REG - Custodian Property abrdn Property Inc. - RECOMMENDED ALL-SHARE MERGER

Custodian Property Income ReitAnnouncement

19/01/2024 07:00

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RNS Number : 2818A  Custodian Property Income Reit PLC  19 January 2024

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS, PROSPECTUS
EQUIVALENT DOCUMENT OR SCHEME DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY
INVESTMENT DECISION IN RELATION TO THE MERGER OR NEW CREI SHARES EXCEPT ON THE
BASIS OF INFORMATION IN THE SCHEME DOCUMENT AND THE COMBINED CIRCULAR AND
PROSPECTUS WHICH ARE PROPOSED TO BE PUBLISHED IN DUE COURSE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

19 January 2024

RECOMMENDED ALL-SHARE MERGER

OF

ABRDN PROPERTY INCOME TRUST LIMITED

with

CUSTODIAN PROPERTY INCOME REIT PLC

 

to be implemented by means of a Court-sanctioned scheme of arrangement under
Part VIII of the Companies (Guernsey) Law, 2008 (as amended)

Summary and highlights

The boards of Custodian Property Income REIT plc ("CREI") and abrdn Property
Income Trust Limited ("API") are pleased to announce that they have reached
agreement on the terms and conditions of a recommended all-share merger
pursuant to which CREI will acquire the entire issued and to be issued share
capital of API (the "Merger"). It is intended that the Merger will be
implemented by means of a Court-sanctioned scheme of arrangement under Part
VIII of the Companies Law (the "Scheme").

Under the terms of the Merger, Scheme Shareholders will receive:

for each Scheme Share, 0.78 New CREI Shares

(the "Exchange Ratio")

The Exchange Ratio is based on the Rolled-Forward Unaudited EPRA Net Tangible
Asset value ("NTA") of each of CREI and API as at 31 December 2023, subject to
certain adjustments to reflect post balance sheet asset disposals, the fair
value of each company's debt and derivatives, the relative levels of dividend
cover between the two companies and the costs expected to be incurred by each
party in connection with the Merger. Following completion of the Merger,
existing CREI Shareholders will hold approximately 59.7 per cent. and API
Shareholders approximately 40.3 per cent. respectively in the CREI Group as
enlarged by the API Group (the "Combined Group").

Applying the Exchange Ratio to the Closing Price per CREI Share of 79.6 pence
on 18 January 2024 (the "Latest Practicable Date") values each API Share at
62.1 pence and the entire issued and to be issued share capital of API at
approximately £237 million, and represents a premium of approximately:

29.4 per cent. to the Closing Price of 48.0 pence per API Share on the Latest
Practicable Date;

23.0 per cent. to the 1-month volume-weighted average price of 50.5 pence per
API Share on the Latest Practicable Date; and

26.5 per cent. to the 3-month volume-weighted average price of 49.1 pence per
API Share on the Latest Practicable Date.

 

The boards of CREI and API will retain their current dividend policies for the
period to the Effective Date. CREI and API have agreed that API Shareholders
will be entitled to receive and retain a quarterly final dividend of up to 1.0
penny per API Share in respect of the quarter ended 31 December 2023 (the "API
Q4 Dividend") and that CREI Shareholders will be entitled to receive and
retain a quarterly interim dividend of up to 1.375 pence per CREI Share in
respect of the quarter ended 31 December 2023 (the "CREI Q3 Dividend"). The
API Q4 Dividend and the CREI Q3 Dividend will each be declared on, and paid by
reference to, a date falling prior to the Effective Date, consistent with
their respective past practices as to timing and amount of such dividends.
Payment of each of the API Q4 Dividend and the CREI Q3 Dividend is expected to
occur in late February 2024. Further announcements will be made by the boards
of CREI and API in due course.

With effect from completion of the Merger, Custodian Capital will provide
investment management, administrative and advisory services to the Combined
Group pursuant to the terms of the Amended and Restated Investment Management
Agreement. It has been agreed between CREI and Custodian Capital that
Custodian Capital will waive its management fee in relation to the net asset
value ("NAV") attributable to API for the first nine months following
completion of the Merger. There will also be a reduction in the management
fees payable by CREI to Custodian Capital for a period of two years following
completion of the Merger (the "Transition Period"), at the end of which the
Management Engagement Committee of CREI intends to conduct its regular review
of the terms of Custodian Capital's appointment to ensure that the terms
comply with market and industry practice and remain in the best interests of
shareholders. In recognition of the waiver and reduction in fees, the CREI
Board has agreed to an extension to the term of Custodian Capital's
appointment pursuant to the terms of the Amended and Restated Investment
Management Agreement until the conclusion of the Transition Period, at which
point the contract will revert to being terminable on 12 months' written
notice.

API's existing investment management agreement (which includes provisions for
an orderly handover) will be terminated.

Following completion of the Merger, it is expected that the CREI Board will
comprise eight directors, with the addition of two of the existing API
Directors, Jill May and Sarah Slater. Following the integration of the API
portfolio, the CREI Board expects to conduct a review of its succession plan,
assessing its composition and size to ensure an appropriate combination of
skills, experience, diversity and knowledge, pursuant to which the Board
intends to become fully independent.

It is intended that the Merger will be implemented by means of a
Court-sanctioned scheme of arrangement under Part VIII of the Companies Law.

API will issue a circular (the "Scheme Document") which will include full
details of the Scheme, together with notices of the API Court Meeting and the
API General Meeting and the expected timetable, and will specify the action to
be taken by Scheme Shareholders. It is expected that the Scheme Document,
together with the Forms of Proxy, will be published as soon as practicable and
in any event within 28 days of the date of this Announcement (or such later
date as may be agreed by CREI and API with the consent of the Panel).

CREI is required to produce a circular and a prospectus (the "Combined
Circular and Prospectus") in connection with the Merger (i) to convene a
general meeting of CREI Shareholders at which shareholders' approval of an
ordinary resolution seeking authority to issue the New CREI Shares will be
sought and (ii) to facilitate the admission to trading and listing of the New
CREI Shares. It is expected that the Combined Circular and Prospectus will be
a single document published at or around the same time as the Scheme Document
is published and posted to API Shareholders.

Background to, and reasons for, the Merger

CREI and API share an income-focused investment strategy with an emphasis on
regional, below-institutional sized assets that are well-positioned to capture
the rental growth and yield advantage available in order to generate higher
income returns and capital growth for shareholders.

The CREI Board and the API Board believe that the Merger would bring together
two complementary portfolios to create a differentiated REIT with enhanced
diversification and share liquidity and a fully covered and sustainable
dividend for the Combined Group's shareholders.

The boards of CREI and API believe there is a compelling strategic and
financial rationale for the Merger. In particular, shareholders in the
Combined Group are expected to benefit from:

A substantially larger portfolio with approximately 200 assets and a combined
property value in excess of £1.0 billion as at 31 December 2023;

An enhanced portfolio diversification by asset, geography and tenant with
broad-based regional exposure, with 50% of the Combined Group's income derived
from the top 54 tenants and 90% of the Combined Group's income derived from
the top 204 tenants, an average lot size of approximately £5.1 million and
similar tenant covenant profiles as at 31 December 2023;

A continuation of CREI's focus on below-institutional sized assets which
delivers greater diversification, with no single tenant accounting for more
than 2% of the Combined Group's rent roll, and supports the performance of the
portfolio in a variety of market conditions. This focus enables CREI to find
mispriced assets and make counter-cyclical investments in order to secure
future rental and capital growth;

A suitable balance between the main commercial property sectors, in keeping
with each of CREI's and API's existing policies, including significant
exposure to the industrial sector (representing 44% of the Combined Group's
ERV as at 31 December 2023) which continues to benefit from low vacancy
levels, limited new supply, strong occupier demand and, hence, rental
growth;

Meaningful reversionary potential with the combined ERV of £84.3 million
exceeding the combined passing rent of £68.1 million by 24% at 31 December
2023;

A shared commitment to sustainability underpinning the shared asset management
strategy with 81% of the combined portfolio holding an EPC rating of C or
above;

Material cost savings, comprising:

£1.0 million of recurring annual cost savings realised principally from a
reduction in management fees due to CREI's tiered fee structure and the
removal of duplicated corporate expenses and other potential operational
efficiencies; and

£2.1 million of additional non-recurring cost savings during the Transition
Period as a result of a reduction in management fees payable to Custodian
Capital;

A stronger and more resilient balance sheet enhancing the Combined Group's
ability to grow and to address future refinancing events, with the expected
retention of CREI's and API's existing debt facilities implying a pro forma
LTV of approximately 30.2 per cent., a weighted average cost of debt of 5.0
per cent. and a weighted average debt maturity of 3.8 years for the Combined
Group as at 31 December 2023. The aggregate debt portfolio of £225 million of
fixed rate debt expiring between 2025 - 2032 and the £125 million of
revolving credit facilities will allow for the ongoing financing of the
Combined Group in the long and short term;

Continued commitment to paying a fully covered dividend, in line with CREI's
existing policy and practice since IPO, which is expected to result in an
uplift in annual dividends payable to API Shareholders, with an objective of
growing the dividend on a sustainable basis;

Creation of an enlarged REIT with an enhanced market profile, broader appeal
to investors, greater share liquidity, and the scale to support a larger
weighting in key indices with potential for inclusion in the FTSE 250 Index in
due course;

Diversification of the shareholder register of the Combined Group with a broad
mix of private and institutional investors, while enabling mutual shareholders
to consolidate their holdings across the two companies; and

Continued focus on corporate governance, with the CREI Board benefiting from
the added expertise of certain API Directors and the transition to a fully
independent board following the integration of the two companies.

The Combined Group's pro forma sector weighting by ERV as at 31 December 2023
is shown below:

                     Weighting by ERV (as at 31 December 2023)

 Sector              CREI            API             Combined Group
 Industrial          41%             48%             44%
 Office              16%             25%             20%
 Retail warehousing  22%             11%             18%
 Other(*)            13%             12%             12%
 High street retail  8%              4%              6%

((*) 'Other' sectors include: (i) in respect of the CREI portfolio, pubs and
restaurants, gyms, drive-throughs, motor trade, leisure and trade counter; and
(ii) in respect of the API portfolio, leisure, data centres, student housing,
hotels (and apart-hotels) and healthcare.)

The Combined Group's pro forma weighting by tenant quality as at 31 December
2023 is shown below:

                       Weighting by ERV (as at 31 December 2023)

 Experian risk rating  CREI            API             Combined Group
 Government            2%              9%              5%
 Very low risk         57%             51%             54%
 Low risk              8%              14%             10%
 Below average risk    13%             10%             12%
 Above average risk    8%              5%              7%
 High risk             2%              1%              2%
 Other                 11%             9%              10%

Background to, and reasons for, the API Directors' recommendation

API has consistently sought to meet shareholders' objectives by investing in
good quality assets that have the potential to provide an above market level
of total return as well as an attractive level of income that has scope to
grow. API has achieved this through successful capital rotation and active
asset management resulting in an attractive portfolio, with industrial assets
constituting 48% of the portfolio by ERV as at 31 December 2023.

Over the last 18 months, however, API along with other diversified investment
trusts has had to contend with the significant challenges facing the real
estate sector as a whole, with rising inflation leading to a substantial
increase in interest rates to levels not seen since before the Global
Financial Crisis. This in turn has impacted investor sentiment, real estate
capital values, transaction volumes and equity market liquidity,
notwithstanding operational robustness in many sub-sectors of the market,
including those to which API has significant exposure.

In API's case, these challenges have been compounded by the relatively small
scale of the company and in particular the need to refinance its debt facility
(consisting of a term loan and revolving credit facility) in late 2022, ahead
of the previous maturity date in April 2023, at a time when politically
induced gilt market volatility was at its height. API currently pays an
annualised dividend of 4 pence per share which is not covered by EPRA
earnings, with cover of approximately 80% for the last reported quarter ended
30 September 2023. In recognition of these challenges, and the impact on API's
share price and discount to EPRA NTA per share, the Board elected to undertake
a comprehensive review of API's strategic options in Q3 2023 with the
objective of potentially delivering an uplift in value for API Shareholders,
as well as increased share liquidity and an enhanced and fully covered
dividend for API Shareholders.

Having assessed a wide range of potential strategic options in detail, the API
Board believes that there is a strong strategic and financial rationale for a
combination with CREI, noting in particular:

That based on the Closing Price per CREI Share, the exchange ratio represents
a premium of approximately 29.4% to API's Closing Price, 23.0% to API's
1-month volume-weighted average price and 26.5% to API's 3-month
volume-weighted average price as at the Latest Practicable Date;

API Shareholders are expected to experience an annualised uplift in dividends
of 7.3% (based on the Exchange Ratio and CREI's target dividend of 5.5 pence
per share) with the dividend being fully covered;

CREI's and API's shared income-focused approach to investing in diversified UK
commercial property, the complementary nature of their two portfolios, similar
sectoral weightings and sustainability credentials;

The enhanced capital structure of the Combined Group and its superior ability
to address future refinancing events as a consequence;

The opportunity for API Shareholders to remain invested, with ongoing exposure
to API's attractive portfolio and its growth prospects through holding shares
in the Combined Group;

The superior valuation at which the CREI Shares have historically traded
relative to API's, with an average discount to EPRA NTA per share of
approximately 11% over the last year, compared to approximately 37% for API,
and approximately 10% over the last 3 years compared to approximately 29% for
API;

The anticipated increase in share liquidity by virtue of the Combined Group's
enhanced scale, potential index weightings and broader appeal to investors;

The strong track record of Custodian Capital, as demonstrated by CREI's total
shareholder returns over time relative to peers; and

The commitment of the CREI Board to strong corporate governance, including
through the appointment of two API Directors to the CREI Board and the
transition to a fully independent board following the integration of the two
companies.

In summary, the API Board is firmly of the view that a combination with CREI
represents an attractive opportunity for API Shareholders to benefit from a
significant premium to the current share price and enhanced share liquidity
and dividend income through continued investment in a differentiated REIT of
improved scale.

Recommendations

The API Directors, who have been so advised by Lazard & Co., Limited
("Lazard") as to the financial terms of the Merger, consider the terms of the
Merger to be fair and reasonable. In providing its advice to the API
Directors, Lazard has taken into account the commercial assessments of the API
Directors. Lazard is providing independent financial advice to the API
Directors for the purposes of Rule 3 of the Takeover Code.

Accordingly, the API Directors intend to recommend unanimously that Scheme
Shareholders vote in favour of the Scheme at the API Court Meeting (or, in the
event that the Merger is implemented by way of a Takeover Offer, to accept or
procure the acceptance of the Takeover Offer) and that API Shareholders vote
in favour of the API Resolution to be proposed at the API General Meeting, as
the API Directors have irrevocably undertaken to do in respect of their own
beneficial holdings of, in aggregate, 295,092 API Shares, representing
approximately 0.08 per cent. of the issued ordinary share capital of API on
the Latest Practicable Date.

In order to allot and issue the New CREI Shares, CREI will be required to seek
the approval of CREI Shareholders of the CREI Resolution at the CREI General
Meeting. The Merger is accordingly conditional on the approval of the CREI
Shareholders of the CREI Resolution at the CREI General Meeting.

The CREI Directors consider the Merger to be in the best interests of CREI
Shareholders as a whole and intend unanimously to recommend that CREI
Shareholders vote in favour of the CREI Resolution to be proposed at the CREI
General Meeting, as those CREI Directors, together with certain of Ian
Mattioli's close relatives and related trusts, who hold CREI Shares have
irrevocably undertaken to do in respect of their own holdings of, in
aggregate, 6,204,817 CREI Shares, representing approximately 1.41 per cent. of
the issued ordinary share capital of CREI on the Latest Practicable Date.

Letter of intent

In addition to the irrevocable undertakings referred to above received from
the API Directors, CREI has received a letter of intent to vote in favour of
the resolutions relating to the Merger at the API Meetings (or in the event
that the Merger is implemented by a Takeover Offer, to accept such Takeover
Offer) from Brooks Macdonald Asset Management in respect of 11,376,425 API
Shares, representing approximately 2.98 per cent. of the issued ordinary share
capital of API on the Latest Practicable Date.

In total, CREI has therefore received irrevocable undertakings and a letter of
intent, including those irrevocable undertakings from all API Directors, in
respect of, in aggregate, 11,671,517 API Shares, representing approximately
3.06 per cent. of the issued ordinary share capital of API on the Latest
Practicable Date.

Further details of these irrevocable undertakings and letter of intent are set
out in Appendix 3 to this Announcement.

Information on CREI

CREI, established in 2014, is a UK real estate investment trust which seeks to
deliver an enhanced income return by investing in a diversified portfolio of
smaller, regional, Core/Core-plus properties let to predominantly
institutional grade tenants across the UK. CREI seeks to provide investors
with an attractive level of income and the potential for capital growth from a
portfolio with strong environmental credentials, becoming the REIT of choice
for private and institutional investors seeking high and stable dividends from
well-diversified UK real estate. In line with CREI's published growth
strategy, its investment policy has been amended to specify that CREI is
committed to seeking further growth, which may involve strategic property
portfolio acquisitions and corporate consolidation, such transactions
potentially including public and private companies, holding companies and
special purpose vehicles.

CREI's portfolio was valued at £602 million as at 31 December 2023 with an
EPRA Topped-Up Net Initial Yield of 6.2%, a reversionary yield of 7.8%, a 41%
weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of
£413 million or 93.7 pence per CREI Share. As at the Latest Practicable Date,
CREI had a market capitalisation of £351 million. CREI is externally managed
by Custodian Capital, a property management and investment business which is
regulated by the FCA.

A fundamental element of CREI's strategy is to target smaller sized
properties, principally characterised by properties with individual values of
less than £10 million at acquisition, to capture the yield advantage
available relative to larger sized properties. In the period from 2010 - 2023,
data sourced from PropertyData((1)) shows that there is a transaction yield
advantage of approximately 150 basis points between properties with individual
values below £10 million versus properties with individual values above £10
million, compared to a yield advantage of approximately 60 basis points
between 2000 - 2010. The CREI Board believes that this implied increase in
yield differential since 2010 is not entirely reflective of a rise in risk
associated with smaller properties but also due to a change in the supply and
demand dynamics in the market. The CREI Board believes these dynamics are
principally because of an increase in strategies that pursue larger sized
properties, which has resulted in a reduction in the associated yields, which
has coincided with those same investors reducing their exposure to smaller
sized properties and thus increasing the supply of such assets and associated
yields.

Custodian Capital is a wholly-owned subsidiary of Mattioli Woods plc
("Mattioli Woods"), the specialist wealth management and employee benefits
business, with in excess of £15 billion of assets under management,
administration or advice. CREI entered the UK REIT regime on 27 March 2014. As
a consequence of CREI continuing to be a UK REIT and meeting the relevant
conditions, it should not be subject to UK corporation tax on the profits
(income and capital gains) derived from its investment property portfolio and
while CREI remains within the UK REIT regime, the disposal of any properties
currently held by it and used within its property rental business should
continue to be tax exempt.

((1) Average transaction yields between Q1 2010 - Q1 2023 as per
PropertyData.)

 

 

Information on API

API, established in 2003, is a UK real estate investment trust investing in a
diversified portfolio of UK commercial properties in the industrial, office,
retail and "other" sectors with the objective of providing shareholders with
an attractive level of income together with the prospect of income and capital
growth.

API's portfolio was valued at £439 million as at 31 December 2023 with an
EPRA Topped-Up Net Initial Yield of 5.4%, a reversionary yield of 7.3%, a 48%
weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of
£299 million or 78.5 pence per API share. As at the Latest Practicable Date,
API had a market capitalisation of £183 million.

Timetable and Conditions

It is intended that the Merger will be implemented by way of a
Court-sanctioned scheme of arrangement under Part VIII of the Companies Law.
Subject to the Panel's consent, CREI reserves the right to implement the
Merger by way of a Takeover Offer.

The terms of the Merger and resolutions concerning related matters will be put
to the Scheme Shareholders at the API Court Meeting, to the API Shareholders
at the API General Meeting and to the CREI Shareholders at the CREI General
Meeting. The Merger is conditional upon the resolutions to be put to the
Scheme Shareholders at the API Court Meeting and the API Shareholders at the
API General Meeting and the CREI Resolution being passed by the requisite
majorities. In order to become Effective, the Scheme must be approved by a
majority in number of Scheme Shareholders present and voting (and entitled to
vote) at the API Court Meeting, whether in person or by proxy, representing at
least 75 per cent. of the voting rights of such Scheme Shareholders. In
addition, at the API General Meeting, the API Resolution to authorise the API
Board to implement the Scheme and to amend the Articles must be passed by API
Shareholders representing at least 75 per cent. of the votes validly cast on
the resolution, whether in person or by proxy. The API General Meeting will be
held immediately after the API Court Meeting. At the CREI General Meeting the
CREI Resolution requires the approval of a simple majority of votes cast, in
person or by proxy, in order to be passed. The CREI General Meeting will be
held simultaneously with the API Meetings.

The Merger will be made in accordance with the Takeover Code and on the terms
and subject to the Conditions which are set out in Appendix 1 to this
Announcement and on the further terms and conditions that will be set out in
the Scheme Document.

It is expected that the Scheme Document containing further information about
the Merger and notices of the API Meetings, together with the Forms of Proxy,
and the Combined Circular and Prospectus containing further information on
CREI and the Combined Group and notice of the CREI General Meeting will be
published within 28 days of the date of this Announcement (or such later date
as may be agreed by CREI and API with the consent of the Panel). It is
currently expected that the Scheme will become Effective in early April 2024.

Comments on the Merger

Commenting on the Merger, David MacLellan, Chairman of CREI said:

"The Board is pleased to announce the merger of CREI and API which it firmly
believes will benefit both our existing and new shareholders. This transaction
creates a well-positioned REIT of significant scale, giving the Combined
Group's shareholders the opportunity to participate in the returns from the
complementary API and CREI portfolios, with a fully covered and sustainable
dividend and a focus on ESG.

In the current interest rate environment, security and resilience of cash
flows, scale and liquidity, supported by a clear and compelling strategic
direction are the defining characteristics of a successful REIT. The
challenges the wider listed property sector has faced over the last 18 months
highlight the merits of CREI's differentiated approach and operational
robustness, which contribute to CREI's strong rating relative to its peers.
The income and income growth characteristics of the API portfolio should
enable the merged entity to optimise earnings and maintain CREI's progressive
dividend policy.

Shareholders in the Combined Group will benefit from material cost savings and
efficiencies along with benefitting from significant future growth
opportunities to enhance shareholder returns".

Commenting on the Merger, James Clifton-Brown, Chair of API said:

"API has always sought to focus on delivering attractive, income-driven
returns for shareholders. Over the years, API's manager, abrdn Fund Managers,
has assembled an attractive portfolio on the company's behalf, with a
weighting to more favoured areas of the market, a diversified tenant base and
a focus on ESG. The board of API would like to thank the management team for
the important role they have played in assembling and managing the portfolio.

The Merger will enable API Shareholders to retain exposure to the portfolio
and its growth prospects at a significant premium to API's share price, with
the prospect of superior share liquidity and an enhanced and fully covered
dividend. The API Board believes that, with increased scale and an enhanced
capital structure, the Combined Group will be well positioned for the future.
The API Board is therefore pleased to recommend the Merger to API
Shareholders."

This summary should be read in conjunction with, and is subject to, the full
text of this Announcement and its Appendices. The Merger will be subject to
the Conditions and further terms set out in Appendix 1 and to the full terms
and conditions which will be set out in the Scheme Document. Appendix 2 to
this Announcement contains the sources of information and bases of calculation
of certain information contained in this Announcement. Summary details of the
irrevocable undertakings and letter of intent received by CREI are set out in
Appendix 3. Property valuation reports for CREI and API (each as at 31
December 2023) are set out in Appendix 4 pursuant to Rule 29 of the Takeover
Code. Certain terms used in this summary and this Announcement are defined in
Appendix 6.

A pre-recorded video briefing in relation to the Merger, presented by Richard
Shepherd-Cross of Custodian Capital, is available on CREI's website at
www.custodianreit.com (http://www.custodianreit.com) .

Enquiries

 Custodian Property Income REIT plc (CREI)

 David MacLellan (Chair)

                                                                  via Deutsche Numis
 Deutsche Numis (Financial Adviser and Corporate Broker to CREI)  +44 20 7260 1000‎

 Nathan Brown

 Stuart Ord

 Alexander Kladov

 George Shiel
 FTI Consulting (Financial PR Adviser to CREI)                    +44 20 3727 1000

 Richard Sunderland

 Andrew Davis

 Oliver Parsons
 abrdn Property Income Trust Limited (API)

 James Clifton-Brown (Chair)

                                                                  via Winterflood

 Lazard (Financial Adviser to API)

 Patrick Long                                                     +44 20 7187 2000

 Jolyon Coates
 Winterflood (Corporate Broker to API)

 Neil Langford                                                    +44 20 3100 0160

Stephenson Harwood LLP is acting as English legal adviser to CREI in
connection with the Merger.

Addleshaw Goddard LLP is acting as English legal adviser to API in connection
with the Merger.

Important notices

Numis Securities Limited (which is trading for these purposes as Deutsche
Numis) ("Deutsche Numis"), which is authorised and regulated by the Financial
Conduct Authority in the United Kingdom, is acting exclusively for CREI and
for no one else in connection with the Merger and/or any other matter referred
to in this Announcement and will neither regard any other person as its client
nor be responsible to anyone other than CREI for providing the protections
afforded to its clients or for providing advice in connection with the Merger,
the contents of this Announcement, or any other matters referred to in this
Announcement. Neither Deutsche Numis nor any of its affiliates owes or accepts
any duty, liability or responsibility whatsoever (whether direct, indirect,
consequential, whether in contract, in tort, under statute or otherwise) to
any person who is not a client of Deutsche Numis in connection with this
Announcement, any statement or other matter or arrangement referred to herein
or otherwise.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, is acting exclusively as
financial adviser to API and no one else in connection with the matters set
out in this Announcement and will not be responsible to anyone other than API
for providing the protections afforded to clients of Lazard nor for providing
advice in relation to the matters set out in this Announcement. Neither Lazard
nor any of its affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client of Lazard
in connection with this Announcement, any statement contained herein or
otherwise.

Winterflood Securities Limited ("Winterflood"), which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom, is acting
exclusively for API and no-one else in connection with the matters set out in
this Announcement and will not be responsible to anyone other than API for
providing the protections afforded to customers of Winterflood or for
providing advice in relation to the matters set out in this Announcement.
Neither Winterflood nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of Winterflood in connection with this Announcement, any statement
contained herein or otherwise.

Further information

This Announcement is for information purposes only and is not intended to and
does not constitute, or form part of an offer, invitation or the solicitation
of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities, or the solicitation of any vote or approval in any
jurisdiction, pursuant to the Merger or otherwise, nor shall there be any
sale, issuance or transfer of securities of API in any jurisdiction in
contravention of applicable law. The Merger will be made solely pursuant to
the terms of the Scheme Document (or, if the Merger is implemented by way of a
Takeover Offer, the Offer Document), which will contain the full terms and
conditions of the Merger, including details of how API Shareholders may vote
in respect of the Merger. Any vote, approval, decision in respect of, or other
response to, the Merger should be made only on the basis of the information
contained in the Scheme Document and the Combined Circular and Prospectus (or
any other document by which the Merger is made by way of a Takeover Offer).

CREI will prepare the Combined Circular and Prospectus, containing information
on the New CREI Shares and the Combined Group. CREI and API urge API
Shareholders to read the Scheme Document and the Combined Circular and
Prospectus carefully when they become available because they will contain
important information in relation to the Merger, the New CREI Shares and the
Combined Group.

The statements contained in this Announcement are made as at the date of this
Announcement, unless some other time is specified in relation to them, and the
release of this Announcement shall not give rise to any implication that there
has been no change in the facts set out in this Announcement since such date.
This Announcement does not constitute a prospectus or prospectus equivalent
document.

No person should construe the contents of this Announcement as legal,
financial or tax advice. If you are in any doubt about the contents of this
Announcement or the action you should take, you are recommended to seek your
own independent financial advice immediately from your stockbroker, bank
manager, solicitor, accountant or from an independent financial adviser duly
authorised under FSMA if you are resident in the United Kingdom, or another
appropriately authorised independent financial adviser, if you are in a
territory outside the United Kingdom.

Neither the GFSC nor the States of Guernsey take any responsibility for the
financial soundness of API or for the correctness of any of the statements
made or opinions expressed with regard to it.

Overseas Shareholders

This Announcement has been prepared for the purpose of complying with Guernsey
law, English law, the Takeover Code, the Market Abuse Regulation, the
Disclosure Guidance and Transparency Rules and the Listing Rules and
information disclosed may not be the same as that which would have been
disclosed if this Announcement had been prepared in accordance with the laws
of jurisdictions outside the United Kingdom or Guernsey. Nothing in this
Announcement should be relied on for any other purpose.

The release, publication or distribution of this Announcement in or into
certain jurisdictions other than the United Kingdom or Guernsey may be
restricted by the laws and/or regulations of those jurisdictions and therefore
persons into whose possession this Announcement comes who are subject to the
laws and/or regulations of any jurisdiction other than the United Kingdom or
Guernsey should inform themselves about and observe any such applicable laws
and/or regulations in their jurisdiction. In particular, the ability of
persons who are not resident in the United Kingdom or Guernsey to vote their
Scheme Shares or API Shares (as applicable) with respect to the Scheme at the
API Court Meeting or the API Resolution at the API General Meeting, or to
appoint another person as proxy to vote at the API Court Meeting or the API
General Meeting on their behalf, may be affected by the laws of the relevant
jurisdiction in which they are located. Further details in relation to
Overseas Shareholders will be contained in the Scheme Document. Any failure to
comply with any such restrictions may constitute a violation of the securities
laws of any such jurisdiction. To the fullest extent permitted by applicable
law, the companies and persons involved in the Merger disclaim any
responsibility or liability for the violation of such restrictions by any
person.

Unless otherwise determined by CREI or required by the Takeover Code, and
permitted by applicable law and regulation, the Merger will not be made
available, in whole or in part, directly or indirectly, in, into or from a
Restricted Jurisdiction where to do so would violate the laws in that
jurisdiction and no person may vote in favour of the Merger by any such use,
means, instrumentality or from within a Restricted Jurisdiction or any other
jurisdiction if to do so would constitute a violation of the laws of that
jurisdiction. Copies of this Announcement and any formal documentation
relating to the Merger are not being, and must not be, directly or indirectly,
mailed or otherwise forwarded, distributed or sent in or into or from any
Restricted Jurisdiction and persons receiving such documents (including
custodians, nominees and trustees) must not mail or otherwise forward,
distribute or send them in or into or from any Restricted Jurisdiction. Doing
so may render invalid any related purported vote in respect of the Merger. If
the Merger is implemented by way of a Takeover Offer (unless otherwise
permitted by applicable law and regulation), the Takeover Offer may not be
made directly or indirectly, in or into, or by the use of mails or any means
or instrumentality (including, but not limited to, facsimile, e-mail or other
electronic transmission, telex or telephone) of interstate or foreign commerce
of, or of any facility of a national, state or other securities exchange of
any Restricted Jurisdiction and the Takeover Offer may not be capable of
acceptance by any such use, means, instrumentality or facilities.

Further details in relation to Overseas Shareholders will be contained in the
Scheme Document.

Forward-looking statements

This Announcement (including information incorporated by reference into this
Announcement), oral statements made regarding the Merger, and other
information published by CREI and API contain statements about CREI, API
and/or the Combined Group that are or may be deemed to be "forward-looking
statements". All statements other than statements of historical facts included
in this Announcement, may be forward-looking statements. Forward-looking
statements are prospective in nature and are not based on historical facts,
but rather on current expectations and projections of CREI and API about
future events, and are therefore subject to risks and uncertainties which
could cause actual results to differ materially from the future results
expressed or implied by the forward-looking statements.

 

The forward-looking statements contained in this Announcement include
statements relating to the expected effects of the Merger on CREI and API, the
expected timing and scope of the Merger and other statements other than
historical facts. Often, but not always, forward-looking statements can be
identified by the use of forward-looking words such as "plans", "expects" or
"does not expect", "is expected", "is subject to", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "should", "would", "might"
or "will" be taken, occur or be achieved. Forward looking statements include
statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects; and (ii)
business and management strategies and the expansion and growth of CREI's or
API's or the Combined Group's operations and potential synergies resulting
from the Merger.

Although CREI and API believe that the expectations reflected in such
forward-looking statements are reasonable, neither CREI nor API can give
assurance that such expectations will prove to be correct. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.

There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by such forward-looking
statements. These factors include, but are not limited to: the ability to
complete the Merger; the ability to obtain requisite regulatory and
shareholder approvals and the satisfaction of other Conditions on the proposed
terms; changes in the global political, economic, business and competitive
environments and in market and regulatory forces; changes in future exchange
and interest rates; changes in tax rates; future business combinations or
disposals; changes in general economic and business conditions; changes in the
behaviour of other market participants; the anticipated benefits from the
Merger not being realised as a result of changes in general economic and
market conditions in the countries in which CREI and API operate; weak,
volatile or illiquid capital and/or credit markets; changes in the degree of
competition in the geographic and business areas in which CREI and API
operate; and changes in laws or in supervisory expectations or requirements.
Other unknown or unpredictable factors could cause actual results to differ
materially from those expected, estimated or projected in the forward-looking
statements. If any one or more of these risks or uncertainties materialises or
if any one or more of the assumptions proves incorrect, actual results may
differ materially from those expected, estimated or projected. Such
forward-looking statements should therefore be construed in the light of such
factors.

Neither CREI nor API, nor any of their respective associates or directors,
officers or advisers, provides any representation, assurance or guarantee that
the occurrence of the events expressed or implied in any forward-looking
statements in this Announcement will actually occur. Given the risks and
uncertainties, you are cautioned not to place any reliance on these
forward-looking statements. Other than in accordance with their legal or
regulatory obligations, neither CREI nor API is under any obligation, and each
of CREI and API expressly disclaim any intention or obligation, to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per
cent. or more of any class of relevant securities of an offeree company or of
any securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the offer period and, if later, following the announcement in
which any securities exchange offeror is first identified. An Opening Position
Disclosure must contain details of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no
later than 3.30 p.m. (London time) on the 10th Business Day following the
commencement of the offer period and, if appropriate, by no later than 3.30
p.m. (London time) on the 10(th) Business Day following the announcement in
which any securities exchange offeror is first identified. Relevant persons
who deal in the relevant securities of the offeree company or of a securities
exchange offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the offeree
company or of any securities exchange offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain details of
the dealing concerned and of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule 8. A
Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no
later than 3.30 p.m. (London time) on the Business Day following the date of
the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. You should contact the Panel's Market Surveillance Unit on
+44 (0)20 7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing Disclosure.

Quantified Financial Benefits Statement

Statements of estimated cost savings and synergies relate to future actions
and circumstances which, by their nature, involve risks, uncertainties and
contingencies. As a result, the cost savings and synergies referred to may not
be achieved, may be achieved later or sooner than estimated, or those achieved
could be materially different from those estimated. Neither the Quantified
Financial Benefits Statement nor any other statement in this Announcement
should be construed as a profit forecast or interpreted to mean that the
Combined Group's earnings in the first full year following the Effective Date,
or in any subsequent period, would necessarily match or be greater than or be
less than those of CREI or API for the relevant preceding financial period or
any other period. For the purposes of Rule 28 of the Takeover Code, the
Quantified Financial Benefits Statement contained in this Announcement is the
responsibility of CREI and the CREI Directors.

 

No profit forecasts or estimates

No statement in this Announcement is intended as a profit forecast or profit
estimate for any period and no statement in this Announcement should be
interpreted to mean that earnings or earnings per share for CREI or API for
the current or future financial years would necessarily match or exceed the
historical published earnings or earnings per share for CREI or API.

Rounding

Certain figures included in this Announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that precede them.

Publication on a website

In accordance with Rule 26.1 of the Takeover Code, a copy of this Announcement
will be made available, subject to certain restrictions relating to persons
resident in Restricted Jurisdictions, on CREI's website at
www.custodianreit.com (http://www.custodianreit.com) and API's website at
www.abrdnpit.co.uk (http://www.abrdnpit.co.uk) by no later than 12 noon
(London time) on the first Business Day following the date of this
Announcement.

For the avoidance of doubt, neither the contents of these websites nor the
contents of any websites accessible from any hyperlinks is incorporated into
or forms part of this Announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Takeover Code, API Shareholders may
request a hard copy of this Announcement (and any information incorporated by
reference in this Announcement), free of charge, by contacting Northern Trust
International Fund Administration Services (Guernsey) Limited ("Northern
Trust") during business hours on 01481 745001 (from within the United Kingdom)
and +44 (0) 1481 745001 (from outside the United Kingdom) or by submitting a
request in writing to The Company Secretary, at team_api@ntrs.com. Calls are
charged at the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable international
rate. Lines will be open between 9.00 a.m. to 5.30 p.m., Monday to Friday
excluding public holidays in England and Wales.

For persons who receive a copy of this Announcement in electronic form or via
a website notification, a hard copy of this Announcement will not be sent
unless so requested. Such persons may also request that all future documents,
announcements and information to be sent to them in relation to the Merger
should be in hard copy form.

Scheme Process

In accordance with Section 5 of Appendix 7 of the Takeover Code, API will
announce through a Regulatory Information Service key events in the Scheme
process including the outcomes of the API Meetings and the Sanction Hearing.

Unless otherwise consented to by the Court and the Panel, any modification or
revision to the Scheme will be made no later than the date which is 14 days
prior to the API Meetings (or any later date to which such meetings are
adjourned). In accordance with Section 11 of Appendix 7 of the Takeover Code,
if the Scheme lapses or is withdrawn all documents of title and other
documents lodged will be returned as soon as practicable and in any event
within 14 days of such lapsing or withdrawal.

Information relating to API Shareholders

Please be aware that addresses, electronic addresses and certain other
information provided by API Shareholders, persons with information rights and
other relevant persons for the receipt of communications from API may be
provided to CREI during the Offer Period as required under Section 4 of
Appendix 4 to the Takeover Code to comply with Rule 2.11(c) of the Takeover
Code.

Rule 2.9 of the Takeover Code

For the purposes of Rule 2.9 of the Takeover Code, CREI confirms that, as at
the close of business on the Latest Practicable Date, it had in issue
440,850,398 ordinary shares of one penny which carry voting rights of one vote
per share and are admitted to trading on the London Stock Exchange with ISIN
GB00BJFLFT45.

For the purposes of Rule 2.9 of the Takeover Code, API confirms that, as at
the close of business on the Latest Practicable Date (being the last Business
Day before the date of this Announcement), it had in issue 381,218,977
ordinary shares of one penny each (excluding any shares held as treasury
shares) which carry voting rights of one vote per share and are admitted to
trading on the London Stock Exchange with ISIN GB0033875286.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS, PROSPECTUS
EQUIVALENT DOCUMENT OR SCHEME DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY
INVESTMENT DECISION IN RELATION TO THE MERGER OR NEW CREI SHARES EXCEPT ON THE
BASIS OF INFORMATION IN THE SCHEME DOCUMENT AND THE COMBINED CIRCULAR AND
PROSPECTUS WHICH ARE PROPOSED TO BE PUBLISHED IN DUE COURSE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

19 January 2024

RECOMMENDED ALL-SHARE MERGER

OF

ABRDN PROPERTY INCOME TRUST LIMITED

with

CUSTODIAN PROPERTY INCOME REIT PLC

 

to be implemented by means of a Court-sanctioned scheme of arrangement under
Part VIII of the Companies (Guernsey) Law, 2008 (as amended)

SUMMARY AND HIGHLIGHTS

The boards of CREI and API are pleased to announce that they have reached
agreement on the terms and conditions of a recommended all-share merger
pursuant to which CREI will acquire the entire issued and to be issued share
capital of API (the "Merger"). It is intended that the Merger will be
implemented by means of a Court-sanctioned scheme of arrangement under Part
VIII of the Companies Law (the "Scheme").

Under the terms of the Merger, which will be subject to the Conditions and
further terms set out in Appendix 1 to this Announcement and to the full terms
and conditions which will be set out in the Scheme Document, Scheme
Shareholders will be entitled to receive:

for each Scheme Share, 0.78 New CREI Shares

The Exchange Ratio is based on the Rolled-Forward Unaudited EPRA NTA of each
of CREI and API as at 31 December 2023, subject to certain adjustments to
reflect post balance sheet asset disposals, the fair value of each company's
debt and derivatives, the relative levels of dividend cover between the two
companies and the costs expected to be incurred by each party in connection
with the Merger. Following completion of the Merger, existing CREI
Shareholders will hold approximately 59.7 per cent. and API Shareholders
approximately 40.3 per cent. respectively in the Combined Group.

Applying the Exchange Ratio to the Closing Price per CREI Share of 79.6 pence
as at the Latest Practicable Date values each API Share at 62.1 pence and the
entire issued and to be issued share capital of API at approximately £237
million, and represents a premium of approximately:

29.4 per cent. to the Closing Price of 48.0 pence per API Share on the Latest
Practicable Date;

23.0 per cent. to the 1-month volume-weighted average price of 50.5 pence per
API Share on the Latest Practicable Date; and

26.5 per cent. to the 3-month volume-weighted average price of 49.1 pence per
API Share on the Latest Practicable Date.

Appendix 4 to this Announcement contains reports from independent property
valuers for CREI's and API's property assets, each as at 31 December 2023,
pursuant to the requirements of Rule 29 of the Takeover Code. These property
valuation reports will, subject to the requirements of the Takeover Code, be
reproduced in the Combined Circular and Prospectus and the Scheme Document,
which are expected to be published as soon as reasonably practicable and in
any event within 28 days of this Announcement (or such later date as may be
agreed by CREI and API with the consent of the Panel). Each of Knight Frank
and Savills has given and not withdrawn its consent to the publication of its
valuation report in this Announcement in the form and context in which it is
included.

It is expected that the Scheme Document will be published as soon as
practicable and, in any event, within 28 days of this Announcement, unless
CREI and API otherwise agree, and the Panel consents, to a later date. It is
expected that the API Court Meeting and the API General Meeting will be held
in February 2024 and that, subject to the satisfaction of the Conditions and
the further terms set out in Appendix 1 to this Announcement and to be set out
in full in the Scheme Document, the Scheme is expected to become Effective in
early April 2024.

Background to, and reasons for, the Merger

CREI and API share an income-focused investment strategy with an emphasis on
regional, below-institutional sized assets that are well-positioned to capture
the rental growth and yield advantage available in order to generate higher
income returns and capital growth for shareholders.

The CREI Board and the API Board believe that the Merger would bring together
two complementary portfolios to create a differentiated REIT with enhanced
diversification and share liquidity and a fully covered and sustainable
dividend for the Combined Group's shareholders.

The boards of CREI and API believe there is a compelling strategic and
financial rationale for the Merger. In particular, shareholders in the
Combined Group are expected to benefit from:

A substantially larger portfolio with approximately 200 assets and a combined
property value in excess of £1.0 billion as at 31 December 2023;

An enhanced portfolio diversification by asset, geography and tenant with
broad-based regional exposure, with 50% of the Combined Group's income derived
from the top 54 tenants and 90% of the Combined Group's income derived from
the top 204 tenants, an average lot size of approximately £5.1 million and
similar tenant covenant profiles as at 31 December 2023;

A continuation of CREI's focus on below-institutional sized assets which
delivers greater diversification, with no single tenant accounting for more
than 2% of the Combined Group's rent roll, and supports the performance of the
portfolio in a variety of market conditions. This focus enables CREI to find
mispriced assets and make counter-cyclical investments in order to secure
future rental and capital growth;

A suitable balance between the main commercial property sectors, in keeping
with each of CREI's and API's existing policies, including significant
exposure to the industrial sector (representing 44% of the Combined Group's
ERV as at 31 December 2023) which continues to benefit from low vacancy
levels, limited new supply, strong occupier demand, and hence rental growth;

Meaningful reversionary potential with the combined ERV of £84.3 million
exceeding the combined passing rent of £68.1 million by 24% at 31 December
2023;

A shared commitment to sustainability underpinning the shared asset management
strategy with 81% of the combined portfolio holding an EPC rating of C or
above;

Material cost savings, comprising:

£1.0 million of recurring annual cost savings realised principally from a
reduction in management fees due to CREI's tiered fee structure and the
removal of duplicated corporate expenses and other potential operational
efficiencies; and

£2.1 million of additional non-recurring cost savings during the Transition
Period as a result of a reduction in management fees payable to Custodian
Capital;

A stronger and more resilient balance sheet enhancing the Combined Group's
ability to grow and to address future refinancing events, with the expected
retention of CREI's and API's existing debt facilities implying a pro forma
LTV of approximately 30.2 per cent., a weighted average cost of debt of 5.0
per cent. and a weighted average debt maturity of 3.8 years for the Combined
Group as at 31 December 2023. The aggregate debt portfolio of £225 million of
fixed rate debt expiring between 2025 - 2032 and the £125 million of
revolving credit facilities will allow for the ongoing financing of the
Combined Group in the long and short term;

Continued commitment to paying a fully covered dividend, in line with CREI's
existing policy and practice since IPO, which is expected to result in an
uplift in annual dividends payable to API Shareholders, with an objective of
growing the dividend on a sustainable basis;

Creation of an enlarged REIT with an enhanced market profile, a broader appeal
to investors, greater share liquidity, and the scale to support a larger
weighting in key indices with potential for inclusion in the FTSE 250 Index in
due course;

Diversification of the shareholder register of the Combined Group with a broad
mix of private and institutional investors, while enabling mutual shareholders
to consolidate their holdings across the two companies; and

Continued focus on corporate governance, with the CREI Board benefiting from
the added expertise of certain API Directors and the transition to a fully
independent board following the integration of the two companies.

The Combined Group's pro forma sector weighting by ERV as at 31 December 2023
is shown below:

 

 

 

 

                     Weighting by ERV (as at 31 December 2023)

 Sector              CREI            API             Combined Group
 Industrial          41%             48%             44%
 Office              16%             25%             20%
 Retail warehousing  22%             11%             18%
 Other(*)            13%             12%             12%
 High street retail  8%              4%              6%

((*) 'Other' sectors include: (i) in respect of the CREI portfolio, pubs and
restaurants, gyms, drive-throughs, motor trade, leisure and trade counter; and
(ii) in respect of the API portfolio, leisure, data centres, student housing,
hotels (and apart-hotels) and healthcare.)

The Combined Group's pro forma weighting by tenant quality as at 31 December
2023 is shown below:

                       Weighting by ERV (as at 31 December 2023)

 Experian risk rating  CREI            API             Combined Group
 Government            2%              9%              5%
 Very low risk         57%             51%             54%
 Low risk              8%              14%             10%
 Below average risk    13%             10%             12%
 Above average risk    8%              5%              7%
 High risk             2%              1%              2%
 Other                 11%             9%              10%

 

Quantified Financial Benefits Statement

 

The CREI Directors, having reviewed and analysed the potential cost savings of
the Combined Group, as well as taking into account factors they can influence,
believe the Combined Group can deliver shareholder value through the expected
realisation of approximately:

£1.0 million of pre-tax recurring run-rate cost synergies by the end of the
first year following the Effective Date (the "Recurring Cost Synergies"); and

£2.1 million of additional non-recurring pre-tax cost synergies during the
Transition Period (the "Transition Period Cost Synergies").

The Recurring Cost Synergies are expected to be realised principally from:

Management fees: unification of investment management under Custodian
Capital, delivering an estimated £0.5 million of annualised run-rate cost
synergies derived from lower management and administrative fees charged on the
API investment properties (the "Management Fee Savings"); and

Corporate and administrative: rationalisation of duplicated listing,
administration and operational expenses delivering at least an estimated £0.5
million of annualised run rate cost synergies.

 

The additional Transition Period Cost Synergies are expected to be realised
principally from:

Amended management fee tiers: reduction in the management fees payable by CREI
to Custodian Capital for the Transition Period delivering an estimated £0.3
million of annualised run rate cost synergies (£0.6 million total estimated
cost synergies) through the consolidation of the first two fee tiers into one
fee tier, such that the consolidated fee tier will be calculated as a fee of
0.75 per cent. in respect of the NAV of the Combined Group which is less than
or equal to £500 million (rather than a fee of 0.90 per cent. in respect of
NAV up to £200 million and 0.75 per cent. up to £500 million) (the "Amended
Management Fee Tier Savings"); and

Partial management fee waiver: Custodian Capital has agreed to waive its
management fee in relation to the NAV attributable to the API portfolio for
the first nine months following completion of the Merger (the "Partial
Management Fee Waiver Savings") delivering an estimated £1.5 million of cost
synergies in the first year following the Effective Date.

 

In order to achieve the Management Fee Savings, the Amended Management Fee
Tier Savings and the Partial Management Fee Waiver Savings, it is estimated
that API will incur one-off costs of between £1.5 million and £2.0 million
in connection with the termination of the API Investment Management Agreement.
These costs will be incurred within the first year following the Effective
Date and have been reflected as a cost to API within the Exchange Ratio. The
CREI Directors expect that any costs incurred in the realisation of the other
cost synergies will be immaterial.

Other potential adverse effects of the Merger have been considered and were
determined by the CREI Directors to be immaterial for the analysis.

The identified cost savings will accrue as a direct result of the Merger and
would not be achieved on a standalone basis.

These statements relating to identified cost savings and estimated savings
relate to future actions or circumstances which by their nature involve risks,
uncertainties and contingencies. As a consequence, the identified synergies
and estimated savings referred to may not be achieved, may be achieved later
or sooner than estimated, or those achieved could be materially different from
those estimated.

Further information on the bases of belief supporting the Quantified Financial
Benefits Statement, including the principal assumptions and sources of
information, is set out in Appendix 5 to this Announcement.

board RecommendationS

The API Directors, who have been so advised by Lazard as to the financial
terms of the Merger, consider the terms of the Merger to be fair and
reasonable. In providing its advice to the API Directors, Lazard has taken
into account the commercial assessments of the API Directors. Lazard is
providing independent financial advice to the API Directors for the purposes
of Rule 3 of the Takeover Code.

Accordingly, the API Directors intend to recommend unanimously that Scheme
Shareholders vote in favour of the Scheme at the API Court Meeting (or, in the
event that the Merger is implemented by a Takeover Offer, to accept such
Takeover Offer) and that API Shareholders vote in favour of the API Resolution
to be proposed at the API General Meeting as the API Directors have
irrevocably undertaken to do in respect of their own beneficial holdings of,
in aggregate, 295,092 API Shares, representing approximately 0.08 per cent. of
the issued ordinary share capital of API on the Latest Practicable Date.

In order to allot and issue the New CREI Shares, CREI will be required to seek
the approval of CREI Shareholders of the CREI Resolution at the CREI General
Meeting. The Merger is accordingly conditional on the approval of the CREI
Shareholders of the CREI Resolution at the CREI General Meeting.

The CREI Directors consider the Merger to be in the best interests of CREI
Shareholders as a whole and intend unanimously to recommend that CREI
Shareholders vote in favour of the CREI Resolution to be proposed at the CREI
General Meeting, as those CREI Directors, together with certain of Ian
Mattioli's close relatives and related trusts, who hold CREI Shares have
irrevocably undertaken to do in respect of their own holdings of, in
aggregate, 6,204,817 CREI Shares, representing approximately 1.41 per cent. of
the issued ordinary share capital of CREI on the Latest Practicable Date.

Background to, and Reasons for, the API directors' Recommendation

API has consistently sought to meet shareholders' objectives by investing in
good quality assets that have the potential to provide an above market level
of total return as well as an attractive level of income that has scope to
grow. API has achieved this through successful capital rotation and active
asset management resulting in an attractive portfolio, with industrial assets
constituting 48% of the portfolio by ERV as at 31 December 2023.

Over the last 18 months, however, API along with other diversified investment
trusts has had to contend with the significant challenges facing the real
estate sector as a whole, with rising inflation leading to a substantial
increase in interest rates to levels not seen since before the Global
Financial Crisis. This in turn has impacted investor sentiment, real estate
capital values, transaction volumes and equity market liquidity,
notwithstanding operational robustness in many sub-sectors of the market,
including those to which API has significant exposure.

In API's case, these challenges have been compounded by the relatively small
scale of the company and in particular the need to refinance its debt facility
(consisting of a term loan and revolving credit facility) in late 2022, ahead
of the previous maturity date in April 2023, at a time when politically
induced gilt market volatility was at its height. API currently pays an
annualised dividend of 4 pence per share which is not covered by EPRA
earnings, with cover of approximately 80% for the last reported quarter ended
30 September 2023. In recognition of these challenges, and the impact on API's
share price and discount to EPRA NTA per share, the API Board elected to
undertake a comprehensive review of API's strategic options in Q3 2023 with
the objective of potentially delivering an uplift in value for API
Shareholders, as well as increased share liquidity and an enhanced and fully
covered dividend for API Shareholders.

Having assessed a wide range of potential strategic options in detail, the API
Board believes that there is a strong strategic and financial rationale for a
combination with CREI, noting in particular:

That based on the Closing Price per CREI Share, the exchange ratio represents
a premium of approximately 29.4% to API's Closing Price, 23.0% to API's
1-month volume-weighted average price and 26.5% to API's 3-month
volume-weighted average price as at the Latest Practicable Date;

API Shareholders are expected to experience an annualised uplift in dividends
of 7.3% (based on the Exchange Ratio and CREI's target dividend of 5.5 pence
per share) with the dividend being fully covered;

CREI's and API's shared income-focused approach to investing in diversified UK
commercial property, the complementary nature of their two portfolios, similar
sectoral weightings and sustainability credentials;

The enhanced capital structure of the Combined Group and its superior ability
to address future refinancing events as a consequence;

The opportunity for API Shareholders to remain invested, with ongoing exposure
to API's attractive portfolio and its growth prospects through holding shares
in the Combined Group;

The superior valuation at which CREI's shares have historically traded
relative to API's, with an average discount to EPRA NTA per share of
approximately 11% over the last year, compared to approximately 37% for API,
and approximately 10% over the last 3 years compared to approximately 29% for
API;

The anticipated increase in share liquidity by virtue of the Combined Group's
enhanced scale, potential index weightings and broader appeal to investors;

The strong track record of Custodian Capital, as demonstrated by CREI's total
shareholder returns over time relative to peers; and

The commitment of the CREI Board to strong corporate governance, including
through the appointment of two API Directors and the transition to a fully
independent board following the integration of the two companies.

In summary, the API Board is firmly of the view that a combination with CREI
represents an attractive opportunity for API Shareholders to benefit from a
significant premium and enhanced share liquidity and dividend income through
continued investment in a differentiated REIT of improved scale.

Accordingly, following careful consideration, the API Directors unanimously
intend to recommend the Merger to API Shareholders.

Background to, and Reasons for, the CREI DIRECTORS' Recommendation

The CREI Board believes there is a compelling strategic and financial
rationale for the Merger. The CREI Board views API's portfolio as
complementary to the CREI portfolio based on API's similar property strategy
and CREI's current sector and geographical weightings. The Merger will result
in a substantially larger portfolio generating the scale to support a larger
weighting in key indices and broaden appeal to investors.

CREI and API have both pursued an income-focused investment strategy,
exploiting the mispricing of good secondary and smaller lot size properties to
drive higher income returns, without adding property specific or concentration
risk. The combined portfolio resulting from the Merger will support the
strategies sought by shareholders on both registers in a larger, more liquid,
and broadly diversified portfolio.

The Merger is expected to result in material cost savings, including a
reduction in management fees (resulting in lower ongoing charges as a
percentage of NTA), the removal of duplicated corporate expenses and other
potential operational efficiencies, which together with CREI's progressive
dividend policy, is expected to improve total shareholder returns. This
transaction will further enhance the ability of the Combined Group to grow and
address future refinancing events with a stronger and more resilient balance
sheet.

Consequently, the CREI Board believes that the Merger is of benefit to the
existing CREI Shareholders as it will grow and diversify the CREI portfolio
while reducing key costs as a proportion of net asset value and driving total
shareholder returns.

Accordingly, following careful consideration, the CREI Directors unanimously
intend to recommend that CREI Shareholders vote in favour of the CREI
Resolution at the CREI General Meeting.

Irrevocable undertakings and letter of intent

CREI has received irrevocable undertakings from each of the API Directors who
are interested in API Shares to vote in favour of the Scheme at the Court
Meeting and vote in favour of the API Resolution at the API General Meeting
(or, in the event that the Merger is implemented by way of a Takeover Offer,
to accept or procure acceptance of the Takeover Offer), in respect of, in
aggregate 295,092 API Shares representing approximately 0.08 per cent. of the
issued share capital of API as at the Latest Practicable Date.

CREI has also received a letter of intent to vote in favour of the Scheme at
the Court Meeting and in favour of the API Resolution at the API General
Meeting (or, in the event that the Merger is implemented by way of Takeover
Offer, to accept or procure acceptance of the Takeover Offer), from Brooks
Macdonald Asset Management in respect of 11,376,425 API Shares representing
approximately 2.98 per cent. of the issued share capital of API as at the
Latest Practicable Date.

In total, therefore, CREI has received irrevocable undertakings and a letter
of intent, including those irrevocable undertakings from all API Directors, in
respect of 11,671,517 API Shares in aggregate, representing approximately 3.06
per cent. of the issued ordinary share capital of API as at the Latest
Practicable Date.

In connection with the CREI General Meeting, those CREI Directors, together
with certain of Ian Mattioli's close relatives and related trusts, that hold
CREI Shares have irrevocably undertaken to vote in favour of the CREI
Resolution at the CREI General Meeting in respect of 6,204,817 CREI Shares in
aggregate, representing approximately 1.41 per cent. of the issued ordinary
share capital of CREI as at the Latest Practicable Date.

Further details of these irrevocable undertakings and letters of intent are
set out in Appendix 3 to this Announcement.

INFORMATION ON crei

CREI, established in 2014, is a UK real estate investment trust with a
portfolio comprising high quality properties predominantly let to
institutional grade tenants throughout the UK, principally characterised by
properties with individual values of less than £10 million at acquisition.
CREI seeks to provide investors with an attractive level of income and the
potential for capital growth from a portfolio with strong environmental
credentials, striving to be the REIT of choice for private and institutional
investors seeking high and stable dividends from well diversified UK real
estate. In line with CREI's published growth strategy, its investment policy
has been amended to specify that CREI is committed to seeking further growth,
which may involve strategic property portfolio acquisitions and corporate
consolidation, such transactions potentially including public and private
companies, holding companies and special purpose vehicles.

CREI's portfolio was valued at £602 million as at 31 December 2023 with an
EPRA Topped-Up Net Initial Yield of 6.2%, a reversionary yield of 7.8%, a 41%
weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of
£413 million or 93.7 pence per CREI share. As at the Latest Practicable Date,
CREI had a market capitalisation of £351 million. CREI is externally managed
by Custodian Capital, a property management and investment business which is
regulated by the FCA.

A fundamental element of CREI's strategy is to target smaller sized
properties, principally characterised by properties with individual values of
less than £10 million at acquisition, to capture the yield advantage
available relative to larger sized properties. In the period from 2010 - 2023,
data sourced from PropertyData((2)) shows that there is a transaction yield
advantage of approximately 150 basis points between properties with individual
values below £10 million versus properties with individual values above £10
million, compared to a yield advantage of approximately 60 basis points
between 2000 - 2010. The CREI Board believes that this implied increase in
yield differential since 2010 is not entirely reflective of a rise in risk
associated with smaller properties but also due to a change in the supply and
demand dynamics in the market. The CREI Board believes these dynamics are
principally because of an increase in strategies that pursue larger sized
properties, which has resulted in a reduction in the associated yields, which
has coincided with those same investors reducing their exposure to smaller
sized properties and thus increasing the supply of such assets and associated
yields.

Custodian Capital is a wholly-owned subsidiary of Mattioli Woods, the
specialist wealth management and employee benefits business, with in excess of
£15 billion of assets under management, administration or advice. CREI
entered the UK REIT regime on 27 March 2014. As a consequence of CREI
continuing to be a REIT and meeting the relevant conditions, it should not be
subject to UK corporation tax on the profits (income and capital gains)
derived from its investment in its property portfolio and while CREI remains
within the UK REIT regime, the disposal of any properties currently held by it
and used within its property rental business should continue to be tax exempt.

((2) Average transaction yields between Q1 2010 - Q1 2023 as per
PropertyData.)

Information on API

API, established in 2003, is a UK real estate investment trust investing in a
diversified portfolio of UK commercial properties in the industrial, office,
retail and "other" sectors with the objective of providing shareholders with
an attractive level of income together with the prospect of income and capital
growth.

API's portfolio was valued at £439 million as at 31 December 2023 with an
EPRA Topped-Up Net Initial Yield of 5.4%, a reversionary yield of 7.3%, a 48%
weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of
£299 million or 78.5 pence per API share. As at the Latest Practicable Date,
API had a market capitalisation of £183 million.

intentions for the combined Group

Property strategy

With effect from completion of the Merger, Custodian Capital will provide
investment management, administrative and advisory services to the Combined
Group. Custodian Capital expects to continue each company's ongoing programme
of asset disposals, subject to prevailing sector specific market conditions at
the time of such disposals, to fund ongoing capital expenditure programmes and
reduce the quantum of variable rate debt in the Combined Group. Ongoing
capital expenditure is essential to the rental performance of the portfolio of
the Combined Group and will be prioritised over new acquisitions, in part to
meet target environmental commitments.

Board composition and governance arrangements

Following completion of the Merger, it is expected that Jill May and Sarah
Slater will join the CREI Board as non-executive directors. The CREI Board
believes that these appointments will deliver an appropriately balanced board,
with the complementary experience and skills necessary to drive the Combined
Group forward following the Merger and to provide good continuity for API
Shareholders. Post-Merger, the CREI Board will therefore comprise: David
MacLellan, Elizabeth McMeikan, Hazel Adam, Malcolm Cooper, Chris Ireland, Ian
Mattioli MBE, Jill May and Sarah Slater.

Following the integration of the API portfolio, the CREI Board expects to
conduct a review of its succession plan, assessing its composition and size to
ensure an appropriate combination of skills, experience, diversity and
knowledge.

As part of that review, Ian Mattioli MBE has informed the CREI Board of his
intention to retire as a director of CREI at the annual general meeting prior
to the conclusion of the Transition Period, which will result in a fully
independent board. The CREI Board values Ian Mattioli MBE as a founding
director of CREI and a representative of individual private clients of
Custodian Capital's parent company, Mattioli Woods (the "MW Clients"). The MW
Clients currently represent approximately 65 per cent. of the CREI shareholder
register by value((3)) and Ian's intention reflects the fact that this
proportion is expected to reduce substantially as a consequence of the Merger.
The CREI Board has high regard for Ian's insight and expertise, and it is
expected that he will continue to serve a valuable role for CREI in his
capacity as chair of Custodian Capital, Chief Executive Officer of Mattioli
Woods and an ongoing representative of MW Clients, including attendance at
board meetings as part of the senior management team of Custodian Capital. Ian
Mattioli MBE and his family own 6.1 million CREI Shares (representing
approximately 1.4 per cent. of the CREI shareholder register by value as at
the Latest Practicable Date) and intend to remain long-term shareholders of
the Combined Group.

CREI intends to delist API and to surrender API's registration as an
authorised closed-ended collective investment scheme regulated by the GFSC
following the Effective Date. Consequently, API will not require listed
company governance structures and accordingly, it is intended that the API
Directors will cease to be directors of API and its subsidiaries (as
applicable) with effect from completion of the Merger.

As CREI intends to cancel API's admission to trading on the London Stock
Exchange following completion of the Merger, certain functions which exist in
relation to API's status as a publicly traded company will no longer be
required or will be reduced in size, reflecting the new structure within the
Combined Group.

((3) Based on shareholder registers as at 31 December 2023, shares held by
Mattioli Woods on behalf of discretionary managed portfolios operated on
behalf of its clients represented 3.5 per cent. and 6.4 per cent. of the CREI
and API shareholder registers by value, respectively.)

Management and employees

The API Group does not have any employees and therefore does not operate any
pension scheme, nor does it have any arrangements in place for any employee
involvement in its capital. API has no place of business that will be affected
by the Merger, fixed assets (other than its property portfolio), research and
development function or headquarters. CREI has no intention to change these
features of the API Group, or to introduce any management incentivisation
arrangements for the Combined Group following completion of the Merger. It is
expected that API's existing investment management agreement (which includes
provisions for an orderly handover) will be terminated.

Management arrangements and fees for the Combined Group

With effect from completion of the Merger, it has been agreed between CREI and
Custodian Capital that:

·      Custodian Capital will waive its management fee in relation to
the NAV attributable to API for the first nine months following completion of
the Merger;

·      there will be a reduction in the management fees payable by CREI
to Custodian Capital for the duration of the Transition Period. This will be
implemented through the consolidation of the first two fee tiers into one fee
tier, such that the consolidated fee tier will be calculated as a fee of 0.75
per cent. in respect of the NAV of the Combined Group which is less than or
equal to £500 million (rather than a fee of 0.90 per cent. in respect of NAV
up to £200 million and 0.75 per cent. up to £500 million);

·      in recognition of the waiver and reduction of fees, the CREI
Board has agreed to an extension of the term of Custodian Capital's
appointment as investment manager which will continue from the Effective Date
with either party able to serve 12 months' written notice to terminate the
management arrangements for the Combined Group, save that such notice may not
be served prior to the conclusion of the Transition Period; and

·      in connection with Custodian Capital's additional work on the
Merger, CREI shall pay Custodian Capital a one-off project fee of £350,000
(exclusive of VAT), which shall reduce to £75,000 (exclusive of VAT) if the
Merger does not become Effective.

These changes are documented in the Amended and Restated Investment Management
Agreement, the terms of which shall take effect from the Effective Date.

The CREI Board believes that the terms of the Amended and Restated Investment
Management Agreement will promote management stability and ensure that
Custodian Capital is appropriately incentivised to continue to invest in its
capabilities for the benefit of the Combined Group.

The entry by CREI into the Amended and Restated Investment Management
Agreement falls within Listing Rule 11.1.10R (smaller related party
transactions) and therefore CREI Shareholders are not required to approve
these amendments.

At the end of the Transition Period, the CREI Management Engagement Committee
intends to conduct its regular review of the terms of Custodian Capital's
appointment to ensure that the terms comply with market and industry practice
and remain in the best interests of the shareholders of the Combined Group.

Listing and registered office

Following the Effective Date, CREI will remain listed on the Premium segment
of the Official List and admitted to trading on the Main Market. The
registered office of CREI will remain in Leicester.

REIT status

Both the CREI Group and the API Group fall within the UK REIT regime and
benefit from the tax efficiencies provided by that regime. The Combined Group
is expected to fall within the UK REIT regime and the relevant tax measures
will continue to apply to the Combined Group.

Trading facilities

It is intended that dealings in, and registration of transfers of, API Shares
(other than the registration of the transfer of the Scheme Shares to CREI
pursuant to the Scheme) will be suspended shortly before the Effective Date at
a time to be set out in the Scheme Document. It is further intended that
applications will be made to the London Stock Exchange to cancel trading in
the API Shares on the Main Market, and to the Financial Conduct Authority to
cancel the listing of the API Shares on the Official List, in each case with
effect from or shortly following the Effective Date. Further details about the
de-listing and cancellation of trading of the API Shares can be found in
paragraph 14 of this Announcement.

No statements in this paragraph 10 are "post-offer undertakings" for the
purposes of Rule 19.5 of the Takeover Code.

Offer Related Arrangements

Confidentiality Agreement

On 10 July 2023, API and CREI entered into a confidentiality agreement in
relation to the Merger (the "Confidentiality Agreement"), pursuant to which,
amongst other things, CREI and API gave certain mutual undertakings to: (a)
subject to certain exceptions, keep information relating to each other and the
Merger confidential and not to disclose it to third parties; and (b) use such
confidential information only in the consideration and evaluation of CREI's
and API's respective businesses in relation to a possible acquisition of the
entire issued and to be issued share capital of API, or of all or a material
part of the assets or undertaking of API, or any transaction having
substantially equivalent effect to the same (the "Purpose"). These
confidentiality obligations will remain in force until the earlier of 24
months from 10 July 2023 and completion of any transaction within the meaning
of the Purpose, which would include the Merger. In the Confidentiality
Agreement, CREI and API also give customary standstill undertakings in
relation to each of themselves and their concert parties, all of which cease
to apply upon the release of this Announcement.

Dividends

 

Expected timetable for the Merger

 

The boards of CREI and API will retain their current dividend policies for the
period to the Effective Date.

 

CREI and API have agreed that:

·      API Shareholders will be entitled to receive and retain a
quarterly final dividend of up to 1.0 penny per API Share in respect of the
quarter ended 31 December 2023 (the "API Q4 Dividend"); and

·      CREI Shareholders will be entitled to receive and retain a
quarterly interim dividend of up to 1.375 pence per CREI Share in respect of
the quarter ended 31 December 2023 (the "CREI Q3 Dividend").

 

The API Q4 Dividend and the CREI Q3 Dividend will each be declared on, and
paid by reference to, a date falling prior to the Effective Date, consistent
with their respective past practices as to timing and amount of such
dividends. Payment of the API Q4 Dividend and the CREI Q3 Dividend is expected
to occur in late February 2024. Further announcements will be made by the
boards of CREI and API in due course.

 

It is currently expected that the Merger will become Effective in early April
2024. The New CREI Shares will be issued credited as fully paid-up and will
rank pari passu in all respects with the CREI Shares in issue at the time the
New CREI Shares are issued, including the right to receive and retain
dividends and other distributions declared, made or paid by reference to a
record date on or after the Effective Date. Accordingly, based on the expected
timetable for the Merger to become Effective, Scheme Shareholders, assuming
the Scheme Shareholder has retained their New CREI Shares, would receive the
quarterly final dividend to be declared by CREI in respect of the quarter
ended 31 March 2024 (the "CREI Q4 Dividend").

 

Delay to the expected timetable for the Merger

 

If, however, the timetable for the Merger is delayed such that the Merger will
become Effective after the expected date (but prior to the Long Stop Date),
CREI and API have agreed that API Shareholders will be entitled to receive and
retain any quarterly interim dividend declared by API in respect of the
quarter ended 31 March 2024 (the "API Q1 Dividend") and CREI Shareholders will
be entitled to receive and retain any CREI Q4 Dividend declared by CREI, in
each case, to be declared consistent with their respective past practices as
to timing and amount of such dividends.

 

Amendments to the Exchange Ratio

The Exchange Ratio will be adjusted:

(a)   in the event that either CREI or API announces, declares, makes or
pays any one or more dividends or other distributions prior to the Merger
becoming Effective that is or are, in aggregate, in excess of: (i) 1.375 pence
per CREI Share in respect of the CREI Q3 Dividend and, if the ex dividend date
falls prior to the Merger becoming Effective, 1.375 pence per CREI Share in
respect of the CREI Q4 Dividend; or (ii) 1.0 penny per API Share in respect of
the API Q4 Dividend and, if the ex-dividend date falls prior to the Merger
becoming Effective, 1.0 penny per API Share in respect of the API Q1 Dividend
(the amount of such excess in each case being the "Excess"), in which event
the adjustment to the Exchange Ratio shall be to take account of the Excess;
and/or

(b)   in the event that (i) the API Q1 Dividend is not covered by the income
earned in the relevant quarter (the "API Q1 Uncovered Dividend Portion"), or
(ii) the CREI Q4 Dividend is not covered by the income earned in the relevant
quarter (the "CREI Q4 Uncovered Dividend Portion"), in which event the
adjustment to the Exchange Ratio shall be to take account of the API Q1
Uncovered Dividend Portion and/or the CREI Q4 Uncovered Dividend Portion;
and/or

(c)   if, at the time of completion of the Merger, either CREI or API has
announced, declared, made or paid the CREI Q4 Dividend or the API Q1 Dividend,
respectively, but the other has not announced, declared, made or paid its
corresponding dividend (a "Dividend Discrepancy"), in which case the
adjustment to the Exchange Ratio shall be to take account of the Dividend
Discrepancy.

 

In the event that any adjustment to the Exchange Ratio is required pursuant to
(a), (b) and/or (c) above, such adjustment will be made by reference to the
relevant Rolled-Forward Unaudited EPRA NTA(s) as at 31 December 2023. Any
adjustment to the Exchange Ratio shall be the subject of an announcement and,
for the avoidance of doubt, shall not be regarded as constituting any revision
or variation of the terms of the Scheme or the Merger. To the extent that a
dividend or distribution has been declared but not paid prior to the Effective
Date, and such dividend or distribution is cancelled, then the Exchange Ratio
shall not be subject to change in accordance with this paragraph.

Following completion of the Merger, the Combined Group intends to focus on
maintaining CREI's dividend yield and dividend cover going forward. On the
basis of market conditions as at the date of this Announcement, CREI is
targeting a dividend per share of at least 5.5 pence per CREI Share for the
year ending 31 March 2024, and CREI's aim is to grow its dividend on a
sustainable basis as earnings grow through capturing the available rental
growth in the combined portfolio's reversionary potential.

The dividends referred to above are not intended as a profit forecast or
estimate for CREI or API for any period and no statement in this Announcement
should be interpreted to mean that earnings or earnings per CREI Share or per
API Share for the current or future financial years would necessarily match or
exceed the historical published earnings or earnings per CREI Share or per API
Share.

Scheme Process

It is intended that the Merger will be effected by means of a Court-sanctioned
scheme of arrangement between API and the Scheme Shareholders under Part VIII
of the Companies Law, further details of which are contained in this
Announcement and full details of which will be set out in the Scheme Document
to be published by API in due course. The procedure involves, among other
things, an application by API to the Court to sanction the Scheme, in
consideration for which Scheme Shareholders who are on the register of members
at the Scheme Record Time will receive the New CREI Shares on the basis of the
Exchange Ratio as set out in paragraph 1 above. The purpose of the Scheme is
to provide for CREI to become the holder of the entire issued ordinary share
capital of API.

The New CREI Shares will be issued in registered form, credited as fully paid,
and will be capable of being held in both certificated and uncertificated
form. They will rank pari passu in all respects with the existing CREI Shares,
including the rights to receive all dividends and other distributions (if any)
declared, paid or made by CREI by reference to a record date falling after the
Effective Date.

Fractions of New CREI Shares will not be allotted or issued pursuant to the
Scheme and entitlements of Scheme Shareholders will be rounded down to the
nearest whole number of New CREI Shares. All fractional entitlements to New
CREI Shares will be aggregated and sold in the market as soon as practicable
after the Effective Date. The net proceeds of such sale (after deduction of
all expenses and commissions incurred in connection with the sale) will be
distributed by CREI in due proportions to Scheme Shareholders who would
otherwise have been entitled to such fractions, save that individual
entitlements to amounts of less than £5 will be retained for the benefit of
the Combined Group.

The Merger will be subject to the Conditions and the further terms referred to
in Appendix 1 to this Announcement and the full terms and conditions to be set
out in the Scheme Document, and will only become Effective if, among other
things, the following events occur on or before 11:59 p.m. (London time) on
the Long Stop Date (or such later date as CREI and API may, with the consent
of the Panel, agree and, if required, the Court may allow):

approval of the Scheme by a majority in number of the Scheme Shareholders who
are present and voting (and entitled to vote), either in person or by proxy,
at the API Court Meeting or at any adjournment thereof and who represent not
less than 75 per cent. of the voting rights of such Scheme Shareholders;

the API Resolution is passed at the API General Meeting or at any adjournment
thereof by the requisite majority of votes validly cast on the API Resolution,
whether in person or by proxy;

the CREI Resolution is passed at the CREI General Meeting or at any
adjournment thereof by the requisite majority;

the FCA having acknowledged to CREI or its agent (and such acknowledgement not
having been withdrawn) that the application for the admission of the New CREI
Shares to the Official List with a Premium segment listing has been approved
and (after satisfaction of any conditions to which such approval is expressed
to be subject) will become effective as soon as a dealing notice has been
issued by the FCA and any listing conditions having been satisfied;

the London Stock Exchange having acknowledged to CREI or its agent (and such
acknowledgement not having been withdrawn) that the New CREI Shares will be
admitted to trading on the Main Market;

following the API Meetings, the Scheme is sanctioned by the Court (without
modification, or with modification on terms agreed by CREI and API); and

the Scheme becoming Effective by no later than 11.59 p.m. on the Long Stop
Date.

The Scheme will become Effective at the time and date to be stated in the
Scheme Court Order. Upon the Scheme becoming Effective: (i) it will be binding
on all Scheme Shareholders, irrespective of whether or not they attended or
voted at the API Meetings (and if they attended and voted, whether or not they
voted in favour); and (ii) share certificates in respect of API Shares will
cease to be valid and entitlements to API Shares held within the CREST system
will be cancelled.

The API Resolution to be proposed at the API General Meeting will, amongst
other matters, provide that the Articles be amended to incorporate provisions
requiring any API Shares issued after the Scheme Record Time (other than to
CREI and/or its nominees) to be automatically transferred to CREI on the same
terms as the Merger (other than terms as to timings and formalities). The
provisions of the Articles (as amended) will avoid any person (other than CREI
and its nominees) holding API Shares after the Effective Date.

The Scheme will lapse and the Merger will not take place if:

either the API Court Meeting or the API General Meeting are not held on or
before the 22nd day after the expected date of such API Meetings, to be set
out in the Scheme Document in due course (or such later date as may be agreed
between CREI and API with the consent of the Panel (and that the Court may
allow if required));

the Sanction Hearing is not held on or before the 22nd day after the expected
date of the Sanction Hearing, to be set out in the Scheme Document in due
course (or such later date as may be agreed between CREI and API with the
consent of the Panel (and that the Court may allow if required));

the Scheme does not become Effective on or before 11:59 p.m. (London time) on
the Long Stop Date,

provided, however, that the deadlines for the timing of the API Court Meeting,
the API General Meeting and the Sanction Hearing, to be set out in the Scheme
Document in due course, may be waived by CREI, and the Long Stop Date may be
extended by agreement in writing between CREI and API (with the Panel's
consent and as the Court may allow, if such consent and/or approval is/are
required). If any of the dates and/or times in the Scheme Document change, the
revised dates and/or times will be notified to API Shareholders by
announcement through a Regulatory Information Service, with such announcement
being made available on API's website at www.abrdnpit.co.uk
(http://www.abrdnpit.co.uk) .

The Scheme Document will include full details of the Scheme, together with
notices of the API Court Meeting and the API General Meeting and the expected
timetable, and will specify the action to be taken by Scheme Shareholders. It
is expected that the Scheme Document, together with the Forms of Proxy, will
be published as soon as practicable and in any event within 28 days of the
date of this Announcement (or such later date as may be agreed by CREI and API
with the consent of the Panel).

Subject, amongst other things, to the satisfaction or waiver of the
Conditions, it is expected that the Scheme will become Effective in early
April 2024. The Scheme will be governed by Guernsey law and will be subject to
the jurisdiction of the Court. The Scheme will be subject to the applicable
requirements of the Takeover Code, the Panel, the London Stock Exchange and
the FCA.

CREI has reserved the right to elect, subject to the consent of the Panel, for
the Merger to be implemented by way of a Takeover Offer. In this event, the
Takeover Offer will be implemented on the same terms, so far as applicable, as
those which would apply to the Scheme. If CREI does elect to implement the
Merger by way of a Takeover Offer, and if sufficient acceptances of such
Takeover Offer are received and/or sufficient API Shares are otherwise
acquired, it is the intention of CREI to apply the provisions of Part XVIII of
the Companies Law to acquire compulsorily any outstanding API Shares to which
such Merger relates.

Delisting OF API SHARES

Prior to the Scheme becoming Effective, it is intended that API will make an
application to the FCA for the cancellation of the listing of API Shares on
the Official List, and to the London Stock Exchange to cancel the admission to
trading of the API Shares on the Main Market, in each case to take effect from
or shortly after the Effective Date.

It is expected that the last day of dealings in API Shares on the Main Market
will be the Business Day immediately prior to the Sanction Hearing and no
transfers will be registered after 6.00 p.m. (London time) on that date.

Following the Scheme becoming Effective. CREI (and/or its nominee(s)) will
acquire the Scheme Shares fully paid and free from all liens, equitable
interests, charges, encumbrances and other third party rights of any nature
whatsoever and together with all rights attaching to them including the right
to receive and retain all dividends and distributions (if any) declared after
the Effective Date.

Admission of, and commencement of dealings in, the New CREI Shares

Applications will be made to the FCA and to the London Stock Exchange,
respectively, for the New CREI Shares to be issued in consideration for the
Merger to be admitted to the premium listing segment of the Official list and
to be admitted to trading on the Main Market.

It is expected that Admission will become effective and that unconditional
dealings in the New CREI Shares will commence on the London Stock Exchange, at
8.00 a.m. (London time) on the first Business Day following the date on which
the Scheme becomes Effective.

Details of how API Shareholders can hold, access and trade in CREI Shares will
be set out in the Scheme Document. API Shareholders resident in the United
Kingdom will be able to hold their CREI Shares through any of the ways
currently available to CREI Shareholders, including through an intermediary of
their own choice should they wish to do so.

CREI Shareholder Approval

The Merger will be conditional on, among other things, the CREI Resolution
being passed by the requisite majority of CREI Shareholders at the CREI
General Meeting.

CREI is required to publish a prospectus in connection with the admission of
the New CREI Shares. Accordingly, CREI will prepare the Combined Circular and
Prospectus which will contain a notice convening the CREI General Meeting and
information relating to, amongst other things, the Combined Group and the New
CREI Shares.

It is expected that the Combined Circular and Prospectus will be published and
posted to CREI Shareholders at the same time as the Scheme Document is posted
to API Shareholders. The Combined Circular and Prospectus will be made
available by CREI on its website at www.custodianreit.com
(http://www.custodianreit.com) and by API on its website at www.abrdnpit.co.uk
(http://www.abrdnpit.co.uk) . API and CREI urge API Shareholders to read the
Scheme Document and the Combined Circular and Prospectus carefully as each
will contain important information relating to the Merger. API Shareholders
are also advised to read the Combined Circular and Prospectus, as it will
contain important information relating to the New CREI Shares. Any vote,
decision in respect of or other response to the Merger (or the Scheme, if
applicable) should only be made on the basis of the information contained in
the Scheme Document and the Combined Circular and Prospectus.

Disclosure of Interests

Except for the irrevocable undertakings referred to in paragraph 7 above and
save as otherwise disclosed in this Announcement, as at the close of business
on the Latest Practicable Date, neither CREI nor any of the CREI Directors,
nor, so far as CREI is aware, any person acting in concert (within the meaning
of the Takeover Code) with CREI:

has any interest in, or right to subscribe for, any relevant securities of
API; nor

has any short position in API Shares, including any short position under a
derivative, any agreement to sell, any delivery obligation or right to require
another person to purchase or take delivery of relevant securities of API; nor

has borrowed or lent any relevant securities of API or entered into any
financial collateral arrangements relating to relevant securities of API; nor

is party to any dealing arrangement of the kind referred to in Note 11 on the
definition of acting in concert in the Takeover Code in relation to relevant
securities of API.

An "interest in" securities for these purposes arises, in summary, when a
person has long economic exposure, whether absolute or conditional, to changes
in the price of securities (and a person who only has a short position in
securities is not treated as interested in those securities). In particular, a
person will be treated as having an 'interest' by virtue of the ownership,
voting rights or control of securities, or by virtue of any agreement to
purchase, option in respect of, or derivative referenced to securities.

In the interests of secrecy prior to this Announcement, it has not been
practicable for CREI to make enquiries of all of its concert parties in
advance of the release of this Announcement. Therefore, if CREI becomes aware,
following the making of such enquiries, that any of CREI's concert parties
have any additional interests in relevant securities of API, all relevant
details in respect of API's concert parties will be included CREI's Opening
Position Disclosure in accordance with the Takeover Code.

Consents

Each of Deutsche Numis, Lazard and Winterflood has given and not withdrawn
their consent to the publication of this Announcement with the inclusion
herein of the references to their names in the form and context in which they
appear.

RSM UK Corporate Finance LLP has given and not withdrawn its consent to the
inclusion in this Announcement of its report on the Custodian Quantified
Financial Benefits Statement, with the inclusion herein to the references to
its name and, where applicable, report in the form and context in which it is
included.

Each of Knight Frank and Savills has given and not withdrawn its consent to
the publication of its valuation report(s) in this Announcement with the
inclusion herein to the references to its name and, where applicable, report
in the form and context in which it is included.

Documents published on a website

In accordance with Rule 26.2 of the Takeover Code, copies of the following
documents will, to the extent not already published there, by no later than
12.00 noon on the Business Day following the date of this Announcement, be
published on CREI's website at www.custodianreit.com
(http://www.custodianreit.com) and API's website at www.abrdnpit.co.uk
(http://www.abrdnpit.co.uk) during the Offer Period:

this Announcement;

the irrevocable undertakings and a letter of intent referred to in paragraph 7
above and summarised in Appendix 3 to this Announcement;

the Confidentiality Agreement referred to in paragraph 11 above;

the consent letters from each of Deutsche Numis, Lazard, Winterflood, Knight
Frank and Savills referred to in paragraph 18 above;

the Knight Frank valuation report in respect of certain properties comprising
the CREI portfolio as set out in Part A of Appendix 4 of this Announcement;

the Savills valuation report in respect of certain properties comprising the
CREI portfolio as set out in Part B of Appendix 4 of this Announcement; and

the Knight Frank valuation report in respect of the API portfolio as set out
in Part C of Appendix 4 of this Announcement.

The contents of CREI's website and API's website, and any website accessible
from hyperlinks, are not incorporated into and do not form part of this
Announcement.

General

Appendix 2 to this Announcement contains bases and sources of certain
information contained in this Announcement. Details of irrevocable
undertakings and the letter of intent received are set out in Appendix 3.
Property valuation reports for CREI and API (each as at 31 December 2023)
pursuant to Rule 29 of the Takeover Code are set out in Appendix 4. Certain
terms used in this Announcement are defined in Appendix 6.

In the event that the assets within either CREI's or API's property portfolios
were to be sold at the valuations contained in the valuation reports set out
in Appendix 4 to this Announcement, any gains realised on such disposals may
be subject to taxation in the UK and/or (in the case of API) Guernsey.

Generally, disposals by a UK REIT of assets located in the UK held for the
purpose of a property rental business should be exempt from UK corporation
tax, however there are specific rules which can result in assets held as part
of the property rental business being subject to tax on disposal, for example
when a property is materially developed and sold within three years of
completion of that development. In connection with the Merger it is not
contemplated that the aforementioned liability to taxation will crystallise.

For the purposes of Rule 29.5 of the Takeover Code, the CREI Board confirms
that each of Knight Frank and Savills has confirmed to it that an updated
valuation of CREI's property portfolio as at the date of this Announcement
would not be materially different from the valuation given by each of Knight
Frank and Savills as at 31 December 2023 and contained in Knight Frank's and
Savills' valuation reports respectively, set out in Appendix 4 to this
Announcement.

For the purposes of Rule 29.5 of the Takeover Code, the API Board confirms
that Knight Frank has confirmed to it that an updated valuation of API's
property portfolio as at the date of this Announcement would not be materially
different from the valuation given by Knight Frank as at 31 December 2023 and
contained in Knight Frank's valuation report set out in Appendix 4 to this
Announcement.

For the purposes of Rule 28 of the Takeover Code, the Quantified Financial
Benefits Statement is the responsibility of CREI and the CREI Directors.
Appendix 5 to this Announcement sets out the Quantified Financial Benefits
Statement relating to cost savings and synergies arising out of the Merger and
provides underlying information and bases of belief. Appendix 5 also includes
reports from CREI's reporting accountant, RSM UK Corporate Finance LLP, and
its financial adviser Deutsche Numis in connection with the Quantified
Financial Benefits Statement, as required pursuant to Rule 28.1(a) of the
Takeover Code, and provides underlying information and bases for the
accountant's and advisers' respective reports.

This Announcement does not constitute an offer for sale of any securities or
an invitation to purchase or subscribe for any securities. API Shareholders
are advised to read carefully the Scheme Document and related Forms of Proxy
once they have been dispatched.

A pre-recorded video briefing in relation to the Merger, presented by Richard
Shepherd-Cross of Custodian Capital, is available on CREI's website at
www.custodianreit.com (http://www.custodianreit.com) .

Enquiries

 Custodian Property Income REIT plc (CREI)

 David MacLellan (Chair)

                                                                  via Deutsche Numis
 Deutsche Numis (Financial Adviser and Corporate Broker to CREI)  +44 20 7260 1000‎

 Nathan Brown

 Stuart Ord

 Alexander Kladov

 George Shiel
 FTI Consulting (Financial PR Adviser to CREI)                    +44 20 3727 1000

 Richard Sunderland

 Andrew Davis

 Oliver Parsons
 abrdn Property Income Trust Limited (API)

 James Clifton-Brown (Chair)

                                                                  via Winterflood

 Lazard (Financial Adviser to API)

 Patrick Long                                                     +44 20 7187 2000

 Jolyon Coates
 Winterflood (Corporate Broker to API)

 Neil Langford                                                    +44 20 3100 0160

Stephenson Harwood LLP is acting as English legal adviser to CREI in
connection with the Merger.

Addleshaw Goddard LLP is acting as English legal adviser to API in connection
with the Merger.

Important notices

Numis Securities Limited (which is trading for these purposes as Deutsche
Numis) ("Deutsche Numis"), which is authorised and regulated by the Financial
Conduct Authority in the United Kingdom, is acting exclusively for CREI and
for no one else in connection with the Merger and/or any other matter referred
to in this Announcement and will neither regard any other person as its client
nor be responsible to anyone other than CREI for providing the protections
afforded to its clients or for providing advice in connection with the Merger,
the contents of this Announcement, or any other matters referred to in this
Announcement. Neither Deutsche Numis nor any of its affiliates owes or accepts
any duty, liability or responsibility whatsoever (whether direct, indirect,
consequential, whether in contract, in tort, under statute or otherwise) to
any person who is not a client of Deutsche Numis in connection with this
Announcement, any statement or other matter or arrangement referred to herein
or otherwise.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, is acting exclusively as
financial adviser to API and no one else in connection with the matters set
out in this Announcement and will not be responsible to anyone other than API
for providing the protections afforded to clients of Lazard nor for providing
advice in relation to the matters set out in this Announcement. Neither Lazard
nor any of its affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client of Lazard
in connection with this Announcement, any statement contained herein or
otherwise.

Winterflood Securities Limited ("Winterflood"), which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom, is acting
exclusively for API and no-one else in connection with the matters set out in
this Announcement and will not be responsible to anyone other than API for
providing the protections afforded to customers of Winterflood or for
providing advice in relation to the matters set out in this Announcement.
Neither Winterflood nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of Winterflood in connection with this Announcement, any statement
contained herein or otherwise.

Further information

This Announcement is for information purposes only and is not intended to and
does not constitute, or form part of an offer, invitation or the solicitation
of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities, or the solicitation of any vote or approval in any
jurisdiction, pursuant to the Merger or otherwise, nor shall there be any
sale, issuance or transfer of securities of API in any jurisdiction in
contravention of applicable law. The Merger will be made solely pursuant to
the terms of the Scheme Document (or, if the Merger is implemented by way of a
Takeover Offer, the Offer Document), which will contain the full terms and
conditions of the Merger, including details of how API Shareholders may vote
in respect of the Merger. Any vote, approval, decision in respect of, or other
response to, the Merger should be made only on the basis of the information
contained in the Scheme Document and the Combined Circular and Prospectus (or
any other document by which the Merger is made by way of a Takeover Offer).

CREI will prepare the Combined Circular and Prospectus, containing information
on the New CREI Shares and the Combined Group. CREI and API urge API
Shareholders to read the Scheme Document and the Combined Circular and
Prospectus carefully when they become available because they will contain
important information in relation to the Merger, the New CREI Shares and the
Combined Group.

The statements contained in this Announcement are made as at the date of this
Announcement, unless some other time is specified in relation to them, and the
release of this Announcement shall not give rise to any implication that there
has been no change in the facts set out in this Announcement since such date.
This Announcement does not constitute a prospectus or prospectus equivalent
document.

No person should construe the contents of this Announcement as legal,
financial or tax advice. If you are in any doubt about the contents of this
Announcement or the action you should take, you are recommended to seek your
own independent financial advice immediately from your stockbroker, bank
manager, solicitor, accountant or from an independent financial adviser duly
authorised under FSMA if you are resident in the United Kingdom, or another
appropriately authorised independent financial adviser, if you are in a
territory outside the United Kingdom.

Neither the GFSC nor the States of Guernsey take any responsibility for the
financial soundness of API or for the correctness of any of the statements
made or opinions expressed with regard to it.

Overseas Shareholders

This Announcement has been prepared for the purpose of complying with Guernsey
law, English law, the Takeover Code, the Market Abuse Regulation, the
Disclosure Guidance and Transparency Rules and the Listing Rules and
information disclosed may not be the same as that which would have been
disclosed if this Announcement had been prepared in accordance with the laws
of jurisdictions outside the United Kingdom or Guernsey. Nothing in this
Announcement should be relied on for any other purpose.

The release, publication or distribution of this Announcement in or into
certain jurisdictions other than the United Kingdom or Guernsey may be
restricted by the laws and/or regulations of those jurisdictions and therefore
persons into whose possession this Announcement comes who are subject to the
laws and/or regulations of any jurisdiction other than the United Kingdom or
Guernsey should inform themselves about and observe any such applicable laws
and/or regulations in their jurisdiction. In particular, the ability of
persons who are not resident in the United Kingdom or Guernsey to vote their
Scheme Shares or API Shares (as applicable) with respect to the Scheme at the
API Court Meeting or the API Resolution at the API General Meeting, or to
appoint another person as proxy to vote at the API Court Meeting or the API
General Meeting on their behalf, may be affected by the laws of the relevant
jurisdiction in which they are located. Further details in relation to
Overseas Shareholders will be contained in the Scheme Document. Any failure to
comply with any such restrictions may constitute a violation of the securities
laws of any such jurisdiction. To the fullest extent permitted by applicable
law, the companies and persons involved in the Merger disclaim any
responsibility or liability for the violation of such restrictions by any
person.

Unless otherwise determined by CREI or required by the Takeover Code, and
permitted by applicable law and regulation, the Merger will not be made
available, in whole or in part, directly or indirectly, in, into or from a
Restricted Jurisdiction where to do so would violate the laws in that
jurisdiction and no person may vote in favour of the Merger by any such use,
means, instrumentality or from within a Restricted Jurisdiction or any other
jurisdiction if to do so would constitute a violation of the laws of that
jurisdiction. Copies of this Announcement and any formal documentation
relating to the Merger are not being, and must not be, directly or indirectly,
mailed or otherwise forwarded, distributed or sent in or into or from any
Restricted Jurisdiction and persons receiving such documents (including
custodians, nominees and trustees) must not mail or otherwise forward,
distribute or send them in or into or from any Restricted Jurisdiction. Doing
so may render invalid any related purported vote in respect of the Merger. If
the Merger is implemented by way of a Takeover Offer (unless otherwise
permitted by applicable law and regulation), the Takeover Offer may not be
made directly or indirectly, in or into, or by the use of mails or any means
or instrumentality (including, but not limited to, facsimile, e-mail or other
electronic transmission, telex or telephone) of interstate or foreign commerce
of, or of any facility of a national, state or other securities exchange of
any Restricted Jurisdiction and the Takeover Offer may not be capable of
acceptance by any such use, means, instrumentality or facilities.

Further details in relation to Overseas Shareholders will be contained in the
Scheme Document.

Forward-looking statements

This Announcement (including information incorporated by reference into this
Announcement), oral statements made regarding the Merger, and other
information published by CREI and API contain statements about CREI, API
and/or the Combined Group that are or may be deemed to be "forward-looking
statements". All statements other than statements of historical facts included
in this Announcement, may be forward-looking statements. Forward-looking
statements are prospective in nature and are not based on historical facts,
but rather on current expectations and projections of CREI and API about
future events, and are therefore subject to risks and uncertainties which
could cause actual results to differ materially from the future results
expressed or implied by the forward-looking statements.

 

The forward-looking statements contained in this Announcement include
statements relating to the expected effects of the Merger on CREI and API, the
expected timing and scope of the Merger and other statements other than
historical facts. Often, but not always, forward-looking statements can be
identified by the use of forward-looking words such as "plans", "expects" or
"does not expect", "is expected", "is subject to", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "should", "would", "might"
or "will" be taken, occur or be achieved. Forward looking statements include
statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects; and (ii)
business and management strategies and the expansion and growth of CREI's or
API's or the Combined Group's operations and potential synergies resulting
from the Merger.

Although CREI and API believe that the expectations reflected in such
forward-looking statements are reasonable, neither CREI nor API can give
assurance that such expectations will prove to be correct. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.

There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by such forward-looking
statements. These factors include, but are not limited to: the ability to
complete the Merger; the ability to obtain requisite regulatory and
shareholder approvals and the satisfaction of other Conditions on the proposed
terms; changes in the global political, economic, business and competitive
environments and in market and regulatory forces; changes in future exchange
and interest rates; changes in tax rates; future business combinations or
disposals; changes in general economic and business conditions; changes in the
behaviour of other market participants; the anticipated benefits from the
Merger not being realised as a result of changes in general economic and
market conditions in the countries in which CREI and API operate; weak,
volatile or illiquid capital and/or credit markets; changes in the degree of
competition in the geographic and business areas in which CREI and API
operate; and changes in laws or in supervisory expectations or requirements.
Other unknown or unpredictable factors could cause actual results to differ
materially from those expected, estimated or projected in the forward-looking
statements. If any one or more of these risks or uncertainties materialises or
if any one or more of the assumptions proves incorrect, actual results may
differ materially from those expected, estimated or projected. Such
forward-looking statements should therefore be construed in the light of such
factors.

Neither CREI nor API, nor any of their respective associates or directors,
officers or advisers, provides any representation, assurance or guarantee that
the occurrence of the events expressed or implied in any forward-looking
statements in this Announcement will actually occur. Given the risks and
uncertainties, you are cautioned not to place any reliance on these
forward-looking statements. Other than in accordance with their legal or
regulatory obligations, neither CREI nor API is under any obligation, and each
of CREI and API expressly disclaim any intention or obligation, to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per
cent. or more of any class of relevant securities of an offeree company or of
any securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the offer period and, if later, following the announcement in
which any securities exchange offeror is first identified. An Opening Position
Disclosure must contain details of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no
later than 3.30 p.m. (London time) on the 10th Business Day following the
commencement of the offer period and, if appropriate, by no later than 3.30
p.m. (London time) on the 10(th) Business Day following the announcement in
which any securities exchange offeror is first identified. Relevant persons
who deal in the relevant securities of the offeree company or of a securities
exchange offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the offeree
company or of any securities exchange offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain details of
the dealing concerned and of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule 8. A
Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no
later than 3.30 p.m. (London time) on the Business Day following the date of
the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. You should contact the Panel's Market Surveillance Unit on
+44 (0)20 7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing Disclosure.

Quantified Financial Benefits Statement

Statements of estimated cost savings and synergies relate to future actions
and circumstances which, by their nature, involve risks, uncertainties and
contingencies. As a result, the cost savings and synergies referred to may not
be achieved, may be achieved later or sooner than estimated, or those achieved
could be materially different from those estimated. Neither the Quantified
Financial Benefits Statement nor any other statement in this Announcement
should be construed as a profit forecast or interpreted to mean that the
Combined Group's earnings in the first full year following the Effective Date,
or in any subsequent period, would necessarily match or be greater than or be
less than those of CREI or API for the relevant preceding financial period or
any other period. For the purposes of Rule 28 of the Takeover Code, the
Quantified Financial Benefits Statement contained in this Announcement is the
responsibility of CREI and the CREI Directors.

 

No profit forecasts or estimates

No statement in this Announcement is intended as a profit forecast or profit
estimate for any period and no statement in this Announcement should be
interpreted to mean that earnings or earnings per share for CREI or API for
the current or future financial years would necessarily match or exceed the
historical published earnings or earnings per share for CREI or API.

Rounding

Certain figures included in this Announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that precede them.

Publication on a website

In accordance with Rule 26.1 of the Takeover Code, a copy of this Announcement
will be made available, subject to certain restrictions relating to persons
resident in Restricted Jurisdictions, on CREI's website at
www.custodianreit.com and API's website at www.abrdnpit.co.uk
(http://www.abrdnpit.co.uk) by no later than 12 noon (London time) on the
first Business Day following the date of this Announcement.

For the avoidance of doubt, neither the contents of these websites nor the
contents of any websites accessible from any hyperlinks is incorporated into
or forms part of this Announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Takeover Code, API Shareholders may
request a hard copy of this Announcement (and any information incorporated by
reference in this Announcement), free of charge, by contacting Northern Trust
during business hours on 01481 745001 (from within the United Kingdom) and +44
(0) 1481 745001 (from outside the United Kingdom) or by submitting a request
in writing to The Company Secretary, at team_api@ntrs.com. Calls are charged
at the standard geographic rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable international rate. Lines
will be open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public
holidays in England and Wales.

For persons who receive a copy of this Announcement in electronic form or via
a website notification, a hard copy of this Announcement will not be sent
unless so requested. Such persons may also request that all future documents,
announcements and information to be sent to them in relation to the Merger
should be in hard copy form.

Scheme Process

In accordance with Section 5 of Appendix 7 of the Takeover Code, API will
announce through a Regulatory Information Service key events in the Scheme
process including the outcomes of the API Meetings and the Sanction Hearing.

Unless otherwise consented to by the Court and the Panel, any modification or
revision to the Scheme will be made no later than the date which is 14 days
prior to the API Meetings (or any later date to which such meetings are
adjourned). In accordance with Section 11 of Appendix 7 of the Takeover Code,
if the Scheme lapses or is withdrawn all documents of title and other
documents lodged will be returned as soon as practicable and in any event
within 14 days of such lapsing or withdrawal.

Information relating to API Shareholders

Please be aware that addresses, electronic addresses and certain other
information provided by API Shareholders, persons with information rights and
other relevant persons for the receipt of communications from API may be
provided to CREI during the Offer Period as required under Section 4 of
Appendix 4 to the Takeover Code to comply with Rule 2.11(c) of the Takeover
Code.

Rule 2.9 of the Takeover Code

For the purposes of Rule 2.9 of the Takeover Code, CREI confirms that, as at
the close of business on the Latest Practicable Date, it had in issue
440,850,398 ordinary shares of one penny which carry voting rights of one vote
per share and are admitted to trading on the London Stock Exchange with ISIN
GB00BJFLFT45.

For the purposes of Rule 2.9 of the Takeover Code, API confirms that, as at
the close of business on the Latest Practicable Date, it had in issue
381,218,977 ordinary shares of one penny each (excluding any shares held in
treasury) which carry voting rights of one vote per share and are admitted to
trading on the London Stock Exchange with ISIN GB0033875286.

Appendix 1

CONDITIONS TO AND CERTAIN FURTHER TERMS OF THE MERGER

Part A

Conditions to the Scheme and Merger

1.         The Merger will be conditional upon the Scheme becoming
unconditional and becoming Effective, subject to the provisions of the
Takeover Code, by no later than 11:59 p.m. (London time) on the Long Stop Date
or such later date as CREI and API may, with the consent of the Panel, agree
and (if required) the Court may allow.

Conditions of the Scheme

2.         The Scheme will be conditional upon:

(a)

(i)       its approval by a majority in number representing 75 per cent.
or more of the voting rights of those Scheme Shareholders (or the relevant
class or classes thereof) who are on the register of members of API at the
Voting Record Time, and who are present and vote, whether in person or by
proxy, at the API Court Meeting and at any separate class meeting which may be
required by the Court, or, in each case, at any adjournment of any such
meeting; and

(ii)      such API Court Meeting and any separate class meeting which may
be required by the Court or any adjournment of any such meeting being held on
or before the 22(nd) day after the expected date of the API Court Meeting to
be set out in the Scheme Document (or such later date (if any) as may be
agreed between CREI and API with the consent of the Panel and (if required)
that the Court may allow);

(b)

(i)       the API Resolution being duly passed by the requisite majority
or majorities of API Shareholders at the API General Meeting (or any
adjournment thereof); and

(ii)      the API General Meeting, or any adjournment of that meeting,
being held on or before the 22(nd) day after the expected date of the API
General Meeting to be set out in the Scheme Document (or such later date (if
any) as may be agreed between CREI and API with the consent of the Panel and
(if required) that the Court may allow); and

(c)

(i)       the sanction of the Scheme by the Court (with or without
modification, but subject to any such modification being on terms acceptable
to CREI and API); and

(ii)      the Sanction Hearing being held on or before the 22(nd) day
after the expected date of the Sanction Hearing to be set out either in (X)
the Scheme Document (or such later date (if any) as may be agreed between CREI
and API with the consent of the Panel and, if required, that the Court may
allow); or (Y) in the event that such expected date remains unknown at the
time of publication of the Scheme Document and the Scheme Document identifies
any date as indicative only, in any update announcement issued through a
Regulatory Information Service pursuant to paragraph 6(a) of Appendix 7 of the
Takeover Code (or such later date (if any) as may be agreed between CREI and
API, with the consent of the Panel and (if required) that the Court may
allow);

General Conditions

3.         In addition, subject to: (i) the terms of Part B of this
Appendix 1; and (ii) the requirements of the Panel, CREI and API have agreed
that the Merger will be conditional upon the following Conditions and,
accordingly, the necessary actions to make the Scheme Effective will not be
taken unless the following Conditions (as amended if appropriate) have been
satisfied or, where relevant, waived prior to the Scheme being sanctioned by
the Court:

(a)      the CREI Resolution being duly passed by the requisite majority
at the CREI General Meeting (or at any adjournment thereof) provided that the
CREI General Meeting may not be adjourned beyond the 22(nd) day after the
expected date of the CREI General Meeting to be set out in the Combined
Circular and Prospectus in due course (or such later date (if any) as may be
agreed between CREI and API, with the consent of the Panel);

(b)      the FCA having acknowledged to CREI or its agent (and such
acknowledgement not having been withdrawn) that the application for the
admission of the New CREI Shares to the Official List with a premium listing
has been approved and (after satisfaction of any conditions to which such
approval is expressed to be subject ("Listing Conditions")) that admission
will become effective as soon as a dealing notice has been issued by the FCA
and any Listing Conditions having been satisfied;

(c)      the London Stock Exchange having acknowledged to CREI or its
agent (and such acknowledgement not having been withdrawn) that the New CREI
Shares will be admitted to trading on the Main Market;

(d)      all material notifications, filings and/or applications which
are deemed necessary by CREI and API having been made, all necessary waiting
and other time periods (including any extensions of such waiting and other
time periods) under any applicable legislation or regulation of any relevant
jurisdiction having expired, lapsed or been terminated (as appropriate) and
all statutory or regulatory obligations in any relevant jurisdiction having
been complied with, in each case in connection with the Merger or the
acquisition or proposed acquisition by any member of the Wider CREI Group of
any shares or other securities in, or control of, any member of the Wider API
Group;

(e)      all Authorisations which are deemed necessary by CREI and API in
any relevant jurisdiction for or in respect of the Merger (or its
implementation) or the acquisition, or proposed acquisition, of any shares or
other securities (or the equivalent) in, or control of, API or any other
member of the Wider API Group by CREI or any member of the Wider CREI Group,
having been obtained, in terms and in a form reasonably satisfactory to CREI
and API from all appropriate Third Parties or from any persons or bodies with
whom any member of the Wider CREI Group or any other member of the Wider API
Group has entered into contractual arrangements, and all such Authorisations,
together with all Authorisations deemed necessary by CREI and API for any
member of the Wider CREI Group and any member of the Wider API Group to carry
on its business, remaining in full force and effect and all filings necessary
for such purpose having been made, and there being no notice or other
intimation of any intention to revoke, suspend, restrict, modify or not to
renew any of the same;

General regulatory

(f)      all Authorisations which are necessary in any relevant
jurisdiction for or in respect of the Merger (or its implementation) or the
acquisition, or proposed acquisition, of any shares or other securities (or
the equivalent) in, or control of, API or any other member of the Wider API
Group by CREI or any member of the Wider CREI Group, having been obtained, in
terms and in a form reasonably satisfactory to CREI and API from all
appropriate Third Parties or from any persons or bodies with whom any member
of the Wider CREI Group or any member of the Wider API Group has entered into
contractual arrangements, and all such Authorisations, together with all
Authorisations necessary for any member of the Wider CREI Group and Wider API
Group to carry on its business, remaining in full force and effect and all
filings necessary for such purpose having been made, and there being no notice
or other intimation of any intention to revoke, suspend, restrict, modify or
not to renew any of the same that, in any case to an extent which is or would
be material in the context of the Wider API Group and/or the Wider CREI Group
taken as a whole or in the context of the Merger:

require, prevent or materially delay any divestiture, or alter the terms
envisaged for any proposed divestiture, by any member of the Wider CREI Group
or any member of the Wider API Group of all or any part of their respective
businesses, assets or property, or impose any limitation on the ability of all
or any of them to conduct their respective businesses (or any part thereof) or
to own, control or manage any of their respective assets or properties (or any
part thereof);

require, prevent or materially delay any divestiture, or alter the terms
envisaged for any proposed divestiture, by any member of the Wider CREI Group,
of any shares or other securities (or the equivalent) in API or any member of
the Wider API Group;

impose any limitation on, or result in a material delay in, the ability of any
member of the Wider CREI Group, directly or indirectly, to acquire, hold or to
exercise effectively all or any rights of ownership in respect of shares or
other securities (or the equivalent) in any member of the Wider API Group or
the Wider CREI Group or on the ability of any member of the Wider API Group or
any member of the Wider CREI Group, directly or indirectly, to hold or to
exercise effectively all or any rights of ownership in respect of shares or
other securities (or the equivalent) in, or to exercise voting or management
control over, any such member;

make the Merger, its implementation or the acquisition or proposed acquisition
of any shares or other securities (or the equivalent) in, or control or
management of API or any member of the Wider API Group by CREI or any member
of the Wider CREI Group void, unenforceable and/or illegal under the laws of
any jurisdiction, or otherwise, directly or indirectly, prevent or prohibit,
restrain, restrict, delay or otherwise interfere with the implementation of
the same, or impose additional adverse conditions or obligations with respect
to, or otherwise challenge, impede, interfere with the Merger (or its
implementation) or such acquisition, or require material amendment to the
terms of the Merger or the acquisition of any shares or other securities (or
the equivalent) in, or control or management of, API by any member of the
Wider CREI Group;

require (save as envisaged in the implementation of the Merger) any member of
the Wider CREI Group or any member of the API Group to acquire, or to offer to
acquire, any shares or other securities (or the equivalent) in, or any
interest in any of the assets owned by, any member of the Wider CREI Group or
any member of the API Group owned by any Third Party, or to sell or offer to
sell any shares or other securities (or their equivalent) or any interest in
any of the assets owned by any member of the Wider CREI Group or the Wider API
Group;

limit the ability of any member of the Wider CREI Group or the Wider API Group
to conduct, integrate or co-ordinate its business, or any part of it, with all
or any part of the businesses of any other members of the Wider CREI Group
and/or the Wider API Group;

result in any member of the Wider CREI Group or any member of the Wider API
Group ceasing to be able to carry on business under any name under which it
presently carries on business; or

otherwise materially adversely affect any or all of the business, assets,
profits or prospects of any member of the Wider CREI Group or of any member of
the Wider API Group,

and all applicable waiting and other time periods (including any extensions
thereof) during which any such antitrust regulator or Third Party could decide
to take, institute, implement or threaten any such action, proceeding, suit,
investigation, enquiry or reference or take any other step under the laws of
any relevant jurisdiction in respect of the Merger or the acquisition of any
API Shares or otherwise intervene having expired, lapsed or been terminated
(as the case may be);

Certain matters arising as a result of any arrangement, agreement etc.

(g)      save as Disclosed, there being no provision of any agreement,
arrangement, lease, licence, permit, franchise or other instrument to which
any member of the Wider API Group or the Wider CREI Group is a party, or by or
to which any such member, or any of its assets, is or are or may be bound,
entitled or subject to, or any event or circumstance, which, in each case as a
consequence of the Merger (or its implementation) or the proposed acquisition
by CREI or any member of the Wider CREI Group, or otherwise of any shares or
other securities (or the equivalent) in, or control or management of, API or
any member of the Wider API Group, would or might reasonably be expected to
result in any of the following, in any case to an extent which is or would be
material in the context of the Wider API Group and/or the Wider CREI Group
taken as a whole or in the context of the Merger:

(i)      any monies borrowed by, or any other indebtedness or liabilities
(actual or contingent) of, or any grant available to, any member of the Wider
API Group or the Wider CREI Group, being or becoming repayable or capable of
being declared repayable immediately or earlier than their or its stated
maturity date or repayment date, or the ability of any such member to borrow
monies or incur any indebtedness being withdrawn or inhibited, or being
capable of becoming or being withdrawn or inhibited;

(ii)      any asset or interest of any member of the Wider API Group or
the Wider CREI Group, or any asset the use of which is enjoyed by any member
of the Wider API Group or the Wider CREI Group, being or falling to be
disposed of or charged or ceasing to be available to any member of the Wider
API Group or the Wider CREI Group,  or any right arising under which any such
asset or interest could be required to be disposed of or charged or could
cease to be available to any member of the Wider API Group or the Wider CREI
Group, otherwise than in the ordinary course of business;

(iii)     the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business, property, assets
or interest of any member of the Wider API Group or the Wider CREI Group, or
any such mortgage, charge, encumbrance or other security interest (wherever
and whenever created, arising or having arisen) bring enforced or becoming
enforceable;

(iv)     any arrangement, agreement, lease, licence, permit, franchise or
other instrument, or the rights, liabilities, obligations or interests of any
member of the Wider API Group or the Wider CREI Group, thereunder, being,
terminated, adversely modified or adversely affected or any adverse action
being taken or arising thereunder or any onerous obligation or liability
arising
thereunder;

(v)     the rights, liabilities, obligations or interests of any member of
the Wider API Group or the Wider CREI Group, in, or the business of any such
member with, any person, firm, company or body (or any arrangement or
arrangements relating to any such interest or business) being terminated,
adversely modified or affected other than as directed, requested and/or
required by CREI or API (as applicable);

(vi)     the value of, or the financial or trading position or profits of,
any member of the Wider API Group or the Wider CREI Group, being prejudiced or
adversely affected; or

(vii)    the creation or acceleration of any liability (actual or
contingent) by any member of the Wider API Group or the Wider CREI Group,
other than trade creditors or other liabilities incurred in the ordinary
course of business or in connection with the Merger.

Certain events occurring since 31 December 2022

(h)      save as Disclosed, no member of the Wider API Group having since
31 December 2022:

(i)      issued or agreed to issue, or authorised or proposed or
announced its intention to authorise or propose the issue of, additional
shares of any class, or securities (or the equivalent) or securities
convertible into, or exchangeable for, or rights, warrants or options to
subscribe for or acquire, any such shares, securities (or the equivalent) or
convertible securities, or transferred or sold or agreed to transfer or sell
or authorised or proposed the transfer or sale of API Shares out of treasury,
except, where relevant, as between API and wholly-owned subsidiaries of API or
between the wholly-owned subsidiaries of API;

(ii)      recommended, declared, paid or made, or proposed to recommend,
declare, pay or make, any bonus, dividend or other distribution (whether
payable in cash or otherwise) other than the Permitted Dividends or any
dividends or other distributions (whether payable in cash or otherwise)
lawfully paid or made by any wholly-owned subsidiary of API to API or any of
their respective wholly-owned subsidiaries;

(iii)     except for transactions between API and its respective
wholly-owned subsidiaries, or between such wholly-owned subsidiaries of API,
implemented, effected, authorised or proposed, or announced its intention to
implement, effect, authorise or propose, any acquisition of any body
corporate, partnership or business, merger, demerger, reconstruction,
amalgamation, scheme, commitment or offer or disposal of assets or shares or
loan capital (or the equivalent thereof);

(iv)     undertaken:

(A)      a conversion under Part V of the Companies Law;

(B)      an amalgamation under Part VI of the Companies Law;

(C)      a migration under Part VII of the Companies Law; or

(D)     an arrangement or reconstruction (other than the Scheme) under
Part VIII of the Companies Law;

(v)     except for transactions between API and its respective
wholly-owned subsidiaries, or between such wholly-owned subsidiaries of API,
acquired or disposed of or transferred, mortgaged, charged or created any
security interest over any material asset (including shares in any undertaking
and trade investments) or any right, title or interest in any asset, or
authorised, proposed or announced any intention to do the same;

(vi)     except for transactions between API and its respective
wholly-owned subsidiaries, or between such wholly-owned subsidiaries of API,
issued, authorised or proposed or announced an intention to authorise or
propose the issue of, or made any change in or to the terms of, any debentures
or other trade credit incurred in the ordinary course of business, or become
subject to any contingent liability or incurred or increased any indebtedness
or other liability (actual or contingent), which is material in the context of
the Wider API Group taken as a whole;

(vii)    entered into, varied, authorised, proposed, or announced an
intention to enter into or vary, any contract, arrangement, agreement,
transaction or commitment (whether in respect of capital expenditure or
otherwise) which is of a long term, unusual or onerous nature or magnitude, or
which is or which involves or could involve an obligation of a nature or
magnitude which is or could reasonably be expected to be restrictive on the
business of any member of the Wider API Group which, taken together with any
other such transaction, arrangement, agreement, contract or commitment, is
material in the context of the Wider API Group taken as a whole;

(viii)    entered into, or materially varied the terms of, or made any
offer (which remains open for acceptance) to enter into or vary the terms of,
any contract, service agreement, commitment or arrangement with any director
of any member of the Wider API Group;

(ix)     purchased, redeemed or repaid, or announced any proposal to
purchase, redeem or repay, any of its own shares or other securities (or the
equivalent) or reduced or made any other change to any part of its share
capital;

(x)     except in the ordinary course of business, waived, settled,
abandoned or compromised any claim which is material in the context of the
Wider API Group taken as a whole;

(xi)     made any material alteration to its memorandum or articles of
incorporation or other incorporation documents, in each case other than in
connection with the implementation of the Merger;

(xii)    terminated or varied the terms of any agreement or arrangement
between any member of the Wider API Group and any other person in a manner
which would, or might reasonably be expected to, have a material adverse
effect on the financial position or prospects of the Wider API Group taken as
a whole other than as directed, required and/or requested by CREI;

(xiii)    put in place any pension schemes for its directors or their
dependants, or made or agreed or consented to any change to:

(A)      the terms of the trust deeds and rules constituting the pension
scheme(s) (if any) established by any member of the Wider API Group for its
directors or their dependants;

(B)      the contributions payable to any such scheme(s) or to the
benefits which accrue, or to the pensions which are payable, thereunder;

(C)      the basis on which qualification for, or accrual or entitlement
to, such benefits or pensions are calculated or determined; or

(D)     the basis upon which the liabilities (including pensions) of such
pension schemes are funded, valued, made, agreed or consented to;

(xiv)   been unable, or admitted in writing that it is unable, to pay its
debts or commenced negotiations with one or more of its creditors with a view
to rescheduling or restructuring any of its indebtedness, or having stopped or
suspended (or threatened to stop or suspend) payment of its debts generally or
ceased or threatened to cease carrying on all or a substantial part of its
business;

(xv)    taken or proposed any steps or corporate action or had any legal
proceedings instituted or threatened against it in relation to the suspension
of payments, a moratorium of any indebtedness, its winding-up (voluntary or
otherwise), dissolution, reorganisation or for the appointment of a receiver,
administrator, manager, administrative receiver, trustee or similar officer of
all or any of its assets or revenues or any analogous or equivalent steps or
proceedings in any jurisdiction or appointed any analogous person in any
jurisdiction or had any such person appointed;

(xvi)   entered into, implemented or authorised the entry into, any joint
venture, asset or profit sharing arrangement, partnership or merger of
business or corporate entities;

(xvii)   entered into any agreement, arrangement, commitment or contract or
passed any resolution or made any offer (which remains open for acceptance)
with respect to or announced an intention to, or to propose to, effect any of
the transactions, matters or events referred to in this Condition 3(h); or

(xviii)  taken (or agreed or proposed to take) any action which requires, or
would require, the consent of the Panel or the approval of API Shareholders at
a general meeting of API in accordance with, or as contemplated by, Rule 21.1
of the Takeover Code;

No adverse change

(i)       save as Disclosed since 31 December 2022:

(i)      no adverse change or deterioration having occurred in the
business, assets, financial or trading position or profits or prospects or
operational performance of the Wider API Group or Wider CREI Group taken as a
whole, in each case to an extent which is or could be material in the context
of the Wider API Group and/or the Wider CREI Group taken as a whole;

(ii)      no litigation, arbitration proceedings, prosecution or other
legal proceedings having been threatened, announced or instituted by or
against or remaining outstanding against or in respect of, any member of the
Wider API Group or Wider CREI Group or to which any member of the Wider API
Group or Wider CREI Group is or may become a party (whether as a plaintiff,
defendant or otherwise) having been instituted, announced, implemented or
threatened in writing by or against or remaining outstanding in respect of any
member of the Wider API Group or Wider CREI Group which in any such case is or
might reasonably be expected to have a material adverse effect on the Wider
API Group or Wider CREI Group taken as a whole;

(iii)     no contingent or other liability of any member of the Wider API
Group or Wider CREI Group having arisen or become apparent to any member of
the Wider CREI Group or Wider API Group, or increased, which is reasonably
likely to affect adversely the business, assets, financial or trading position
or profits or prospects of any member of the Wider API Group or Wider CREI
Group, which in any case is material in the context of the Wider API Group
and/or the Wider CREI Group taken as a whole;

(iv)     no member of the Wider API Group or Wider CREI Group having
conducted its business in breach of any applicable laws and regulations and
which in any case is material in the context of the Wider API Group and/or the
Wider CREI Group taken as a whole; and

(v)     no steps having been taken and no omissions having been made which
are reasonably likely to result in the withdrawal, cancellation, termination
or modification of any licence or permit held by any member of the Wider API
Group or Wider CREI Group which is necessary for the proper carrying on of its
business and which in any case is material in the context of the Wider API
Group and/or the Wider CREI Group taken as a whole;

No discovery of certain matters

(j)       save as Disclosed, CREI or API not having discovered that (in
each case to an extent which is or could be material in the context of the
Wider API Group and/or Wider CREI Group taken as a whole or material in the
context of the Merger):

(i)      any financial, business or other information concerning the
Wider API Group or Wider CREI Group publicly announced before the date of this
Announcement or disclosed, whether publicly or otherwise, at any time to any
member of the Wider CREI Group or Wider API Group by or on behalf of any
member of the Wider API Group or Wider CREI Group is materially misleading,
contains any material misrepresentation of fact, or omits to state a fact
necessary to make any information contained therein not misleading;

(ii)      any member of the Wider API Group or Wider CREI Group is
subject to any liability (contingent or otherwise), other than in the ordinary
course of business;

(iii)     any information which affects the import of any information
disclosed at any time by or on behalf of any member of the Wider API Group or
Wider CREI Group;

(iv)     any past or present member of the Wider API Group or Wider CREI
Group has failed to comply with any applicable legislation or regulations or
common law of any jurisdiction or any notice, order or requirement of any
Third Party or any Authorisations relating to the use, treatment, handling,
storage, carriage, disposal, spillage, release, discharge, leak or emission of
any waste or hazardous or harmful substance or any substance likely to impair
the environment (including property) or harm human health or animal health or
otherwise relating to environmental matters or the health and safety of
humans, which non-compliance would be likely to give rise to any material
liability including any penalty for non-compliance (whether actual or
contingent) on the part of any member of the Wider API Group; or

(v)     there is or has been a disposal, discharge, spillage,
accumulation, release, leak, emission or the migration, production, supply,
treatment, storage, transport or use of any waste or hazardous or harmful
substance or any substance likely to impair the environment (including any
property) or harm human or animal health which (whether or not giving rise to
non-compliance with any law or regulation), would be likely to give rise to
any material liability (whether actual or contingent) on the part of any
member of the Wider API Group or Wider CREI Group;

(vi)     there is or is reasonably likely to be any obligation or
liability (whether actual or contingent) or requirement to make good,
remediate, repair, reinstate or clean up any property or controlled waters,
currently or previously owned, occupied, operated or made use of or controlled
by any past or present member of the Wider API Group (or on its behalf) or the
Wider CREI Group (or on its behalf), or in which any such member may have or
previously have had or be deemed to have had an interest, under any
environmental legislation, common law, regulation, notice, circular,
Authorisation or order of any Third Party in any jurisdiction or to contribute
to the cost thereof or associated therewith or indemnify any person in
relation thereto;

 

Anti-corruption and sanctions

(k)      CREI and API not having discovered:

(i)      any:

(A)      past or present member, director or officer of the Wider API
Group or Wider CREI Group is or has at any time engaged in any activity,
practice or conduct which would constitute an offence under the Bribery Act
2010, the US Foreign Corrupt Practices Act of 1977, the Prevention of
Corruption (Bailiwick of Guernsey) Law 2003 or any other applicable
anti-corruption or anti-bribery legislation, rule or regulation applicable to
the Wider API Group or the Wider CREI Group or any other law, rule or
regulation concerning improper payments or kickbacks; or

(B)      person that performs or has performed services for or on behalf
of the Wider API Group or the Wider CREI Group is or has at any time engaged
in any activity, practice or conduct in connection with the performance of
such services which would constitute an offence under the Bribery Act 2010,
the US Foreign Corrupt Practices Act of 1977, the Prevention of Corruption
(Bailiwick of Guernsey) Law 2003 or any other applicable anti-corruption or
anti-bribery legislation, rule or regulation applicable to the Wider API Group
or any other law, rule or regulation concerning improper payments or
kickbacks;

(ii)      any asset of any member of the Wider API Group or Wider CREI
Group constitutes criminal property as defined by section 340(3) of the
Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition)
or proceeds of crime under any other applicable law, rule or regulation
concerning money laundering or proceeds of crime or any member of the Wider
API Group or Wider CREI Group is found to have engaged in activities
constituting money laundering;

(iii)     any past or present member, director or officer of the Wider API
Group or Wider CREI Group, or any other person for whom any such person may be
liable or responsible, is or has engaged in any conduct or business which
would violate any economic sanctions or dealt with, made any investments in,
made any funds or assets available to or received any funds or assets from:
(a) any government, entity or individual in respect of which US, UK or
European Union persons, or persons operating in those territories, are
prohibited from engaging in activities or doing business, or from receiving or
making available funds or economic resources, by applicable US, UK or European
Union laws or regulations, including the economic sanctions administered by
the United States Office of Foreign Assets Control, or HM Treasury &
Customs in the United Kingdom; or (b) any government, entity or individual
targeted by any of the economic sanctions of the United Nations, the United
States, the UK or the European Union or any of their respective member states;

(iv)     any past or present member, director or officer of the Wider API
Group or Wider CREI Group, or any other person for whom any such person may be
liable or responsible:

(A)      has engaged in conduct which would violate any relevant
anti-terrorism laws, rules, or regulations, including but not limited to the
U.S. Anti-Terrorism Act;

(B)      has engaged in conduct which would violate any relevant
anti-boycott law, rule or regulation or any applicable export controls,
including but not limited to the Export Administration Regulations
administered and enforced by the U.S. Department of Commerce or the
International Traffic in Arms Regulations administered and enforced by the
U.S. Department of State;

(C)      has engaged in conduct which would violate any relevant laws,
rules or regulations concerning human rights, including but not limited to any
law, rule or regulation concerning false imprisonment, torture or other cruel
and unusual punishment or child labour;

(D)     is debarred or otherwise rendered ineligible to bid for or to
perform contracts for or with any government, governmental instrumentality or
international organisation or found to have violated any applicable law, rule
or regulation concerning government contracting or public procurement; or

(v)     any member of the Wider API Group or Wider CREI Group has or is
engaged in any transaction which would cause CREI or any member of the Wider
CREI Group (including the Wider API Group) to be in breach of any applicable
law or regulation upon its acquisition of API, including but not limited to
the economic sanctions of the United States Office of Foreign Assets Control
or HM Treasury & Customs in the UK, or any government, entity or
individual targeted by any of the economic sanctions of the United Nations,
the United States, the UK the European Union or any of its member states.

 

Part B

Certain further terms of the Merger

1.         Conditions 2(a), 2(b) and 3(a) to 3(k) (inclusive) of Part
A of this Appendix 1 must each be fulfilled or (if capable of waiver) waived,
no later than 11:59 p.m. (London time) on the date immediately preceding the
date of the Sanction Hearing (or such later date as CREI, API and the Panel
and, if required, the Court may allow), failing which the Merger will lapse,
or if the Merger is implemented by way of Takeover Offer, no later than as
permitted by the Panel.

2.         To the extent permitted by law and subject to the
requirements of the Panel in accordance with the Takeover Code, each of CREI
and API reserves the right, in its sole discretion, to waive in whole or in
part all or any of the Conditions set out in part A above, and to proceed with
the Sanction Hearing prior to the fulfilment, satisfaction or waiver of any of
the Conditions, except Conditions 1, 2(a)(i), 2(b)(i) and 2(c)(i), which
cannot be waived. If any of Conditions 2(a)(ii), 2(b)(ii) or 2(c)(ii) is not
satisfied by the relevant deadline specified in the relevant Condition, CREI
will make an announcement by 8.00 a.m. (London time) on the Business Day
following such deadline confirming whether it has invoked the relevant
Condition, waived the relevant deadlines or agreed with API to extend the
relevant deadline.

3.         The Merger will lapse if the Scheme does not become
Effective by no later than 11.59 p.m. (London time) on the Long Stop Date.

4.         If CREI is required by the Panel to make a Takeover Offer
for API Shares under the provisions of Rule 9 of the Takeover Code, CREI may
make such alterations to any of the above Conditions and terms of the Merger
as are necessary in order to comply with the provisions of that Rule.

5.         Each of CREI and API shall be under no obligation to waive
(if capable of waiver), to determine to be or remain satisfied, or to treat as
fulfilled any of the Conditions by a date earlier than the latest date
specified for the fulfilment or waiver thereof, notwithstanding that the other
Conditions may, at such earlier date, have been waived or fulfilled and that
there are, at such earlier date, no circumstances indicating that any of such
Conditions may not be capable of satisfaction or fulfilment.

6.         The API Shares will be acquired under the Scheme, fully
paid and free from all liens, equities, charges, encumbrances, options, rights
of pre-emption and any other third party rights and interests of any nature
whatsoever and together with all rights now or hereafter attaching or accruing
to them, including, without limitation, voting rights and the right to receive
and retain in full all dividends and other distributions (if any) declared,
made or paid, on or after the date of this Announcement, save for the
Permitted Dividends.

7.         The Exchange Ratio will be adjusted:

7.1.     in the event that either CREI or API announces, declares, makes
or pays any one or more dividends or other distributions prior to the Merger
becoming Effective that is or are, in aggregate, in excess of: (i) 1.375 pence
per CREI Share in respect of the CREI Q3 Dividend and, if the ex dividend date
falls prior to the Merger becoming Effective, 1.375 pence per CREI Share in
respect of the CREI Q4 Dividend; or (ii) 1.0 penny per API Share in respect of
the API Q4 Dividend and, if the ex-dividend date falls prior to the Merger
becoming Effective, 1.0 penny per API Share in respect of the API Q1 Dividend
(the amount of such excess in each case being the "Excess"), in which event
the adjustment to the Exchange Ratio shall be to take account of the Excess;
and/or

7.2.     in the event that (i) the API Q1 Dividend is not covered by the
income earned in the relevant quarter (the "API Q1 Uncovered Dividend
Portion"), or (ii) the CREI Q4 Dividend is not covered by the income earned in
the relevant quarter (the "CREI Q4 Uncovered Dividend Portion"), in which
event the adjustment to the Exchange Ratio shall be to take account of the API
Q1 Uncovered Dividend Portion and/or the CREI Q4 Uncovered Dividend Portion;
and/or

7.3.     if, at the time of completion of the Merger, either CREI or API
has announced, declared, made or paid the CREI Q4 Dividend or the API Q1
Dividend, respectively, but the other has not announced, declared, made or
paid its corresponding dividend (a "Dividend Discrepancy"), in which case the
adjustment to the Exchange Ratio shall be to take account of the Dividend
Discrepancy.

In the event that any adjustment to the Exchange Ratio is required pursuant to
paragraph 7.1, 7.2 and/or 7.3 of this Part B above, such adjustment will be
made by reference to the relevant Rolled-Forward Unaudited EPRA NTA(s) as at
31 December 2023. Any adjustment to the Exchange Ratio referred to in this
paragraph 7 shall be the subject of an announcement and, for the avoidance of
doubt, shall not be regarded as constituting any revision or variation of the
terms of the Scheme or the Merger. To the extent that a dividend or
distribution has been declared but not paid prior to the Effective Date, and
such dividend or distribution is cancelled, then the Exchange Ratio shall not
be subject to change in accordance with this paragraph.

8.         Under Rule 13.5(a) of the Takeover Code, CREI may only
invoke a Condition so as to cause the Merger not to proceed, to lapse or to be
withdrawn with the consent of the Panel. The Panel will normally only give its
consent if the circumstances which give rise to the right to invoke the
Condition are of material significance to CREI in the context of the Merger.
This will be judged by reference to the facts of each case at the time that
the relevant circumstances arise. The Conditions set out in Conditions 1 and 2
of Part A above (and any Takeover Offer Acceptance Condition (as defined
below) adopted on the basis specified in paragraphs 4 or 10 of this Part B)
are not subject to this provision of the Takeover Code. Any Condition that is
subject to Rule 13.5(a) may be waived by CREI.

9.         Under Rule 13.6 of the Takeover Code, API may not invoke,
or permit CREI to invoke a Condition unless the circumstances which give rise
to the right to invoke the Condition are of material significance to the
shareholders of API in the context of the Merger This will be judged by
reference to the facts of each case at the time that the relevant
circumstances arise. The Conditions set out in Conditions 1 and 2 of Part A
above (and any Takeover Offer Acceptance Condition (as defined below) adopted
on the basis specified in paragraphs 4 or 10 of this Part B) are not subject
to this provision of the Takeover Code. Any Condition that is subject to Rule
13.6 may be waived by API.

10.        CREI reserves the right to elect to implement the Merger by
way of a Takeover Offer as an alternative to the Scheme (subject to the
Panel's consent (where necessary)). In such event, the Merger will be
implemented on the same terms and conditions (subject to appropriate
amendments including (without limitation) the inclusion of an acceptance
condition set at 90 per cent. of the API Shares to which the Takeover Offer
relates (or such lower percentage (being more than 50 per cent.) of the issued
share capital of API as CREI may, subject to the rules of the Takeover Code
and with the consent of the Panel, decide) as those which would apply to the
Scheme (each a "Takeover Offer Acceptance Condition"). Further, if sufficient
acceptances of the Takeover Offer are received and/or sufficient API Shares
are otherwise acquired, it is the intention of CREI to apply the provisions of
Part XVIII of the Companies Law to compulsorily acquire any outstanding API
Shares to which such Takeover Offer relates.

11.        The availability of the Merger to API Shareholders who are
not resident in the United Kingdom or Guernsey may be affected by the laws of
the relevant jurisdictions in which they are located or of which they are
citizens. Persons who are not resident in the United Kingdom or Guernsey
should inform themselves about and observe any applicable legal or regulatory
requirements of their jurisdictions. Further information in relation to
overseas shareholders will be contained in the Scheme Document.

12.        The Merger is not being made, directly or indirectly, in,
into or from, or by use of the mails of, or by any means of instrumentality
(including, but not limited to, facsimile, e-mail or other electronic
transmission, telex or telephone) of interstate or foreign commerce of, or of
any facility of a national, state or other securities exchange of, any
Restricted Jurisdiction where to do so would violate the laws of that
jurisdiction.

13.        The Merger and the Scheme will be governed by the laws of
Guernsey and be subject to the jurisdiction of the Court and to the conditions
and further terms set out in this Appendix 1 and the full terms and conditions
to be set out in the Scheme Document. The Merger will also be subject to the
applicable requirements of the Companies Law, the Court (as a result of API
being incorporated in Guernsey), the GFSC, the FCA, the London Stock Exchange
and the Takeover Code.

14.        Each of the Conditions shall be regarded as a separate
Condition and shall not be limited by reference to any other Condition.

 

Appendix 2

SOURCES OF INFORMATION AND BASES OF CALCULATIONS

Unless otherwise stated, the following constitute the sources of information
and bases of calculations in this Announcement:

1.  Property portfolio and valuation information relating to CREI is from the
valuation reports as at 31 December 2023 produced by Knight Frank and Savills
as set out in Appendix 4 to this Announcement.

2.  Property portfolio and valuation information relating to API is from the
valuation report as at 31 December 2023 produced by Knight Frank as set out in
Appendix 4 to this Announcement.

3.  Financial information relating to CREI has been extracted or derived
(without adjustment) from the unaudited management accounts for CREI as at 30
September 2023 and CREI's RNS announcement on 31 October 2023 "Second quarter
trading update shows rental growth supporting fully covered dividends and
stable values".

4.  Financial information relating to API has been extracted or derived
(without adjustment) from the unaudited management accounts for API as at 30
September 2023 and API's RNS announcement on 7 November 2023 "Unaudited Net
Asset Value as at 30 September 2023".

5.  All Closing Prices for the API Shares and the CREI Shares are derived
from the Daily Official List as at 18 January 2024 (being the Latest
Practicable Date).

6.  All volume-weighted average prices are derived from data provided by
Bloomberg for the relevant time periods.

7.  API's issued share capital consists of 381,218,977 API Shares as at the
Latest Practicable Date, with no outstanding options or rights to convertible
securities.

8.  CREI's issued share capital consists of 440,850,398 CREI Shares as at the
Latest Practicable Date, with no outstanding options or rights to convertible
securities.

9.  The average discount to EPRA NTA per share is based on the daily Closing
Price and the EPRA NTA per share (or EPRA NAV per share, prior to the
introduction of EPRA NTA) as at the last quarterly balance sheet date on any
given day.

10. CREI's Rolled-Forward Unaudited EPRA NTA as at 31 December 2023 has been
calculated as follows:

 

 £'000 unless stated          EPRA NTA as at 30 September 2023  Adjustment for Disposals((2))  Adjustment for 31 December 2023 Valuation((3))  Rolled-Forward Unaudited EPRA NTA as at 31 December 2023
 Property value((1))          609,150                           (550)                          (6,830)                                         601,770
 Cash                         6,697                             -                              -                                               6,697
 Bank loans                   (183,689)                         529                            (3,047)                                         (186,207)
 Other net liabilities        (9,378)                           -                              -                                               (9,378)
 EPRA NTA((4))                422,780                           (21)                           (9,877)                                         412,882
 Total diluted shares ('000)  440,850                                                                                                          440,850
 EPRA NTA per share (pence)   95.9                                                                                                             93.7

( )

( )

(Notes:)

((1) Investment property value represents the market value as per Knight Frank
/ Savills valuation of the CREI portfolio.)

((2) Represents proceeds from the disposal of CREI's interest in Chesham
(announced by CREI on 13 November 2023).)

((3) 31 December 2023 revaluation adjustment for the market valuation of
investment properties as per Knight Frank / Savills valuation, adjusted for
estimated capital expenditure of £3 million.)

((4) The CREI Directors confirm that the aggregate of other movements in EPRA
NTA between 30 September 2023 and 31 December 2023 is not material.)

11. API's Rolled-Forward Unaudited EPRA NTA as at 31 December 2023 has been
calculated as follows:

 

 £'000 unless stated          EPRA NTA as at 30 September 2023  Adjustment for Disposals((4))  Adjustment for 31 December 2023 Valuation((5))  Rolled-Forward Unaudited EPRA NTA as at 31 December 2023
 Property value((1))          449,629                           (6,550)                        (3,894)                                         439,185
 Cash                         5,742                             -                              -                                               5,742
 Bank loans                   (139,310)                         6,126                          (7,272)                                         (140,456)
 Other net liabilities((2))   (5,301)                           -                              -                                               (5,301)
 EPRA NTA((3))                310,760                           (424)                          (11,166)                                        299,170
 Total diluted shares ('000)  381,219                                                                                                          381,219
 EPRA NTA per share (pence)   81.5                                                                                                             78.5

( )

(Notes:)

((1) Consists of investment property, land and lease incentives as per the
Knight Frank valuation of the API portfolio.)

((2) Consists of other assets / (liabilities) and the EPRA adjustment (which
removes the fair value of derivatives).)

((3) The API Directors confirm that the aggregate of other movements in EPRA
NTA between 30 September 2023 and 31 December 2023 is not material.)

((4) Represents the change in property value and net proceeds associated with
the disposal of the Cullen Square asset (announced by API on 20 December
2023).)

((5) 31 December 2023 revaluation adjustment for the market valuation of
investment properties as per Knight Frank valuation of the API portfolio,
adjusted for estimated capital expenditure of £7 million.)

 

 

 

 

 

 

 

 

 

 

 

Appendix 3

DETAILS OF IRREVOCABLE UNDERTAKINGS AND LETTER OF INTENT

Part 1: Irrevocable undertakings and letter of intent in respect of API Shares

API Directors' Irrevocable Undertakings

The following API Directors who hold API Shares have given irrevocable
undertakings to vote in favour of the Scheme at the API Court Meeting and the
API Resolution at the API General Meeting in respect of their own beneficial
holdings of API Shares (or those API Shares over which they have control):

 Name                 Total number of API Shares  Percentage of API Shares in issue on the Latest Practicable Date (%)
 API Directors
 Jill May             128,592                     0.03
 Michael Balfour      125,000                     0.03
 James Clifton-Brown  21,500                      0.01
 Sarah Slater         20,000                      0.01

Notes:

1.   The percentages in the table above have been rounded up to two decimal
places.

 

The undertakings provided by the API Directors will cease to be binding if:

 

·      the Scheme Document or, if the Merger is implemented by way of a
Takeover Offer, the Offer Document (as applicable) has not been posted to API
Shareholders within 28 days of the issue of this Announcement (or within such
longer period as CREI and API, with the consent of the Panel, may agree);

·      in the event that the Merger proceeds by way of a Scheme, any
resolution to be proposed at the API Court Meeting and the API General Meeting
is not approved by the requisite majority of API Shareholders;

·      CREI announces, with the consent of the Panel and before the
Scheme Document or Offer Document (as applicable) is published, that it does
not intend to proceed with the Merger;

·      the Scheme, or Takeover Offer (as applicable) has not become
Effective, or become or been declared unconditional in all respects (as the
case may be), on or before the Long Stop Date (or such later time or date as
agreed between API and CREI with the approval of the Court and/or the Panel,
if required);

·      the Scheme or Offer, as applicable, lapses or is withdrawn in
accordance with its terms; or

·      any competing offer for the entire issued and to be issued share
capital of API becomes or is declared unconditional (if implemented by way of
a takeover offer) or, if proceeding by way of a scheme of arrangement, becomes
effective in accordance with its terms; or

·      any event occurs or becomes known to CREI or Deutsche Numis
before despatch of the Scheme Document or the Offer Document (as the case may
be) as a result of which the Panel requires or agrees that CREI need not
proceed with the Merger.

 

API Shareholder Letter of Intent

 

 Name                               Total number of API Shares  Percentage of API Shares in issue on the Latest Practicable Date (%)
 Brooks Macdonald Asset Management  11,376,425                  2.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Part 2: Irrevocable undertakings in respect of CREI Shares

The following CREI Directors, together with certain of Ian Mattioli's close
relatives and related trusts, who hold CREI Shares have given irrevocable
undertakings to vote in favour of the CREI Resolution at the CREI General
Meeting in respect of their own beneficial holdings of CREI Shares (or those
CREI Shares over which they have control):

 Name                 Total number of CREI Shares  Percentage of CREI Shares in issue on the Latest Practicable Date (%)
 Elizabeth McMeikan   20,400                       0.00
 Chris Ireland        50,345                       0.01
 Malcolm Cooper       45,000                       0.01
 Hazel Adam           19,566                       0.00
 Ian Mattioli MBE     1,370,552                    0.31
 MW Trustees Limited  1,715,339                    0.39
 Clare Mattioli       837,554                      0.19
 Laura Mattioli       1,493,457                    0.34
 Alexandra Dariani    652,604                      0.15

Notes:

1.   The CREI Shares referred to in the table above are held via nominees.
In each case, the CREI Shareholder has undertaken to vote himself/herself, or
to procure the exercise of the votes attaching to his/her CREI Shares, in
favour of the CREI Resolution.

2.   MW Trustees Limited is a trustee for certain family trusts in respect
of which Ian Mattioli MBE and members of his family are beneficiaries.

3.   The irrevocable undertakings provided by Ian Mattioli MBE and Clare
Mattioli both include 100,000 CREI Shares held by the Ian and Clare Mattioli
Charitable Trust. However, for the purposes of disclosure in this Announcement
these 100,000 CREI Shares have been counted as part of Ian Mattioli MBE's
irrevocable undertaking only.

4.   The percentages in the table above have been rounded up to two decimal
places.

 

These undertakings will cease to be binding if:

 

·      the Merger terminates, lapses or is withdrawn in accordance with
its terms; or

·      the Scheme has not become effective, or the Takeover Offer has
not been declared unconditional in all respects (as the case may be), in
accordance with the requirements of the Takeover Code by 6.00 p.m. on the Long
Stop Date or such later time or date as agreed between API and CREI with the
approval of the Court and/or the Panel, if required.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix 4

VALUATION REPORTS

Part A | Knight Frank Valuation Report in respect of CREI

 Valuation Report.

 Custodian Portfolio

 Prepared for Custodian Property Income REIT plc.

 Valuation date:         31 December 2023
 Important Notice to all readers of this report

 Unless you are the Client named within this report, or have been explicitly
 identified by us as a party to whom we owe a duty of care and who is entitled
 to rely on this report, Knight Frank LLP does not owe or assume any duty of
 care to you in respect of the contents of this report and you are not entitled
 to rely upon it.

                                                       Date of issue: 19 January 2024

Our Ref:  I: 1140121

 (each an "Addressee" and together the "Addressees")

(each an "Addressee" and together the "Addressees")

 

 

 

Date of issue: 19 January 2024

Our Ref:  I: 1140121

 

Dear Sirs

Valuation Report in respect of the properties of Custodian Property Income
REIT Plc as at 31 December 2023 for inclusion in a Rule 2.7 Announcement,
Scheme Document and Combined Prospectus and Circular ("Valuation Report")

 

Further to your instructions, we are pleased to provide our Valuation Report
in respect of the properties ("Properties") set out in Appendix 1 (List of
Properties) below in connection with the Client's all-share offer for the
entire issued and to be issued share capital of API (the "Acquisition").  If
you have any queries regarding this Valuation Report, please let us know as
soon as possible.

 

Signed for and on behalf of Knight Frank LLP

 Kevin Morris MRICS                                                Indi Sidhu MRICS

 RICS Registered Valuer                                            RICS Registered Valuer

 Partner, Valuation & Advisory                                     Associate, Valuation & Advisory

 kevin.morris@knightfrank (mailto:kevin.morris@knightfrank) .com   indi.sidhu@knightfrank (mailto:indi.sidhu@knightfrank) .com

 T          +44 121 233 6451                                       T          +44 121 233 6414

 M         +44 7747 007 580                                        M         +44 7793 283284

Contents

1. (#_Toc256000000)          (#_Toc256000000) (#_Toc256000000) About
this report (#_Toc256000000)
.....................................................................................................................
(#_Toc256000000) (#_Toc256000000) 5 (#_Toc256000000)

Engagement of Knight Frank LLP (#_Toc256000001)
...........................................................................................
(#_Toc256000001) (#_Toc256000001) 5 (#_Toc256000001)

Status and experience of valuer (#_Toc256000002)
.............................................................................................
(#_Toc256000002) (#_Toc256000002) 5 (#_Toc256000002)

Conflicts of Interest:  Declaration and Disclosures (#_Toc256000003)
..................................................................
(#_Toc256000003) (#_Toc256000003) 5 (#_Toc256000003)

Independence (#_Toc256000004)
........................................................................................................................
(#_Toc256000004) (#_Toc256000004) 6 (#_Toc256000004)

Use of this Valuation (#_Toc256000005)
.............................................................................................................
(#_Toc256000005) (#_Toc256000005) 6 (#_Toc256000005)

Limitations on liability (#_Toc256000007)
............................................................................................................
(#_Toc256000007) (#_Toc256000007) 8 (#_Toc256000007)

Scope of work (#_Toc256000008)
......................................................................................................................
(#_Toc256000008) (#_Toc256000008) 9 (#_Toc256000008)

2. (#_Toc256000009)          (#_Toc256000009) (#_Toc256000009)
Valuation (#_Toc256000009)
.................................................................................................................................
(#_Toc256000009) (#_Toc256000009) 11 (#_Toc256000009)

Methodology (#_Toc256000010)
.......................................................................................................................
(#_Toc256000010) (#_Toc256000010) 11 (#_Toc256000010)

Valuation bases (#_Toc256000011)
...................................................................................................................
(#_Toc256000011) (#_Toc256000011) 11 (#_Toc256000011)

Market Value (#_Toc256000012)
.......................................................................................................................
(#_Toc256000012) (#_Toc256000012) 11 (#_Toc256000012)

Responsibility (#_Toc256000013)
......................................................................................................................
(#_Toc256000013) (#_Toc256000013) 13 (#_Toc256000013)

Consent (#_Toc256000014)
..............................................................................................................................
(#_Toc256000014) (#_Toc256000014) 13 (#_Toc256000014)

 

 

Appendices

Appendix 1 (#_Toc256000015)     (#_Toc256000015) (#_Toc256000015) List of
Properties (#_Toc256000015)

 

 

About this report

Engagement of Knight Frank LLP

This Valuation Report sets out our valuation, as at 31 December 2023
("valuation date"), of the Properties ("Valuation"). This Valuation Report has
been prepared in accordance with our Terms of Engagement letter dated 15
January 2024 addressed to the Addressees, and our General Terms of Business
for Valuation Services (together the "Agreement").

Client

We have been instructed to prepare this Valuation Report by Custodian Property
Income REIT plc.. However as set out above, this Valuation Report has also
been addressed to abrdn Property Income Trust Limited, Lazard & Co.,
Limited and Numis Securities Limited.

Valuation standards

The Valuation has been undertaken in accordance with and complies with: (a)
the current editions of RICS Valuation - Global Standards, which incorporate
the International Valuation Standards, and the RICS UK National Supplement.
References to the "Red Book" refer to either or both of these documents, as
applicable; (b) Rule 29 of the City Code on Takeovers and Mergers (the "Code")
as issued by the UK Panel on Takeovers and Mergers; (c) paragraphs 128-130 of
the Financial Conduct Authority ("FCA") Primary Market Technical Note 619.1
(the "FCA Technical Note"); and (d) Rules 5.4.5 and 5.4.6 of the UK Prospectus
Regulation Rules published by the FCA and item 2.7 of Annex 4 to the UK
Prospectus Regulation Rules.

The Properties have been valued by a valuer who is qualified for the purposes
of the Valuation in accordance with Rule 29 of the Code. For the purposes of
this Valuation Report, "UK Prospectus Regulation Rules" shall mean the
prospectus regulation rules made by the FCA for the purposes of part 6 of the
Financial Services and Markets Act 2000.

Status and experience of valuer

Valuer and expertise

The valuers, on behalf of Knight Frank LLP, with the responsibility for this
Valuation Report are Indi Sidhu MRICS ("Lead Valuer") and Kevin Morris MRICS,
RICS Registered Valuers.  Parts of the Valuation have been undertaken by
additional valuers as listed on our file.

We confirm that the Lead Valuer and any additional valuers who value the
Properties meet the requirements of the Red Book and Rule 29.3(a)(iii) of the
Code in having sufficient current knowledge of the particular market and the
skills and understanding to undertake the Valuation and prepare this Valuation
Report competently and, are appropriately qualified for the purposes of the
Valuation as required by Rule 29.3(a)(ii) of the Code, and are independent of
the parties to the offer as required by Rule 29.3(a)(i) of the Code.

We confirm that we are not aware of any reason why we would not satisfy the
requirements of Rule 29.3(a)(i) of the Code.

Conflicts of Interest:  Declaration and Disclosures

For the purposes of Directive 2011/61/EU and/or any implementing legislation,
laws or regulations thereof (including, but not limited to, the Alternative
Investment Fund Manager's Regulations 2013) ("AIFMD") we act as the Client's
valuation advisers but are not acting as "External Valuer" (as defined
therein). Our role is limited to providing property valuation services in
accordance with the Red Book under the terms of the Agreement; we shall not
perform the valuation function referred to in Article 19 of AIFMD for the
Client, and, we are not responsible for making the final determination of the
value of the Properties nor for the calculation of the Net Asset Value of the
Client.

We confirm that the valuer and additional valuers meet the requirements of the
Red Book, having sufficient current knowledge of the particular market and the
skills and understanding to undertake the Valuation competently.

We confirm that we have no material interest in the Client and we have acted
as an External Valuer for the purpose of valuing the Properties pursuant to
the terms of our letter of engagement dated 15 January 2024;

This Valuation Report has been vetted as part of Knight Frank LLP's quality
assurance procedures.

We recognise and support the RICS Rules of Conduct and have procedures for
identifying conflicts of interest.

Independence

As set out in paragraph 1.8, Knight Frank LLP currently values the Properties,
for financial reporting purposes, on behalf of the Client. The total fees for
this assignment, earned by Knight Frank LLP (or other companies forming part
of the same group of companies within the UK) from the Client (or other
companies within the UK) is less than 5.0% of the total UK revenues. It is not
anticipated that there will be a material increase in the proportion of the
fees payable, or likely to be payable, by the Client.

Use of this Valuation

Purpose of valuation

The Valuation and this Valuation Report are each provided solely for the
purpose of:

(A)     inclusion in an announcement proposed to be made by the Client and
API pursuant to Rule 2.7 of the Code in connection Acquisition (the "Rule 2.7
Announcement");

(B)     inclusion in a scheme circular to be published by API in
connection with the Acquisition (the "Scheme Document");

(C)     inclusion in a combined prospectus and circular to be published by
the Client in connection with the Acquisition and the issue and allotment of
new shares in the capital of the Client pursuant to the terms of the
Acquisition (the "Combined Prospectus and Circular");

(D)     inclusion and/or reference to it in any other announcements,
documents and/or supplementary documents required to be released by the Client
and/or API pursuant to the Code and which directly relate to the Acquisition
(each a "Code Document"); and

(E)     publication on the Client's website and API's website in
accordance with the requirements of the Code and the UK Prospectus Regulation
Rules,

(together, the "Purpose").

Reliance

This Valuation Report has been prepared for the Addressees only.
Notwithstanding the General Terms, we acknowledge that this Valuation Report
will also be used for the Purpose set out above.

Save for: (a) the Addressees; and (b) any responsibility arising under the
Code and/or the UK Prospectus Regulation Rules to any person as and to the
extent there provided, in accordance with Clauses 3 & 4 of the General
Terms and to the fullest extent permitted by law, we do not assume any
responsibility and will not accept any liability to any other person for any
loss suffered by any such other person as a result of, arising out of, or in
accordance with this Valuation Report or our statement, required by and given
solely for the purposes of complying with the UK Prospectus Regulation Rules
and Rule 29 of the Code.

Disclosure & publication

As stated in the Agreement, this Valuation Report is confidential to the
Addressees and must not be disclosed to any person other than for the Purpose
without our express written consent. Other than for the Purpose, neither the
whole, nor any part of this Valuation Report nor any reference thereto may be
included in any prospectus, listing particulars, published document, circular
or statement nor published in any way without our prior written approval of
the form or context in which it may appear.

Notwithstanding paragraph 1.17 above, this Valuation Report may be disclosed
as set out below:

Subject to the terms and conditions (but disregarding for these purposes
clauses 4.3 to 4.6 (inclusive) of the General Terms) of the Agreement and our
approval of the form and context thereof, we hereby confirm that we will
authorise and consent to the disclosure of this Valuation Report:

i.          as may be required by any applicable court of competent
jurisdiction or other competent judicial or governmental body or any
applicable law or regulation or pursuant to government action, regulatory
requirement or request;

ii.          to each Addressee's affiliates and each Addressee's
affiliates' respective directors, officers, employees, agents, professional
advisers, insurers, auditors and bankers that need to see the Valuation in
connection with the Purpose including Custodian Capital Limited in its
capacity as the Fund Manager;

iii.         in the case of each of Numis Securities Limited and
Lazard & Co., Limited, in seeking to establish a defence or otherwise in
connection with any actual or threatened legal or regulatory proceedings or
investigation relating to the matters set out in this Letter or claims that
may be brought against them arising from their roles as sponsor and/or
financial advisers to the Client and/or API;

iv.         in investor presentations and other investor education
materials prepared in connection with the Acquisition, and in any private
discussions with Investors or other third parties in connection with the
Acquisition; and

v.         for the Purpose.

It is a condition of such disclosure that each party in receipt of this
Valuation Report that is not an Addressee agrees and acknowledges that this
Valuation Report cannot be relied upon by them, and we do not accept any
responsibility, duty of care or liability to them, whether in contract, tort
(including negligence), misrepresentation or otherwise in respect of the
Valuation and the information it contains.  For the avoidance of doubt,
nothing in the preceding sentence shall affect our responsibility, for the
purposes of Rule 5.3.2R(2)(f) of the UK Prospectus Regulation Rules, for the
information contained in this Valuation Report.

This Valuation Report complies with Rule 29 of the Code and we understand that
the publication or reproduction by the Client and/or API of this Valuation
Report and/or the information contained herein as required by Rules 26 and 29
of the Code is necessary, including in the Rule 2.7 Announcement, the Scheme
Document and any Code Document.

For the purpose of the Code, we accept responsibility for the information
within this Valuation Report and have ensured that the information contained
in this Valuation Report is, to the best of our knowledge (having taken all
reasonable care to ensure that such is the case), in accordance with the facts
and contains no omission likely to affect its import.

We confirm that this Valuation Report complies with Rules 5.4.5G and 5.4.6G of
the UK Prospectus Regulation Rules and paragraphs 128 to 130 of the FCA
Technical Note.

We confirm that the information contained in the Combined Prospectus and
Circular or any supplementary prospectus and/or circular (as the case may be)
which is extracted from this Valuation Report is accurate, balanced and
complete and is not misleading or inconsistent with this Valuation Report as
prepared by us and has been properly extracted, derived or computed from this
Valuation Report.

The Addressees agree and acknowledge that we shall have no liability for any
error, omission or inaccuracy in this Valuation Report to the extent resulting
from our reliance on information provided by or on behalf of the Addressees
unless otherwise stated. Notwithstanding the above, we highlight the
restricted nature of this instruction, in accordance with the Red Book; as a
result the reliance that can be placed on the Valuation is limited.

Verification

We recommend that before any financial transaction is entered into based upon
the Valuation, you obtain verification of any third-party information
contained within this Valuation Report and the validity of the assumptions we
have adopted.

We would advise you that whilst we have valued the Properties reflecting
current market conditions, there are certain risks which may be, or may
become, uninsurable. Before undertaking any financial transaction based upon
this Valuation, you should satisfy yourselves as to the current insurance
cover and the risks that may be involved should an uninsured loss occur.

Limitations on liability

Knight Frank LLP's total liability for any direct loss or damage (whether
caused by negligence or breach of contract or otherwise) arising out of or in
connection with this Valuation is limited in accordance with the terms of the
Agreement.  Knight Frank LLP accepts no liability for any indirect or
consequential loss or for loss of profits.

We confirm that we hold adequate and appropriate PII cover for this
instruction.

No claim arising out of or in connection with this Valuation may be brought
against any member, employee, partner or consultant of Knight Frank LLP.
Those individuals will not have a personal duty of care to any party and any
claim for losses must be brought against Knight Frank LLP.

Nothing in this Valuation shall exclude or limit our liability in respect of
fraud or for death or personal injury caused by our negligence or for any
other liability to the extent that such liability may not be excluded or
limited as a matter of law.

Scope of work

Information to be relied upon

We will rely on the information previously provided to us by you, or by third
parties in respect of the 30 September 2023 valuation and will assume it to be
correct for the purposes of the Valuation unless you inform us otherwise,
subject only to any valuation that we have agreed to undertake.

Where we express an opinion in respect of (or which depends upon) legal
issues, any such opinion must be verified by your legal advisors before any
Valuation can be relied upon.

We are instructed to rely on floor areas and tenancy information provided by
the Client. We have not read lease agreements nor verify accordance between
tenancy schedule and lease terms.

Knight Frank LLP cannot be held liable as regards the legal description of the
Properties, its use, non-compliance with statutory requirements, technological
and natural risks, the areas taken into account, the existence of concealed
defects, presence of asbestos, adverse ground condition, presence of soil
contamination, presence of insects, noxious animals or plants, rot, or
deleterious materials, etc. This Valuation Report comments on the above on the
basis of Technical or Environmental reports, if provided.

Inspections

In our ongoing role as External Valuers, we are instructed to carry out an
external and internal inspection of the Properties, and the Valuation has been
prepared in accordance with our previous inspections of the Properties. Our
internal inspections of all the Properties have been undertaken within the
last twelve months.

Information Provided

In this Valuation Report we have been provided with information by the Client,
its advisors and other third parties. We have relied upon this information as
being materially correct in all aspects.

In the absence of any documents or information provided, we have had to rely
solely upon our own enquiries as outlined in this Valuation Report.

We have assumed there to be good and marketable titles to the properties. We
have made oral enquiries where appropriate and have taken account, insofar as
we are aware, of unusual outgoings, planning proposals and onerous
restrictions or local authority intentions which affect the properties.
However, this information has been provided to us on the basis that it should
not be relied upon.

We have been supplied with details of tenure and tenancies and have valued on
the basis that there are no undisclosed matters which would affect our
valuation.

We have not undertaken any building surveys or environmental audits and are
therefore unable to report that the Properties are free of any structural
fault, rot, infestation or defects of any other nature, including inherent
weaknesses due to the use in construction of materials now suspect. No tests
were carried out on any of the technical services. However, we have reflected
any apparent wants of repair in our opinion of value as appropriate.

We have made oral enquiries where appropriate and have taken account, insofar
as we are aware, of unusual outgoings, planning proposals and onerous
restrictions or local authority intentions which affect the Properties.

We have assumed, except where we have been informed to the contrary, that
there are no adverse ground or soil conditions or environmental contaminations
which would affect the present or future use of the Properties and that the
load bearing qualities of the site of each property are sufficient to support
the buildings constructed or to be constructed thereon.

The Properties have been valued individually, not as part of a portfolio.

 

 

 

 

 

 

Valuation

Methodology

The Valuation has been undertaken using appropriate valuation methodology and
our professional judgement.

Comparative method

In undertaking the Valuation, we have made our assessment on the basis of a
collation and analysis of appropriate comparable transactions, together with
evidence of demand within the vicinity of the subject properties.  With the
benefit of such transactions we have then applied these to the properties,
taking into account size, location, aspect and other material factors.

Investment method

The Valuation has been carried out using the comparative and investment
methods.  In undertaking the Valuation, we have made our assessment on the
basis of a collation and analysis of appropriate comparable investment and
rental transactions, together with evidence of demand within the vicinity of
the subject properties. With the benefit of such transactions we have then
applied these to the Properties, taking into account size, location, terms,
covenant and other material factors.

Valuation bases

The basis of value for the Valuation as required by the Code is Market Value
and therefore these valuations have been prepared on a Market Value basis.

Market Value

Market Value is defined within RICS Valuation - Global Standards as:

"The estimated amount for which an asset or liability should exchange on the
valuation date between a willing buyer and a willing seller in an arm's length
transaction after proper marketing and where the parties had each acted
knowledgeably, prudently and without compulsion."

Portfolios

In a valuation of a property portfolio, we have valued the individual
properties separately and we have assumed that the individual properties have
been marketed in an orderly way.

Market Value

Market Value

We are of the opinion that the aggregate Market Value of the freehold,
feuhold, ownership and leasehold properties, as at the valuation date is:

£319,830,000 (Three Hundred and Nineteen Million, Eight Hundred and Thirty
Thousand Pounds)

The tenure of the Properties held by the Client as at 31 December 2023
comprises the following:

            No. of Properties  Market Value
 Freehold   64                 £275,500,000
 Leasehold  14                 £44,330,000
 Total      78                 £319,830,000

 

Our opinions of value are summarised in the table below:

              Valuation            Weighting by value

              31  December 2023    31 December 2023

              £'000                %
 Industrial   £162,500             50.81%
 RW           £82,375              25.76%
 Other        £30,940              9.67%
 Office       £30,875              9.65%
 High Street  £13,140              4.11%
 Total        £319,830             100%

 

 Source: Knight Frank

 

 Location       Valuation          Weighting by value

                31 December 2023   31 December 2023

                £'000              %
 West Midlands  £54,065            16.90%
 North West     £62,125            19.42%
 South East     £31,200            9.76%
 East Midlands  £54,825            17.14%
 South West     £46,265            14.47%
 North East     £23,425            7.32%
 Scotland       £41,100            12.85%
 Eastern        £3,575             1.12%
 Wales          £3,250             1.02%
 Total          £319,830           100%

 

For the purposes of Rule 29.5 of the Code, we confirm that in our opinion the
current valuation of the Properties as at the date of this Valuation Report
would not be materially different from the valuation of the Properties as at
the valuation date.

However we bring to your attention the potential material change in the
portfolio in so far as Osprey House, Pegasus Business Park, Castle Donnington
DE74 2UZ is currently under offer and is likely to be sold early in calendar
year 2024. This property is therefore included within this Valuation Report
but could soon be removed from the portfolio.

We are not aware, as a result of our role as an External Valuer of the
Properties of any matter which would materially affect the Market Value of the
Properties which is not disclosed in this Valuation Report (subject to the
assumptions set out in this Valuation Report) and we are not aware of any
matter in relation to this Valuation Report that we believe should be and has
not yet been brought to the attention of the Addressees.

For the purposes of paragraph 130(vi) of the FCA Technical Note, we are
required to explain any differences between the valuation figure in this
Valuation Report and the equivalent figure reported in the Client's latest
published annual or consolidated accounts. The Company's properties were
valued as at 31 March 2023 for the annual report valuation of the Company. The
difference between the 31 March 2023 valuation and this Valuation is
attributed to changes in the market value of the Properties and the
acquisition and disposal of assets between that date and the date of this
report.

Responsibility

For the purposes of the Code, we are responsible for this Valuation Report and
accept responsibility for the information contained in this Valuation Report
and confirm that to the best of our knowledge (having taken all reasonable
care to ensure this is the case), the information contained in this Valuation
Report is in accordance with the facts and contains no omissions likely to
affect its import. This Valuation Report complies with and is prepared in
accordance with, and on the basis of, the Code. We authorise its contents for
the purposes of Rule 29 of the Code.

We accept responsibility (including for the purpose of Rule 5.3.2R(2)(f) of
the UK Prospectus Regulation Rules) for the information contained in this
Valuation Report and to the best of our knowledge, the information contained
in this Valuation Report is in accordance with the facts and the Valuation
Report makes no omission likely to affect its import.

Consent

Knight Frank LLP has given and has not withdrawn its consent to the inclusion
of this Valuation Report in the Rule 2.7 Announcement, the Scheme Document and
in the Combined Prospectus and Circular that is to be reviewed and approved by
the FCA, and to the publication and reproduction of this Valuation Report in
accordance with the Purpose.

We consent to the inclusion of the Valuation and this Valuation Report and any
extracts or references thereto in the Combined Prospectus and Circular or any
supplementary prospectus and/or circular (as the case may be) and the
reference to our name in the form and context in which they are included in
the Combined Prospectus and Circular or any supplementary prospectus and/or
circular (as the case may be) (subject to us first approving the form and
context in which our Valuation Report will appear).

 

Appendix 1   List of Properties

   Feuhold     Menzies - Aberdeen, 6 Abbotswell Road West Tullos Ind Estate, Aberdeen, AB12  R00-173  15/02/2023
               3AB

   Freehold    Unit 2, Snipe Retail Park, Ash, Ashton-under-Lyne                             R00-150  02/02/2023

   Freehold    Southam Road, Banbury, OX16 2R                                                R00-115  14/03/2023

   Freehold    Part of Plot S, Stratton Bus Park, Biggleswade                                R00-051  25/04/2023

   Long Lease  Unit 10, Albert Reach, Bristol, Bristol                                       R00-091  12/04/2023

   Freehold    Unit 1, Centrum 100, Burton, D, Burton                                        R00-137  01/02/2023

   Freehold    Unit A, Wellington Road Retail Park, Burton                                   R00-155  17/11/2023

   Freehold    55 Westburn Drive, Cambuslang                                                 R00-087  28/02/2023

   Freehold    90 Queen Street, Cardiff                                                      R00-154  21/07/2023

   Freehold    Unit 1 St Nicholas Gate Retail, Carlisle                                      R00-159  14/02/2023

   Long Lease  Osprey House, Pegasus Business Park, Castle Donnington,                       R00-120   21/02/2023

               DE74 2UZ
   Freehold    Unit 1, Willowbridge Way, Wakefield, Castleford                               R00-049  02/02/2023

   Long Lease  Wienerberger House, Royal Bus, Cheadle                                        R00-121  28/02/2023

   Long Lease  Container Components, Holmewood Industrial Park, Chesterfield                 R00-206  23/11/2022
   Freehold    Orchard Business Park, Coventry                                               R00-032  10/01/2023

   Freehold    Homebase, Holt Road, Cromer                                                   R00-198  23/11/2022
   Freehold    Unit 7, Badby Park, Daventry                                                  R00-136  28/07/2023

   Freehold    DFS Droitwich, Roman Way Retail Park, Droitwich, WR9 9AY                      R00-204  19/01/2023

   Feuhold     47B George St, Edinburgh, EH2                                                 R00-007  16/11/2022

   Freehold    Opus Aspect, Chester Road, Erdington                                          R00-047  09/02/2023

   Long Lease  2 Campsie Drive, Glasgow Airport, Glasgow                                     R00-100  01/11/2022

   Freehold    Unit 1 & 2, Eastern Avenue, Gloucester                                        R00-142  13/02/2023

   Ownership   Thornbridge Distribution Centre, Grangemouth                                  R00-200  14/02/2023

   Freehold    GF Yellow Wing GW House Grove Park, Leicester, LE19 1SY                       R00-035  28/01/2023

   Freehold    Market Street, Guildford, GU1 4LB                                             R00-109  09/02/2023

   Freehold    1 Livingstone Boulevard, Hamilton, G72 0BP                                    R00-052  01/02/2023

   Long Lease  Harrison Court Hilton Industrial Est, Hilton, DE65 5UR                        R00-182  25/04/2023

   Freehold    Telford Way, Kettering, NN16 8UN                                              R00-093  19/01/2023

   Freehold    Penrhyn Court, Knowsley                                                       R00-184  19/01/2023

   Freehold    The Old Knutsford Library, Brook Street, Knutsford, WA16 8BN                  R00-004  21/02/2023

   Freehold    Units A and B, National Court, Leeds, LS10 1PS                                R00-084  17/11/2023

   Freehold    489 Aylestone Road, Leicester                                                 R00-061  07/06/2023

   Freehold    Stephenson Road, Lincoln, LN6 3QU                                             R00-101  07/06/2023

   Freehold    Total Fitness, Whisby Road, Lincoln, LN6 3TA                                  R00-163  09/02/2023

   Feuhold     East Avenue, Linwood                                                          R00-175  19/01/2023

   Long Lease  Units 1 - 4, The Beat, Liverpool                                              R00-138  19/01/2023

   Freehold    2 Todd Square, Houstoun Estate Livingston                                     R00-153  02/12/2022

   Freehold    VW Loughborough                                                               R00-172  02/02/2023

   Long Lease  Unit 4, The Furrows, The Furrows Merlin Park Trafford Park                    R00-041  18/01/2023

               Manchester, M32 0SZ
   Freehold    60 Fountain Street, Manchester, M2 2FE                                        R00-186  28/04/2023

   Freehold    DFS Measham, Tamworth Road, Measham, DE12 7DU                                 R00-205  09/02/2023

   Feuhold     5 Brittain Way, Motherwell                                                    R00-207  19/01/2023

   Feuhold     Menzies, 1 Claylands Road, Newbridge - Edinburgh                              R00-174  21/02/2023
   Freehold    Unit D1, Loscoe Close, Normanton, WF6 1TW                                     R00-094  05/09/2023
   Freehold    Starbucks, The Portal Queens Drive, Nottingham, NG2 1AL                       R00-181  16/01/2023
   Freehold    1 Dunsil Road, Moorgreen Industrial Park Newthorpe, Nottingham, NG16 3TN      R00-199  17/11/2023
   Freehold    Springfield Road Retail Park, Hucknall Lane, Bulwell,                         R00-202  23/11/2022

               Nottingham
   Freehold    DX Parcel Depot, Harrington Way, Nuneaton                                     R00-053  10/02/2023

   Freehold    Willow Court Minns Business Park, Oxford                                      R00-183  25/10/2023

   Freehold    Unit A, Coypool Road, Plymouth                                                R00-145  24/10/2022

   Freehold    AGO, Harbour Road, Portishead, Bristol, BS20 7AJ                              R00-039  24/10/2022

   Freehold    Phase II, Mustad Way Portishead                                               R00-079  25/10/2022

   Freehold    226-238 Commercial Road, Portsmouth                                           R00-110  17/11/2022

   Freehold    Alto House, Ravensbank Drive, Redditch                                        R00-072  25/10/2022
   Freehold    Parkwood Health & Fitness, Salisbury                                          R00-151  02/02/2023

   Freehold    Synergy Health, Sheffield Parkway, Sheffield,                                 R00-020  02/02/2023

               S9 4WU
   Freehold    Parkway 1 Business Centre, Sheffield                                          R00-126  02/02/2023

   Freehold    Foundry House, Sheffield                                                      R00-168  10/11/2022

   Freehold    28 & 29A Pride Hill, Shrewsbury                                               R00-062  02/12/2022

   Long Lease  Audi Shrewsbury                                                               R00-166  02/12/2022

   Long Lease  TJ Vickers Shrewsbury                                                         R00-164  31/01/2023

   Long Lease  19-23 Palmerston Road, South Sea, Portsmouth                                  R00-065  25/10/2022

   Freehold    Unit E, DHL, Estuary Commerce Park, Speke, L24 8RF                            R00-054  19/01/2023

   Freehold    County Road Retail Park, Swindon                                              R00-123  11/10/2022

   Freehold    302 Relay Park, Tamworth                                                      R00-118  23/11/2022

   Freehold    Sainsbury's, Anthony Road, Torpoint, PL11 2JW                                 R00-078  25/10/2023

   Long Lease  Unit 1 & 5, Abbey Sands, Torquay, TQ2 5FB                                     R00-103  25/10/2022

   Freehold    Unit 1, Leacroft Road, Warrington, WA3 6PJ                                    R00-112  10/02/2023
   Freehold    1 Chesford Grange, Warrington, WA1 4RQ                                        R00-070  10/02/2023

   Long Lease  The Dome Roundabout, NW Avenue, Watford                                       R00-027  01/02/2023

   Freehold    Hawthorns Business Park, Halford Lane, West Bromwich, B66 1BB                 R00-124  17/11/2022

   Freehold    26 Kings Hill Avenue, Kings Hill, West Malling, ME19 4AE                      R00-113  28/01/2023

   Freehold    Unit 1 Jubilee Close Retail Park, Weymouth                                    R00-171  11/10/2023

   Freehold    127-128 High Street, Winchester, SO23 9AX                                     R00-201  23/11/2023

   Freehold    Unit One, Road One, Winsford, CW7 2RL                                         R00-122  24/01/2023

   Freehold    Menzies Distribution Centre, George Cayley, Clifton, York                     R00-187  21/02/2023

   Freehold    Units 1&2, Clifton Moor Retail Park, York                                     R00-203  21/02/2023

 

 

 

 

 

 

Part B | Savills Valuation Report in respect of CREI

 

 

 

 

Project Utah

Report and Valuation

19 January 2024

·

Contents

1. (#_Toc151369487)            (#_Toc151369487) (#_Toc151369487)
Valuation Report (#_Toc151369487) (#_Toc151369487)

1.1. (#_Toc151369488)         (#_Toc151369488) (#_Toc151369488)
Addressees (#_Toc151369488) (#_Toc151369488)

1.2. (#_Toc151369489)         (#_Toc151369489) (#_Toc151369489) Project
Name (#_Toc151369489) (#_Toc151369489)

1.3. (#_Toc151369490)         (#_Toc151369490) (#_Toc151369490)
Instructions and Purpose of Valuation (#_Toc151369490) (#_Toc151369490)

1.4. (#_Toc151369491)         (#_Toc151369491) (#_Toc151369491) Terms
of Reference (#_Toc151369491) (#_Toc151369491)

1.5. (#_Toc151369492)         (#_Toc151369492) (#_Toc151369492)
Conflicts of Interest (#_Toc151369492) (#_Toc151369492)

1.6. (#_Toc151369493)         (#_Toc151369493) (#_Toc151369493) Date of
Valuation and Changes to Value since the Valuation Date (#_Toc151369493)
(#_Toc151369493)

1.7. (#_Toc151369494)         (#_Toc151369494) (#_Toc151369494) Valuer
Details (#_Toc151369494) (#_Toc151369494)

1.8. (#_Toc151369495)         (#_Toc151369495) (#_Toc151369495) Basis
of Valuation (#_Toc151369495) (#_Toc151369495)

1.9. (#_Toc151369496)         (#_Toc151369496) (#_Toc151369496) Market
Conditions (#_Toc151369496) (#_Toc151369496)

1.10. (#_Toc151369497)       (#_Toc151369497) (#_Toc151369497) Market
Value (#_Toc151369497) (#_Toc151369497)

1.11. (#_Toc151369498)       (#_Toc151369498) (#_Toc151369498)
Confidentiality (#_Toc151369498) (#_Toc151369498)

1.12. (#_Toc151369499)       (#_Toc151369499) (#_Toc151369499) Portfolio
Valuation General Assumptions and Conditions (#_Toc151369499) (#_Toc151369499)

1.13. (#_Toc151369500)       (#_Toc151369500) (#_Toc151369500) Reliance
(#_Toc151369500) (#_Toc151369500)

1.14. (#_Toc151369501)       (#_Toc151369501) (#_Toc151369501)
Signatories (#_Toc151369501) (#_Toc151369501)

1.15. (#_Toc151369502)       (#_Toc151369502) (#_Toc151369502) Date of
Report (#_Toc151369502) (#_Toc151369502)

2. (#_Toc151369503)            (#_Toc151369503) (#_Toc151369503)
Schedule of Properties (#_Toc151369503) (#_Toc151369503)

3. (#_Toc151369504)            (#_Toc151369504) (#_Toc151369504)
Portfolio Valuation General Assumptions and Conditions (#_Toc151369504)
(#_Toc151369504)

 

 

 Valuation Report
 Addressees                                                       Custodian Property Income REIT plc ("Custodian REIT")

                                                                  1 New Walk Place

                                                                  Leicester

                                                                  LE1 6RU

                                                                  Numis Securities Limited ("Deutsche Numis")

                                                                  45 Gresham Street

                                                                  London

                                                                  EC2V 7BF

                                                                  abrdn Property Income Trust Limited ("API")

                                                                  PO Box 255

                                                                  Trafalgar Court, Les Banques

                                                                  St Peter Port

                                                                  Guernsey

                                                                  Lazard & Co Limited ("Lazard")

                                                                  50 Stratton Street

                                                                  London

                                                                  W1J 8LL

                                                                  FAO:  Alex Nix
 Project Name                                                     Project Utah
 Instructions and Purpose of Valuation                            In accordance with our instructions received from Custodian Property Income
                                                                  REIT plc ("Custodian REIT") and our terms of engagement dated 15 January 2024
                                                                  with Custodian REIT, we have undertaken valuations (the "Valuations") of the
                                                                  freehold and leasehold interests in the properties described in Schedule 2
                                                                  (the "Properties" and each being a "Property") (together, the "Portfolio") in
                                                                  connection with a recommended all-share offer by Custodian REIT for API (the
                                                                  "Transaction").  Custodian REIT has expressly instructed us not to disclose
                                                                  certain information which is considered commercially sensitive, namely the
                                                                  individual values of the properties.

                                                                  This report (the "Report") has been prepared in accordance with the RICS
                                                                  Valuation - Global Standards (incorporating the IVSC International Valuation
                                                                  Standards) effective from 31 January 2022 together with the UK National
                                                                  Supplement effective 14 January 2019, together the "Red Book''. The Report has
                                                                  been prepared in accordance with and complies with: (a) the requirements of
                                                                  Rule 29 of the City Code on Takeovers and Mergers (the "Code"); (b) Rules
                                                                  5.4.5G and 5.4.6G of the prospectus regulation rules made by the Financial
                                                                  Conduct Authority ("FCA") for the purposes of Part 6 of the Financial Services
                                                                  and Markets Act 2000 (the "Prospectus Regulation Rules"); and (c)  paragraphs
                                                                  128-130 of the FCA Primary Market Technical Note 619.1 (the "FCA Technical
                                                                  Note"). We understand that this Report is required for: (i) inclusion in an
                                                                  announcement proposed to be made by Custodian REIT and API pursuant to Rule
                                                                  2.7 of the Code in connection the "Transaction (the "Announcement");(ii)
                                                                  inclusion in a scheme circular to be published by API in connection with the
                                                                  Transaction (the "Scheme Document"); (iii) inclusion in a combined prospectus
                                                                  and circular to be published by Custodian REIT in connection with the
                                                                  Transaction and the issue and allotment of new shares in the capital of
                                                                  Custodian REIT pursuant to the terms of the Transaction (the "Combined
                                                                  Prospectus and Circular"); (iv).inclusion and/or reference to it in any other
                                                                  announcements, documents and/or supplementary documents required to be
                                                                  released by Custodian REIT and/or API pursuant to the Code and which directly
                                                                  relate to the Transaction (each a "Code Document"); and (v) publication on
                                                                  Custodian REIT's website and API's website in accordance with the requirements
                                                                  of the Code and the Prospectus Regulation Rules
 Terms of Reference                                               The Portfolio comprises 80 Properties, fifteen of which are held on a
                                                                  leasehold basis, whilst the remainder are held on a freehold / heritable
                                                                  basis. The Properties are all held for investment purposes and are located
                                                                  throughout the UK. The properties have been inspected within the last 12
                                                                  months. All the Properties are identified on the attached schedule at Section
                                                                  2 of this Report.

                                                                  Custodian REIT has provided us with floor areas for the Properties, which we
                                                                  understand were calculated in accordance with the current RICS Property
                                                                  Measurement and upon which we have relied.  We have not remeasured the office
                                                                  properties in the portfolio in accordance with International Property
                                                                  Measurement Standard (IPMS) 3 - Offices and therefore our Valuations are based
                                                                  on Net Internal Areas as defined in the RICS Property Measurement.  We have
                                                                  been provided with legal documents for the Properties and tenancy schedules
                                                                  provided by Custodian REIT In addition to this, we have received updates from
                                                                  Custodian REIT specialist advisors. We confirm that we have considered
                                                                  sustainability features relevant to the Properties and the implications these
                                                                  could have on our Valuations.
 Conflicts of Interest                                            In accordance with the RICS professional statement on Conflicts of Interest
                                                                  (1(st) Edition, March 2017), we are not aware of any conflict of interest
                                                                  preventing us from providing you with an independent valuation of the
                                                                  properties in accordance with the RICS Red Book. We confirm that we undertake
                                                                  valuations of the Properties on behalf of Custodian REIT for accounts purposes
                                                                  on a quarterly basis, the last of which was as at 30 September 2023. We
                                                                  confirm we are acting as an "external valuer" as defined in the RICS Red Book.
 Date of Valuation and Changes to Value since the Valuation Date  Our opinions of value are as at Valuation Date (the "Valuation Date"). The
                                                                  importance of the Valuation Date must be stressed as property values can
                                                                  change over a relatively short period. We note the following between the
                                                                  Valuation Date and the date of this Report:

                                                                  ·      1 Pride Place, Pride Park, Derby sold on 5 January 2024.

                                                                  ·      Milton Keynes - Massmould, Bradbourne Drive, Milton Keynes is
                                                                  under offer and expected to complete in January 2024.

                                                                  These properties have been included in this Report. However, we note that the
                                                                  Pride Park, Derby property has now been removed from the portfolio and the
                                                                  Milton Keynes - Massmould property could soon be removed from the portfolio.

                                                                  For the purposes of Rule 29.5 of the Code, and with the exception of the sale
                                                                  of the two above properties, we confirm that there is no material difference
                                                                  between the values of the remaining properties stated in this Report and the
                                                                  values that would be stated were the Valuation Date the date of this Report.
                                                                  Nor do we believe that market conditions have changed sufficiently to
                                                                  materially alter the Valuations reported as at the Valuation Date. As a
                                                                  result, we confirm for the purpose of Rule 29.5 of the Code and paragraph
                                                                  130(iv) of the  FCA Technical Note that an updated valuation as at the date
                                                                  of this Report would not be materially different from the Valuations as at the
                                                                  Valuation Date.
 Valuer Details                                                   These Valuations have been prepared by a number of valuers under the
                                                                  supervision of Tom Priest MRICS and James Daffern MRICS (the "Lead Valuers"),
                                                                  both of whom are RICS Registered Valuers. We confirm that the Lead Valuers are
                                                                  appropriately qualified for the purposes of the Valuation as required by Rule
                                                                  29.3(a)(ii) of the Code,  meet the requirements of the Red Book and Rule
                                                                  29.3(a)(iii) of the Code in having sufficient current knowledge of the
                                                                  relevant markets and the necessary skills and understanding to undertake the
                                                                  Valuations competently in accordance with Rule 29 of the Code and Rules 5.4.5G
                                                                  and 5.4.6G of the Prospectus Regulation Rules. We confirm that the Lead
                                                                  Valuers are independent of the parties to the Transaction as required by Rule
                                                                  29.3(a)(i) of the Code, and confirm that we are not aware of any reason why we
                                                                  would not satisfy the requirements of Rule 29.3(a)(i) of the Code.

                                                                  We are required by RICS regulations to disclose the following:

                                                                  ·      Tom Priest MRICS and James Daffern MRICS commenced supervision of
                                                                  the Valuation of this Portfolio in June 2021, when Savills (UK) Limited was
                                                                  instructed to provide quarterly valuations;

                                                                  ·      In the financial year ending 31 December 2023, the total fees
                                                                  earned from the Addressees, and connected parties, was less than 5% of Savills
                                                                  (UK) Limited's turnover.
 Basis of Valuation                                               Our Valuations have been prepared on the basis of Market Value, the definition
                                                                  of which is as follows:

                                                                  "The estimated amount for which an asset or liability should exchange on the
                                                                  valuation date between a willing buyer and a willing seller in an arm's length
                                                                  transaction after proper marketing and where the parties had each acted
                                                                  knowledgeably, prudently and without compulsion."

                                                                  Our Valuations have been arrived at predominantly by reference to market
                                                                  evidence for comparable property. We have made no allowance for any Capital
                                                                  Gains Tax or other taxation liability that might arise upon a sale of the
                                                                  property, nor have we allowed for any adjustment to any of the properties'
                                                                  income streams to take into account any tax liabilities that may arise.  Our
                                                                  Valuations are exclusive of VAT (if applicable).  We have excluded from our
                                                                  Valuations any additional value attributable to goodwill, or to fixtures and
                                                                  fittings which are only of value in situ to the present occupiers.

                                                                  No allowance has been made for rights, obligations or liabilities arising in
                                                                  relation to fixed plant and machinery, and it has been assumed that all fixed
                                                                  plant and machinery and the installation thereof complies with the relevant
                                                                  EEC legislation, insofar that the latter is applicable.

                                                                  We have made no variation from standard assumptions.
 Market Conditions                                                The UK economy continues to grapple with inflationary pressures amid sluggish

                                                                economic growth. In the first quarter of 2023, the UK witnessed a modest
                                                                  expansion, leading the IMF to upgrade their forecasts and dismiss the

                                                                possibility of a recession this year. To combat inflation, the Bank of England
                                                                  has been consistently raising interest rates, reaching a high of 5.25% in

                                                                August 2023. However, the potential for further increases cannot be ruled out.
                                                                  As a result, borrowing costs have increased, surpassing prime yields.

                                                                  The commercial real estate market felt the impact of these developments and

                                                                experienced a sharp correction in prices. Many sales have been withdrawn as
                                                                  vendors' price expectations were not met, while buyers have adopted an

                                                                opportunistic pricing approach. Real estate lenders are exercising caution
                                                                  when it comes to financing new lending opportunities, except for the most

                                                                exceptional assets and sponsors.

                                                                Consequently, transactional volumes and liquidity have significantly declined,
                                                                  leading to a scarcity of comparable evidence to inform the valuation process.

                                                                Market sentiment has gained increased importance in making informed
                                                                  assessments, given the limited availability of data. Notably, a divided market

                                                                is emerging, differentiating "best in class" properties from those facing
                                                                  challenges due to locational factors and the overall quality of the real

                                                                estate. Stakeholders in the market, including occupiers, investors, and
                                                                  lenders, are attaching heightened significance to environmental, social, and

                                                                governance (ESG) considerations and the associated costs, in their decision
                                                                  making.

                                                                  While there is still liquidity in the market, ongoing geopolitical

                                                                uncertainties, economic challenges, and the cost and accessibility of debt
                                                                  finance are expected to further impact pricing in certain sectors. As a

                                                                result, the potential for future value erosion cannot be discounted,
                                                                  particularly for properties outside prime markets where more significant

                                                                declines are anticipated.

                                                                It is therefore important to recognise that our valuations have been prepared
                                                                  against the backdrop outlined above. Moreover, investor behaviour can change

                                                                quickly during such periods of heightened volatility. As such, the conclusions
                                                                  set out in this report are only valid at the valuation date and we would

                                                                recommend that the value of the properties are kept under regular review. For
                                                                  the avoidance of doubt, our valuations are not reported as being subject to

                                                                'material valuation uncertainty' as defined in the RICS Valuation - Global
                                                                  Standards.

 Market Value                                                     We are of the opinion that the aggregate Market Value of the Properties in the
                                                                  Portfolio, as at 31 December 2023, is:

TOTAL  £281,940,000

 

                                                                  (TWO HUNDRED AND EIGHTY ONE MILLION NINE HUNDRED AND FORTY THOUSAND POUNDS)

                                                                  The total valuation figure reported is the aggregate total of the individual
                                                                  Properties and not necessarily a figure that could be achieved if the
                                                                  Portfolio was sold as a single holding. Our Valuations include standard
                                                                  purchaser's costs but do not include costs of realisation.

                                                                  For the purposes of paragraph 130(vi) of the FCA Technical Note, we are
                                                                  required to comment on any differences between the valuation figure in this
                                                                  Report and the valuation figures reported in Custodian REIT's latest published
                                                                  annual or consolidated accounts.

                                                                  For the purposes of paragraph 130(vi) of the FCA Technical Note, we are
                                                                  required to comment on any differences between the valuation figure in this
                                                                  Report and the valuation figures reported in Custodian REIT's latest published
                                                                  annual or consolidated accounts. The Company's properties were valued as at 31
                                                                  March 2023 for the annual report valuation of the Company. The difference
                                                                  between the 31 March 2023 valuation and this Valuation is attributed to
                                                                  changes in the market value of the Properties and the disposal of assets
                                                                  between that date and the date of this Report.

                                                                  The Market Value of the Properties split by property type (based on Custodian
                                                                  REIT categorisations) is as follows:

                  Valuation 31 December 2023 (£m)   Valuation 31 December 2023 (%)
                                                                  Retail            £25,540,000                       9.06%
                                                                  Retail Warehouse  £43,775,000                       15.53%
                                                                  Offices           £34,925,000                       12.39%
                                                                  Industrial        £143,325,000                      50.84%
                                                                  Other             £34,375,000                       12.19%
                                                                  Total             £281,940,000                      100%

 

                                                                  The Market Value of the Properties split by region (based on Custodian REIT
                                                                  categorisations) is as follows:

               Valuation 31 December 2023 (£m)   Valuation 31 December 2023 (%)
                                                                  East Anglia    £16,130,000                       5.72%
                                                                  East Midlands  £35,900,000                       12.73%
                                                                  North East     £31,950,000                       11.33%
                                                                  North West     £41,640,000                       14.77%
                                                                  Scotland       £35,470,000                       12.58%
                                                                  South East     £47,750,000                       16.94%
                                                                  South West     £16,850,000                       5.98%
                                                                  Wales          £1,850,000                        0.66%
                                                                  West Midlands  £54,400,000                       19.29%
                                                                  Total          £281,940,000                      100%

 

                                                                  The tenure of the Properties held by Custodian REIT as at the Valuation Date
                                                                  comprises the following:

           No. of Properties  Market Value
                                                                  Freehold   65                 £243,565,000
                                                                  Leasehold  15                 £38,375,000
                                                                  Total      80                 281,940,000

·
 Confidentiality                                                  In accordance with the recommendations of the RICS, this Report is provided
                                                                  solely for the purpose stated in this Report.  It is confidential to and for
                                                                  the use only of the parties to whom it is addressed, and no responsibility is
                                                                  accepted to any third party for the whole nor any part of its contents.  Any
                                                                  such parties rely upon this Report at their own risk.  Save as referred to in
                                                                  this Report neither the whole nor any part of this Report or any reference to
                                                                  it may be included now, or at any time in the future, in any published
                                                                  document, circular or statement, nor published, referred to or used in any way
                                                                  without our written approval of the form and context in which it may appear.

                                                                  Notwithstanding the above, we understand that the Report is for inclusion in
                                                                  the Announcement, Scheme Document and the Combined Prospectus and Circular and
                                                                  any further documents or announcements to be published by Custodian REIT
                                                                  and/or API in accordance with the Transaction. We consent to the publication
                                                                  and reproduction of the Report as required (including in the Announcement, the
                                                                  Scheme Document and the Combined Prospectus and Circular) subject to the
                                                                  provisions of our Terms of Engagement.
 Portfolio Valuation General Assumptions and Conditions           All valuation advice has been carried out on the basis of the General
                                                                  Assumptions and Conditions (#Assumptions) set out in Section 3.
 Reliance                                                         This Report is addressed to and capable of being relied upon by:

                                                                  ·      Custodian REIT

                                                                  ·      Deutsche Numis

                                                                  ·      API

                                                                  ·      Lazard

                                                                  (together, the Addressees) provided that, in relying on this Report, each of
                                                                  the Addressees acknowledges and agrees that our liability under or in
                                                                  connection with this report to any one, or more, or all of the Addressees and
                                                                  any other party who becomes entitled to rely on the report is limited to
                                                                  £20,000,000 (Twenty Million Pounds) in the aggregate (the "Aggregate Limit").
                                                                  Further and without prejudice to the above, our maximum liability with respect
                                                                  to any single property contained in this report shall be limited to an amount
                                                                  equal to 20% (twenty percent) of the reported Value of that property (the "Per
                                                                  Property Limit"). For the avoidance of doubt, the Per Property Limit is not in
                                                                  addition to the Aggregate Limit, rather, where claims relate to multiple
                                                                  properties, the Per Property Limit for each Property will apply until the
                                                                  Aggregate Limit is reached, above which we will have no further liability.

                                                                  Notwithstanding the above, we acknowledge that this Report will also be for
                                                                  the use of the shareholders of Custodian REIT and API for the specific Purpose
                                                                  set out in this Valuation.

                                                                  This Report is subject to the terms and conditions set out in our Terms of
                                                                  Engagement dated 15 January 2024.
 Responsibility                                                   For the purposes of the Code, we are responsible for this Report and accept
                                                                  responsibility for the information contained in this Report and confirm that
                                                                  to the best of our knowledge (having taken all reasonable care to ensure that
                                                                  such is the case), the information contained in this Report is in accordance
                                                                  with the facts and contains no omissions likely to affect its import. This
                                                                  Report complies with, and is prepared in accordance with, and on the basis of,
                                                                  the Code. We authorise its contents for the purpose of Rule 29 of the Code.
                                                                  We understand that the publication or reproduction by Custodian REIT and/or
                                                                  API of this Report and/or the information contained herein as required by
                                                                  Rules 26 and 29 of the Code is necessary, including in the Announcement, the
                                                                  Scheme Document and  any other announcements, documents and/or supplementary
                                                                  documents required to be released by Custodian REIT and/or API pursuant to the
                                                                  Code and which directly relate to the Transaction.

                                                                  We accept responsibility (including for the purpose of Rule 5.3.2R(2)(f) of
                                                                  the UK Prospectus Regulation Rules) for the information contained in this
                                                                  Report and to the best of our knowledge, the information contained in this
                                                                  Report is in accordance with the facts and this Report makes no omission
                                                                  likely to affect its import.

                                                                  We confirm that we are not aware, as a result of our role as an External
                                                                  Valuer of the Properties of any matter which would affect the Market Value of
                                                                  the properties which is not disclosed in this Report (subject to any
                                                                  assumptions set out in this Report) in order to make this Report materially
                                                                  accurate and not misleading and we are not aware of any matter in relation to
                                                                  this Report that we believe should be and has not yet been brought to the
                                                                  attention of the Addressees of this Report.
 Signatories

                                                                  Tom Priest MRICS                              James Daffern MRICS

                                                                  RICS Registered Valuer                        RICS Registered Valuer

                                                                  Director                                      Director
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 Date of Report                                                   19 January 2024

 

(TWO HUNDRED AND EIGHTY ONE MILLION NINE HUNDRED AND FORTY THOUSAND POUNDS)

The total valuation figure reported is the aggregate total of the individual
Properties and not necessarily a figure that could be achieved if the
Portfolio was sold as a single holding. Our Valuations include standard
purchaser's costs but do not include costs of realisation.

For the purposes of paragraph 130(vi) of the FCA Technical Note, we are
required to comment on any differences between the valuation figure in this
Report and the valuation figures reported in Custodian REIT's latest published
annual or consolidated accounts.

For the purposes of paragraph 130(vi) of the FCA Technical Note, we are
required to comment on any differences between the valuation figure in this
Report and the valuation figures reported in Custodian REIT's latest published
annual or consolidated accounts. The Company's properties were valued as at 31
March 2023 for the annual report valuation of the Company. The difference
between the 31 March 2023 valuation and this Valuation is attributed to
changes in the market value of the Properties and the disposal of assets
between that date and the date of this Report.

 

The Market Value of the Properties split by property type (based on Custodian
REIT categorisations) is as follows:

                   Valuation 31 December 2023 (£m)   Valuation 31 December 2023 (%)
 Retail            £25,540,000                       9.06%
 Retail Warehouse  £43,775,000                       15.53%
 Offices           £34,925,000                       12.39%
 Industrial        £143,325,000                      50.84%
 Other             £34,375,000                       12.19%
 Total             £281,940,000                      100%

 

The Market Value of the Properties split by region (based on Custodian REIT
categorisations) is as follows:

                Valuation 31 December 2023 (£m)   Valuation 31 December 2023 (%)
 East Anglia    £16,130,000                       5.72%
 East Midlands  £35,900,000                       12.73%
 North East     £31,950,000                       11.33%
 North West     £41,640,000                       14.77%
 Scotland       £35,470,000                       12.58%
 South East     £47,750,000                       16.94%
 South West     £16,850,000                       5.98%
 Wales          £1,850,000                        0.66%
 West Midlands  £54,400,000                       19.29%
 Total          £281,940,000                      100%

 

The tenure of the Properties held by Custodian REIT as at the Valuation Date
comprises the following:

            No. of Properties  Market Value
 Freehold   65                 £243,565,000
 Leasehold  15                 £38,375,000
 Total      80                 281,940,000

·

Confidentiality

In accordance with the recommendations of the RICS, this Report is provided
solely for the purpose stated in this Report.  It is confidential to and for
the use only of the parties to whom it is addressed, and no responsibility is
accepted to any third party for the whole nor any part of its contents.  Any
such parties rely upon this Report at their own risk.  Save as referred to in
this Report neither the whole nor any part of this Report or any reference to
it may be included now, or at any time in the future, in any published
document, circular or statement, nor published, referred to or used in any way
without our written approval of the form and context in which it may appear.

Notwithstanding the above, we understand that the Report is for inclusion in
the Announcement, Scheme Document and the Combined Prospectus and Circular and
any further documents or announcements to be published by Custodian REIT
and/or API in accordance with the Transaction. We consent to the publication
and reproduction of the Report as required (including in the Announcement, the
Scheme Document and the Combined Prospectus and Circular) subject to the
provisions of our Terms of Engagement.

Portfolio Valuation General Assumptions and Conditions

All valuation advice has been carried out on the basis of the General
Assumptions and Conditions (#Assumptions) set out in Section 3.

Reliance

This Report is addressed to and capable of being relied upon by:

·      Custodian REIT

·      Deutsche Numis

·      API

·      Lazard

(together, the Addressees) provided that, in relying on this Report, each of
the Addressees acknowledges and agrees that our liability under or in
connection with this report to any one, or more, or all of the Addressees and
any other party who becomes entitled to rely on the report is limited to
£20,000,000 (Twenty Million Pounds) in the aggregate (the "Aggregate Limit").
Further and without prejudice to the above, our maximum liability with respect
to any single property contained in this report shall be limited to an amount
equal to 20% (twenty percent) of the reported Value of that property (the "Per
Property Limit"). For the avoidance of doubt, the Per Property Limit is not in
addition to the Aggregate Limit, rather, where claims relate to multiple
properties, the Per Property Limit for each Property will apply until the
Aggregate Limit is reached, above which we will have no further liability.

Notwithstanding the above, we acknowledge that this Report will also be for
the use of the shareholders of Custodian REIT and API for the specific Purpose
set out in this Valuation.

This Report is subject to the terms and conditions set out in our Terms of
Engagement dated 15 January 2024.

Responsibility

For the purposes of the Code, we are responsible for this Report and accept
responsibility for the information contained in this Report and confirm that
to the best of our knowledge (having taken all reasonable care to ensure that
such is the case), the information contained in this Report is in accordance
with the facts and contains no omissions likely to affect its import. This
Report complies with, and is prepared in accordance with, and on the basis of,
the Code. We authorise its contents for the purpose of Rule 29 of the Code.
We understand that the publication or reproduction by Custodian REIT and/or
API of this Report and/or the information contained herein as required by
Rules 26 and 29 of the Code is necessary, including in the Announcement, the
Scheme Document and  any other announcements, documents and/or supplementary
documents required to be released by Custodian REIT and/or API pursuant to the
Code and which directly relate to the Transaction.

We accept responsibility (including for the purpose of Rule 5.3.2R(2)(f) of
the UK Prospectus Regulation Rules) for the information contained in this
Report and to the best of our knowledge, the information contained in this
Report is in accordance with the facts and this Report makes no omission
likely to affect its import.

We confirm that we are not aware, as a result of our role as an External
Valuer of the Properties of any matter which would affect the Market Value of
the properties which is not disclosed in this Report (subject to any
assumptions set out in this Report) in order to make this Report materially
accurate and not misleading and we are not aware of any matter in relation to
this Report that we believe should be and has not yet been brought to the
attention of the Addressees of this Report.

Signatories

 

 

 

 

Tom Priest MRICS

RICS Registered Valuer

Director

James Daffern MRICS

RICS Registered Valuer

Director

For and on behalf of Savills Advisory Services Limited, a subsidiary of
Savills Plc

Regulated by RICS

Registered in England No. 06215875

Registered Office: 33 Margaret Street, London, W1G 0JD

Date of Report

19 January 2024

 Schedule of Properties

 

 

 Pride Park                           1 Pride Place, Pride Park, Derby, DE24 8QR              Freehold        24/05/2023
 Bardon                               Units E/F, Bardon, Coalville, LE67 1FL                  Freehold        01/06/2023
 Avonmouth                            Unit M3, RD Park, BS11 0QL - Ref:1100-CU197             Freehold        24/05/2023
 Sheffield                            Unit 2 Sheffield, 3 Europa Drive, S9 1XT                Long Leasehold  04/08/2023
 Triangle Retail Park                 Triangle Retail Park (HUT 341), Lubbesthorpe            Long Leasehold  09/06/2023
 Crewe                                 Counterpoint, Crewe, CW1 6EH                           Freehold        10/02/2023
 Oldbury                              Brades Road, Oldbury                                    Freehold        04/06/2023
 Ermine Business Park                 Lancaster Way, Ermine Business Park, PE29 6XU           Freehold        16/10/2023
 Jewellery Quarter                    37/38 Frederick St, Jewellery Quarter, B1 3HH           Long Leasehold  04/06/2023
 Portsmouth                           109 Commercial Road, Portsmouth, PO                     Freehold        20/10/2023
 Redhill                              105-107 Brighton Road, Redhill, RH1 6PS                 Freehold        13/05/2023
 Glasgow                              98 Argyle Street, Glasgow, G2 9BQ                       Freehold        31/05/2023
 Bath                                 GF Bath, Bluecoat House, Bath, BA1 1EY                  Long Leasehold  02/08/2023
 Speke - PSL                          PSL, Unit C Estuary Commerce Park, L24 8RF              Long Leasehold  26/05/2023
 Castleford - MKM                     Castleford - MKM                                        Freehold        01/06/2023
 Colchester                           2 Long Wyre Street, Colchester                          Freehold        27/06/2023
 Southampton                          54 Above Bar Street, Southampton                        Long Leasehold  07/02/2023
 High Wycombe                         46/50a High Street, Frogmoor, High Wycombe              Freehold        24/10/2023
 Milton Keynes                        Staples Unit, Milton Keynes, MK9 1AN                    Freehold        28/02/2023
 Doncaster                            3 Carriage Way, White Rose Way, DN4 5NT                 Freehold        01/06/2023
 Gillingham                           Beechings Way, Gillingham, ME8 6PS                      Long Leasehold  22/06/2023
 Leeds - Cardinal House               9 Manor Road, Leeds, LS11 9AH                           Freehold        01/06/2023
 Leeds - David Street                 40 David Street, Leeds, LS11 5QJ                        Freehold        01/06/2023
 Milton Keynes - Massmould            Bradbourne Drive, Milton Keynes, MK7 8AT                Freehold        28/02/2023
 Salford - Zeus                       Zeus Building, Unit 4, Salford, M27 8UJ                 Freehold        10/02/2023
 Grantham                             Discovery Retail Park, London Road                      Freehold        19/05/2023
 Plymouth                             Unit 2, Langage Science Park, PL7 5BQ                   Freehold        30/07/2023
 Glasgow - West George St             250 West George St, Lower Ground Floor                  Freehold        31/05/2023
 Normanton                            Unit B, Centre 31, Foxbridge Way, WF6 1TN               Freehold        01/06/2023
 Ashby                                Unit 16, Ashby Park, LE65 1JF                           Freehold        09/06/2023
 Warwick - Tournament Fields          Warwick - Tournament Fields                             Freehold        01/06/2023
 Chester - Eastgate                   6 Eastgate Row South, CH1 1LF                           Freehold        11/11/2023
 Farnborough                          21/21A Invincible Road, Farnborough, GU14 7QU           Long Leasehold  01/11/2023
 St Albans                            37 Market Place, St Albans, AL3 5DL                     Freehold        29/03/2023
 Taunton                              61 East Street, Taunton, TA1 3LX                        Freehold        28/09/2023
 Cannock                              Kingswood Lakeside, Cannock, WS11 8LD                   Freehold        04/06/2023
 Birmingham - Lancaster House         Lancaster House, Birmingham                             Freehold        05/07/2023
 Stevenage                            Cromer House, Caxton Way, Stevenage, SG1 2DF            Freehold        29/03/2023
 Crewe - Phoenix Leisure Park         Phoenix Leisure Park, Crewe, CW1 3AJ                    Freehold        29/05/2023
 Colchester                           High Street/Trinity Square, Colchester                  Freehold        27/06/2023
 Redditch - Ravensbank Business Park  Ravens Eight, Redditch, B98 9EX                         Freehold        01/06/2023
 Winnersh                             Unit 2, Gazelle Close, Reading, RG41 5HH                Freehold        01/04/2023
 Perth                                Unit 1, St Catherines Leisure Park, PH1 5XA             Freehold        25/05/2023
 Chester                              4 Eastgate Row                                          Freehold        11/11/2023
 Warrington - Life Tech               Unit 4 Kingsland Grange, Warrington, WA1 4KW            Freehold        05/06/2023
 Irlam,  Manchester                   Irlam Wharf Road, Irlam, M44 5PN                        Freehold        26/05/2023
 Atherstone                           Units 18-39 Holly Lane Ind Est CV9 2QX                  Long Leasehold  09/06/2023
 Kettering - Venture Business Park    Unit 2200, Kettering Venture Park, NN15 6XR             Freehold        09/06/2023
 Leighton Buzzard                     Vimy Road, LU7 1ER                                      Freehold        16/10/2023
 Bedford - Telford Way                Window Ware Unit, Telford Way, MK42 0PQ                 Freehold        03/06/2023
 Stoke                                George Eastham Avenue, Stoke                            Freehold        03/05/2023
 Shrewsbury                           Pride Hill, Shrewsbury, SY1 1DN                         Freehold        29/06/2023
 Chester Ernest/Lakeland              10 Eastgate Street                                      Freehold        11/11/2023
 York                                 Units 5 & 6 Centurion Park, Y030 4WW                    Freehold        28/03/2023
 Langley Mill                         Warburtons Unit, Acess 26, Langley Mill                 Freehold        24/05/2023
 Eurocentral                          Plot L, Woodrow, Eurocentral, ML1 4YG                   Freehold        31/05/2023
 Sheldon                              Unit A, Wells Green Retail Park, B26 3JA                Freehold        09/06/2023
 Plymouth - Transit Way               Unit A, Transit Way, Plymouth                           Freehold        30/07/2023
 Maypole                              Druids Lane, Maypole                                    Freehold        01/06/2023
 Worcester                            55&56 High St&4/5 St Swithin's St -0257-CU264           Freehold        18/11/2023
 Leicester - Matalan                  Beaumont Way, Beaumont Leys, Leicester                  Long Leasehold  09/06/2023
 Team Valley                          401 Princesway, Team Valley Trading Estate              Long Leasehold  11/05/2023
 Bellshill                            4 Rosehall Road, Bellshill Industrial Estate            Freehold        31/05/2023
 Hilton - Derby                       1 Lowman Way, Hilton, Derby, DE65 5LJ                   Freehold        03/06/2023
 Stratford                            Ground Floor, The Grove, Stratford, E15 1EL             Long Leasehold  18/11/2023
 Evesham                              Unit 1, Evesham Shopping Centre, Worcester Rd           Freehold        02/06/2023
 Ipswich - Menzies                    Bluestem Road, Ransomes Europark, IP3 9RR               Freehold        22/02/2023
 Norwich - Menzies                    Memorial Way, Broadlands Business Park                  Freehold        22/02/2023
 Swansea - Menzies                    Mill Stream Way, Central Business Park                  Long Leasehold  04/07/2023
 Weybridge - Menzies                  Units 1-3 Campbell Centre, Avro Way                     Freehold        30/09/2023
 Dundee - Menzies                     Lockheed Close,Preston Farm Industrial Estate           Freehold        25/05/2023
 Mayflower House                      Mayflower House, Team Valley Trading Estate, Gateshead  Long Leasehold  11/05/2023
 Duloch Park                          Duloch Park, Dumfermline, KY11 4QX                      Freehold        25/05/2023
 Monteith House                       Monteith House, 11 George Square, Glasgow               Freehold        25/05/2023
 Lakeside 5500                        Lakeside 5500, Cheadle                                  Long Leasehold  26/05/2023
 Arthur House, Manchester             Arthur House, Chorlton Street, Manchester               Freehold        26/05/2023
 Gloucester                           108 Eastern Avenue Retail Park, Gloucester              Freehold        02/06/2023
 Lochside House                       Lochside House, Edinburgh                               Freehold        01/06/2023
 Burnside Industrial Centre           Burnside Industrial Centre, Aberdeen                    Freehold        25/05/2023
 Kew Retail Park                      Kew Retail Park, Southport                              Freehold        05/07/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Portfolio Valuation General Assumptions and Conditions

 

General Assumptions

 

Our reports and valuations are carried out on the basis of the following
General Assumptions:

 

Tenure and Tenancies

That the properties are not subject to any unusual or especially onerous
restrictions, encumbrances or outgoings contained in the Freehold Title.  We
will not inspect the Title Deeds or Land Registry Certificate and shall rely
upon information provided by you or your solicitor relating to both tenure and
tenancy data. Should there be any mortgages or charges, we have assumed that
the Properties would be sold free of them.

 

Condition and Repair

That the buildings are structurally sound, and that there are no structural,
latent or other material defects, including rot and inherently dangerous or
unsuitable materials or techniques, whether in parts of the building we have
inspected or not, that would cause us to make allowance by way of capital
repair.  Our inspection of the properties and this report do not constitute a
building survey. Our Valuation is on the basis that a building survey would
not reveal material defects or cause us to alter our Valuation materially.

 

That in the construction or alteration of the building no use was made of any
deleterious or hazardous materials or techniques, such as high alumina cement,
calcium chloride additives, woodwool slabs used as permanent shuttering and
the like (other than those points referred to above).  We will not carry out
any investigations into these matters.

 

That the properties are not adversely affected, nor is likely to become
adversely affected, by any highway, town planning or other schemes or
proposals, and that there are no matters adversely affecting value that might
be revealed by a local search, replies to usual enquiries, or by any statutory
notice.

 

That the buildings have been constructed and is used in accordance with all
statutory and bye-law requirements, and that there are no breaches of planning
control.  Likewise, that any future construction or use will be lawful.

 

That the properties are connected or capable of being connected without undue
expense, to the public services of gas, electricity, water, telephones and
sewerage.  Sewers, mains services and roads giving access to the Properties
have been adopted, and any lease provides rights of access and egress over all
communal estate roadways, pathways, corridors, stairways and the use of
communal grounds, parking areas and other facilities.

 

Environmental Risks

That the properties have not suffered any land contamination in the past, nor
is it likely to become so contaminated in the foreseeable future.  We have
not carried out any soil tests or made any other investigations in this
respect, and we cannot assess the likelihood of any such contamination.

 

That there are no adverse site or soil conditions, that the properties are not
adversely affected by the Town and Country Planning (Assessment of
Environmental Effects) Regulations 1988, that the ground does not contain any
archaeological remains, nor that there is any other matter that would cause us
to make any allowance for exceptional delay or site or construction costs in
our valuation.

 

That the properties are free from environmental hazards, including infestation
from invasive plants such as Japanese Knotweed.  This assumption is made in
recognition of the fact that identifying Japanese knotweed is problematic and
cannot be guaranteed.  This is partly because during the early stages of its
annual life cycle some of the classic visual characteristics are not
distinctive and during the winter months the plant sheds its leaves and
suffers die back.  It is also possible that Japanese knotweed has received a
herbicide-based treatment which has removed all visible above ground signs but
may not have killed the below ground rhizome (root) which, in turn, may lead
to new growth and the spread of the plant in time.

 

Floor Areas

That any floor areas provided by a third party and assigned to Savills (UK)
Limited, have been measured in accordance with the current RICS Property
Measurement.  This is the basis on which we will carry out measured surveys
as instructed.

 

Development Opportunity

In situations where a property is in the course of development, we reflect its
physical condition and the costs remaining to be spent at the valuation
date.  We have considered the cost estimates provided by the professional
advisors involved in the project.

 

In the case of properties where we have been asked to value the site under the
special assumption that the properties will be developed, there are no adverse
site or soil conditions, that the properties are not adversely affected by the
Town and Country Planning (Environmental Impact Assessment) Regulations 2017
that the ground does not contain any archaeological remains, nor that there is
any other matter that would cause us to make any allowance for exceptional
delay or site or construction costs in our Valuation.

 

General Conditions

 

Our reports and valuations are carried out on the basis of the following
General Conditions:

 

1.   We have not made any allowance for any Capital Gains Tax or other
taxation liability that might arise upon a sale of the properties. No
allowance has been made for any expenses of realisation.

2.   Our valuations are exclusive of VAT (if applicable).

3.   Excluded from our valuations is any additional value attributable to
goodwill, or to fixtures and fittings which are only of value in situ to the
present occupier.

4.   Our valuations are prepared in accordance with the latest edition of
the RICS Valuation - Professional Standards ("the Red Book") on the basis of
Market Value, unless instructed otherwise.  Any such deviation is expressly
stated in our terms of engagement.

5.   Each property has been valued individually and no allowance has been
made, either positive or negative, should it form part of a larger disposal.
The total stated is the aggregate of the individual Market Values.

6.   No allowance has been made for rights, obligations or liabilities
arising under the Defective Premises Act 1972, and it has been assumed that
all fixed plant and machinery and the installation thereof complies with the
relevant UK and EEU legislation, insofar that the latter is applicable.

7.   That we have been supplied with all information likely to have an
effect on the value of the properties and that the information supplied to us
and summarised in this report is both complete and correct.

8.   Our valuations are based on market evidence which has come into our
possession from numerous sources.  That from other agents and valuers is
given in good faith but without liability.  It is often provided in verbal
form.  Some comes from databases such as the Land Registry or computer
databases to which Savills subscribes.  In all cases, other than where we
have had a direct involvement with the transactions, we are unable to warrant
that the information on which we have relied is correct although we believe it
to be so.

 

9.   The files which we hold relating to all of our property valuations may
be subject to monitor and audit by the RICS under its conduct and disciplinary
regulations.

 

 Tom Priest MRICS     James Daffern MRICS
 Director             Director
 +44 (0) 2920 368941  +44 (0) 121 200 4578
 tpriest@savills.com  James.daffern@savills.com

 

Part C | Knight Frank Valuation Report in respect of API

abrdn Property Income Trust Limited ("API")

PO Box 255

Trafalgar Court

Les Banques

St Peter Port

Guernsey

GY1 3QL

 

Lazard & Co., Limited

50 Stratton Street

London

W1J 8LL

 

Custodian Property Income REIT plc ("Custodian")

1 New Walk Place

Leicester

Leicestershire

LE1 6RU

 

Numis Securities Limited

45 Gresham Street

London

EC2V 7BF

 

(each an "Addressee" and together the "Addressees")

 

 

Date of issue:  19 January 2024

 

Dear Sir/Madam,

 

abrdn Property Income Trust Limited

Valuation as at 31 December 2023

Under the terms of the Engagement Letter dated 16 January 2024 ("Engagement
Letter") we have valued the freehold and leasehold properties as listed below
("Properties"), as at 31 December 2023, for the purposes set out below.

The Valuation and this Valuation Report are each provided solely for the
purpose (the "Purpose") of:

a)   inclusion in any announcement (including an announcement made under
Rule 2.7 of the City Code on Takeovers and Mergers (the "Code")), scheme
document, offer document, response circular or any other document or
supplementary circular (the "Code Documentation", and "Code Document" shall
mean any one of them) that may be published or made available by API or
Custodian in connection with a possible offer or offer for API or merger by
API with another party in accordance with the Code (the "Proposed
Transaction") and any further document which API or Custodian is required to
publish under the Code; and

b)   (i) publication on API's website; and (ii) the website of any other
party required in accordance with the Code.

 

Basis of Valuation

 

Our valuation has been undertaken by us as qualified valuers and in accordance
with the current edition of RICS Valuation - Global Standards, which
incorporate the International Valuation Standards. References to the "Red
Book" refer to either or both of these documents, as applicable. As required
by the Red Book, some key matters relating to this instruction are set out
below.

 

The valuation (as defined in the General Terms) and this Valuation Report,
each as applicable to the Purpose (as defined above), together with and Code
Documentation (as defined above) comply with Rule 29 of the Code as issued by
The Takeover Panel. We understand that the publication or reproduction by API
or Custodian of this Valuation Report and/or the information contained herein
as required by Rules 26 and 29 of the Code will be necessary, including in any
Code Document.

 

The properties have been valued individually on the basis of Market Value
which is set out in the RICS Valuation - Professional Standards VPS 4 (4) as
follows:

 

"The estimated amount for which an asset or liability should exchange on the
valuation date between a willing buyer and a willing seller in an arm's length
transaction, after proper marketing and where the parties had each acted
knowledgeably, prudently and without compulsion."

 

In our opinion the adoption of the required Market Value basis does not result
in any material difference in the value reported from that derived under the
definition of Fair Value in accordance with the RICS Valuation - Professional
Standards VPS4 (1.5) Fair Value and VPGA 1 Valuations for Inclusion in
financial statements which adopt the definition of Fair Value adopted by the
International Accounting Standards Board:

 

"The price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date."

 

Valuation Methodology

 

The basis for the Valuation as required by the Code is Market Value as defined
in the Red Book. Additionally, in relation to any Properties comprising land
being developed or with immediate development potential (as referred to in
Note 3 to Rule 29.4 of the Code), this Valuation Report includes (in relation
to those Properties) the additional matters set out in Note 3 to Rule 29.4

 

Our valuation has been undertaken using appropriate valuation methodology and
our professional judgement.

 

The Valuer's opinion of Market Value was primarily derived using recent
comparable market transactions on arm's length terms, where available, and
appropriate valuation techniques (the Investment Method (as defined in the
RICS Red Book)).

 

 

The Properties have been valued individually and not as part of a portfolio.
Disposal as a portfolio, or by other prudent lotting, may result in either a
premium or discount, depending upon market conditions. Our report does not
seek to address this.

 

Valuation

 

The Properties have been categorised as investment properties in accordance
with the individual values ascribed.

 

We are of the opinion that the aggregate of the Market Values of the Freehold,
Heritable and Long Leasehold interests in the Properties, as at 31 December
2023 was:

 

£ 439,185,037

(Four Hundred and Thirty Nine Million, One Hundred and Eighty Five Thousand
and Thirty Seven Pounds)

 

Taxation and Costs

 

No account has been taken in our valuations for any liability for tax
(including Value Added Tax) on either the rental income, or the notional sale
prices, or any gains which may be realised on disposal.

 

We have made a deduction from our valuations to reflect notional purchasers'
acquisition costs in accordance with normal practice.

 

Our valuation reflects full liability for UK Stamp Duty as applicable at the
valuation date.

 

Valuation Assumptions

 

As agreed with API, our valuations are based on information provided by them,
upon which we have relied, and which has not been verified by us. Our
assumptions (as defined in the RICS Red Book) relating to this information are
set out below.

 

Our valuations assume that the Properties have good and marketable titles and
are free of any undisclosed onerous burdens, outgoings or restrictions.

 

We have not inspected title deeds to the Properties, although copies of leases
and other relevant documentation relating to individual properties, where made
available to us, have been fully considered, together with other information
supplied to us by API. We have assumed that this information is comprehensive
and correct.

 

When considering the covenant strength of individual tenants we have not
carried out credit enquiries but have reflected in our valuations our general
understanding of purchasers' likely perceptions of tenants' financial status.

 

Our valuations are based on measurements which have been provided by API. We
have assumed that these measurements have been undertaken in accordance with
the current RICS Code of Measuring Practice.

 

The adoption of IPMS (International Property Measurement Standards), for the
office sector, became mandatory with effect from 1st January 2016 for all RICS
members replacing NIA (Net Internal Area) as set out under the current Code of
Measurement Practice (Sixth Edition). It has been agreed with API that until
the new definition of measurement has been adopted by the leasing market,
rental analysis for the office sector will continue to be shown on a net
internal area basis. As or when buildings are re-measured, we will present our
analysis on a dual basis, namely IPMS and NIA.

 

Minimum Energy Efficiency Standards are the standards set out by the
Government for let properties in England and Wales. Buildings that have an EPC
rating of F and G must be brought up to standard before they are let subject
to some conditions, exemptions and relief. This commenced from 1 April 2018
for all new lettings and they apply to all continuing lettings from 1 April
2020 for domestic buildings and from 2023 for non-domestic buildings.

 

There is currently no standard approach to either the provision or the
interpretation of ESG-related data and property benchmarking. In arriving at
our opinion of value, we have therefore interpreted the information available
to us as we consider market participants would reflect this.

 

For Scottish properties, the Assessment of Energy Performance of Non-Domestic
Buildings (Scotland) Regulations 2016 came into force in Scotland in 2016 and
does not incorporate a "ban" on new lettings. Owners are encouraged to carry
out improvements, or improve efficiency through monitoring emissions from a
building via creating an Action Plan. The Action Plan procedure will apply to
the sale or letting of larger buildings, with a floor area >1,000 sq m.
This only applies to buildings that are subject to a new sale or lease and
buildings constructed to building standards applicable from March 2002, or
otherwise meeting those standards, are exempt.

 

Where we have been provided with the EPC rating, we have taken into account
any capital expenditure that API have provided to us to improve the demise to
meet the standards, to enable the property to be let.

 

Town Planning and Highways

 

We have made oral enquiries of the appropriate Town Planning and Highways
Authorities in respect of matters affecting the properties, where considered
appropriate, although this information was provided to us on the basis that it
should not be relied upon.

 

We have assumed that each of the properties has been constructed, or is being
constructed, and occupied or used in accordance with the appropriate consents
and that there are no outstanding statutory notices.

 

We have not seen planning consents and, except where advised to the contrary,
have assumed that the properties have been erected and are being occupied and
used in accordance with all requisite consents and that there are no
outstanding statutory notices.

 

Repairs

 

We have not carried out building surveys on the portfolio and are therefore
unable to report that the properties are free from any structural fault, rot,
infestation or defects of any other nature, including inherent weaknesses due
to the use in construction of materials now suspect. No tests were carried out
on any of the technical services.

 

Other than as referred to below, we have assumed that there are no adverse
ground or soil conditions and that the load bearing qualities of the sites of
each property are sufficient to support the buildings constructed or to be
constructed thereon.

Environmental

 

We have not carried out any investigation into past or present uses of either
the properties or any neighbouring land to establish whether there is any
potential for contamination from these uses or sites to the subject
properties. We understand that the fund has established procedures for
inspections of newly acquired properties to be carried out with particular
reference to environmental matters, and that any such matters identified
receive appropriate attention.

 

Unless we have been provided with information to the contrary, we have assumed
that the properties are not, nor are likely to be, affected by land
contamination and that there are no ground conditions which would affect the
present or future uses of the properties.

Where we have received, from the fund, evidence regarding contamination we
have reflected this in our valuations but unless otherwise stated have assumed
that the cost of any decontamination work would be immaterial thereto. Should
it be established subsequently that contamination exists at any of the
properties or on any neighbouring land or that the properties have been or are
being put to a contaminative use this might reduce the values now reported.

 

In all cases, we have assumed that, unless notified by API to the contrary,
there have not been any material changes to the information provided by them.

 

Inspections

 

We confirm the Properties have been inspected within the last 12 months.

 

Compliance and Independence

 

We confirm that Knight Frank LLP meets the requirements of API in the role of
External Valuer (as defined in the RICS Red Book), having been appointed in
September 2015. In accordance with VPS3 of the Red Book, the valuers on behalf
of Knight Frank LLP, with the responsibility for this report is Emily Miller
MRICS, RICS Registered Valuer (the "Lead Valuer").  Parts of this valuation
have been undertaken by additional valuers as listed on our file.

 

We confirm that the valuers and additional valuers meet the requirements of
the Red Book, having sufficient current knowledge of the particular market and
the skills and understanding to undertake the valuation competently.

 

Additionally, the Lead Valuer and any additional valuers who value the
Properties are qualified for the purposes of the Valuation as required by Rule
29.3(a)(ii) of the Code and have sufficient current knowledge of the property
market and the necessary skills to prepare this Valuation Report as required
by Rule 29.3(a)(iii) of the Code.

 

Further, we confirm that in relation to Knight Frank LLP's preceding financial
year the proportion of the total fees paid by the fund to the total fee income
of Knight Frank LLP was less than 5%.

 

Under the Terms of Engagement letter dated 30 September 2015, Knight Frank
prepared a Valuation Report on the Portfolio, for which a fee was payable, for
inclusions in a public prospectus in connection with a placing and open offer
of ordinary shares to be traded on the London Stock Exchange.

 

We recognise and support the RICS Rules of Conduct and have procedures for
identifying conflicts of interest. We are providing an objective and unbiased
valuation.

 

We confirm that we do have a material connection or involvement giving rise to
a potential conflict of interest, as set out below:

 

·      we have valued the Properties for API within the last two years
for accounts purposes

 

We have previously disclosed this to API and API have confirmed that
notwithstanding this matter that it is content for us to proceed with this
instruction. We confirm that we have had no previous material interest in API
or material connection or involvement with any of the Properties other than as
set out above, and accordingly are in a position to provide an objective and
unbiased valuation.

 

Accordingly, we confirm that: (i) we are not aware of any reason why we would
not satisfy the requirements of Rule 29.3(a)(i) of the Code; and (ii) during
the term of the engagement, we shall not do anything that could reasonably be
expected to cause us not to satisfy the requirements of Rule 29.3(a)(i) of the
Code.

 

General

 

For the purposes of Rule 29.5 of the Code, we confirm that there is no
material difference between the values stated in this Valuation Report and the
values that would be stated were the Valuation Date the date of this Rule 2.7
Announcement.

 

Knight Frank has given and has not withdrawn its consent to the inclusion of
this Valuation Report in this Rule 2.7 Announcement published by the Client
and Custodian in the form and context in which it is included.

 

For the purposes of the Code, we are responsible for this Valuation Report and
accept responsibility for the information contained in this Valuation Report
and confirm that to the best of our knowledge (having taken all reasonable
care to ensure that such is the case), the information contained in this
Valuation Report is in accordance with the facts and contains no omissions
likely to affect its import. This Valuation Report complies with, and is
prepared in accordance with, and on the basis of, the Code. We authorise its
contents for the purpose of Rule 29 of the Code. Knight Frank has given and
has not withdrawn its consent to the inclusion of this Valuation Report in the
Rule 2.7 Announcement.

 

This Valuation Report and our valuations therein have been prepared on the
basis that there has been full disclosure of all relevant information and
facts which may affect them.

 

Save for (a) the addressees and (b) any responsibility to any person arising
under Rule 29.4 of the Code, to the fullest extent permitted by law, we do not
assume any responsibility and will not accept any liability to any other
person for any loss suffered by any such person as a result of, or arising out
of, or in accordance with this Valuation Report or our statement required by
and given solely for the purposes of complying with Rule 29.4 of the Code.

 

Save as set out below, neither the whole or any part of the valuation report
nor any reference thereto may be included in any published document, circular
or statement nor published in any way whatsoever whether in hard copy or
electronically (including on any web-site) without our prior written approval
of the form and context in which it may appear, except as set out below.

 

This Valuation Report will be included in the relevant Code Documentation to
be published by API or Custodian. We will review the sections of the relevant
Code Documentation relating to the Valuation and this Valuation Report and the
Addressees agree not to publish any Code Document containing this Valuation
Report until they have received a consent letter (in the form set out in Annex
2 of our engagement letter) from us. We further hereby consent to this
Valuation Report being made available on API's website (and the website of any
other party referred to in any Code Document) in accordance with the Code.

 

Knight Frank has given and not withdrawn its consent to the inclusion of this
Valuation Report in the Code Documentation published by API or Custodian in
the form and context in which it is included.

 

For the purposes of the Code, we are responsible for this Valuation Report and
accept responsibility for the information contained in this Valuation Report
and confirm that to the best of our knowledge (having taken all reasonable
care to ensure that such in the case), the information contained in this
Valuation Report is in accordance with the facts and contains no omissions
likely to affect its import.

 

Yours faithfully

 

 

 

 

 

Emily M Miller BSc (Hons)
MRICS
Matthew O Dichler MSc MRICS

RICS Registered
Valuer
            RICS Registered Valuer

Partner, Valuation & Advisory
 
Partner, Valuation & Advisory

For and on behalf of Knight Frank
LLP                           For and on behalf of
Knight Frank LLP

 

 

Appendix I

 

Schedules of Investment Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Property Address                        Property reference
 Ocean Trade Centre, Aberdeen            C5285
 Badentoy North, Aberdeen                C5768
 Unit 14 Interlink Park, Bardon          C5201
 21 Gavin Way, Birmingham                C5538
 3 Elliot Way, Birmingham                C5726
 Unit 4 Easter Park, Bolton              C5172
 Garanor Way, Bristol                    B5675
 Kings Business Park, Bristol            C5714
 3 Earlstrees Road, Corby                C5676
 Bastion Point, Dover                    B5673
 2 Brunel Way, Fareham                   C5583
 85 Fullarton Drive, Glasgow             C5746
 Unit 4 Monkton Business Park, Hebburn   C5587
 Villiers Road, Knowsley                 C5787
 Mount Farm, Milton Keynes               C5534
 Walton Summit, Preston                  B5680
 Symphony, Rotherham                     C5507
 Cosford Lane, Rugby                     B5677
 Tempsford Road, Sandy                   C5742
 Whitehorse Business Park, Shellingford  C5734
 Stadium Way, St. Helens                 C5783
 Tetron 141, Swadlincote                 C5512
 Tetron 93, Swadlincote                  C5525
 Opus 9, Warrington                      B5681
 Rainhill Road, Washington               C5715

 Property Address                                    Property reference
 Alston Road, Washington                             C5784
 54 Hagley Road, Birmingham                          C5763
 One Station Square, Bracknell                       C5730
 Explorer, Crawley                                   C5427
 160 Causewayside, Edinburgh                         C5767
 Monck Street, London                                C5394
 15 Basinghall Street, London                        C5747
 101 Princess Street, Manchester                     C5721
 The Pinnacle, Reading                               C5719
 82-84 Eden Streety, Kingston-upon-Thames            B5686
 Howard Town Retail Park, Glossop                    C5517
 B&Q, Halesowen                                      C5773
 Victoria Shopping Park, Hednesford                  B5683
 Olympian Way, Leyland                               C5477
 The Point Retail Park, Rochdale                     B5685
 Morrisons, Welwyn Garden City                       C5788
 Grand National Leisure Park, Aintree                C5737
 Building 3000 Birmingham Business Park, Birmingham  C5750
 Hollywood Green, London                             C5113
 Far Ralia, Newtonmore                               C5782
 Motor Point, Yarm Road, Stockton-on-Tees            C5786

 

 

 

Appendix 5

 CREI QUANTIFIED FINANCIAL BENEFITS STATEMENT

Part A

Paragraph 3 of this Announcement contains statements of the estimated cost
savings and synergies expected to arise from the Merger (together, the
"Quantified Financial Benefits Statement").

A copy of the Quantified Financial Benefits Statement is set out below:

The CREI Directors, having reviewed and analysed the potential cost savings of
the Combined Group, as well as taking into account factors they can influence,
believe the Combined Group can deliver shareholder value through the expected
realisation of approximately:

£1.0 million of pre-tax recurring run-rate cost synergies by the end of the
first year following the Effective Date (the "Recurring Cost Synergies"); and

£2.1 million of additional non-recurring pre-tax cost synergies during the
Transition Period (the "Transition Period Cost Synergies").

The Recurring Cost Synergies are expected to be realised principally from:

Management fees: unification of investment management under Custodian
Capital, delivering an estimated £0.5 million of annualised run-rate cost
synergies derived from lower management and administrative fees charged on the
API investment properties (the "Management Fee Savings"); and

Corporate and administrative: rationalisation of duplicated listing,
administration and operational expenses delivering at least an estimated £0.5
million of annualised run rate cost synergies.

The additional Transition Period Cost Synergies are expected to be realised
principally from:

Amended management fee tiers: reduction in the management fees payable by CREI
to Custodian Capital for the Transition Period delivering an estimated £0.3
million of annualised run rate cost synergies (£0.6 million total estimated
cost synergies) through the consolidation of the first two fee tiers into one
fee tier, such that the consolidated fee tier will be calculated as a fee of
0.75 per cent. in respect of the NAV of the Combined Group which is less than
or equal to £500 million (rather than a fee of 0.90 per cent. in respect of
NAV up to £200 million and 0.75 per cent. up to £500 million) (the "Amended
Management Fee Tier Savings"); and

Partial management fee waiver: Custodian Capital has agreed to waive its
management fee in relation to the NAV attributable to API for the first nine
months following completion of the Merger (the "Partial Management Fee Waiver
Savings"), delivering an estimated £1.5 million of cost synergies in the
first year following the Effective Date.

 

In order to achieve the Management Fee Savings, the Amended Management Fee
Tier Savings and the Partial Management Fee Waiver Savings, it is estimated
that API will incur one-off costs of between £1.5 million and £2.0 million
in connection with the termination of the API Investment Management Agreement.
These costs will be incurred within the first year following the Effective
Date and have been reflected as a cost to API within the Exchange Ratio. The
CREI Directors expect that any costs incurred in the realisation of the other
cost synergies will be immaterial.

Other potential adverse effects of the Merger have been considered and were
determined by the CREI Directors to be immaterial for the analysis.

The identified cost savings will accrue as a direct result of the Merger and
would not be achieved on a standalone basis.

These statements relating to identified cost savings and estimated savings
relate to future actions or circumstances which by their nature involve risks,
uncertainties and contingencies. As a consequence, the identified synergies
and estimated savings referred to may not be achieved, may be achieved later
or sooner than estimated, or those achieved could be materially different from
those estimated.

Bases of belief and principal assumptions

Following initial discussion regarding the Merger, a team of Custodian Capital
staff has evaluated and assessed the potential synergies available arising
from the Merger.

The team which comprises senior Custodian Capital personnel, worked to
identify, challenge, and quantify potential synergies as well as the potential
costs to achieve and timing of such synergies. The Custodian Capital team has
performed a bottom-up analysis of costs included in the API financial
information and has sought to include in the synergy analysis those costs
which the team believes will be either reduced or eliminated from within the
Combined Group.

The Management Fee Savings and Amended Management Fee Tier savings are based
on applying Custodian Capital's tiered fee structure, including the proposed
amended fee tiers in the Transition Period, and assumptions regarding the pro
forma NAV of the Combined Group. The Partial Management Fee Waiver is based
upon excluding the NAV attributable to API from the pro forma NAV of the
Combined Group in calculating fees payable to Custodian Capital for the first
nine months following the Effective Date.

In general, the synergy assumptions related to the corporate and
administrative synergies have in turn been risk adjusted, exercising a degree
of prudence in the calculation of the estimated synergy benefits set out
above.

The cost bases used as the basis for the quantified financial benefits
exercise are the CREI and API full year expenses for the twelve-month period
to 30 September 2023, and the independent CREI and API property valuations as
at 31 December 2023.

The CREI Directors have, in addition, made the following assumptions:

The value of the Combined Group property portfolio remaining at or above the
31 December 2023 independent property valuation of £1.0 billion.

CREI retains its status as a UK-REIT.

There will be no material impact on the underlying operations of
either CREI or API or their ability to continue to conduct their
businesses.

There will be no material change to macroeconomic, political, regulatory or
legal conditions in the markets or regions in which CREI or API operate
that will materially impact on the implementation or costs to achieve the
proposed cost savings.

There will be no change in tax legislation or tax rates or other legislation
in the UK or Guernsey that could materially impact the ability to achieve any
benefits.

Reports

As required by Rule 28.1(a) of the Takeover Code, RSM UK Corporate Finance
LLP, as reporting accountants to CREI, and Deutsche Numis, as financial
advisers to CREI, have provided the opinions required under that Rule. Copies
of these reports are included at Parts B and C of this Appendix 5. Each of
RSM UK Corporate Finance LLP, and Deutsche Numis has given and not withdrawn
its consent to the publication of its report in this Announcement in the form
and context in which it is included.

These statements are not intended as a profit forecast and should not be
interpreted as such. These statements of estimated synergies relate to future
actions and circumstances which, by their nature, involve risks, uncertainties
and contingencies. As a result, the estimated synergies referred to may not be
achieved, or may be achieved later or sooner than estimated, or those achieved
could be materially different from those estimated. Neither the Quantified
Financial Benefits Statement nor any other statement in this Announcement
should be construed as a profit forecast or interpreted to mean that CREI's
earnings in the first full year following the Effective Date, or in any
subsequent period, will necessarily match or be greater than or be less than
those of CREI or API for the relevant preceding financial period or any
other period.

Due to the scale of the Combined Group, there may be additional changes to the
Combined Group's operations. As a result, and given the fact that the changes
relate to the future, the resulting synergies may be materially greater or
less than those estimated.

 

 

 

 

 

 

Part B

REPORT FROM RSM UK CORPORATE FINANCE LLP ON CREI QUANTIFIED FINANCIAL BENEFITS
STATEMENT

 

 RSM UK Corporate Finance LLP

 25 Farringdon Street

 London

 EC4A 4AB

 United Kingdom

 T  +44 (0)20 3201 8000

 rsmuk.com

 

 

 

 

 

 

 

 

 

 

 

 

The Directors

Custodian Property Income REIT plc

1 New Walk Place

Leicester

LE1 6RU

 

The Directors

Numis Securities Limited

45 Gresham Street

London

EC2V 7BF

          19 January 2024

To the Directors of Numis Securities Limited and Custodian Property Income
REIT plc,

Report on Quantified Financial Benefits Statement by Custodian Property Income
REIT plc (the "Company") and its subsidiary undertakings (the "Group")

We report on the quantified financial benefits statement (the "Statement") by
the directors of the Company (the "Directors") included in Part A of Appendix
5 (CREI Quantified Financial Benefits Statement) of the Rule 2.7 Announcement
dated 19 January 2024 to the effect that:

The CREI Directors, having reviewed and analysed the potential cost savings of
the Combined Group, as well as taking into account factors they can influence,
believe the Combined Group can deliver shareholder value through the expected
realisation of approximately:

·      £1.0 million of pre-tax recurring run-rate cost synergies by the
end of the first year following the Effective Date (the "Recurring Cost
Synergies"); and

·      £2.1 million of additional non-recurring pre-tax cost synergies
during the Transition Period (the "Transition Period Cost Synergies").

The Recurring Cost Synergies are expected to be realised principally from:

·      Management fees: unification of investment management under
Custodian Capital, delivering an estimated £0.5 million of annualised
run-rate cost synergies derived from lower management and administrative fees
charged on the API investment properties (the "Management Fee Savings"); and

·      Corporate and administrative: rationalisation of duplicated
listing, administration and operational expenses delivering at least an
estimated £0.5 million of annualised run rate cost synergies.

 

 

The additional Transition Period Cost Synergies are expected to be realised
principally from:

·      Amended management fee tiers: reduction in the management fees
payable by CREI to Custodian Capital for the Transition Period delivering an
estimated £0.3 million of annualised run rate cost synergies (£0.6 million
total estimated cost synergies) through the consolidation of the first two fee
tiers into one fee tier, such that the consolidated fee tier will be
calculated as a fee of 0.75 per cent. in respect of the NAV of the Combined
Group which is less than or equal to £500 million (rather than a fee of 0.90
per cent. in respect of NAV up to £200 million and 0.75 per cent. up to £500
million) (the "Amended Management Fee Tier Savings"); and

·      Partial management fee waiver: Custodian Capital has agreed to
waive its management fee in relation to the NAV attributable to the API
portfolio for the first nine months following completion of the Merger (the
"Partial Management Fee Waiver Savings") delivering an estimated £1.5 million
of cost synergies in the first year following the Effective Date.

In order to achieve the Management Fee Savings, the Amended Management Fee
Tier Savings and the Partial Management Fee Waiver Savings, it is estimated
that API will incur one-off costs of between £1.5 million and £2.0 million
in connection with the termination of the API Investment Management Agreement.
These costs will be incurred within the first year following the Effective
Date and have been reflected as a cost to API within the Exchange Ratio. The
CREI Directors expect that any costs incurred in the realisation of the other
cost synergies will be immaterial.

Other potential adverse effects of the Merger have been considered and were
determined by the CREI Directors to be immaterial for the analysis.

The identified cost savings will accrue as a direct result of the Merger and
would not be achieved on a standalone basis.

These statements relating to identified cost savings and estimated savings
relate to future actions or circumstances which by their nature involve risks,
uncertainties and contingencies. As a consequence, the identified synergies
and estimated savings referred to may not be achieved, may be achieved later
or sooner than estimated, or those achieved could be materially different from
those estimated.

Opinion

In our opinion, the Statement has been properly compiled on the basis stated.

The Statement has been made in the context of the disclosures in Part A of
Appendix 5 of the Rule 2.7 Announcement setting out the basis of the
Directors' belief (including the principal assumptions and sources of
information) supporting the Statement and their analysis and explanation of
the underlying constituent elements.

This report is required by Rule 28.1(a) of the City Code on Takeovers and
Mergers (the "Takeover Code") and is given for the purpose of complying with
that requirement and for no other purpose.

Responsibilities

It is the responsibility of the Directors to prepare the Statement in
accordance with the requirements of Rule 28 of the Takeover Code.

 

 

 

It is our responsibility to form our opinion, as required by Rule 28.1(a)(i)
of the Takeover Code, as to whether the Statement has been properly compiled
on the basis stated and to report that opinion to you.

Save for any responsibility which we may have to those persons to whom this
report is expressly addressed and for any responsibility arising under Rule
28.1(a)(i) of the Takeover Code to any person as and to the extent therein
provided, to the fullest extent permitted by law we do not assume any
responsibility and will not accept any liability to any other person for any
loss suffered by any such other person as a result of, arising out of, or in
connection with this report or our statement, required by and given solely for
the purposes of complying with Rule 23.2 of the Takeover Code, consenting to
its inclusion in the Rule 2.7 Announcement.

Basis of preparation of the Statement

The Statement has been prepared on the basis stated in Part A of Appendix 5 of
the Rule 2.7 Announcement.

Basis of opinion

We conducted our work in accordance with the Standards for Investment
Reporting issued by the Financial Reporting Council in the United Kingdom. We
are independent in accordance with relevant ethical requirements. In the
United Kingdom this is the FRC's Ethical Standard as applied to Investment
Circular Reporting Engagements, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.

We have discussed the Statement, together with the underlying plans (relevant
bases of belief/including sources of information and assumptions), with the
Directors and Numis Securities Limited. Our work did not involve any
independent examination of any of the financial or other information
underlying the Statement.

We planned and performed our work so as to obtain the information and
explanations we considered necessary in order to provide us with reasonable
assurance that the Statement has been properly compiled on the basis stated.

We do not express any opinion as to the achievability of the benefits
identified by the Directors in the Statement.

Since the Statement and the assumptions on which it is based relate to the
future and may therefore be affected by unforeseen events, we express no
opinion as to whether the actual benefits achieved will correspond to those
anticipated in the Statement and the differences may be material.

Yours faithfully,

 

 

RSM UK Corporate Finance LLP

 

 

 

 

Part C

REPORT FROM DEUTSCHE NUMIS ON CREI QUANTIFIED FINANCIAL BENEFITS STATEMENT

 

The Board of Directors

Custodian Property Income REIT plc

1 New Walk Place

Leicester

LE1 6RU

19 January 2024

 

Dear the Board of Directors

 

Recommended All-Share Merger of Custodian Property Income REIT plc ("CREI")
and abrdn Property Income Trust Limited ("API") - Quantified Financial
Benefits Statement made by CREI

 

We refer to the Quantified Financial Benefits Statement, the bases of belief
thereof and the notes thereto (together, the "Statement") made by CREI as set
out in Part A of Appendix 5 to the announcement dated 19 January 2024 of which
this letter forms part (the "Announcement"), for which the board of directors
of CREI (the "CREI Board") are solely responsible under Rule 28.3 of the City
Code on Takeovers and Mergers (the "Code").

 

We have discussed the Statement (including the assumptions and sources of
information referred to therein), with the CREI Board and those officers and
employees of CREI who developed the underlying plans as well as with RSM UK
Corporate Finance LLP ("RSM"). The Statement is subject to uncertainty as
described in the Announcement and our work did not involve an independent
examination of any of the financial or other information underlying the
Statement.

 

We have also reviewed the work carried out by RSM and have discussed with them
the opinion set out in Part B of Appendix 5 to the Announcement addressed to
yourselves and ourselves on this matter and the accounting policies and bases
of calculation for the Statement.

 

We have relied upon the accuracy and completeness of all the financial and
other information provided to us by, or on behalf of, CREI, or otherwise
discussed with or reviewed by us, and we have assumed such accuracy and
completeness for the purposes of providing this letter.

 

We do not express any opinion as to the achievability of the quantified
financial benefits identified by the CREI Board.

 

This letter is provided to you solely in connection with Rule 28.1(a)(ii) of
the Code and for no other purpose. We accept no responsibility to CREI or its
shareholders or any person (including, without limitation, the board and
shareholders of API) other than the CREI Board in respect of the contents of
this letter. We are acting exclusively as financial adviser to CREI and no one
else in connection with the transaction between CREI and API referred to in
the Announcement and it was solely for the purpose of complying with Rule
28.1(a)(ii) of the Code that CREI requested us to prepare this letter relating
to the Statement. No person other than the CREI Board can rely on the contents
of, or the work undertaken in connection with, this letter, and to the fullest
extent permitted by law, we exclude all liability (whether in contract, tort
or otherwise) to any other person, in respect of this letter, its contents, or
the work undertaken in connection with this letter, or any of the results or
conclusions that can be derived from this letter or any written or oral
information provided in connection with this letter, and any such liability is
expressly disclaimed except to the extent that such liability cannot be
excluded by law.

 

On the basis of the foregoing, we consider that the Statement, for which you
as the CREI Board are solely responsible, for the purposes of the Code has
been prepared with due care and consideration.

 

Yours faithfully

Deutsche Numis

Appendix 6

DEFINITIONS

The following definitions apply throughout this Announcement unless the
context requires otherwise:

 Admission                                             admission of the New  CREI  Shares to be issued pursuant to the Merger (i)
                                                       to trading on the Main Market becoming effective in accordance with the LSE
                                                       Admission Standards; and (ii) to listing on the Premium segment of the
                                                       Official List becoming effective in accordance with the Listing Rules;
 Amended and Restated Investment Management Agreement  the amended and restated investment management agreement dated 19 January
                                                       2024, together with the side letter thereto also dated 19 January 2024,
                                                       between CREI and Custodian Capital, the terms of which shall take effect from
                                                       the Effective Date;
 Amended Management Fee Tier Savings                   has the meaning given to it in paragraph 3 of this Announcement;
 Announcement                                          this announcement, made in accordance with Rule 2.7 of the Takeover Code;
 API                                                   abrdn Property Income Trust Limited, a non-cellular company limited by shares,
                                                       incorporated in Guernsey with registration number 41352;
 API Articles                                          the articles of incorporation of API from time to time;
 API Board                                             the board of API Directors as at the date of this Announcement;
 API Court Meeting                                     the meeting or meetings of the Scheme Shareholders to be convened pursuant to
                                                       an order of the Court pursuant to section 107 of the Companies Law for the
                                                       purpose of considering and, if thought fit, approving the Scheme (with or
                                                       without modification), including any adjournment, postponement or reconvention
                                                       of any such meeting, notice of which shall be contained in the Scheme
                                                       Document;
 API Directors                                         the directors of API as at the date of this Announcement;
 API General Meeting                                   the extraordinary general meeting of API Shareholders to be convened in
                                                       connection with the Scheme to consider and, if thought fit, to approve the API
                                                       Resolution (with or without amendment), including any adjournment,
                                                       postponement or reconvening thereof;
 API Group                                             API and its subsidiaries and subsidiary undertakings from time to time;
 API Investment Management Agreement                   the investment management agreement dated 10 December 2018 between API and the
                                                       API Investment Manager;
 API Investment Manager or abrdn Fund Managers         abrdn Fund Managers Limited, a private limited company with company number
                                                       00740118;
 API Meetings                                          the API Court Meeting and the API General Meeting;
 API Q1 Dividend                                       has the meaning given to it in paragraph 12 of this Announcement;
 API Q4 Dividend                                       has the meaning given to it in paragraph 12 of this Announcement;
 API Q1 Uncovered Dividend Portion                     has the meaning given to it in paragraph 12 of this Announcement;
 API Resolution                                        the resolution to be proposed at the API General Meeting necessary to
                                                       implement the Scheme, including a resolution authorising the API Board to take
                                                       all actions as they may consider necessary or appropriate to give effect to
                                                       the Scheme, a resolution to amend the API Articles by the adoption and
                                                       inclusion of a new article under which any API Shares issued or transferred
                                                       after the Scheme Record Time (other than to  CREI  and/or its nominees)
                                                       shall be automatically transferred to  CREI  (and, where applicable, for
                                                       consideration to be paid to the transferee or to the original recipient of the
                                                       API Shares so transferred or issued) on the same terms as the Merger (other
                                                       than terms as to timings and formalities);
 API Shareholders                                      the registered holders of API Shares from time to time;
 API Shares                                            ordinary shares of £0.01 each in the capital of API;
 Business Day                                          any day (excluding any Saturday or Sunday or any public holiday in England or
                                                       Guernsey) on which banks in the City of London and Guernsey are generally open
                                                       for business;
 CBRE                                                  CBRE Limited;
 Closing Price                                         the closing middle market price of an API Share or  CREI  Share (as
                                                       applicable) as derived from the Daily Official List on any particular date;
 Combined Circular and Prospectus                      the combined circular and prospectus to be published by  CREI  and to be
                                                       sent to  CREI  Shareholders outlining, amongst other things, the Merger and
                                                       containing the notice convening the  CREI  General Meeting and information
                                                       on  CREI , the Combined Group and the New  CREI  Shares;
 Combined Group                                        the  CREI  Group as enlarged by the API Group following completion of the
                                                       Merger;
 Companies Act                                         the UK Companies Act 2006, as amended from time to time;
 Companies Law                                         the Companies (Guernsey) Law, 2008 (as amended);
 Conditions                                            the conditions to the Merger, as set out in Appendix 1 to this Announcement
                                                       and to be set out in the Scheme Document;
 Confidentiality Agreement                             the confidentiality agreement entered into between  CREI  and API in
                                                       relation to the Merger dated 10 July 2023, a summary of which is set out in
                                                       paragraph 11 of this Announcement;
 Core                                                  Core real estate, which is considered to generally offer the lowest risk and
                                                       target returns, referring to real estate requiring little asset management and
                                                       fully let on long leases;
 Core-plus                                             Core-plus real estate, which is considered to generally offer low-to-moderate
                                                       risk and target returns, typically referring to high quality and well-occupied
                                                       properties but also providing asset management opportunities;
 Court                                                 the Royal Court of Guernsey;
 CREI                                                  Custodian Property Income REIT plc, a public limited company incorporated in
                                                       England and Wales with company number 08863271;
 CREI Board                                            the board of directors of CREI as at the date of this Announcement;
 CREI Directors                                        the directors of CREI as at the date of this Announcement;
 CREI Existing Investment Management Agreement         the investment management agreement dated 22 June 2020 between CREI and
                                                       Custodian Capital, as amended by a side letter dated 8 June 2023;
 CREI General Meeting                                  the general meeting of CREI to be convened by the CREI Board  to approve the
                                                       CREI Resolution and currently expected to be held in February 2024;
 CREI Group                                            CREI and its subsidiaries and subsidiary undertakings from time to time;
 CREI Q3 Dividend                                      has the meaning given to it in paragraph 12 of this Announcement;
 CREI Q4 Dividend                                      has the meaning given to it in paragraph 12 of this Announcement;
 CREI Q4 Uncovered Dividend Portion                    has the meaning given to it in paragraph 12 of this Announcement;
 CREI Resolution                                       the ordinary resolution to be proposed at the CREI General Meeting to approve
                                                       the issue of the New CREI Shares in connection with the Merger;
 CREI Shareholders                                     the holders of CREI Shares;
 CREI Shares                                           ordinary shares of £0.01 each in the capital of CREI and, as the context may
                                                       require, may include Existing CREI Shares and New CREI Shares;
 CREST                                                 the CREST system (as defined in the CREST Regulations) in accordance with
                                                       which securities may be held and transferred in uncertificated form;
 CREST Regulations                                     the Uncertificated Securities (Guernsey) Regulations 2009 (SI 2009 No. 48);
 Custodian Capital                                     Custodian Capital Limited, a private limited company incorporated in England
                                                       and Wales with company number 06504305;
 Daily Official List                                   the daily official list of the London Stock Exchange;
 Dealing Disclosure                                    an announcement pursuant to Rule 8 of the Takeover Code containing details of
                                                       dealings in interests in relevant securities of a party to an offer;
 Disclosed                                             in respect of API, information disclosed by, or on behalf of, API (i) in API's
                                                       annual report and audited financial statements for the financial year ended 31
                                                       December 2022, (ii) in the interim results of API for the six month period
                                                       ended 30 June 2023, (iii) in this Announcement; (iv) in any other announcement
                                                       to a Regulatory Information Service by, or on behalf of, API before the
                                                       publication of this Announcement; and/or (v) as otherwise fairly disclosed in
                                                       writing to CREI or its officers, employees, agents or professional advisers
                                                       prior to the date of this Announcement by, or on behalf of, API or its
                                                       officers, employees, agents or professional advisers (in their capacity as
                                                       such), including in the virtual data room, prior to 5.00 p.m. on 16 January
                                                       2024, operated on behalf of API and which CREI and its advisers are able to
                                                       access in respect of the Merger; and

                                                       in respect of CREI, (a) information disclosed by, or on behalf of, CREI (i) in
                                                       CREI's annual report and audited financial statements for the 12 months ended
                                                       31 March 2023, (ii) in the interim results of CREI or the six month period
                                                       ended 30 September 2023, (iii) in this Announcement, (iv) in any other
                                                       announcement to a Regulatory Information Service by, or on behalf of, API
                                                       before the publication of this Announcement; and/or (v) as otherwise fairly
                                                       disclosed in writing to API or its officers, employees, agents or professional
                                                       advisers prior to the date of this Announcement by, or on behalf of, CREI or
                                                       its officers, employees, agents or professional advisers (in their capacity as
                                                       such), including in the virtual data room, prior to 5.00 p.m. on 16 January
                                                       2024, operated on behalf of CREI and which API and its advisers are able to
                                                       access in respect of the Merger;
 Dividend Discrepancy                                  has the meaning given to it in paragraph 12 of this Announcement;
 Effective                                             either:

                                                       (a)      if the Merger is implemented by way of the Scheme, the Scheme
                                                       having become effective pursuant to its terms; or

                                                       (b)      if the Merger is implemented by way of a Takeover Offer, means
                                                       the Takeover Offer having been declared or having become unconditional in
                                                       accordance with the requirements of the Takeover Code;
 Effective Date                                        the date on which the Merger becomes Effective;
 EPC                                                   environmental performance certificate
 EPRA                                                  European Public Real Estate Association;
 EPRA Guidance                                         the EPRA Best Practices Recommendations Guidelines October 2019;
 EPRA Topped-Up Net Initial Yield                      the current annualised rent, net of costs, adjusted for the expiration of rent
                                                       free periods and other unexpired lease incentives, expressed as a percentage
                                                       of capital value (adding notional purchasers costs), calculated in line with
                                                       EPRA guidance;
 ERV                                                   estimated rental value;
 Excess                                                has the meaning given to it in paragraph 12 of this Announcement;
 Exchange Ratio                                        0.78 New CREI Shares for each API Share;
 Excluded Shares                                       any API Shares:

                                                       (a)   registered in the name of, or beneficially owned by, CREI or any
                                                       member of the Wider CREI Group or their respective nominees; or

                                                       (b)   held by API as treasury shares (within the meaning of the Companies
                                                       Law);
 Existing CREI Shares                                  the 440,850,398 existing CREI Shares in issue as at the date of this
                                                       Announcement;
 FCA                                                   the Financial Conduct Authority;
 Forms of Proxy                                        the forms of proxy in connection with each of the API Court Meeting and the
                                                       API General Meeting, which shall accompany the Scheme Document;
 FSMA                                                  the Financial Services and Markets Act 2000, as amended from time to time;
 GFSC                                                  the Guernsey Financial Services Commission;
 Guernsey                                              the Island of Guernsey;
 ISIN                                                  the International Securities Identification Number;
 Knight Frank                                          Knight Frank LLP;
 Listing Rules                                         the listing rules, made by the FCA under Part 6 of FSMA, as amended from time
                                                       to time;
 Latest Practicable Date                               18 January 2024 (being the last Business Day prior to the date of this
                                                       Announcement);
 London Stock Exchange                                 London Stock Exchange plc;
 Long Stop Date                                        30 April 2024, or such later date as may be agreed in writing between CREI and
                                                       API (with the Panel's consent and as the Court may allow, if such consent
                                                       and/or approval is/are required);
 LTV                                                   loan-to-value: the outstanding amount of a loan as a percentage of property
                                                       value;
 Main Market                                           the London Stock Exchange's main market for listed securities;
 Management Fee Savings                                has the meaning given to it in paragraph 3 of this Announcement;
 Mattioli Woods                                        Custodian Capital's parent company, Mattioli Woods plc, a public limited
                                                       company incorporated in England and Wales with company number  03140521;
 Merger                                                the recommended offer to be made by CREI to acquire the entire issued ordinary
                                                       share capital of API to be effected by means of the Scheme (or, if CREI so
                                                       elects and subject to the Panel's consent, a Takeover Offer) on the terms and
                                                       subject to the conditions set out in Appendix 1 to this Announcement;
 MW Clients                                            the individual private clients of Mattioli Woods;
 NAV                                                   net asset value;
 New CREI Shares                                       the new CREI Shares proposed to be issued ad allotted as fully paid to the
                                                       Scheme Shareholders in connection with the Scheme;
 NTA                                                   net tangible assets;
 Offer Document                                        if (with the consent of the Panel, as applicable) CREI elects to implement the
                                                       Merger by way of a Takeover Offer, the document to be sent to API Shareholders
                                                       which will contain, inter alia, the terms and conditions of the Takeover
                                                       Offer;
 Offer Period                                          the offer period (as defined in the Takeover Code) relating to API commencing
                                                       on the date of this Announcement and ending on the earlier of the Effective
                                                       Date and/or the date on which the Scheme lapses or is withdrawn (or such other
                                                       date as the Panel may decide);
 Official List                                         the Official List of the FCA;
 Overseas Shareholders                                 Scheme Shareholders who are resident in, ordinarily resident in, or citizens
                                                       of, jurisdictions outside the United Kingdom;
 Panel                                                 the Panel on Takeovers and Mergers;
 Partial Management Fee Waiver Savings                 has the meaning given to it in paragraph 3 of this Announcement;
 Permitted Dividends                                   each of the API Q4 Dividend and API Q1 Dividend, that are declared on the
                                                       terms and subject to the criteria set out in paragraph 12 of this
                                                       Announcement;
 Recurring Cost Synergies                              has the meaning given to it in paragraph 3 of this Announcement;
 Regulatory Information Service                        any information service authorised from time to time by the FCA for the
                                                       purpose of disseminating regulatory announcements;
 REIT                                                  a company or group to which Part 12 of the CTA 2010 applies (including, where
                                                       relevant, a REIT Group);
 Restricted Jurisdiction                               any jurisdiction where local laws or regulations may result in a significant
                                                       risk of civil, regulatory or criminal exposure if information concerning the
                                                       Merger is sent or made available to API Shareholders in that jurisdiction;
 Rolled-Forward Unaudited EPRA NTA                     the rolled-forward, unaudited EPRA NTA of each of CREI and API as at 31
                                                       December 2023, as more specifically shown in paragraphs 10 and 11 of Appendix
                                                       2 to this Announcement;
 Sanction Hearing                                      the Court hearing at which API will seek an order sanctioning the Scheme for
                                                       the purposes of section 110 of the Companies Law;
 Scheme                                                the proposed scheme of arrangement under Part VIII of the Companies Law
                                                       between API and Scheme Shareholders to implement the Merger, with or subject
                                                       to any modification, addition or condition approved or imposed by the Court
                                                       and agreed to by API and CREI;
 Scheme Court Order                                    the order of the Court sanctioning the Scheme;
 Scheme Document                                       the document to be dispatched to API Shareholders containing, amongst other
                                                       things, the full terms and conditions of the Scheme, an explanatory statement
                                                       in compliance with section 108 of the Companies Law, and the notices convening
                                                       the API Court Meeting and the API General Meeting;
 Scheme Record Time                                    the time and date specified as such in the Scheme Document, expected to be
                                                       6.00 p.m. on the Business Day immediately prior to the Effective Date, or such
                                                       later time as CREI and API may agree;
 Scheme Shareholders                                   holders of Scheme Shares;
 Scheme Shares                                         all API Shares:

                                                       (a)   in issue at the date of the Scheme Document and which remain in issue
                                                       at the Scheme Record Time;

                                                       (b)   (if any) issued after the date of the Scheme Document and prior to the
                                                       Voting Record Time and which remain in issue at the Scheme Record Time; and

                                                       (c)    (if any) issued at or after the Voting Record Time and prior to the
                                                       Scheme Record Time in respect of which the original or any subsequent holder
                                                       thereof is bound by the Scheme, or shall by such time have agreed in writing
                                                       to be bound by the Scheme and which remain in issue at the Scheme Record Time,

                                                       but excluding any Excluded Shares;
 Substantial Interest                                  a direct or indirect interest in 20 per cent. or more of the voting equity
                                                       share capital of an undertaking;
 Takeover Code                                         the City Code on Takeovers and Mergers, as issued from time to time by or on
                                                       behalf of the Panel;
 Takeover Offer                                        should the Merger be implemented by way of a takeover offer (which shall be an
                                                       offer for the purposes of Part XVIII of the Companies Law), the offer to be
                                                       made by or on behalf of CREI to acquire the entire issued ordinary share
                                                       capital of API and, where the context requires, any subsequent revision,
                                                       variation, extension or renewal of such offer;
 Transition Period Cost Synergies                      has the meaning given to it in paragraph 3 of this Announcement;
 UK or United Kingdom                                  the United Kingdom of Great Britain and Northern Ireland;
 uncertificated or in uncertificated form              a share or other security title to which is recorded in the relevant register
                                                       of the share or security as being held in uncertificated form, in CREST, and
                                                       title to which, by virtue of the CREST Regulations may be transferred by means
                                                       of CREST;
 US or United States                                   the United States of America, its territories and possessions, any state of
                                                       the United States of America and the District of Columbia;
 Voting Record Time                                    the time and date specified as such in the Scheme Document by reference to
                                                       which entitlement to vote at the API Court Meeting will be determined;
 Wider CREI Group                                      CREI, its subsidiary undertakings and associated undertakings (including any
                                                       joint venture, partnership, firm or company) in which CREI and/or such
                                                       undertakings (aggregating their interests) have a Substantial Interest; and
 Wider API Group                                       API, its subsidiary undertakings and associated undertakings (including any
                                                       joint venture, partnership, firm or company) in which API and/or such
                                                       undertakings (aggregating their interests) have a Substantial Interest.

All references to time in this Announcement are to London (UK) time unless
otherwise stated.

All references to "pounds", "pounds Sterling", "Sterling", "£", "pence",
"penny" and "p" are to the lawful currency of the United Kingdom.

A reference to "includes" shall mean "includes without limitation", and
references to "including" and any other similar term shall be construed
accordingly.

For the purposes of this Announcement, "subsidiary", "subsidiary undertaking",
"undertaking" and "equity share capital" have the meanings given by the
Companies Act.

All references to a statutory provision or law or to any order or regulation
shall be construed as a reference to that provision, law, order or regulation
as extended, modified, replaced or re-enacted from time to time and all
statutory instruments, regulations and orders from time to time made
thereunder or deriving validity therefrom.

 

 

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