 million
MIP:
the
gross Maximum Incentive Payment for which the Executive may be eligible under
Scenario 1
New Assets: any assets that are
acquired by the Company after 31 March 2021 and deemed at any time by RemCo to
be included in this definition of New Assets
Original Assets: the assets that are
listed in Appendix 1 below
Overage: the
Collective Sales Figure, less the Value Figure
Relevant Date: the earliest date on
which the Collective Sales Figure is equal to (or greater than) 90% of the
Value Figure; or such later date as the Company and the Executives may agree
in writing
RemCo: the
Remuneration Committee of the board of directors of the Company as constituted
from time to time
Value Figure: the total of the 31
March 2021 Valuation plus (if any) the Additional Figure
APPENDIX 1
"Original Assets" the Group's current and
certain former property assets set out as follows:
1. Park House, 300 Pavilion Drive, Northampton;
2. Victory House, 400 Pavilion Drive, Northampton;
3. Cheltenham House, 14-16 Temple Street, Birmingham;
4. Elizabeth House, London Road, Staines;
5. One Castlepark, Tower Hill, Bristol (sold - December 2021);
6. Kents Hill Business Park, Kents Hill, Milton Keynes (K1, K2, K3 -
Offices);
7. Conference Centre, Kents Hill Park, Timbold Drive, Milton Keynes
(subject of this Disposal);
8. 35-37 Great Charles Street, Birmingham;
9. 135 Aztec West, Almondsbury, Bristol (sold - September 2021);
10. Somerset House, Temple Street, Birmingham;
11. 141 Moorgate, London (sold, completion expected in Q1 2022);
12. 710 Aztec West, Bristol;
13. 720 Aztec West, Bristol;
14. Concorde Business Park, Maidenhead; and
15. Power House, Milton Keynes (sold - March 2021).
APPENDIX 2
Scenario 1 - Illustrative examples - assuming all other eligibility criteria
met
Example 1
· Relevant Date is 1 April 2021 - 31 March 2023 inclusive;
· Value Figure is £135.4 million;
· Collective Sales Figure is £108 million (and therefore less than
80% of Value Figure); and
· Incentive Payment would be Nil.
Example 2
· Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP
is £750,000);
· Value Figure is £135.4 million;
· Collective Sales Figure is £108.32 million (80% of Value
Figure); and
· Incentive Payment would be £200,000.
Example 3
· Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP
is £750,000);
· Value Figure is £135.4 million;
· Collective Sales Figure is £115.09 million (85% of the Value
Figure); and
· Incentive Payment would be £337,500.
Example 4
· Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP
is £750,000);
· Value Figure is £135.4 million;
· Collective Sales Figure is £128.63 million (95% of the Value
Figure); and
· Incentive Payment would be £612,500.
Example 5
· Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP
is £750,000);
· Value Figure is £135.4 million;
· Collective Sales Figure is £135.4 million (100% of the Value
Figure); and
· Incentive Payment would be £750,000.
Example 6
· Relevant Date is 1 April 2021 - 31 March 2023 inclusive (so MIP
is £750,000);
· Value Figure is £135.4 million;
· Collective Sales Figure is £140 million (more than 100% of the
Value Figure); and
· No Incentive Payment under Rule 3. Rule 4 would apply
instead.
Example 7
· Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP
is £562,500);
· Value Figure is £135.4 million;
· Collective Sales Figure is £108.32 million (80% of Value
Figure); and
· Incentive Payment would be £200,000.
Example 8
· Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP
is £562,500);
· Value Figure is £135.4 million;
· Collective Sales Figure is £115.09 million (85% of the Value
Figure); and
· Incentive Payment would be £290,625.
Example 9
· Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP
is £562,500);
· Value Figure is £135.4 million;
· Collective Sales Figure is £128.63 million(95% of the Value
Figure); and
· Incentive Payment would be £471,875.
Example 10
· Relevant Date is 1 April 2023 - 31 March 2024 inclusive (so MIP
is £562,500);
· Value Figure is £135.4 million;
· Collective Sales Figure is £135.4 million (100% of the Value
Figure); and
· Incentive Payment would be £562,500.
Scenario 2 - illustrative example - assuming all eligibility criteria met
Example 11
· Relevant date is on or before 31 March 2023;
· Value Figure is £135.4 million;
· Collective Sales Figure is £142.4 million;
· Overage is £7 million;
· Lump sum incentive payment would be £750,000;
· 25% of the Overage would be an incentive payment of £1,750,000;
and
· Incentive Payment would be £2,500,000.
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