REG - Develop North PLC - Change to Investment Policy & Potential Fundraise

Develop NorthAnnouncement

09/07/2025 07:00

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RNS Number : 2548Q  Develop North PLC  09 July 2025

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9 July 2025

DEVELOP NORTH PLC

(the "Company" or "DVNO")

Proposed Change to Investment Policy and Potential Fundraise

Develop North PLC, the North East's Investment Fund, announces that the Board
proposes to change the investment policy ("Investment Policy") and potentially
raise further capital to enhance shareholder value through a broader, more
diversified portfolio of investments predominantly focussed in the North East
of England.

Currently, Develop North PLC is a property-backed lending fund managed by its
Investment Adviser, Tier One Capital Ltd, providing finance to commercial and
residential real estate developers, predominantly secured over land/or real
estate.

The Company's recent announcement on 2 May 2025 outlined ambitions to raise
its international profile, drive new investment into the Company, and promote
economic growth across the North East Region. The revised Investment Policy,
which requires shareholder approval, supports the Company's objective to
deliver consistent and stable income and the potential for attractive total
returns over the medium to long term. The change will enable the Company to
allocate the capital that it intends to raise across a wider range of asset
classes while continuing to focus on areas where the investment team has deep
expertise and strong regional insight.

Background

The proposed changes to the Investment Policy will enable the Company to take
advantage of a growing investment opportunity in the North East, which is
increasingly recognised as a highly investable UK region, offering leading
innovation in sectors such as healthcare and technology, a growing base of
skilled talent, attractive entry pricing and attractive rental yields(1).

In addition, there is growing political pressure for Local Government Pension
Schemes ("LGPS") to invest more of their funds into the UK and into their
local regions. As well as hosting one of the UK's largest LGPS, the North East
of England has recently witnessed two major events that are contributing to a
far higher level of focus than before. This greater focus is creating wider
investment interest and an array of new investment opportunities.

·      In May 2024, a devolution agreement was formalised between
central UK government and the North East Mayoral Combined Authority, releasing
an expected £1.4bn of investment into the region.

·      In October 2021, Newcastle United Football Club was acquired by a
consortium with the majority shareholder being the Saudi Public Investment
Fund ("PIF"), which has brought a sustained spotlight to the area, catalysing
investment interest, international profile and commercial development tied to
the club's growth ambitions(2).

Currently the Company is restricted to a single asset class: debt
predominantly secured over land or real estate. To capitalise on the range of
opportunities available in the North East, the Board wishes to widen this
approach to multiple assets and provide investors with diversification and
attractive total returns over the medium to long term.

Revised Investment Policy Overview

The Company is seeking to evolve, subject to obtaining shareholder authority,
from a single-asset debt fund to a multi-asset strategy, pursuing investments
across three core areas:

·      Real Estate Lending (20-50% of total assets): Focussed on
creating a diversified portfolio of fixed rate loans predominantly secured
over land and/or real estate predominantly in the North East, with investments
primarily through senior secured loans positions, although other assets such
as bridging loans, subordinated loans, selected loan financings and other
investment instruments may be considered if appropriate.

 

The Company's real estate lending portfolio will be diversified by sector and
will be predominantly split between residential housebuilding, small to medium
commercial real estate development and direct sale and leaseback vehicles
primarily operating in the professional sectors of healthcare, accountants,
solicitors and finance professionals. The typical loan term will be between
one and five years, but discretion is retained to make investments for either
shorter or longer periods. The Company will target a blended Loan to Value
("LTV") of no more than 75%.

 

·      Commercial Real Estate (20-50% of total assets): Focussed on
creating a portfolio of assets, diversified by size and location of assets
predominantly within the North East, and by use classes including office,
logistics, retail and other commercial real estate uses. When required the
Company will finance refurbishments and invest capex sums to upgrade real
estate and install environmental improvements to attract occupiers and
increase rents.

 

·      Residential Real Estate (20-50% of total assets): Focussed on
private rented sector assets to lease to supported housing providers
predominantly in the North East, including local authority, charities and
non-profit organisations and Community Interest Companies ("CICs"). The
balance of the assets allocated to the strategy will be deployed in the
private rented sector.

The Company will seek freehold or leasehold real estate, including
single-family homes, apartments, and purpose-built or adapted housing for
supported housing needs.

The allocations to the three strategies stated above will take effect from the
date on which the Net Asset Value equals or exceeds £100 million for the
first time. Until such time, and noting that this will require the Company to
raise further capital, (a) the Company's assets will be invested in a manner
consistent with achieving the allocation ranges when the Net Asset Value
reaches £100 million and (b) the portfolio may have allocations to one or
more of the three asset classes that are greater or less than the stated
range.

Supporting Tier One Capital in managing the Company through its next phase of
growth is an experienced and regionally embedded asset management team,
comprising Homes or Houses, specialists in residential acquisitions and
leasing; and Broadoak Asset Management, experts in commercial real estate
investment. The addition of these partners brings strong sector expertise and
further regional insight, enabling the Company to better identify and execute
investments aligned with its revised strategy.

Borrowing

The Company may use gearing where it believes it will enhance shareholder
returns over the longer term. Overall, external borrowings and other forms of
gearing will be limited by each strategy. The Company may finance individual
assets in part by external borrowings.

The full Investment Policy, pending shareholder approval, will be made
available on the Company's website.

No material change will be made to the Investment Policy without the approval
of shareholders by ordinary resolution.

Co-investment

The Company may co-invest alongside other parties in respect of each of the
three asset classes.

Potential Fundraise

The Company is exploring the potential issuance of new shares to raise further
capital via an offer for subscription and share issuance programme. Any such
issuance will be priced at a small premium to the last published net asset
value per share.

The fundraise will enable the Company to invest at greater scale and take
advantage of the new opportunities identified in the new Investment Policy.

Any decision on an equity raise is at the absolute discretion of the directors
of the Company and will be subject to prevailing market conditions and
investor sentiment. Any equity raise would also be conditional upon, amongst
other things, the passing of the shareholder resolutions to: (i) authorise the
fundraising and (ii) approve the new Investment Policy. Should the Company
decide to proceed with an equity raise, a further announcement will be made in
due course.

Timetable

The Company expects to publish a circular detailing, inter alia, the new
Investment Policy and convening a general meeting to approve it around
September 2025.

(1) The North East Investment Prospectus
(https://indd.adobe.com/view/27b56827-c73c-41b1-9e12-ea4f48c11bfd)
North East to be at the forefront of renewable energy and green innovations
(https://www.insidermedia.com/news/north-east/optimism-is-in-our-dna-neca-business-and-economy-board-vice-chair-outlines-growth-ambitions-for-the-region?utm_medium=email&utm_source=northeast_newsletter&utm_campaign=top_story_article)

A growing base of skilled talent
(https://investnortheastengland.co.uk/north-east-england-works/education-and-training/)

Attractive rental yields
(https://avison-young.foleon.com/research-uk/big-nine-q1-2025/national-investment-overview)

(2) Newcastle pitched as 'gateway to Saudi'
(https://www.chroniclelive.co.uk/news/north-east-news/newcastle-pitched-gateway-saudi-after-29170241)

Big boost for Newcastle as Saudi PIF nears £1bn investment deal
(https://sports.yahoo.com/big-boost-newcastle-saudi-pif-194300430.html)
Saudi investment in the North of England to soar in 2024
(https://dwfgroup.com/en/news-and-insights/insights/2023/12/saudi-investment-in-the-north-of-england-to-soar-in-2024)

Saudi influence in Newcastle
(https://www.nytimes.com/athletic/4932881/2023/10/06/newcastle-saudi-city-reubens/)

Football attracts Saudi investment to England's north-east
(https://www.economist.com/britain/2024/01/22/football-attracts-saudi-investment-to-englands-north-east?utm_medium=cpc.adword.pd&utm_source=google&ppccampaignID=18156330227&ppcadID=&utm_campaign=a.22brand_pmax&utm_content=conversion.direct-response.anonymous&gad_source=5&gad_campaignid=18156330848&gclid=EAIaIQobChMIwtyuwPXcjQMVBJGDBx1wWR_-EAAYASAAEgI29fD_BwE&gclsrc=aw.ds)

 

Enquiries:

 Develop North PLC                                                           +44 (0) 191 222 0099
 Ian McElroy

Fergus Trim

Brendan O'Grady
 Cavendish Capital Markets Limited (Financial Adviser and Corporate Broker)  +44 (0) 207 220 0500
 Robert Peel

Andrew Worne

Hamish Kennett
 Alma Strategic Communications (Financial Communications Adviser)            +44 (0) 203 405 0211
 Andrew Jaques

Josh Royston

Joe Pederzolli

Louisa El-Ahwal

 

Notes to Editors:

Develop North PLC's investment objective is to provide shareholders with a
consistent and stable income and the potential for an attractive total return
over the medium to long term, through a diversified portfolio of investments
predominantly in the North East of England.

 The Company has the financial strength, credibility and professionalism
expected of a business listed on the London Stock Exchange, while also
offering the flexibility, creativity and common sense of an approachable,
local business.

Since the Company's IPO in 2017, it has invested over £80 million of capital
into the North of England and Scotland and has helped create over 12,000 jobs
with a gross development value of over £275 million.

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