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THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE LR 13.3.1 (4) YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should take, you are recommended to seek your own financial advice immediately from an independent financial adviser who specialises in advising on shares or other securities and who is authorised under the Financial Services and Markets Act 2000 (“FSMA”) if you are resident in the United Kingdom or, if not, from another appropriately independent financial adviser. This document, which comprises (i) a circular prepared in accordance with Chapter 13 of the UK Listing AIII/6.1 Rules for the purposes of the Extraordinary General Meeting convened pursuant to the Notice of EGM LR 13.3.1 (1) set out at the end of this document and (ii) a prospectus relating to Redefine International P.L.C. (“Redefine International”) for, to the extent the Placing proceeds, the purposes of section 85(2) of FSMA, has been prepared in accordance with the UK Prospectus Rules of the UK Listing Authority pursuant to Part VI of FSMA and has been approved as a prospectus by the Financial Conduct Authority (“FCA”) in accordance with section 87A of FSMA. This prospectus has been filed with the FCA and made available to the public in accordance with Rule 3.2.1 of the Prospectus Rules by the same being available at www.redefineinternational.com. If you sell or have sold or otherwise transferred all of your Existing Ordinary Shares, you should send LR 13.3.1 (6) this document (but not any personalised Form of Proxy) at once to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or the transferee. However, the distribution of this document and the Form of Proxy into jurisdictions other than the United Kingdom may be restricted by law. Therefore, persons outside the United Kingdom into whose possession this document and any accompanying documents come should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of the relevant jurisdiction. The Company and the Directors, whose names are set out on page 38 of this document, accept AI/1.1, 1.2 responsibility for the information contained in this document. To the best of the knowledge and belief of AIII/1.1, 1.2 the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. This document should be read in its entirety by Shareholders. Your attention is drawn to the letter from the Chairman of Redefine International which is set out in Part 7 (Letter from Chairman of Redefine International P.L.C.) of this document and which contains a recommendation from (i) the Directors that you vote in favour of the Share Authority Resolutions and the Related Party Resolution and (ii) the Independent Directors that you vote in favour of the Rule 9 Waiver Resolution, in each case to be proposed at the Extraordinary General Meeting referred to below. Part 2 of this document entitled “Risk Factors” includes a description of certain important factors, risks and uncertainties that may affect the Enlarged Group’s business and the Ordinary Shares, and which should be taken into account when considering the matters referred to in this document.
REDEFINE INTERNATIONAL P.L.C. AI/5.1.1/ 5.1.2 (Incorporated in the Isle of Man under the Companies Acts, 1931 – 2004 (as amended) and re-registered under the Companies Act 2006 of the Isle of Man with registered number 010534V) LR 13.6.1(1)(a) Potential Placing of up to 375,000,000 Placing Shares Approval of waiver of Rule 9 of the UK Takeover Code AIII/4.1 LR 13.1.1 (a) Approval of the Related Party Transaction and Notice of Extraordinary General Meeting AIII/ 5.4.1 Peel Hunt J.P. Morgan Cazenove Java Capital LR 13.3.1 UK Sponsor and Joint UK Bookrunner JSE Sponsor, South African (9) (a) Joint UK Bookrunner Corporate Adviser and SA Bookrunner
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The Existing Ordinary Shares are admitted to (a) the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities and (b) listing and trading on the Main Board of the JSE. It is proposed that, subject to Shareholder approval of the Resolutions and the Board (in consultation with the Bookrunners) electing to proceed with the Placing, application will be made to (a) the UK Listing Authority for the Placing Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the Placing Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities and (b) the Johannesburg Stock Exchange (the “JSE”) for the Placing Shares to be listed and traded on the Main Board of the JSE (together “Admission”). If the Placing proceeds, it is expected that Admission would become effective and that dealings would commence by 8.00 a.m. (London time) on 23 February 2016 in respect of the UK Placing Shares and 9.00 a.m. (South African time) on 23 February 2016 in respect of the South African Placing Shares. A Notice of Extraordinary General Meeting, which is to be held at 2nd Floor, 30 Charles II Street, London SW1Y 4AE, on 15 February 2016, at 9.30 a.m. (London time) is set out at the end of this document. A Form of Proxy for use in relation to the Extraordinary General Meeting is enclosed. To be valid, the Form of Proxy should be completed, signed and returned in accordance with the instructions printed on it and the notes in the Notice of Extraordinary General Meeting. Completion and return of a Form of Proxy will not preclude Shareholders from attending and voting in person at the Extraordinary General Meeting, should they so wish. This document does not constitute or form part of any offer to buy or any invitation to sell or issue, or any solicitation of any offer to buy or subscribe for, Placing Shares in any jurisdiction. This document has been produced for the purposes of, inter alia, Admission, should the Placing proceed. Accordingly, no Placing Price is included in this document, which will only be determined by the Board and the Bookrunners following the Bookbuild, should the Placing proceed. The release, publication or distribution of this document and the Form of Proxy in jurisdictions other than the United Kingdom may be restricted by law and, therefore, any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. Failure to comply with any such restrictions may constitute a violation of the securities laws of any jurisdiction. This document has been prepared to comply with requirements of English law, the UK Listing Rules, the UK Prospectus Rules and the Rules of the London Stock Exchange and information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside England. Peel Hunt LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as UK sponsor and joint UK bookrunner to the Company in connection with the potential Placing and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Peel Hunt LLP, nor for providing advice in relation to the potential Placing. J.P. Morgan Securities plc (which conducts its UK investment banking business as J.P. Morgan Cazenove), which is authorised in the United Kingdom by the Prudential Regulation Authority (“PRA”) and regulated by the FCA and the PRA, is acting as joint UK bookrunner to the Company in connection with the potential Placing and will not be responsible to anyone other than the Company for providing the protections afforded to clients of J.P. Morgan Securities plc, nor for providing advice in relation to the potential Placing. Java Capital Proprietary Limited is acting as JSE sponsor, SA corporate adviser and SA bookrunner solely for the Company in relation to matters referred to in the document and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Java Capital Proprietary Limited, nor for providing advice in relation to the potential Placing. Aside from the responsibilities and liabilities, if any, which may be imposed under FSMA or the regulatory regime established thereunder, or any other applicable regulatory regime, none of Peel Hunt LLP, J.P. Morgan Securities plc, Java Capital Proprietary Limited or any of their respective affiliates accept any responsibility or liability whatsoever for, nor make any representation or warranty, express or implied, as to the contents of this document, including its accuracy, fairness, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the potential Placing and nothing in this document is, or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Each of Peel Hunt LLP, J.P. Morgan Securities plc and Java Capital Proprietary Limited and their respective affiliates accordingly disclaims to the fullest extent permitted by law all and any responsibility or liability whether
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arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document or any such statement.
NOTICE TO US INVESTORS This document does not constitute an offer of Placing Shares to any person, including those with a registered address in, or who is resident in, the United States or any other Restricted Jurisdiction. Any potential Placing Shares have not been and will not be registered under the US Securities Act, or with any regulatory authority or under the applicable securities laws of any state or other jurisdiction of the United States, or the relevant laws of any state, province or territory of any other Restricted Jurisdiction, or any other Restricted Jurisdiction, and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within any Restricted Jurisdiction or within the United States (as defined in Regulation S under the US Securities Act (“Regulation S”)) unless any offer and sale of Placing Shares has been registered under the US Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Any potential Placing Shares would be offered or sold outside the United States in reliance on Regulation S. This document does not constitute an offer to sell or a solicitation of an offer to buy Placing Shares in any jurisdiction in which such offer or solicitation is unlawful. Neither this document nor any other document connected with the potential Placing will be distributed in or into the United States or any of the other Restricted Jurisdictions. Neither the potential Placing Shares, the Form of Proxy, this document nor any other document connected with the potential Placing have been or will be approved or disapproved by the SEC, any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of any Placing Shares or the accuracy or adequacy of this document connected with any potential Placing. Any representation to the contrary is a criminal offence in the United States. There will be no public offer of the Placing Shares in the United States.
NOTICE TO OVERSEAS SHAREHOLDERS EXCEPT AS OTHERWISE SET OUT HEREIN, THE POTENTIAL PLACING DESCRIBED IN THIS DOCUMENT IS NOT BEING MADE TO SHAREHOLDERS OR INVESTORS IN ANY RESTRICTED JURISDICTIONS. NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW. Capitalised terms have the meanings ascribed to them in Part 17 (Definitions) of this document. Any reproduction or distribution of this document, in whole or in part, and any disclosure of its contents is prohibited, except to the extent such information is otherwise publicly available. No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representations must not be relied upon as having been authorised by Redefine International, Peel Hunt, JPMC or Java Capital. None of Redefine International, Peel Hunt, JPMC or Java Capital takes any responsibility for, or can provide assurance as to the reliability of, other information that you might be given. Redefine International will comply with its obligation to publish a supplementary prospectus containing further updated information required by law or by any regulatory authority but assumes no further obligation to publish further information. Subject to FSMA, the UK Listing Rules, the UK Disclosure and Transparency Rules and the UK Prospectus Rules, the delivery of this document shall not, under any circumstances, create any implication that there has been any change in the affairs of Redefine International since the date of this document or that the information in this document is correct as at any time after this date. Without limitation, the contents of the Group’s website do not form part of this document. Investors should only rely on the information contained in this document and contained in any documents incorporated into this document by reference. THE CONTENTS OF THIS DOCUMENT OR ANY SUBSEQUENT COMMUNICATION FROM REDEFINE INTERNATIONAL, PEEL HUNT, JPMC OR JAVA CAPITAL OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS ARE NOT TO BE CONSTRUED AS LEGAL, FINANCIAL OR TAX ADVICE. INVESTORS SHOULD CONSULT THEIR OWN SOLICITORS, INDEPENDENT FINANCIAL ADVISERS OR TAX ADVISERS FOR LEGAL, FINANCIAL OR TAX ADVICE. The date of this document is 28 January 2016.
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CONTENTS
Page
PART 1 SUMMARY 5
PART 2 RISK FACTORS 18
PART 3 IMPORTANT INFORMATION 30
PART 4 EXPECTED TIMETABLE OF PRINCIPAL EVENTS 36
PART 5 PLACING STATISTICS 37
PART 6 DIRECTORS, COMPANY SECRETARY AND ADVISERS 38
PART 7 LETTER FROM THE CHAIRMAN OF REDEFINE INTERNATIONAL P.L.C. 41
PART 8 INFORMATION ON THE POTENTIAL PLACING SHARES 60
PART 9 INFORMATION ON REDEFINE INTERNATIONAL 63
PART 10 OPERATING AND FINANCIAL REVIEW OF THE GROUP 71
PART 11 HISTORICAL FINANCIAL INFORMATION RELATING TO THE GROUP 80
PART 12 UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP 81
PART 13 PROPERTY VALUATION REPORTS 86
PART 14 WAIVER OF RULE 9 OF THE UK TAKEOVER CODE AND INFORMATION ON THE CONCERT PARTY 188
PART 15 ADDITIONAL INFORMATION 211
PART 16 DOCUMENTS INCORPORATED BY REFERENCE 277
PART 17 DEFINITIONS 279
PART 18 NOTICE OF EXTRAORDINARY GENERAL MEETING 288
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PART 1
SUMMARY
Summaries are made up of disclosure requirements known as “Elements”. These elements are numbered in Sections A–E (A.1–E.7).
This summary contains all the Elements required to be included in a summary for this type of security and company. Because some Elements are not required to be addressed there may be gaps in the numbering sequence of the Elements.
Even though an Element may be required to be inserted into the summary because of the type of security and company, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of “not applicable”. Section A – Introduction and warnings
Disclosure Element requirement Disclosure
A.1 Warning This summary should be read as an introduction to this document. Any decision to invest in the securities should be based on consideration of this document as a whole by the investor. Where a claim relating to the information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the member states of the European Union, have to bear the costs of translating this document before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of this document or it does not provide, when read together with the other parts of this document, key information in order to aid investors when considering whether to invest in such securities.
A.2 Resale or final Not applicable. Redefine International P.L.C. is not engaging any placement of financial intermediaries for any resale of securities or final securities through placement of securities after publication of this document. financial intermediaries
Section B – Company and any guarantor
Disclosure Element requirement Disclosure
B.1 Legal and The Company’s legal and commercial name is Redefine Commercial Name International P.L.C. (the “Company”) and it trades under the name Redefine International.
B.2 Domicile/Legal The Company was initially incorporated with limited liability under Form/Legislation/ the laws of the Isle of Man under the Companies Acts 1931 – Country of 2004 (as amended), and is domiciled in the Isle of Man. The Incorporation Company is subject to the provisions of the Companies Act 2006 of the Isle of Man.
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Disclosure Element requirement Disclosure
B.3 Key factors of The Company is an income focused property investment Company’s company with exposure to a broad range of properties and current operations geographical areas. The Company has direct and indirect and principal property investments geographically diversified across the UK activities and Germany, providing exposure to the retail, office, industrial and hotel sectors.
B.4a Significant trends The investment market, both in the UK and Germany, continues to benefit from strong demand, albeit that levels of investment have normalised following record investment volumes in the second quarter of 2015. International investors continue to dominate the UK investment market with a similar trend now evident in Germany. Rental values in the UK have continued on an upward trend although this has been driven to a large extent by the office and distribution sectors, principally in London and the South East. Growth in retail rents has been more muted although there has been some encouraging data in the second half of 2015. Demand from retailers in Germany continued to strengthen during the year, with interest improving from both local and international brands. Demand continues to outweigh supply in prime locations which is having a positive knock-on effect on secondary locations.
With performance in the next phase of the property cycle likely to be more heavily weighted to income returns and rental growth, the Group’s approach toward recycling capital into assets with strong fundamentals and occupier demand is as important as ever.
B.5 Group structure The Company is the parent company of the Group and has a number of subsidiaries. The Company’s interests in these subsidiary companies are comprised as follows: • 74 of the companies are wholly-owned subsidiary companies; • 14 of the companies are interests held amounting to 75 per cent. or more but less than 100 per cent. of the ownership of the relevant company; • 30 of the companies are interests held in companies of 50 per cent. or more but less than 75 per cent. of the ownership of the relevant company; and • 21 of the companies are minority interests held in companies amounting to less than 50 per cent. of the ownership of the relevant company. The Company holds each of its properties through its subsidiaries and Group companies.
B.6 Notifiable interests As at the Latest Practicable Date, no person (other than the Shareholders listed below) had a notifiable interest in the issued share capital of the Company:
• Redefine Properties held 449,757,285 Ordinary Shares (equal to 30.07 per cent. of the Company’s issued share capital); and
• Allan Gray Unit Trust Management (RF) (Pty) Limited held 57,348,481 Ordinary Shares (equal to 3.83 per cent. of the Company’s issued share capital).
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Disclosure Element requirement Disclosure
Redefine Properties and Allan Gray Unit Trust Management (RF) (Pty) Limited have the same voting rights in connection with their Ordinary Shares as are enjoyed by all other Shareholders.
B.7 Historical financial Selected historical financial information relating to the Company information which summarises the financial condition of the Company for the three financial years ended 31 August 2015, 31 August 2014 and 31 August 2013 is set out in the following table.
Year ended Year ended Year ended 31 August 31 August 31 August 2015 2014 2013 Financial Information £m £m £m Gross rental income 68.3 66.2 51.4 Investment and other income 11.4 11.1 4.6 Net operating income 63.3 61.2 36.9 Profit from operations 109.0 135.6 89.5 ———— ———— ———— Profit for the Year 77.9 102.8 61.1 ———— ———— ———— Total assets 1,226.8 1,183.3 1,062.7 Total liabilities 590.0 673.6 752.3 ———— ———— ———— Net Assets 636.8 509.7 310.4 ———— ———— ———— Net asset value per share – Basic (pence) 40.6p 37.1p 31.0p ———— ———— ———— Net asset value per share – Diluted (pence) 40.5p 37.1p 29.1p ———— ———— ———— The Company completed the acquisition of Banbury Cross Retail Park on 7 September 2015 and the Tranche 1 Properties on 2 October 2015. Save for entering into the AUK Facility, the drawdown of £155.0 million from the AUK Facility, the acquisition of Banbury Cross Retail Park and the Tranche 1 Properties, there has been no significant change to the Company’s financial condition and operating results during or subsequent to the period covered by the historical key financial information on the Company set out in this section.
B.8 Pro forma The unaudited pro forma financial effect of: financial information • the potential Placing (assuming the Company raises the minimum gross proceeds of £100.0 million); • the acquisition of the Combined AUK Portfolio (being the acquisition of Banbury Cross Retail Park and the AUK Portfolio (assuming the completion of the acquisition of both Tranche 1 and Tranche 2 of the AUK Portfolio); • entering into the AUK Facility; and • receipt of proceeds from the sale of the Cromwell Group, the Swiss Coop portfolio and certain petrol filling stations (the cash receipts from these transactions will be used to part fund the acquisition of the Combined AUK Portfolio),
on the Group’s assets and liabilities as if they had occurred on 31 August 2015 would be to increase total assets from £1,226.8 million to £1,513.6 million, and total liabilities from £590 million to £799.9 million.
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Disclosure Element requirement Disclosure
B.9 Profit forecast Not applicable as the Company has not published any profit forecasts or estimates.
No profit forecast or estimate is included in this document.
B.10 Qualifications in Not applicable; the audit reports on the historical financial the audit report information contained in, or incorporated by reference into, this document are not qualified.
B.11 Working capital Not applicable; the Company is of the opinion that the Group’s explanation and the Enlarged Group’s working capital is sufficient for its present requirements, that is, for at least the next 12 months from the date of publication of this document.
Section C – Securities
Disclosure Element requirement Disclosure
C.1 Type and class of The Company would propose to issue up to 375,000,000 Placing securities being Shares pursuant to the Placing. The ISIN which the Placing admitted to trading Shares would trade under is IM00B8BV8G91.
C.2 Currency of the The Ordinary Shares are denominated in Pounds Sterling. securities issue The Existing Ordinary Shares held on the UK share register are quoted and traded in Pounds Sterling and the Existing Ordinary Shares held on the SA share register are quoted and traded in Rand.
The potential Placing Shares to be held on the UK share register would be quoted and traded in Pounds Sterling and the potential Placing Shares to be held on the SA share register would be quoted and traded in Rand.
C.3 Number of shares As at the Latest Practicable Date, the Company had in issue issued 1,495,566,887 fully paid Ordinary Shares of 8.0 pence each, none of which are held in treasury.
C.4 Description of the Any Placing Shares would be issued credited as fully paid and rights attaching to would rank pari passu in all respects with the Existing Ordinary the securities Shares, including the right to receive all dividends and other distributions declared in respect of the ordinary share capital of the Company after the date of the allotment and issue of any such Placing Shares.
Subject to any special rights, restrictions or prohibitions as regards voting for the time being attached to any Ordinary Shares (for example, in the case of joint holders of a share, the only vote which will count is the vote of the person whose name is listed before the other voters on the register for the share), Shareholders shall have the right to receive notice of and to attend and vote at general meetings of the Company. Subject to the provisions of the Companies Act 2006, the Company may from time to time declare dividends and make other distributions on the Ordinary Shares. Shareholders are entitled to participate in the assets of the Company attributable to their shares in a winding-up of the Company or other return of capital, but they have no rights of redemption.
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Disclosure Element requirement Disclosure
C.5 Restrictions on the The following restrictions apply to the free transferability of the free transferability Ordinary Shares: of the securities • If any Shareholder has been served with a request notice under Article 162 of the Articles of Association and does not within the 14 day period prescribed therein supply to the Company the information thereby requested, the Company may (at the absolute discretion of the Directors) at any time thereafter by a restriction notice to such Shareholder direct that no transfer of any of the shares held by such member (the “Default Shares”) shall be recognised or registered by the Directors unless:
(i) the transfer is a permitted transfer; or
(ii) the member is not himself in default as regards supplying the requisite information required under Article 162 and, when presented for registration, the transfer is accompanied by a certificate by the member in a form satisfactory to the Directors to the effect that after due and careful enquiry the member is satisfied that none of the shares the subject of the transfer are Default Shares under the Articles,
provided the Default Shares represent at least 0.25 per cent. (in nominal value) of the issued shares of the same class as the Default Shares.
• The Board may refuse to register a transfer if in its opinion (and with the concurrence of the FCA or the JSE or such other competent authority) exceptional circumstances so warrant.
• Transfers of shares to a prohibited person under the Articles will not be registered.
C.6 Admission Subject to Shareholder approval of the Resolutions, and the Board (in consultation with the Bookrunners) electing to proceed with the potential Placing, application would be made to (a) the UK Listing Authority and to the London Stock Exchange for the Placing Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities; and (b) the JSE for the Placing Shares to be listed and traded on the Main Board of the JSE. In that case, Admission of the Placing Shares could be expected to become effective, and dealings to commence at 8.00 a.m. (London time) on 23 February 2016 in respect of the UK Placing Shares and 9.00 a.m. (South African time) on 23 February 2016 in respect of the South African Placing Shares.
C.7 Dividend policy The Company’s dividend policy is consistent with the UK-REIT Regime, at the date of this document. Currently, as a UK-REIT the Company is required to distribute at least 90 per cent. of its UK property rental profits to Shareholders.
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Section D – Risks
Disclosure Element requirement Disclosure
D.1 Key information The Company believes that the following are key risks affecting on the key risks the Enlarged Group and its business: specific to the • The Enlarged Group’s operations are capital intensive and are issuer or its financed on an asset specific basis. The Group has a number industry of asset-specific financings and also has general corporate borrowings in place to finance its property acquisitions and development activities. There can be no assurance that the Enlarged Group will be able to find lenders in the longer term who are willing to lend on similar terms to those which apply to existing financing arrangements, or at all, upon maturity. An increase in loan-to-value ratio, for example, as a result of declines in property values associated with the Combined AUK Portfolio or generally, would be one factor which could restrict the Enlarged Group’s ability to arrange such financing or refinancing in the longer term. If, in the longer term, the Enlarged Group is not able to refinance borrowings as they mature in the longer term and/or the terms of such refinancing are less favourable than the existing terms of borrowing, this may have a material adverse effect on the business, financial condition, results of operations and future prospects of the Enlarged Group. • The Enlarged Group operates in a highly competitive market for investment opportunities. Heightened competition in the real estate market in the countries in which the Enlarged Group invests may reduce investment opportunities, increase prices of real estate and affect occupancy and rental rates of the Enlarged Group’s properties. Some competitors and potential competitors may have advantages over the Company, including greater name recognition, greater financial, marketing and other resources and better access to capital, which would allow them to respond more quickly to new or changing opportunities. • The Enlarged Group competes for tenants for its properties with real estate investment funds, developers, owners and operators of commercial real estate businesses in the regions where the Enlarged Group’s properties are located. If, as a result of competition or lack of demand, the Enlarged Group is required to reduce rental rates or to offer more substantial rent abatements, tenant improvements, early termination rights or below-market renewal options to retain existing or to attract new tenants, the Enlarged Group’s cash flow and operating results could be adversely affected. • The Enlarged Group’s net asset value may be reduced by downward property valuations, which may occur, for example, as a result of prevailing economic conditions allowing for a tapering of global government asset purchase programmes, decreased demand for commercial and/or government occupied office space, adverse change in retail economic conditions and/or decline in the hotel industry. This may affect the Enlarged Group’s ability in the longer term to refinance debt when required or to pay dividends.
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Disclosure Element requirement Disclosure
• The valuation of the Enlarged Group’s properties is inherently subjective due to the individual nature of each property, its location and the expected future rental revenues from that particular property. As a result, valuations are subject to uncertainty and, in determining market value, valuers are required to make certain assumptions and such assumptions may prove to be inaccurate. Incorrect assumptions or flawed assessments underlying a valuation report could negatively affect the Enlarged Group’s financial condition and potentially inhibit the Enlarged Group’s ability to realise a sale price that reflects the stated valuation. This is particularly so in periods of volatility or when there has been limited real estate transactional evidence against which property valuations can be benchmarked. In addition, incorrect assumptions or flawed assessments underlying a valuation could potentially inhibit the Enlarged Group’s ability to raise finance in the future. Further, if the Enlarged Group acquires properties based on inaccurate valuations, the Enlarged Group’s net assets and results of operations may be materially adversely affected. There can also be no assurance that the valuations of the Enlarged Group’s current and prospective properties will be reflected in the actual transaction prices, even where any such transactions occur shortly after the relevant valuation date, or that the estimated yield and estimated annual rental income will prove to be attainable. In addition, property valuations are dependent on the level of rental income receivable and anticipated to be receivable on that property in the future and, as such, declines in rental income could have an adverse impact on revenue and the value of the Enlarged Group’s properties.
• The Company is internally managed and therefore relies on its management and their experience, skill and judgement, in identifying, selecting and negotiating the acquisition of suitable investment opportunities. The Company also relies on the Directors, and in particular, the Executive Directors, to manage the day-to-day affairs of the Company. There can be no assurance as to the continued service of these individuals as directors and employees of the Company. The departure of any of these individuals from the Company without adequate replacement may have a material adverse effect on the Company’s business prospects and results of operations. The Company is also reliant on its senior asset managers and senior finance staff. The departure of key personnel may require an extended period in which to find suitable replacements and may have a temporary adverse effect on the business.
• Under the Companies Act 2006, subject to the provisions of its memorandum and articles of association, a company may make distributions (including cash dividends) provided that it satisfies the statutory solvency test prescribed by section 49 of the Companies Act 2006. The solvency test is satisfied if a company is able to pay its debts as they become due in the normal course of the company’s business and the value of the company’s assets exceeds the value of its liabilities. The Company’s ability to pay dividends is affected by its
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Disclosure Element requirement Disclosure
profitability and there can be no assurance that the Company will be able to pay a dividend in the future or as to the amount of any such dividend, if paid.
• If the Resolutions are not passed by Shareholders at the Extraordinary General Meeting or prevailing market conditions mean that the Board (in consultation with the Bookrunners) elects not to proceed with the Placing or if, inter alia, the Placing fails to raise gross proceeds of at least £100.0 million, the Board will not proceed with the Placing and will utilise the RPL Loan instead to complete the acquisition of the Tranche 2 Properties. In such circumstances, if the Board elects not to raise funds through a debt or equity fundraising prior to the repayment date of the RPL Loan, the Company may elect to implement the Conversion resulting in the Disposal (or, in the absence of election by the date being three months following drawdown, it will automatically convert). This would result in the Company being in a 50:50 joint venture with Redefine Properties in respect of the Combined AUK Portfolio. Consequently, the Directors would not be able to exclusively direct the strategy and operating decisions of Redefine AUK in the same manner as it would with full control. In particular, material decisions relating to the Combined AUK Portfolio, such as a planned operational change, acquisition, disposal or development, or the refinancing or repayment of debt, would require the consent of Redefine Properties, which may restrict the Enlarged Group’s ability to proceed with such a decision. This lack of control may decrease the value of the assets held by Redefine AUK. Conflict with Redefine Properties may lead to deadlock and result in the Enlarged Group being unable to pursue its desired strategy or exit the joint venture other than on disadvantageous terms. However, under the terms of the RPL JV Agreement, neither the Company nor Redefine Properties is capable of forcing the other to sell its shareholding in Redefine AUK in the event of a deadlock.
• The Company cannot guarantee that it will maintain UK-REIT status nor can it guarantee that it will maintain continued compliance with all of the UK-REIT conditions. If the Company was to leave the UK-REIT Regime within 10 years of joining, HMRC has wide powers to direct how it would be taxed which could have a material impact on the financial condition of the Company.
D.3 Key information The Company believes that the following are key risks affecting on the risks the Ordinary Shares: specific to the securities • Redefine Properties is currently interested in 30.07 per cent. of the issued share capital of the Company (or 30.80 per cent. when aggregated with the interests of the other members of the Concert Party in the issued share capital of the Company) and following completion of the Placing, its percentage shareholding may increase to up to 35.79 per cent. (or 36.45 per cent. when aggregated with the other members of the Concert Party) if, for illustrative purposes, (a) the Placing Price is set at the Minimum Placing Price, (b) Redefine Properties subscribes for the RPL Equity Commitment in full,
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Disclosure Element requirement Disclosure
(c) the other Placees subscribe for Placing Shares for an aggregate value of £30.0 million and (d) no further issues of Ordinary Shares occur between publication of this document and Admission. The concentration of ownership may affect the market price and liquidity of the Ordinary Shares. In addition, Redefine Properties may have the ability to control the outcome of matters requiring Shareholder approval, including appointments to the Board and significant corporate transactions, such as an acquisition or other change of control of the Enlarged Group. On 14 November 2014, the Company entered into the Relationship Agreement with, inter alia, Redefine Properties to regulate aspects of the ongoing relationship between the Company and Redefine Properties. The Directors believe that the terms of the Relationship Agreement enable the Enlarged Group to carry on an independent business as its main activity. However, the interests of Redefine Properties may not be the same as the interest of minority shareholders in the Company and Redefine Properties may make decisions that may have a material adverse impact on an investment in the Ordinary Shares and on the business operations of the Group.
• Prospective investors should be aware that the value of an investment in Redefine International may go down as well as up. The market price of Ordinary Shares could be volatile and subject to significant fluctuations due to a variety of factors including changes in sentiment in the market regarding the Ordinary Shares (or securities similar to them), any regulatory changes affecting the Enlarged Group’s operations, variations in its operating results, business developments or its competitors, the operating and share price performance of other companies in the industries and markets in which it operates, or speculation about the Enlarged Group’s business in the press, media or investment community.
• The potential Placing would be made on a non pre-emptive basis, primarily to institutional investors only. If Shareholders do not or are unable to participate in the Placing, their proportionate ownership and voting interests in Redefine International will be reduced and the percentage that their Ordinary Shares will represent of the total issued share capital of Redefine International will be reduced accordingly.
Section E – Placing
Disclosure Element requirement Disclosure
E.1 Net proceeds and If the Placing were to proceed, the net proceeds of the potential costs of the Placing would be dependent on the number of Placing Shares Placing issued and the actual Placing Price, however, the Placing would be conditional, inter alia, on the Company raising minimum gross proceeds of at least £100.0 million.
By way of illustration, assuming (a) the Placing Shares were issued at 44.4 pence per share (being a five per cent. discount to the mid-market price per Ordinary Share at the Latest Practicable
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Disclosure Element requirement Disclosure
Date) (b) Redefine Properties participated in the Placing and subscribed for Placing Shares representing £70.0 million and (c) other Placees subscribed for Placing Shares representing £30.0 million, the Company would expect to raise net proceeds of approximately £94.5 million through the Placing after deduction of estimated expenses of approximately £5.5 million. No expenses would be charged by the Company to Shareholders who acquire Placing Shares.
E.2a Reason for the If the Placing were to proceed, the Company would seek to raise Placing and use of a minimum of £100.0 million (gross) for the Company which will proceeds allow the Company to complete the acquisition of the Tranche 2 Properties, with the balance of the consideration being funded from existing cash resources and the AUK Facility.
Any additional equity raised would be used to provide capital for further disciplined asset management opportunities within the Group’s existing portfolio as well as new investment opportunities. Additionally any excess equity raised would support refinancing and restructuring of the Group’s existing facilities at lower leverage levels.
For example, should the Company raise up to £150.0 million (gross) through the potential Placing, following the scale back of the RPL Equity Commitment, the excess of £50.0 million may be utilised to reduce the Company’s leverage on the Acquisition. The AUK Facility provides the required flexibility (through the £148.0 million revolving credit facility) with the margin charged subject to the amount of debt drawn and the resultant loan-to- value ratio. Utilising the maximum drawdown of £98.0 million would result in a loan-to-value ratio on the Combined AUK Portfolio of 55 per cent. and a margin of 1.9 per cent. Limiting the drawdown to £75.0 million would result in a reduced margin of 1.75 per cent. Should the overall facility be reduced to £263.0 million following the sale of 16 Grosvenor Street, London and to maintain headroom of £33.0 million, the marginal return on the additional £23.0 million of equity would be 4.6 per cent.
E.3 Terms and If the Resolutions are passed, and if the Board then considers it conditions of the in the best interests of the Company to pursue an equity raising potential Placing and the Placing proceeds, the Bookrunners, as agents of the Company, have agreed to use their respective reasonable endeavours to procure placees for the Placing Shares.
The Placing, if it were to proceed, would be on a non pre-emptive basis, primarily to institutional investors only, and conditional on the Company raising minimum gross proceeds of £100.0 million.
RPL Equity Commitment In connection with the potential Placing, if it were to proceed, Redefine Properties has irrevocably agreed to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate subscription amount of up to £70.0 million (the “RPL Equity Commitment”). The RPL Equity Commitment is subject to the Placing Price representing a minimum discount of five per cent. to the volume weighted average price of an Existing Ordinary Share over the 30 days prior to the date of announcement of any such Placing (the “Maximum RPL Price”).
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Disclosure Element requirement Disclosure
If the Placing proceeds, the Company would seek to raise a minimum additional aggregate of £30.0 million from Placees (other than Redefine Properties) in order to raise a minimum of £100.0 million (gross) through the Placing. If there is a successful procurement of Placees (other than Redefine Properties) representing in excess of £30.0 million of gross proceeds, the Board expects to scale back Redefine Properties’ maximum participation of up to £70.0 million on a pound for pound basis, for every pound raised from other Placees in excess of the additional aggregate £30.0 million, subject to Redefine Properties’ entitlement to participate in the Placing at the level which would maintain its current percentage shareholding in the Company, being 30.07 per cent. Size of potential Placing and Placing Price If the Placing proceeds and there is sufficient demand from Placees (including from Redefine Properties, to the extent that it seeks to participate in excess of its pro-rata entitlement in the Placing, subject to its terms and conditions), the Board may then decide to increase the size of the Placing up to a maximum amount of £150.0 million. The potential Placing would comprise two separate but simultaneous and co-ordinated placings. Placees would be able to participate outside of South Africa and subscribe for UK Placing Shares in Pounds Sterling pursuant to the UK Placing or within South Africa and subscribe for Placing Shares in Rand pursuant to the South African Placing. Investors who participate in the UK Placing would be required to make bids for Placing Shares in Pounds Sterling. Investors who participated in the South African Placing would be required to make bids for Placing Shares in Rand. The South African Placing would be subject to a minimum application of R1 million per investor, acting as principal, except for those categories of exempted persons contemplated in section 96(1)(a) of the South African Companies Act. The South African Placing would be undertaken with certain existing shareholders and new institutional investors. Members of the public (other than any member of the South African public who acts as principal and offers to subscribe for a minimum of R1 million worth of Placing Shares and those categories of exempted persons contemplated in section 96(1)(a) of the South African Companies Act) would not be entitled to participate in the South African Placing. Similarly, the UK Placing would be undertaken with certain existing and new institutional investors. The potential Placing would be conducted, subject to the satisfaction of certain conditions, through an accelerated bookbuild process (the “Bookbuild”) to be carried out by the Joint UK Bookrunners (in respect of the UK Placing) and Java Capital (in respect of the South African Placing). If the Resolutions are passed at the Extraordinary General Meeting, and assuming the Company decides to proceed with the potential Placing, it is expected that the book would open on 16 February 2016 and close at any time thereafter. The timing of the closing of the book, the Placing Price and the number of Placing Shares would be agreed between the Bookrunners and the Board following completion of the Bookbuild and announced as soon as practicable on a Regulatory Information Service in the UK and
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Disclosure Element requirement Disclosure
the Stock Exchange News Service of the JSE. It is expected that a Pricing Statement containing the Placing Price and the number of Placing Shares issued, would (subject to certain restrictions) be published at the same time and would be available on the Company’s website at www.redefineinternational.com. If the Placing proceeds, the Placing Price per UK Placing Share would be set by the Directors and the Bookrunners, following their assessment of market conditions and discussions with a number of institutional investors in the course of the Bookbuild. In addition, in accordance with Listing Rule 9.5.10R, the Placing Price would not represent a discount of more than 10 per cent. to the middle market price at the time of agreeing the Placing. The Placing Price per South African Placing Share will be the equivalent price of a UK Placing Share in Rand (subject only to adjustment in terms of the prevailing exchange rate agreed between the Bookrunners and the Board at the time of the Bookbuild). As this document does not constitute or form part of any offer to buy or any invitation to sell or issue, or any solicitation of any offer to buy or subscribe for, Placing Shares in any jurisdiction, no maximum price has been included in this document. If the Company and the Joint Bookrunners agree that the UK Placing will proceed, the UK Placing is conditional upon, inter alia, the following: • the Resolutions being passed by the relevant Shareholders at the Extraordinary General Meeting (without material amendment); • the Company raising gross proceeds of at least £100.0 million through the Placing; • the Placing Agreement becoming unconditional; and • Admission becoming effective by not later than 8.00 a.m. (London time) on 23 February 2016 or such later time and/or date as the Company and the Joint UK Bookrunners may agree (being not later than 8.00 a.m. (London time) on 31 May 2016). Accordingly, if any of such conditions were not satisfied, or, if applicable, waived, the proposed UK Placing would not proceed, and the Company would utilise the RPL Loan in order to complete the acquisition of the Tranche 2 Properties, to the extent the South African Placing has not otherwise taken place and raised sufficient funds. If the Company and Java Capital agree that the South African Placing will proceed, the South African Placing would be conditional upon, inter alia, the following: • the Resolutions being passed by the relevant Shareholders at the Extraordinary General Meeting (without material amendment); • the Company raising gross proceeds of at least £100.0 million through the Placing; • the South African Placing Agreement becoming unconditional; and
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Disclosure Element requirement Disclosure
• Admission becoming effective by not later than 9.00 a.m. (South African time) on 23 February 2016 or such later time and/or date as the Company and the Bookrunners may agree (being not later than 9.00 a.m. (South African time) on 31 May 2016). Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the proposed South African Placing would not proceed, and the Company would utilise the RPL Loan in order to complete the acquisition of the Tranche 2 Properties, to the extent the UK Placing has not otherwise taken place and raised sufficient funds.
E.4 Material interests Redefine Properties holds 30.07 per cent. and the Concert Party holds 30.80 per cent. of the existing issued share capital of the Company as at the Latest Practicable Date. If the Placing proceeds, these percentages may increase depending on the number of Placing Shares allocated to Redefine Properties which, in turn, will depend on the actual Placing Price. In addition, Michael Watters and Marc Wainer (who are members of the Concert Party) have irrevocably undertaken to participate in the Placing: (a) Michael Watters has irrevocably agreed to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate amount of £150,000 and (b) Marc Wainer has irrevocably agreed to subscribe for 175,000 Placing Shares at the Placing Price (to be held through his Drawood Trust) and procure that his wife subscribes for 20,000 Placing Shares at the Placing Price. Accordingly, the Company is proposing the Rule 9 Waiver Resolution at the Extraordinary General Meeting to waive the need for the Concert Party to make a mandatory takeover offer for the Company under Rule 9 of the UK Takeover Code in the event the Placing proceeds and the Concert Party’s percentage shareholding increases.
E.5 Name of person Not applicable. selling Securities/lock up agreements
E.6 Dilution The potential Placing would be made on a non pre-emptive basis, primarily to institutional investors only. As the potential Placing does not involve a pre-emptive offer of shares to Existing Shareholders, Existing Shareholders who do not, or are not permitted to, participate in the potential Placing would suffer a dilution of up to 20 per cent. to their interests in the Company (assuming the Maximum Placing Shares are issued under the Placing).
E.7 Expenses charged Not applicable; no expenses would be directly charged to the to the Investor investor by the Company.
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PART 2
RISK FACTORS
Any investment in the Ordinary Shares is subject to a number of risks. Before making any investment decision, prospective investors should carefully consider the factors and risks attaching to an investment in the Ordinary Shares, together with all other information contained in this document including, in particular, the risk factors described below. Some of these risk factors apply to carrying on the Enlarged Group’s business generally, while others are specific to the Group. They are not set out in any order of priority. Additional risks and uncertainties currently unknown to the Company, or that it currently believes to be immaterial for taking investment decisions, may also have an adverse (or materially adverse) effect on the Enlarged Group’s business. If any of or a combination of the following risk factors materialise, the Enlarged Group’s business, financial condition and/or operational performance could be materially adversely affected. In such case, the trading price of the Ordinary Shares may decline and potential investors may lose all or part of their value. An investment in Ordinary Shares is only suitable for investors capable of evaluating the risks and merits of such investment and who have sufficient resources to bear any loss which may result from the investment. Accordingly, prospective investors are recommended to obtain independent financial advice from an adviser authorised under FSMA (or another appropriately authorised independent professional adviser) who specialises in advising upon investments. Investors should consider carefully whether an investment in the Ordinary Shares is suitable for them in light of the information in this document and their personal circumstances.
1. RISKS RELATING TO THE ENLARGED GROUP AND ITS BUSINESS 1.1 The valuation of the Enlarged Group’s properties is inherently subjective and uncertain and is based on assumptions which may prove inaccurate The valuation of the Enlarged Group’s properties is inherently subjective due to the individual nature of each property, its location and the expected future rental revenues from that particular property. As a result, valuations are subject to uncertainty and, in determining market value, valuers are required to make certain assumptions and such assumptions may prove to be inaccurate. Incorrect assumptions or flawed assessments underlying a valuation report could negatively affect the Enlarged Group’s financial condition and potentially inhibit the Enlarged Group’s ability to realise a sale price that reflects the stated valuation. This is particularly so in periods of volatility or when there has been limited real estate transactional evidence against which property valuations can be benchmarked. In addition, incorrect assumptions or flawed assessments underlying a valuation could potentially inhibit the Enlarged Group’s ability to raise finance in the future. Further, if the Enlarged Group acquires properties based on inaccurate valuations, the Enlarged Group’s net assets and results of operations may be materially adversely affected. There can also be no assurance that the valuations of the Enlarged Group’s current and prospective properties will be reflected in the actual transaction prices, even where any such transactions occur shortly after the relevant valuation date, or that the estimated yield and estimated annual rental income will prove to be attainable. In addition, property valuations are dependent on the level of rental income receivable and anticipated to be receivable on that property in the future and, as such, declines in rental income could have an adverse impact on revenue and the value of the Enlarged Group’s properties.
Any of the foregoing factors could have an adverse impact on the Enlarged Group’s business, financial condition and/or results of operations.
1.2 The Enlarged Group may not be able to refinance its borrowings in the longer term The Enlarged Group’s operations are capital intensive and are financed on an asset-specific basis. The Group has a number of asset-specific financings, including the AUK Facility, and also has general corporate borrowings in place to finance its property acquisitions and development activities. There can be no assurance that the Enlarged Group will be able to find lenders in the longer term who are willing to lend on similar terms to those which apply to existing financing arrangements, or at all, upon maturity. An increase in loan to value ratio, for example, as a result of declines in property values associated with the Combined AUK Portfolio or generally, would be
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one factor which could restrict the Enlarged Group’s ability to arrange such financing or refinancing in the longer term. Declines in property values may occur, for example, as a result of prevailing economic conditions stemming from the global economic downturn, decreased demand for commercial and/or government occupied office space, adverse change in retail demand or economic conditions and/or decline in the hotel industry. If, in the longer term, the Enlarged Group is not able to refinance borrowings as they mature and/or the terms of such refinancing are less favourable than the existing terms of borrowing, this may have a material adverse effect on the business, financial condition, results of operations, future prospects of the Enlarged Group, the price of the Ordinary Shares and the Enlarged Group’s ability to pay dividends.
1.3 The Enlarged Group’s cost of finance could increase An increase in the cost, or lack of availability of finance (whether for macroeconomic reasons, such as a lack of liquidity in debt markets (in particular in the relevant UK, German or South African markets) or reasons specific to the Enlarged Group, such as the extent to which it is leveraged and decline in property values, as outlined above), could impact both the ability to progress capital investment opportunities necessary to deliver required rates of return to meet shareholder expectations and the day-to-day financing (or refinancing) requirements of the Enlarged Group in the longer term. Adverse interest rate movements could lead to an increase in the cost of borrowing. Although the Enlarged Group has historically been able to obtain financing on reasonable terms, there is no guarantee that future financing will be available on terms that the Enlarged Group considers acceptable. It is possible in the current lending environment that the terms of any new facilities entered into by the Enlarged Group in the future could be more onerous than the terms of the Enlarged Group’s existing financing facilities.
Any of the foregoing factors may have an adverse impact on the Enlarged Group’s business, financial condition and/or results of operations.
1.4 The Enlarged Group may be subject to increases in operating expenses The Enlarged Group’s operating and other expenses could increase without a corresponding increase in turnover or tenant reimbursements of operating and other costs. Factors which could increase operating and other expenses include: • increases in the cost of financing; • increases in the rate of inflation and currency fluctuation; • increases in the costs of services provided by third party providers; • increases in taxes, tax laws and other statutory charges; • changes in laws, regulations or government or local authority policies (including those relating to health and safety and environmental compliance) which increase the costs of compliance with such laws, regulations or policies; • increases in insurance premiums; • increases in the costs of maintaining properties; and • capital expenditure which may arise as a result of defects affecting the properties which need to be rectified, failure to perform by sub-contractors or increases in maintenance costs.
Such increases could have a material adverse effect on the Enlarged Group’s financial position, capital resources and ability to make distributions at historic levels or any distributions to Shareholders.
1.5 The market for the Enlarged Group’s properties is relatively illiquid The Enlarged Group’s properties, and those in which the Enlarged Group may invest in the future, are relatively illiquid and investors may be reluctant to purchase or sell property in the current or future market. Investor appetite for the Enlarged Group’s property assets may be dampened by a dislocation in the global financial markets and a limited availability of financing, any resulting decrease in the value of the Enlarged Group’s property assets, including on account
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of decreased demand for relevant types of properties (e.g. government occupied office space, which represents approximately seven per cent. of the Enlarged Group’s properties). Investor appetites may also be decreased if demand for commercial properties decreased and/or there was an adverse change in retail economic conditions and/or a decline in the hotel industry. The resulting lack of liquidity in commercial real estate may inhibit the Enlarged Group’s ability to strategically adjust the identity and mix of its property portfolio and may affect the Enlarged Group’s ability to dispose of, or liquidate part of, its portfolio in a timely fashion and at satisfactory prices in response to changes in economic, real estate market or other conditions or to finance its development activity. In the case of an accelerated sale or a sale required for compliance with covenants contained in the Enlarged Group’s financing, or in the event of enforcement of security by a lender under one of the Enlarged Group’s non-recourse financings, there may be a significant shortfall between the carrying value of the property on the Enlarged Group’s consolidated balance sheet and the price achieved on the disposal of such property, and there can be no assurance that the price obtained from such a sale would cover the book value of the property sold.
Periods of reduced liquidity in the capital markets may also mean that it may be difficult to achieve the sale of property assets at prices reflecting the Enlarged Group’s property valuations. Failure to achieve successful sales of properties in the future at acceptable prices could have an adverse impact on the Enlarged Group’s business, financial condition and/or results of operations.
1.6 The Enlarged Group is reliant on the performance and retention of key personnel and may not be able to retain key members of the management team The Company is internally managed and therefore relies on its management and their experience, skill and judgement, in identifying, selecting and negotiating the acquisition of suitable investment opportunities. The Company also relies on the Directors, and in particular, the Executive Directors, to manage the day-to-day affairs of the Company. There can be no assurance as to the continued service of these individuals as directors and employees of the Company. The departure of any of these individuals from the Company without adequate replacement may have a material adverse effect on the Company’s business prospects and results of operations. The Company is also reliant on its senior asset managers and senior finance staff. The departure of key personnel may require an extended period in which to find suitable replacements and may have a temporary adverse effect on the business.
1.7 The Company may incur losses as a result of fluctuations in the foreign currency exchange rates between the Pound and other foreign currencies for which it has not, or not effectively, hedged its risk Revenues in Euros are earned from the Enlarged Group’s European business. The Enlarged Group is, therefore subject to currency fluctuations on translating revenues and costs from those foreign currencies to Sterling. This exposure is hedged by matching the value of the foreign assets with borrowings in foreign currencies where practicable. To the extent that the Enlarged Group does not hedge its exposure to foreign currency exchange rate fluctuations, or to the extent that such hedging is inaccurate or otherwise ineffective, such exposure could have a material adverse effect on the Enlarged Group’s business, financial condition, results of operations, future prospects or the price of the Ordinary Shares.
1.8 If the Enlarged Group suffers uninsured losses, it may lose the value of the damaged asset altogether The Company believes it maintains insurance against all risks commonly insured against by persons carrying on similar businesses to its business and believes it insures against all risks against which it might reasonably be expected to insure its assets and property in the particular circumstances of the business carried on by it. Inability to obtain such insurance on comparable terms in the future may result in a material adverse effect on the business of the Enlarged Group. For example, the availability or cost of such insurance may be affected by an act or acts of terrorism. In addition, there can be no guarantee that current insurance coverage will not be cancelled or become unavailable to the Enlarged Group on economically reasonable terms. If the Enlarged Group were to suffer damage to an asset for which it was uninsured, it may lose the
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value of the damaged asset altogether, which could have a material adverse effect on the Enlarged Group’s business, financial condition, results of operations, future prospects or the price of the Ordinary Shares.
There is a risk of accidents involving the public at hotels, shopping centres and other premises owned by the Enlarged Group. Should an accident attract publicity or be of a size and/or nature that is not adequately covered by insurance, the resulting publicity and costs could have an adverse impact on the Enlarged Group’s reputation, business, financial condition and results of operation. In such instance, the Enlarged Group’s ability to put in place public liability insurance cover in the future may also be adversely affected.
1.9 The Enlarged Group’s debt facilities contain restrictions on the business of the Enlarged Group At 31 August 2015, the Enlarged Group had £540.9 million of net external debt outstanding. Covenants contained in the Enlarged Group’s debt facilities may restrict its ability to engage in certain businesses or to implement certain business strategies. For example, the Enlarged Group may be required to seek the relevant lenders’ consent before incurring additional indebtedness or creating further security interests over, or disposing of all or a substantial part of, its property assets. If such consent is withheld, this may hinder the Enlarged Group’s ability to plan for or react to market conditions or otherwise restrict the Enlarged Group’s business plans and adversely affect the Enlarged Group’s ability to finance future strategic acquisitions, investments and development projects.
1.10 A non-renewal by a major tenant could result in a significant loss of letting income, void costs, a reduction in asset value, increased capital expenditure, unoccupied property liabilities and increased bad debts Non-renewal, in particular by one of the Enlarged Group’s principal tenants (such as Redefine BDL, The First Secretary of State (UK Government), Tesco, VBG or Edeka), could result in a loss of rental income, void costs, an increase in bad debts, and decrease the value of the relevant properties. In the event of non-renewal by tenants, the Enlarged Group may be unable to find new tenants quickly or at all or at rents equal to those under the expiring leases or on equally or more favourable terms. Existing and potential tenants may seek to reduce their rental payments, and/or reduce the length of time before they can break, and/or increase their rent-free periods and/or demand a higher grade of fit-out. While properties remain vacant they may incur empty rates liabilities. In the event that any of the above occurs, there could be a material adverse effect on the Enlarged Group’s business, results of operations, financial condition, future prospects and/or the price of the Ordinary Shares.
1.11 Reputational risk The Company may also be subject to reputational risk from adverse publicity associated with particular properties or tenants. The Enlarged Group relies on its reputation for attracting new business partners, investors and maintaining credibility with key stakeholders. For example, relationships with joint venture partners such as Redefine Properties and other professional organisations such as Savills (UK) Limited are important to the delivery of the Enlarged Group’s business strategy. Any reputational damage suffered by the Enlarged Group could have an adverse effect on the Enlarged Group’s business prospects and results of operations.
1.12 The Enlarged Group may not be able to maintain or increase the rental rates for its properties, which may, in the longer term, have a material adverse impact on the value of the Enlarged Group’s properties, as well as the Enlarged Group’s turnover The value of the Enlarged Group’s property portfolio, and its turnover, will be dependent on the rental rates that can be achieved from the properties. The ability of the Enlarged Group to maintain or increase the rental rates for those properties generally may be adversely affected by general economic conditions in the UK and Germany. In addition, there may be other factors that depress rents or restrict the Enlarged Group’s ability to increase rental rates, including local factors relating to particular properties or locations, such as increased competition. Any failure to maintain or increase the rental rates for the properties in the Enlarged Group’s portfolio generally may have a material adverse effect on the Company’s profitability, net asset value, the price of
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the Ordinary Shares and the Enlarged Group’s ability to meet interest and capital repayments on any debt facilities.
1.13 The difficult macroeconomic and property market conditions in many of the markets in which the Enlarged Group operates may have a negative impact on its business The Enlarged Group operates in a highly competitive market for investment opportunities. Heightened competition in the real estate investment market in the countries in which the Enlarged Group invests may reduce investment opportunities and increase prices of real estate. Some competitors and potential competitors may have advantages over the Company, including greater name recognition, longer operating histories, pre-existing relationships with current or potential tenants, greater flexibility as to movement of clients between properties, greater financial, marketing and other resources and better access to capital, which would allow them to respond more quickly to new or changing opportunities.
The Enlarged Group competes for tenants for its properties with real estate investment funds, developers, owners and operators of commercial real estate businesses in the regions where the Enlarged Group’s properties are located. If competitors offer property at rental rates below the rates charged to the Enlarged Group’s tenants or below market rates, the Enlarged Group may lose existing tenants and be unable to attract new tenants. If, as a result of competition or lack of demand, the Enlarged Group is required to reduce rental rates or to offer more substantial rent abatements, tenant improvements, early termination rights or below-market renewal options to retain existing or to attract new tenants, the Enlarged Group’s cash flow and operating results could be adversely affected.
The Enlarged Group’s net asset value may be reduced by downward property valuations, which may occur, for example, as a result of prevailing economic conditions allowing for a tapering of global government asset purchase programmes, decreased demand for commercial and/or government occupied office space, adverse change in retail economic conditions and/or decline in the hotel industry. This may affect the Enlarged Group’s ability in the longer term to refinance debt when required or to pay dividends.
1.14 The Company has increased its exposure to the UK as a result of the Acquisition. As such, any future property market recession or significant increase in interest rates in the UK in a short period of time could materially adversely affect the value of the Enlarged Group’s real estate assets. If the Placing proceeds and if the Company is not required to implement the Disposal, following completion of the acquisition of the Tranche 2 Properties, UK real estate is expected to account for approximately 80 per cent. of the market value of the Enlarged Group’s property portfolio as at 1 March 2016.
The market value of the Enlarged Group’s UK real estate assets may be adversely affected by a number of the following factors: • the overall economic conditions in the UK such as growth or contraction in gross domestic product, employment trends, consumer sentiment and the level of inflation and interest rates; • local real estate conditions, such as the level of demand for and supply of commercial and retail space; and • external factors including major world events such as war or acts of nature such as floods.
Significant reductions in the value of the Enlarged Group’s UK real estate assets could have a material adverse effect on the business prospects and results of operations of the Enlarged Group.
1.15 Benefits in relation to the Acquisition set out in this document may not be achieved or the AUK Portfolio may not perform as expected There is a risk that the benefits of the Acquisition, such as (i) exposure to a high quality diversified UK portfolio where the Company expects to capture rental growth as the UK economy continues to improve, (ii) enhancing the Company’s ability to sell assets and re-invest sale proceeds in
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other properties and (iii) further enhancing the overall yield on the Enlarged Group’s portfolio, fail to materialise, that they are materially less than have been estimated, take longer or cost more to achieve, or that the AUK Portfolio will fail to perform as expected. If the Enlarged Group is unable to realise the expected benefits or these expected benefits take longer to achieve or the AUK Portfolio fails to perform as expected, this could have a significant impact on the business prospects and results of operations of the Enlarged Group.
1.16 Construction of the Enlarged Group’s developments may be subject to delays or disruptions that are outside of the Enlarged Group’s control The Enlarged Group will depend on skilled third party contractors for the timely construction of its developments in accordance with applicable standards of quality and safety. The process of construction may be delayed or disrupted by a number of factors, such as inclement weather or acts of nature, industrial accidents and defective building methods or materials. Any of these factors, alone or in combination, could delay or disrupt the construction process by halting the construction process or damaging materials or the development itself. In addition, the costs of construction depend primarily on the costs of materials and labour, which may be subject to significant unforeseen increases. In the event that a contractor fails to deliver and/or ceases to be financially viable, the timetable of the relevant development or scheme may be delayed, the Enlarged Group may need to provide additional resources to the development (financial or otherwise) and/or may incur financial liabilities. Any of these factors could have a material adverse effect on the Enlarged Group’s business prospects and results of operations.
1.17 The Enlarged Group’s development projects will be subject to the hazards and risks normally associated with the construction and development of commercial real estate The Enlarged Group’s development projects will be subject to the hazards and risks normally associated with the construction and development of commercial real estate, including unforeseen capital expenditure, personal injury and property damage. The Enlarged Group has approved health and safety policies and procedures applicable to all its locations. In addition, the Enlarged Group has public liability insurance in place, which the Directors consider provides an adequate level of protection against third party claims. Should an accident attract publicity or be of a size or nature that is not adequately covered by insurance, the Enlarged Group could face significant costs, and the Enlarged Group’s ability to put in place public liability insurance cover in the future may also be adversely affected.
The occurrence of any of these events could result in significantly increased operating costs, reputational damage, fines, legal fees, or criminal prosecution of the companies within the Enlarged Group, and their directors or management, all of which could have a material adverse effect on the Enlarged Group’s business prospects and results of operations.
1.18 External events beyond the control of the Group may have a negative impact on demand at the Group’s hotels and/or shopping centres and therefore demand for, and the value of, the Group’s properties Demand at the Group’s hotels is dependent on the travel industry and demand at the Group’s shopping centres is affected by customer footfall. Any declines in, or disruptions to, the travel industry or declines in customer footfall at the Group’s shopping centres may therefore adversely affect demand for, and the value of, the Group’s properties. For example, the occurrence of events such as adverse weather, an outbreak of an infectious disease, such as avian or swine flu, or any other serious public health concern, could result in a reduction of demand at the Group’s hotels and/or customer footfall at the Group’s shopping centres. In addition, accidents, system failures or other similar external events could raise questions as to the safety and security of the Group’s hotels and/or shopping centres and result in reputational damage and/or impact the Group’s business, financial condition and/or results of operations.
Furthermore, terrorist attacks or war could damage infrastructure or associated transport infrastructure or otherwise inhibit or prevent access to the Group’s hotels and/or shopping centres or harm the demand for, and the value of, the Group’s properties. Terrorist attacks could also discourage consumers from travelling to, and staying in, places where the Group’s hotels are located or shopping in public places including the Group’s shopping centres. While the Group does have insurance in place in respect of certain risks, it is (or may become) not economically
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viable to insure against all risks (including certain of the risks specified above). Furthermore, any such insurance cover that is in place may not be sufficient to cover the full extent of any loss or damage suffered.
Any of the foregoing could have an adverse impact on the Group’s business, financial condition and/or results of operations.
1.19 Jointly controlled entities The Company participates in a number of jointly controlled entities. For example, the Company acquired a 50 per cent. stake in a €156.8 million German retail portfolio in January 2015 through a joint venture with Redefine Properties, the Company’s largest shareholder. The Enlarged Group does not have full control over such investments and so may be prevented from achieving its objectives without the co-operation of its joint venture partners.
The Enlarged Group’s jointly controlled entities involve the shared control of underlying assets with business partners, from whom approval must be sought for major decisions and in particular for the sale of a joint venture’s underlying assets. These business partners may have economic or business interests that are inconsistent with the objectives of the Enlarged Group. If such approval is withheld, it may have a material adverse effect on the business, results of operations, financial condition and/or prospects of the Enlarged Group.
1.20 Regulatory change may affect the Enlarged Group Legal or regulatory change may affect the Enlarged Group and impose potential limits on the Enlarged Group’s flexibility in implementing its strategy. Any change to landlord and tenant, planning, trust, tax (including stamp duty and stamp duty land tax) or other laws and regulations relating to the UK and European commercial property market may have an adverse effect on the capital value and/or the rental income of the Enlarged Group’s property portfolio.
1.21 The Enlarged Group may incur significant costs in complying with laws and regulations A variety of laws and regulations of local, regional, national and European Union authorities, including planning, zoning, environmental, health and safety, tax and other laws and regulations must be complied with by the Enlarged Group. If the Enlarged Group fails to comply with these laws and regulations, it may have to pay penalties or private damage awards. In addition, changes in existing laws or regulations, or their interpretation or enforcement, could require the Enlarged Group to incur additional costs in complying with those laws, alter its investment strategy, operations or accounting and reporting systems, leading to additional costs or loss of revenue, which could materially adversely affect the Enlarged Group’s business, results of operations and financial condition.
1.22 Risks associated with the tax structuring of investments The Company currently structures its property investments in each relevant country in a manner which, based on professional advice, seeks to optimise their respective tax position in those countries. The structures adopted are based on relevant laws and regulations in each relevant country and the interpretation of those laws and regulations.
To the extent that the laws and regulations or interpretations of those laws and regulations change, or to the extent that the professional advice obtained is incorrect, the structures adopted may not be tax efficient and consequential tax charges could be significant and have a material adverse effect on the financial condition and results of operations of the Enlarged Group.
1.23 Ability to pay dividends under the Isle of Man company law Under the Companies Act 2006, subject to the provisions of its memorandum and articles of association, a company may make distributions (including cash dividends) provided that it satisfies the statutory solvency test prescribed by section 49 of the Companies Act 2006. The solvency test is satisfied if a company is able to pay its debts as they become due in the normal course of the company’s business and the value of the company’s assets exceeds the value of its liabilities. The Company’s ability to pay dividends is affected by its profitability and there can
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be no assurance that the Company will be able to pay a dividend in the future or as to the amount of any such dividend, if paid.
1.24 Because the Company is a holding company and substantially all of its operations are conducted through its subsidiaries, its ability to pay dividends on the Ordinary Shares depends on its ability to obtain cash dividends or other cash payments or to obtain loans from such entities The Enlarged Group will conduct substantially all of its operations through its subsidiaries, and such entities will generate substantially all of its operating income and cash flow. Because the Company has no direct operations or significant assets other than the capital stock of these entities, it relies on those subsidiaries for cash dividends, investment income, financing proceeds and other cash flows to pay dividends, if any, on the Ordinary Shares and, in the long term, to pay other obligations at the holding company level that may arise from time to time.
The ability of such entities to make payments to the Company depends largely on their financial condition and ability to generate profits. In addition, because the Enlarged Group’s subsidiaries are separate and distinct legal entities, they will have no obligation to pay any dividends or to lend or advance the Company funds and may be restricted from doing so by contract, including other financing arrangements, charter provisions, other shareholders or the applicable laws and regulations of the various countries in which they operate. Similarly, because of its holding company structure, claims of the creditors of the Enlarged Group’s subsidiaries, including trade creditors, banks and other lenders, effectively have priority over any claims that the Company may have with respect to the assets of these entities.
There can be no assurance that, in the long term, the Enlarged Group’s subsidiaries will generate sufficient profits and cash flows, or otherwise prove willing or able, to pay dividends or lend or advance to the Company sufficient funds to enable it to meet its obligations and pay interest, expenses and dividends, if any, on the Ordinary Shares. The inability of one or more of these entities to pay dividends or lend or advance the Company funds could, in the long term, have a material adverse effect on its business, financial condition and results of operations.
2. RISKS RELATING TO THE PLACING AND THE RESOLUTIONS NOT BEING PASSED BY SHAREHOLDERS
2.1 If the Resolutions are not passed by Shareholders at the Extraordinary General Meeting or prevailing market conditions mean that the Board (in consultation with the Bookrunners) elects not to proceed with the Placing or if, inter alia, the Placing fails to raise gross proceeds of at least £100.0 million, the Placing will not proceed and the Company will utilise the RPL Loan to complete the acquisition of the Tranche 2 Properties, which could result in the Conversion and the Disposal and the Group not having full control of the Combined AUK Portfolio If the Resolutions are not passed by Shareholders at the Extraordinary General Meeting or prevailing market conditions mean that the Board (in consultation with the Bookrunners) elects not to proceed with the Placing or if, inter alia, the Placing fails to raise gross proceeds of at least £100.0 million, the Placing will not proceed and the Company will utilise the RPL Loan instead to complete the acquisition of the Tranche 2 Properties. In such circumstances, if the Company elects not to raise funds through a debt or equity fundraising prior to the repayment date of the RPL Loan, the Company may elect to implement the Conversion and the Disposal (or, in the absence of election by the date being three months following drawdown, it will automatically convert). This would result in the Company being in a 50:50 joint venture with Redefine Properties in respect of the Combined AUK Portfolio. Consequently, the Directors would not be able to exclusively direct the strategy and operating decisions of Redefine AUK in the same manner as it would with full control. In particular, material decisions relating to the Combined AUK Portfolio, such as a planned operational change, any acquisition, disposal or development, or the refinancing or repayment of debt, would require the consent of Redefine Properties, which may restrict the Enlarged Group’s ability to proceed with such a decision. This lack of control may decrease the value of the assets held by Redefine AUK. Conflict with Redefine Properties may lead to deadlock and result in the Enlarged Group being unable to pursue its desired strategy or exit the joint venture other than on disadvantageous terms. In addition, under the terms of the
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RPL JV Agreement, neither the Company nor Redefine Properties is capable of forcing the other to sell its shareholding in Redefine AUK in the event of a deadlock so any such deadlock could not be resolved except by agreement between the Company and Redefine Properties.
2.2 If any of the South African Placees do not meet their settlement obligations the amount raised may be less than announced If the Placing proceeds, the Joint Bookrunners will be underwriting credit risk on the Placees under the UK Placing (other than Redefine Properties). Java Capital will not be underwriting credit risk on the Placees under the South African Placing. Accordingly, to the extent that South African Placees do not take up and pay for their allocation in full, the amount raised by the Company may be less than the amount announced as having been allocated. However, the Placing will be conditional on the gross proceeds received by the Company being £100 million or more.
3. RISK RELATING TO TAXATION 3.1 The Enlarged Group may not be able to maintain its UK-REIT status It is the expectation of the Directors that the Company will continue to fulfil the relevant ‘‘qualifying conditions’’ for UK-REIT status. The basis of taxation of any Shareholder’s shareholding in the Company will differ or change fundamentally if the Group fails or ceases to maintain its UK-REIT status.
The requirements for maintaining UK-REIT status are complex. While minor breaches of the UK- REIT Regime conditions and requirements may result only in specific additional amounts of tax being payable or will not be punished if remedied within a given period of time (provided that the regime is not breached more than a certain number of times), the Company cannot guarantee that it will maintain continued compliance with all of the UK-REIT conditions. There is a risk that the UK-REIT Regime may cease to apply in some circumstances. HMRC may require the Company to exit the UK-REIT Regime if: (a) it regards a breach of the conditions relating to the UK-REIT Regime (including in relation to the Qualifying Property Rental Business) or an attempt to obtain a tax advantage as sufficiently serious; (b) if the Enlarged Group has committed a certain number of breaches in a specified period; or (c) if HMRC has given the Enlarged Group at least two notices in relation to the obtaining of a tax advantage within a 10-year period.
In addition, if the conditions for group UK-REIT status relating to the share capital of the Company or the prohibition on entering into certain prohibited loans are breached or the Company ceases to be UK tax resident, becomes dual tax resident or an open-ended investment company, the Enlarged Group could lose UK-REIT status. The Enlarged Group could therefore lose its status as a UK-REIT as a result of actions by third parties, for example, in the event of a successful takeover by a company that is not a UK-REIT or due to a breach of the close company condition if it is unable to remedy the breach within a specified timeframe. If the Enlarged Group were to be required to leave the UK-REIT Regime within 10 years of joining, HMRC has wide powers to direct how it would be taxed including in relation to the date on which the Company would be treated as exiting the UK-REIT Regime which could have a material impact on the financial condition of the Company and, as a result, Shareholder returns. In addition, incurring a tax liability could cause the Enlarged Group to have a requirement to borrow funds, liquidate some of its assets or take other steps that could negatively affect its operating results. If the Group fails to remain qualified as a UK-REIT, its rental income and capital gains will be subject to UK taxation. A UK-REIT may become subject to an additional tax charge if it pays a dividend to, or in respect of, a Substantial Shareholder. This additional tax charge will not be incurred if the UK-REIT has taken reasonable steps to avoid paying dividends to a Substantial Shareholder. Therefore, the Articles contain provisions designed to avoid the situation where dividends may become payable to a Substantial Shareholder and these provisions are summarised at paragraph 17.7 of Part 15 (Additional information) of this document. These provisions provide the Directors with powers to
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identify Substantial Shareholders and to prohibit the payment of dividends on Ordinary Shares that form part of a Substantial Shareholding, unless certain conditions are met. The Articles also allow the Board to require the disposal of Ordinary Shares forming part of a Substantial Shareholding in certain circumstances where the Substantial Shareholder has failed to comply with the above provisions.
3.2 Changes in taxation, law and regulation The levels of, and reliefs from, taxation may change, adversely affecting the financial prospects of the Enlarged Group and/or the returns to Shareholders.
There may be changes in taxation, environmental, landlord and tenant and planning laws, and regulations may be introduced in the UK, EU and/or the Isle of Man, which may have an adverse effect on the Enlarged Group, its investments in the affected jurisdiction (if any) and/or the position of Shareholders and may reduce returns to Shareholders. Specifically, any change to the laws and regulations relating to the commercial property market in any country in which the Enlarged Group invests, now or in the future, may have an adverse effect on the capital value of its property assets and/or the rental income arising from its property assets and other investments and may increase costs or otherwise limit the amount of income available for distribution by the Enlarged Group.
3.3 Changes in tax laws or their interpretation could affect the financial condition, prospects and/or the level of dividends that the Enlarged Group is able to pay The nature and amount of tax which members of the Enlarged Group expect to pay and the reliefs expected to be available to any member of the Enlarged Group are each dependent upon a number of assumptions, any one of which may change and which would therefore affect the nature and amount of tax payable and reliefs available. In particular, the nature and amount of tax payable is dependent on the availability of relief under tax treaties in a number of jurisdictions and is subject to changes to the tax laws or practice in any other tax jurisdiction affecting any member of the Enlarged Group. Any change in the terms of tax treaties or any changes in tax law, interpretation or practice could increase the amount of tax payable by members of the Enlarged Group and could affect the value of the investments held by the Enlarged Group or affect its ability to achieve its investment objective and alter the post-tax returns to Shareholders. The level of dividends the Enlarged Group is able to pay would also be likely to be adversely affected.
The Company invests in various jurisdictions through subsidiaries, not all of which are tax resident in the same jurisdiction as the investments they hold. It is intended that no member of the Enlarged Group should have any permanent establishment outside the country in which it is tax resident. If any member of the Enlarged Group were treated as having a permanent establishment, or as otherwise having a taxable presence, in any other country, income attributable to or effectively connected with such permanent establishment or taxable presence may be subject to tax in that other jurisdiction.
The holding company structure for certain of the Enlarged Group’s real estate interests means that the tax base cost of certain of the Enlarged Group’s properties will be lower than their cost, which may have an adverse effect on the value realised upon disposal of those properties.
Some of the Enlarged Group’s real estate was acquired and some in the future may be acquired in the form of property holding companies. If the Enlarged Group were to dispose of the direct real estate interests held by those companies, rather than the companies themselves, the tax base cost for calculation of the capital gains generated on disposal of the real estate may well be lower than the tax base cost of the property holding company, therefore increasing the capital gains tax liability for the Enlarged Group on the disposal. There may be situations where, in order to dispose of a property, the Enlarged Group is required to sell the underlying real estate rather than the holding company, thereby increasing its capital gains tax exposure.
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4. RISKS RELATED TO THE ORDINARY SHARES 4.1 Redefine Properties owns a significant percentage of the Ordinary Shares and, if the potential Placing is completed, its percentage shareholding may increase to up to 35.79 per cent. Redefine Properties is currently interested in 30.07 per cent. of the issued share capital of the Company (or 30.80 per cent. when aggregated with the other members of the Concert Party) and, following completion of the potential Placing, its percentage shareholding may increase to up to 35.79 per cent. (or 36.45 per cent. when aggregated with the other members of the Concert Party) if, for illustrative purposes, (a) the Placing Price is set at the Minimum Placing Price, (b) Redefine Properties subscribes for the RPL Equity Commitment in full, (c) the other Placees subscribe for Placing Shares for an aggregate value of £30.0 million and (d) no further issues of Ordinary Shares occur between publication of this document and Admission. The concentration of ownership may affect the market price and liquidity of the Ordinary Shares. In addition, Redefine Properties may have the ability to control the outcome of matters requiring Shareholder approval, including appointments to the Board and significant corporate transactions, such as an acquisition or other change of control of the Enlarged Group.
On 14 November 2014, the Company entered into the Relationship Agreement with, inter alia, Redefine Properties to regulate aspects of the ongoing relationship between the Company and Redefine Properties. The Directors believe that the terms of the Relationship Agreement enable the Enlarged Group to carry on an independent business as its main activity. However, the interests of Redefine Properties may not be the same as the interests of minority shareholders in the Company and Redefine Properties may make decisions that may have a material adverse impact on an investment in the Ordinary Shares and on the business operations of the Enlarged Group.
4.2 The market price of Ordinary Shares could be volatile and subject to significant fluctuations due to a variety of factors The value of an investment in Redefine International may go down as well as up. The market price of Ordinary Shares could be volatile and subject to significant fluctuations due to a variety of factors including changes in sentiment in the market regarding the Ordinary Shares (or securities similar to them), any regulatory changes affecting the Enlarged Group’s operations, variations in its operating results, business developments or its competitors, the operating and share price performance of other companies in the industries and markets in which it operates, or speculation about the Enlarged Group’s business in the press, media or investment community. Stock markets may experience significant price and volume fluctuations which affect the market prices for securities, including the Ordinary Shares, and which may be unrelated to the Enlarged Group’s operating performance or prospects. Furthermore, the Enlarged Group’s operating results and prospects from time to time may be below the expectations of market analysts and investors.
4.3 No pre-emptive offer of shares to Existing Shareholders, resulting in dilution As the Placing does not involve a pre-emptive offer of shares to Existing Shareholders but will instead be an institutional placing in the UK and South Africa, Existing Shareholders who do not or are unable to participate in the potential Placing will have their proportionate ownership and voting interests in Redefine International reduced and the percentage that their Ordinary Shares will represent of the total issued share capital of Redefine International will be reduced accordingly.
Other than pursuant to the potential Placing or drawdown on the RPL Loan if the Placing does not proceed, Redefine International has no current plans for an offering of shares apart from possible offerings in relation to employee share plans. However, it is possible that Redefine International may decide to offer additional shares in the future either to raise capital or for other purposes. If Shareholders did not take up such offer of shares or were not eligible to participate in such offering, their proportionate ownership and voting interests in Redefine International would be reduced and the percentage that their Ordinary Shares would represent of the total share capital of Redefine International would be reduced accordingly. An additional offering, or
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significant sales of shares by major shareholders, could have a material adverse effect on the market price of Ordinary Shares as a whole.
4.4 Overseas Shareholders may be subject to exchange rate risks The potential Placing Shares will be priced in Pounds Sterling and the Placing Shares to be held on the UK share register will be quoted and traded in Pounds Sterling. The potential Placing Shares to be held on the SA share register will be quoted and traded in Rand and this would expose shareholders on the SA share register to exchange rate risks. In addition, any dividends Redefine International may pay will be declared and paid in Pounds Sterling. Accordingly, holders of Ordinary Shares resident outside the UK are subject to risks arising from adverse movements in the value of their local currencies against the Pound, which may reduce the value of the Placing Shares, as well as that of any dividends paid.
4.5 Admission of the potential Placing Shares may not occur when expected If the Placing proceeds, application would be made for Admission of the potential Placing Shares. Admission would be subject to the approval (subject to satisfaction of any conditions to which such approval is subject) of the UK Listing Authority and the JSE and would become effective as soon as a dealing notice had been issued by the UK Listing Authority, the London Stock Exchange had acknowledged that the Placing Shares would be admitted to trading and the JSE had approved the issue of the Placing Shares. There could be no guarantee that any conditions to which Admission is subject would be met, that the UK Listing Authority would issue a dealing notice or that the JSE would approve the issue of the Placing Shares. See the “Expected Timetable of Principal Events” on page 36 of this document for further information on the expected dates of these events.
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PART 3
IMPORTANT INFORMATION
1. To vote on the Resolutions Shareholders on the UK share register Whether or not you plan to attend the Extraordinary General Meeting in person (which is to be held at 2nd Floor, 30 Charles II Street, London SW1Y 4AE at 9.30 a.m. (London time) on 15 February 2016), please either:
(a) complete a Form of Proxy in accordance with the instructions printed on it and return it so as to be received by no later than 10.00 a.m. (London time) on 12 February 2016;
(b) submit your proxy electronically at www.capitashareportal.com, subject to the terms and conditions shown on the website, by no later than 10.00 a.m. (London time) on 12 February 2016; or
(c) if you hold Ordinary Shares in CREST and wish to appoint a proxy by completing and transmitting a CREST Proxy Instruction, ensure it is received by the Company’s agent, Capita Asset Services (whose CREST ID is RA10), by no later than 10.00 a.m. (London time) on 12 February 2016.
The completion and return of the completed Form of Proxy, electronic submission of your proxy, or transmission of a CREST Proxy Instruction will not prevent you from attending the Extraordinary General Meeting and voting in person (in substitution for your proxy vote) if you so wish and are so entitled.
Shareholders on the SA share register If you hold Dematerialised Shares on the SA share register and do not have “own name” registration you should:
(a) not complete the Form of Proxy; and
(b) contact your CSDP or broker and furnish your CSDP or broker with your voting instructions in the manner and by the cut-off time stipulated by your CSDP or broker in terms of the custody agreement between you and your CSDP or broker.
If you hold your Ordinary Shares in certificated form on the SA share register, or if you have “own name” Dematerialised Shares, whether or not you plan to attend the Extraordinary General Meeting, please complete a Form of Proxy in accordance with the instructions printed on it and return it so as to be received by no later than 12.00 p.m. (South African time) on 12 February 2016 by Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, South Africa or posted to PO Box 61051, Marshalltown, 2107, South Africa, or faxed to fax number +27(11) 688 5238, or emailed to [email protected].
A summary of the action to be taken by the Shareholders is set out in Part 7 (Letter from the Chairman of Redefine International P.L.C.) and Part 18 (Notice of Extraordinary General Meeting) of this document.
2. Presentation of financial information In this document, the terms “Group” and “the Company” refer to the Company and its consolidated subsidiaries. Subsidiaries are consolidated from the date on which control is transferred to the relevant group and cease to be consolidated from the date on which control is transferred from the Group. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights, or by way of contractual agreement.
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Unless otherwise indicated, financial information in this document has been prepared on the basis set out in Note 2 of the consolidated financial statements of the Group for the year ended 31 August 2015 in Part 11 (Historical financial information relating to the Group) of this document.
The audited consolidated financial information contained in Part 11 (Historical financial information relating to the Group) with respect to the Company for the years ended 31 August 2015, 31 August 2014 and 31 August 2013 has been prepared in accordance with IFRS. Unless otherwise indicated, financial information set out below has been extracted without material adjustment from the financial information incorporated by reference in Part 11 (Historical financial information relating to the Group).
The non-financial operating data included in this document has been extracted without material adjustment from the management records of the Group and is unaudited.
Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables contained in this document may not conform exactly to the total figure for that column or row.
3. Currencies In this document references to “Australian Dollar” or “AUD” are to the lawful currency of the Commonwealth of Australia, references to “Euro”, “EUR” or “€” are to the single currency of those relevant adopting member states of the European Union, references to “Pounds Sterling”, “GBP”, “£”, “pence” or “p” are to the lawful currency of the United Kingdom, references to Manx pounds are to the lawful currency of the Isle of Man, references to “Swiss Franc” or “CHF” are to the lawful currency of the Swiss Confederation, and references to “Rand”, “R” or “ZAR” are to the lawful currency of the Republic of South Africa.
Unless otherwise indicated, the financial information contained in this document has been expressed in Pounds Sterling. The functional currency of the Company is Pounds Sterling, as is the reporting currency of the Group. Transactions not already measured in Pounds Sterling have been translated into Pounds Sterling in accordance with the relevant provisions of IAS 21. On consolidation, income statements of subsidiaries for which Pounds Sterling are not the functional currency are translated into Pounds Sterling, the reporting currency for the Group, at average rates of exchange. Balance sheet items are translated into Pounds Sterling at period-end exchange rates. These translations should not be construed as representations that the relevant currency could be converted into Pounds Sterling at the rate indicated, at any other rate or at all.
Indicative exchange rates of Pounds Sterling against the Euro, the Australian Dollar and the Swiss Franc comprising the average rate used for income statements and the specific date used for balance sheet information are shown below:
Period Period-end Average Exchange rates of Euro against one Pound Sterling as used by the Company are: Year ended 31 August 2015 1.3697 1.3464 Latest Practicable Date 1.3124 – Exchange rates of Australian Dollar against one Pound Sterling as used by the Company are: Year ended 31 August 2015 2.1556 1.9625 Exchange rates of Swiss Franc against one Pound Sterling as used by the Company are: Year ended 31 August 2015 1.4840 1.4819 Exchange rates of Rand against one Pound Sterling as used by the Company are: Year ended 31 August 2015 20.3525 18.3270 Latest Practicable Date 23.3631 –
In addition to these translations (the basis of which is described above), the basis of translation of foreign currency transactions and amounts contained in the financial information is set out in Part 11 (Historical financial information relating to the Group) of this document.
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4. Forward-looking statements This document includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “plans”, “anticipates”, “targets”, “aims”, “continues”, “expects”, “intends”, “may”, “will”, “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include statements regarding the Enlarged Group’s and/or the Directors’ intentions, beliefs or current expectations concerning, among other things, the Enlarged Group’s results, operations, financial condition, prospects, growth strategies and the markets in which the Enlarged Group operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including without limitation: conditions in the markets, the market position of the Enlarged Group, earnings, financial position, return on capital, anticipated investments and capital expenditure, changing business or other market conditions and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the events described herein and the Enlarged Group. Forward-looking statements contained in this document based on these trends or activities should not be taken as a representation that such trends or activities will continue in the future. None of the statements made in any way obviates the requirements of the Enlarged Group and/or the Directors to comply with all applicable legal or regulatory requirements including, without limitation, the UK Prospectus Rules, the UK Disclosure and Transparency Rules, UK Listing Rules and the JSE Listings Requirements.
These forward-looking statements are further qualified by risk factors disclosed in this document that could cause actual results to differ materially from those in the forward-looking statements. See Part 2 of this document entitled “Risk Factors”.
These forward-looking statements speak only as at the date of this document. Except as required by the UK Listing Rules, the UK Disclosure and Transparency Rules, the UK Prospectus Rules and any applicable law, the Company and/or the Directors, do not have any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, further events or otherwise. Except as required by the UK Listing Rules, the UK Disclosure and Transparency Rules, the UK Prospectus Rules, the JSE Listings Requirements and any applicable law, the Company and the Directors expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s and/or the Directors’ expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. In light of these risks, uncertainties and assumptions, the forward- looking events discussed in this document might not occur. Investors should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision. Investors and Shareholders should note that the contents of these paragraphs relating to forward looking statements are not intended to qualify the statements made as to the sufficiency of working capital in this document.
5. Notice to investors in the European Economic Area In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’), no Placing Shares have been offered or will be offered pursuant to the Placing to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Placing Shares which has been approved by the competent authority in that Relevant Member State, or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that offers of Placing Shares to the public may be made at any time under the following exemptions under the Prospectus Directive, if they are implemented in that Relevant Member State: (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive; (b) to fewer than 100, or, if the Relevant Member State has implemented the relevant provision of Directive 2010/73/EU (the ‘‘2010 PD Amending Directive’’), 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) in such Relevant Member State; or (c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
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provided that no such offer of Placing Shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State and each person who initially acquires any Placing Shares or to whom any offer is made under the Placing will be deemed to have represented, acknowledged and agreed that it is a ‘‘qualified investor’’ within the meaning of Article 2(1)(c) of the Prospectus Directive.
For the purposes of this provision, the expression an ‘‘offer to the public’’ in relation to any offer of Placing Shares in any Relevant Member State means a communication in any form and by any means presenting sufficient information on the terms of the offer and any Placing Shares to be offered so as to enable an investor to decide to purchase or subscribe for the Placing Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC and the amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State and includes any relevant implementing measure in each Relevant Member State.
The distribution of this prospectus in other jurisdictions may be restricted by law and therefore persons into whose possession this prospectus comes should inform themselves about and observe any such restrictions.
6. Notice to overseas investors
NOTICE TO INVESTORS IN GIBRALTAR The Company is not a “collective investment scheme” as defined under the Financial Services (Collective Investment Schemes) Act 2005 of Gibraltar. This document does not constitute an offer or invitation to the public in Gibraltar for the purchase of Placing Shares. It is being made available to persons in Gibraltar to whom it is addressed for information purposes only and at their request. This document is for the sole use of these persons and will not be issued to any other person in Gibraltar. The Company is not approved or regulated in Gibraltar. This document does not purport to give investment advice. Each such person receiving this document represents by requesting a copy of the document that it will obtain such independent professional advice as it will deem appropriate.
NOTICE TO INVESTORS IN MAURITIUS Placing Shares will not be offered to the public in Mauritius and the Company is not and does not intend to be registered as a “reporting issuer” under the Securities Act 2005 of Mauritius. Accordingly, this document has not been registered with the Mauritius Financial Services Commission (“FSC”). Securities are offered only:
(a) by way of private placements only to the person to whom such offer has been made; and
(b) to persons in Mauritius meeting the criteria “sophisticated investors” as defined under the Securities Act 2005 of Mauritius.
The Company has not been authorised (or recognised) and does not intend to seek authorisation (or recognition) with the FSC, and the FSC expresses no opinion as to the matters contained in this document as to the merits of an investment in the Company. There is no statutory compensation scheme in Mauritius in the event of the Company’s failure.
NOTICE TO INVESTORS IN SWITZERLAND This document does not constitute an issuance prospectus pursuant to Articles 652a or 1156 of the Swiss Code of Obligations and may not comply with the information standards required thereunder.
The Placing Shares will not be listed on the SIX Swiss Exchange and, consequently, the information presented in this document does not necessarily comply with the information standards set out in the relevant listing rules of the SIX Swiss Exchange.
This document has not been and will not be authorised, and may not be able to be authorised, by the Swiss Financial Market Supervisory Authority (“FINMA”) under the Swiss Collective Investment
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Schemes Act (“CISA”). Therefore, investors do not benefit from protection under the CISA or supervision by the FINMA.
The Placing Shares may not be offered, distributed or sold, directly or indirectly, to the public in or from Switzerland as defined in Article 3 of the CISA, but only to qualified investors as defined in the CISA and its implementing ordinance CISO.
This document does not constitute investment advice. It may only be used by those persons to whom it has been delivered by the Company and may neither be copied nor, directly or indirectly, distributed or made available to other persons without the express consent of the Company.
NOTICE TO INVESTORS IN JERSEY This document and the transactions contemplated by this document have not been approved or authorised by the Jersey Financial Services Commission. The Jersey Financial Services Commission has not consented to the, direct or indirect, distribution or circulation of this document or the transactions contemplated by this document. This document may not be publicly distributed or circulated, directly or indirectly, in Jersey. The Company will not solicit directly or indirectly the public in the Island of Jersey in connection with the Placing.
NOTICE TO INVESTORS IN GUERNSEY Any offer that is the subject of this document may only be made in or from within the Bailiwick of Guernsey either:
(a) by persons licensed to do so under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) (the “POI Law”); or
(b) to persons licensed under the POI Law or the Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended), or the Banking Supervision (Bailiwick of Guernsey) Law, 1994 (as amended), or the Regulation of Fiduciaries, Administration Businesses, and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 (as amended), provided the offeror complies with the applicable requirements of the POI Law and all applicable guidance notes issued by the Guernsey Financial Services Commission.
No regulatory approval has been sought to any offer in Guernsey and the Guernsey Financial Services Commission does not accept any responsibility for the financial soundness of or any representations made in connection with the Company.
NOTICE TO INVESTORS IN THE ISLE OF MAN Any offer that is the subject of this document made within the Isle of Man must be made (i) by an Isle of Man financial services licence holder licensed under section 7 of the Isle of Man Financial Services Act 2008 to do so or (ii) in accordance with any relevant exclusion contained in the Regulated Activities Order 2011 or exemption contained in the Financial Services (Exemptions) Regulations 2011.
This document and the transactions contemplated by this document have not been approved or authorised by the Isle of Man Financial Services Authority.
NOTICE TO INVESTORS IN THE BRITISH VIRGIN ISLANDS The Company is not registered or recognised in the British Virgin Islands and as such shares of the Company may not be offered to individuals in the British Virgin Islands. However, shares may be offered to British Virgin Islands business companies (from outside the British Virgin Islands) without restriction. A British Virgin Islands business company is a company formed under or otherwise governed by the BVI Business Companies Act, 2004 (British Virgin Islands).
NOTICE TO INVESTORS IN THE REPUBLIC OF SOUTH AFRICA This document does not constitute an offer to the South African public of Ordinary Shares or Placing Shares as contemplated in the South African Companies Act, and, accordingly, has not been and will not be registered as a prospectus in terms of and in accordance with that Act. The South African Placing would be subject to a minimum application of R1 million per investor, acting as principal, in reliance on
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the exemption from offers to the public contemplated in section 96(1)(b) of the South African Companies Act, except for those categories of exempted persons contemplated in section 96(1)(a) of the South African Companies Act. Members of the public (other than any member of the South African public who acts as principal and offers to subscribe for a minimum of R1 million worth of Placing Shares and those categories of exempted persons contemplated in section 96(1)(a) of the South African Companies Act) would not be entitled to participate in the proposed South African Placing.
7. Incorporation of information by reference The contents of the websites of the Company (including any materials which are hyper-linked to such websites) do not form part of this document and prospective investors should not rely on them.
8. References to defined terms Certain terms used in this document, including certain capitalised terms and other terms, are defined and explained in Part 17 of this document headed “Definitions” on page 279.
9. General notice Nothing contained in this document is intended to constitute investment, legal, tax, accounting or other professional advice. This document is for your information only and nothing in this document is intended to endorse or recommend a particular course of action. You should consult with an appropriate professional adviser for specific advice rendered on the basis of your situation.
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PART 4
This timetable is for illustrative purposes only and represents the anticipated sequence and timing of events in the event that the Placing proceeds.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2016 Publication and posting of this document and Form of Proxy 28 January Last day to trade on the SA share register in order to be eligible to participate and vote at the Extraordinary General Meeting 3 February Record date for Shareholders on the SA share register to be eligible 5.00 p.m. (SA time) to participate and vote at the Extraordinary General Meeting on 10 February Latest time and date for receipt of Forms of Proxy or electronic 12.00 p.m. (SA time) proxy appointments for SA Shareholders on 12 February Latest time and date for receipt of Forms of Proxy or electronic proxy appointments for UK Shareholders 10.00 a.m. on 12 February Record date for Shareholders on the UK share register to be eligible to participate and vote at the Extraordinary General Meeting 6.00 p.m. on 12 February Extraordinary General Meeting 9.30 a.m. on 15 February Launch of the potential Placing 16 February Expected opening of the Bookbuild 16 February Expected closing of the Bookbuild 16 February Results of the Placing (including the Placing Price) announced through a Regulatory Information Service and on SENS, and publication of the Pricing Statement 16 February Admission and commencement of dealings in Placing Shares on the UK share register By 8.00 a.m. on 23 February Admission and commencement of dealings in Placing Shares on the By 9.00 a.m. (SA time) SA share register on 23 February Placing Shares credited to CREST accounts (uncertificated holders only on the UK share register) By 8.00 a.m. on 23 February Placing Shares credited to CSDP/broker accounts (uncertificated By 9.00 a.m. (SA time) holders only on the SA share register) on 23 February Expected despatch of definitive share certificates (where applicable) By 4 March
Notes: (1) Each of the times and dates set out in the above timetable and mentioned in this document and in any other document issued in connection with the potential Placing is subject to change by the Company (with the agreement of the Bookrunners, in certain instances), in which event details of the new times and dates will be notified to the UK Listing Authority and, where appropriate, to Shareholders through an announcement on a Regulatory Information Service and on SENS. (2) Any reference to a time in this document is to UK time, unless otherwise specified. (3) 12.00 p.m. refers to midday. (4) The actual Placing Price and the number of Placing Shares issued will be set out in the Pricing Statement. The Pricing Statement will be available free of charge at the Company’s registered office for 14 days after Admission. In addition, the Pricing Statement will (subject to certain restrictions) be published on the Company’s website at www.redefineinternational.com. (5) The Bookbuild will close once the Company has decided sufficient applications for Placing Shares have been received.
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PART 5
PLACING STATISTICS(1)
Number of Ordinary Shares in issue as at the Latest Practicable Date 1,495,566,887
Maximum number of Placing Shares to be issued pursuant to the potential Placing(2)(3)(4) 375,000,000
Maximum number of Ordinary Shares in issue immediately following Admission(2)(3)(4) 1,870,566,887
Maximum number of Placing Shares as a percentage of the Enlarged Share Capital immediately following Admission(2)(3)(4) 20.0 per cent
Maximum estimated gross proceeds of the potential Placing(2)(5)(6) £150.0 million
Minimum estimated gross proceeds of the potential Placing(5) £100.0 million
Minimum estimated expenses of the potential Placing(5)(6)(7)(8) £5.5 million
Maximum estimated expenses of the potential Placing(2)(5)(6)(8) £6.1 million
Maximum estimated net proceeds of the potential Placing(2)(5) £143.9 million
Minimum estimated net proceeds of the potential Placing(5)(7) £94.5 million
Notes:
(1) If the Resolutions are passed, and if the Board (in consultation with the Bookrunners) decides to proceed with the Placing, it is expected that the Pricing Statement containing the Placing Price and the number of Placing Shares to be issued will be published when the results of the potential Placing are announced and will be available (subject to certain restrictions) on the Company’s website at www.redefineinternational.com. (2) On the assumption that the potential Placing is subscribed for in full with gross proceeds of £150.0 million. (3) On the assumption that no further Ordinary Shares are issued as a result of the exercise of any options under the Redefine Share Schemes between the Latest Practicable Date and Admission. (4) On the assumption that the Placing Price is set at the Minimum Placing Price. (5) The Placing Price per South African Placing Share will be the equivalent price per UK Placing Share in Rand (subject only to adjustment in terms of the prevailing exchange rate agreed between the Bookrunners and the Company at the time of the Bookbuild). (6) The transaction costs include the RPL Fee of £2.5 million payable to Redefine Properties in consideration for Redefine Properties providing the RPL Equity Commitment and the RPL Loan. (7) On the assumption that the potential Placing raises the minimum gross proceeds of £100.0 million. (8) Estimate of expenses based on the Company’s estimate of likely demand and allocation across the UK Placing and South African Placing.
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PART 6
DIRECTORS, COMPANY SECRETARY AND ADVISERS
Directors Gregory Clarke (Chairman, Non-executive Director) Michael Watters (Chief Executive Officer) Stephen Oakenfull (Deputy Chief Executive Officer) Donald Grant (Chief Financial Officer) Adrian Horsburgh (Property Director) Sue Ford (Non-executive Director) Bernard Nackan (Non-executive Director) Robert Orr (Non-executive Director) Gavin Tipper (Non-executive Director) Michael Farrow (Non-executive Director) Marc Wainer (Non-executive Director)
Company Secretary Lisa Hibberd
Registered office Merchants House 24 North Quay Douglas Isle of Man IM1 4LE Tel: +44 (0)1624 689589
Principal place of business 2nd Floor 30 Charles II Street London SW1Y 4AE Tel: +44 (0)20 7811 0100
UK sponsor and joint Peel Hunt LLP UK bookrunner Moor House 120 London Wall London EC2Y 5ET
Joint UK bookrunner J.P. Morgan Securities plc (which conducts its UK investment banking business as J.P. Morgan Cazenove) 25 Bank Street London E14 5JP
JSE sponsor Java Capital Trustees and Sponsors Proprietary Limited 6A Sandown Valley Crescent Sandown, Sandton 2196 Johannesburg South Africa
South African corporate adviser Java Capital Proprietary Limited 6A Sandown Valley Crescent Sandown, Sandton 2196 Johannesburg South Africa
Isle of Man administrator IQE Limited and registered agent Merchants House 24 North Quay Douglas Isle of Man IM1 4LE
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Isle of Man advocates Simcocks Advocates Limited to the Company Ridgeway House Ridgeway Street Douglas Isle of Man IM99 1PY
Legal advisers to the Company Nabarro LLP as to English law 125 London Wall London EC2Y 5AL
Legal advisers to the Norton Rose Fulbright LLP Joint UK Bookrunners 3 More London Riverside as to English law London SE1 2AQ
Reporting Accountants KPMG 1 Stokes Place St. Stephen’s Green Dublin 2 Ireland
Registrars for the Company Capita Registrars (Isle of Man) Limited in the UK Clinch’s House Lord Street Isle of Man IM99 1RZ
Valuers BNP Paribas Real Estate (Jersey) Limited 3rd Floor, Dialogue House 2-6 Anley Street St Helier Jersey JE4 8RD DTZ Debenham Tie Leung Limited (trading as Cushman and Wakefield) No.1 Colmore Square Birmingham B4 6AJ DTZ Debenham Tie Leung Limited (trading as Cushman and Wakefield) 125 Old Broad Street London EC2N 1AR Cushman and Wakefield LLP Rathenauplatz I 60313 Frankfurt am Main Germany Savills Advisory Services Limited 33 Margaret Street London W1G 0JD Savills Advisory Services Germany GmbH & Co. KG Taunusanlage 19 60325 Frankfurt Germany Schlidt Konigsstr 80 70173 Stuttgart Germany Strutt and Parker 13 Hill Street London W1J 5LQ
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South African Transfer Secretaries Computershare Investor Services (Proprietary) Limited Ground Floor 70 Marshall Street Johannesburg, 2001 South Africa
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PART 7
LETTER FROM THE CHAIRMAN OF REDEFINE INTERNATIONAL P.L.C.
(Incorporated in the Isle of Man under the Companies Acts, 1931 – 2004 (as amended) and re-registered under the Companies Act 2006 of the Isle of Man with registered number 010534V)
Directors Registered Office Gregory Clarke (Chairman, Non-executive Director) Merchants House Michael Watters (Chief Executive Officer) 24 North Quay Stephen Oakenfull (Deputy Chief Executive Officer) Douglas Donald Grant (Chief Financial Officer) Isle of Man Adrian Horsburgh (Property Director) IM1 4LE Sue Ford (Non-executive Director) Bernard Nackan (Non-executive Director) Robert Orr (Non-executive Director) Gavin Tipper (Non-executive Director) Michael Farrow (Non-executive Director) Marc Wainer (Non-executive Director)
28 January 2016
Potential Placing of up to 375,000,000 Placing Shares Approval of waiver of Rule 9 of the UK Takeover Code Approval of the Related Party Transaction
and
Notice of Extraordinary General Meeting
1. INTRODUCTION On 7 September 2015, Redefine International P.L.C. published a circular to announce the conditional acquisition of the AUK Portfolio for an aggregate consideration of £437.2 million (£455.7 million after costs) through its wholly-owned subsidiary, Redefine AUK. At the same time the Company also announced that it had exchanged contracts on 4 September 2015 to acquire Banbury Cross Retail Park for a consideration of £52.5 million (£54.7 million including transaction costs). Shareholder approval for the Acquisition, which constituted a Class 1 transaction for the Company under Chapter 10 of the UK Listing Rules, was successfully obtained on 25 September 2015 at an extraordinary general meeting of the Company.
The acquisition of the AUK Portfolio was split into two tranches:
(a) Tranche 1, which was completed on 2 October 2015 and was funded with existing cash resources and £155.0 million of bank debt. The Tranche 1 acquisition comprised nine properties at a purchase price of £203.5 million (£212.1 million including costs).
(b) Tranche 2, which comprised 10 properties, is expected to complete on or around 1 March 2016 at a purchase price of £233.7 million (£243.6 million including costs).
Following this, on 21 December 2015, the Company announced the successful sale of 16 Grosvenor Street, London, which formed part of the Tranche 2 Properties for £35.6 million. The disposal of 16 Grosvenor Street, which had an original apportioned purchase price of £29.0 million, resulted in the purchase price of the Tranche 2 Properties reducing from £233.7 million to £204.7 million. Adjusting for the profit of £3 million realised on the sale, the total cash consideration of £201.7 million (£210.2 million including costs) will be paid to complete Tranche 2. The sale of 16 Grosvenor Street represents just one
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of a number of significant value enhancing opportunities arising for the Company from the acquisition of the AUK Portfolio (and Banbury Cross Retail Park), and progress to date in the delivery of asset management initiatives on the overall portfolio has exceeded the Company’s initial expectations. The early realisation of opportunities is encouraging and serves as immediate evidence of the solid foundation which the Board believes this transformational deal offers the Company, to continue to drive Shareholder value.
At the September EGM, the Shareholders (other than Redefine Properties and its associates) additionally approved:
• the related party transactions, pursuant to Chapter 11 of the UK Listing Rules, with Redefine Properties, regarding potential funding scenarios and the related fees (each as more particularly described in paragraph 5 of Part 4 of the Circular); and
• the Disposal, in the event that the Board considered that market conditions were not conducive to proceeding with an equity fundraise such that the terms of any equity fundraise were not considered by the Board to be in the best interests of existing Shareholders as a whole and the Board elected instead, having regard to the Company’s overall level of gearing, to utilise and convert the RPL Loan into equity, in order to form a 50:50 joint venture in respect of the Combined AUK Portfolio. The Disposal would constitute a Class 1 transaction for the Company under Chapter 10 of the UK Listing Rules as well as a related party transaction for the purposes of Chapter 11 of the UK Listing Rules and approval for the Disposal (if the Company chose to implement it) was obtained at the September EGM. The RPL Loan and RPL JV are described in more detail in paragraphs 21.5 and 21.6 of Part 15 of this document respectively.
After taking account of the disposal of 16 Grosvenor Street, London (as described above) and a maximum drawdown under the AUK facility of £98.0 million, approximately £112.2 million is required to complete the acquisition of the Tranche 2 Properties.
On a pro-forma basis, the Company is expected to have approximately £34.3 million of existing cash resources following the exchange of contracts on the sale of a portfolio of 10 petrol filling stations, which is anticipated to complete on 19 February 2016 and generate net proceeds of £6.6 million following the repayment of £5.2 million of debt. After taking into account committed and potential future cash requirements, the Company believes that minimum gross proceeds of £100.0 million must be raised to support the acquisition of the Tranche 2 Properties and to provide the Company with sufficient working capital. The Placing, if it were to proceed, would be on a non pre-emptive basis, primarily to institutional investors only, and conditional on the Company raising minimum gross proceeds of £100.0 million.
For the Placing to proceed, all the Resolutions need to be approved, following which the Board will decide (in consultation with the Bookrunners) whether market conditions are conducive to proceeding with an equity raising to support the acquisition of the Tranche 2 Properties, or otherwise to utilise the RPL Loan (further details of which are provided in this paragraph 1 below). In connection with the potential Placing, Redefine Properties has irrevocably agreed to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate subscription amount of up to £70.0 million. The RPL Equity Commitment is subject to the Placing Price representing a minimum discount of five per cent. to the volume weighted average price of an Existing Ordinary Share over the 30 days prior to the date of announcement of any such Placing (the “Maximum RPL Price”). If the Placing proceeds and there is a successful procurement of Placees (other than Redefine Properties) representing in excess of £30.0 million of gross proceeds, the Board expects to scale back Redefine Properties’ maximum participation of up to £70.0 million on a pound for pound basis, for every pound raised from other Placees in excess of the additional aggregate £30.0 million, subject to Redefine Properties’ entitlement to participate at the level which would maintain its current 30.07 per cent. shareholding in the Company. If the Placing proceeds and there is sufficient demand from Placees (including from Redefine Properties, to the extent that it seeks to participate in excess of its pro-rata entitlement in the Placing, subject to its terms and conditions), the Board may then decide to increase the size of the Placing up to a maximum amount of £150.0 million. The potential Placing requires the approval of Shareholders. The Directors’ existing authority to allot shares on a non-pre-emptive basis, which was obtained by the Directors at the Company’s annual
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general meeting on 26 January 2016, would not be sufficient to carry out the Placing. Accordingly, the Company proposes the Share Authority Resolutions at the EGM to give the Directors the authority to complete the Placing by dis-applying Shareholders’ pre-emption rights.
In addition, as Redefine Properties is a substantial shareholder of the Company, its participation in the Placing would constitute a Related Party Transaction for the purposes of Chapter 11 of the UK Listing Rules. As such, the Related Party Transaction is conditional on the approval of the Related Party Independent Shareholders. Further, the issue of Placing Shares to Redefine Properties under the Placing would give rise to certain considerations under the UK Takeover Code. Accordingly, to the extent Redefine Properties (together with any other members of the Concert Party) acquires such number of Placing Shares under the Placing which increases its percentage shareholding in the Company, such subscription is conditional on the approval of the Rule 9 Independent Shareholders.
Accordingly, an Extraordinary General Meeting has been convened for 9.30 a.m. on 15 February 2016 at 2nd Floor, 30 Charles II Street, London, SW1Y 4AE. The notice convening the Extraordinary General Meeting is set out at the end of this document and an explanation of the Resolutions to be proposed at the EGM is set out in paragraph 9 below.
As was approved by Shareholders in the September EGM, the Company retains the option to utilise the RPL Loan of up to £135 million to meet the funding requirement for the completion of the Tranche 2 Properties. The Company will utilise the RPL Loan in the event that the Resolutions are not passed by Shareholders or prevailing market conditions mean that the Board (in consultation with the Bookrunners) elects not to proceed with the Placing or if, inter alia, the Placing fails to raise gross proceeds of at least £100.0 million. In such circumstances, if the Company elects not to raise funds through a debt or equity fundraising prior to the repayment date of the RPL Loan, the Company may elect to convert the RPL Loan into a 50 per cent. equity interest in Redefine AUK (or, in the absence of election by the date being three months following drawdown, it will automatically convert), thus creating a 50:50 joint venture between the Company and Redefine Properties resulting in the Disposal. However, if the Placing proceeds, the Company will use the proceeds to complete the acquisition of the Tranche 2 Properties without using the RPL Loan. The RPL Loan and the RPL JV are described in more detail in paragraphs 21.5 and 21.6 of Part 15 (Additional information) of this document respectively.
I am writing to give you further details of the Proposals, including the background to and reasons for the Placing, to explain why:
• subject to an assessment of market conditions following the Extraordinary General Meeting, the Board considers the Proposals to be in the best interests of the Company and Shareholders as a whole;
• the Board unanimously recommends that you vote in favour of the Share Authority Resolutions and the Related Party Resolution to be proposed at the Extraordinary General Meeting; and
• the Independent Directors, who have been so advised by Peel Hunt, consider the terms of the Placing to be fair and reasonable and in the best interests of the Rule 9 Independent Shareholders and the Company as a whole, and unanimously recommend that you vote in favour of the Rule 9 Waiver Resolution to be proposed at the Extraordinary General Meeting.
2. BACKGROUND TO AND REASONS FOR THE POTENTIAL PLACING Given the expected completion date for Tranche 2 of 1 March 2016, the Board considered, at the time the Circular was published in September 2015, that raising funds significantly in advance of the completion date would have been an inefficient use of Shareholders’ funds, and would have resulted in a temporary but significant dilution in earnings. The Board explained that it would consider raising the necessary funds closer to the timing for completion of Tranche 2, subject to prevailing market conditions and ensuring any fundraise would be in the best interests of Shareholders as a whole and having regard to the Company’s overall level of gearing.
As was more particularly described in the Circular, the Company (through its wholly-owned subsidiary, Redefine AUK) also entered into a banking facility of £303.0 million with a syndicate of banks, being HSBC Bank plc, Barclays Bank PLC, Abbey National Treasury Services PLC and the Royal Bank of Scotland plc, conditional only on the Acquisition proceeding. The AUK Facility comprises a £155.0 million five-year term loan and a £148.0 million revolving credit facility expiring in 2020 which
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will be secured against the Combined AUK Portfolio, but will have no recourse to the Group (other than the Redefine AUK Group). The Circular explained the Company’s intention to utilise approximately £270.0 million of the AUK Facility to fund the Acquisition, with the balance of the AUK Facility providing additional headroom and working capital flexibility to the Group and, subject to the terms of the loan, may be used to support future acquisitions. The AUK Facility has been structured in order to provide the Company with a more flexible funding structure and to accommodate alternative sources of debt funding in the future. On 21 December 2015, the Company, jointly with the Seller, sold the property at 16 Grosvenor Street, London for £35.6 million. As was agreed at the time of the announcement of the Acquisition in September 2015, 16 Grosvenor Street was part of the Tranche 2 Properties and subject to a 50 per cent. profit share if sold for more than £35.0 million. The sale, including profits realised, has reduced the consideration payable for the Tranche 2 Properties by £32.0 million to £201.7 million (£210.2 million including costs) and, in addition, has resulted in a net profit to the Group of £3 million. The Company is actively reviewing its existing portfolio to identify assets which do not meet its strategic and financial criteria. As part of this review, the Company has recently exchanged contracts on the sale of a portfolio of 10 petrol filling stations for £12.0 million which, which is anticipated to complete on 19 February 2016 and generate net proceeds of £6.6 million following the repayment of £5.2 million of debt. The sales price reflects a 6.7 per cent. premium to book value. The Company will continue to progress the disposal of other identified assets to support the Company’s goal of managing financial leverage over time and recycling capital into value adding asset management opportunities. The Company proposes to finance the acquisition of the Tranche 2 Properties through a minimum equity capital raise of £100.0 million, up to a maximum of £150.0 million, by way of the Placing. At the September EGM, Shareholders (other than Redefine Properties and its associates) approved the RPL Equity Commitment, pursuant to which Redefine Properties irrevocably agreed to subscribe for up to £70.0 million in any equity capital raise undertaken by the Company to finance the acquisition of the Tranche 2 Properties (subject to the Placing Price being not more than the Maximum RPL Price). Accordingly, in connection with the potential Placing, Redefine Properties has irrevocably agreed to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate subscription amount of up to £70.0 million. The Company would seek to raise a minimum aggregate additional amount of £30.0 million from other Placees in order to raise a minimum of £100.0 million (gross) through the Placing which would allow the Company to complete the acquisition of the Tranche 2 Properties. If the Placing proceeds and there is a successful procurement of Placees (other than Redefine Properties) representing in excess of £30.0 million of gross proceeds, the Board expects to scale back Redefine Properties’ maximum participation of up to £70.0 million on a pound for pound basis, for every pound raised from other Placees in excess of the additional aggregate £30.0 million, subject to Redefine Properties’ entitlement to participate in the Placing at the level which would maintain its current 30.07 per cent. shareholding in the Company. If the Placing proceeds and there is sufficient demand from Placees (including from Redefine Properties, to the extent that it seeks to participate in excess of its pro-rata entitlement in the Placing, subject to its terms and conditions), the Board may then decide to increase the size of the Placing up to a maximum amount of £150.0 million. Further details about the potential Placing and the irrevocable commitment by Redefine Properties to subscribe for up to £70.0 million in equity are set out in paragraph 6 below.
3. USE OF PROCEEDS The acquisition of the Tranche 2 Properties is due to complete on or around 1 March 2016 and requires total funding of approximately £210.2 million (including transaction costs). The Company has the ability to drawdown up to £98.0 million from its revolving credit facility secured against the Combined AUK Portfolio. After taking into account existing cash resources and working capital requirements, the Company requires a minimum additional amount of £100.0 million through the Placing.
As mentioned above, Redefine Properties has irrevocably agreed to subscribe for such number of Placing Shares under the Placing as equals an aggregate amount of up to £70.0 million. Redefine Properties’ irrevocable commitment to subscribe for Placing Shares pursuant to the RPL Equity
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Commitment is conditional on the Placing Price being no higher than the Maximum RPL Price. The Company intends to raise a minimum aggregate additional £30.0 million from other Placees in order to raise a minimum of £100.0 million (gross) through the Placing which would allow the Company to complete the acquisition of the Tranche 2 Properties, with the balance of the consideration being funded from existing cash resources and the AUK Facility. Any additional equity raised would be used to provide capital for further disciplined asset management opportunities within the Group’s existing portfolio as well as new investment opportunities. Additionally the excess equity raised would support refinancing and restructuring of the Group’s existing facilities at lower leverage levels. For example, should the Company raise £150.0 million through the potential Placing, the excess up to £50 million may be utilised to reduce the Company’s leverage on the Acquisition. The AUK Facility is a flexible facility (through the £148.0 million revolving credit facility) with the margin charged subject to the amount of debt drawn and the resultant loan-to-value ratio. Utilising the maximum drawdown of £98.0 million would result in a loan-to-value ratio on the Combined AUK Portfolio of 55 per cent. and a margin of 1.9 per cent. Limiting the drawdown to £75.0 million would result in a reduced margin of 1.75 per cent. Should the overall facility be reduced to £263.0 million following the sale of 16 Grosvenor Street, London and to maintain headroom of £33.0 million, the marginal return on the additional £23.0 million of equity would be 4.6 per cent.
4. BACKGROUND TO AND RATIONALE FOR THE ACQUISITION The Company has previously highlighted its intention to improve the overall quality of its portfolio through the acquisition of assets which exhibit strong property fundamentals including, inter alia, being located in areas of robust economic activity and being of a size, configuration and specification that meet occupiers’ requirements. The acquisition of the Combined AUK Portfolio, comprising 19 (following the disposal of 16 Grosvenor Street, London, as described above) largely institutional quality properties, offered the Company a scalable opportunity to deliver on its strategy. Progress to date in the delivery of asset management initiatives on the Combined AUK Portfolio has exceeded the Company’s initial expectations. The early realisation of opportunities underlines the Board’s continued belief that the acquisition of the Combined AUK Portfolio provides the Company with an opportunity to acquire a large portfolio of institutional quality assets which provide enhanced income and capital growth opportunities to the Group. The acquisition of the Combined AUK Portfolio also provides a number of strategic benefits in terms of scale, liquidity and access to alternative sources of funding. The strategic rationale is set out in more detail below: • The Combined AUK Portfolio provides exposure to a high quality diversified UK portfolio where the Company expects to capture rental growth as the UK economy continues to improve and supply of available space continues to reduce. • The acquisition of the Combined AUK Portfolio provides scale and critical mass to the Company’s portfolio, increasing the value of the property portfolio to approximately £1.5 billion. The increased number of assets in predominantly well located areas of the UK provides opportunities to work with occupiers across the enlarged portfolio. • The acquisition of the Combined AUK Portfolio increases the Company’s exposure to the UK, meaning that, following the disposal of the Company’s interest in the Cromwell Group on 31 August 2015, the Group’s pro forma portfolio will be focused on the UK (80 per cent) and Germany (20 per cent), two of the strongest economies in Europe. • The portfolio is geographically diversified throughout the UK with over 76 per cent. by value located in the following key regions: London (29 per cent), the South East (33 per cent) and the “Big Six” regional cities of Manchester, Leeds, Bristol, Birmingham, Edinburgh and Glasgow (15 per cent) providing exposure to areas with strong and improving economic fundamentals. • The portfolio is predominantly focused on the retail and office sectors which fit well within the Group’s existing asset base and areas of expertise. • The portfolio provides exposure to £98.1 million of well-located industrial and distribution assets; a sector in which the Company has limited exposure and which is currently experiencing strong demand and rental growth potential.
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• The acquisition of the Combined AUK Portfolio enhances the ability of the Company to recycle capital. The increased size of the Company’s overall portfolio will allow the sale of mature or underperforming assets without materially impacting on the Group’s short term earnings expectations. • The overall yield on the portfolio may be further enhanced through a number of asset management initiatives including recycling capital from certain lower yielding assets into higher yielding opportunities. • At the date of this document, the portfolio has an overall occupancy of 96.69 per cent. (by area) providing asset management opportunities to reduce voids and associated carrying costs which will drive both higher income returns and capital values. • The Company has previously announced its intention to diversify its sources of debt funding away from bilateral banking facilities to provide improved liquidity, lower its cost of funding and provide improved operational flexibility. The acquisition of the Combined AUK Portfolio and the AUK Facility support the acceleration of this strategy through establishing a more flexible banking facility with a group of relationship banks well known to the Company. The AUK Facility is being used to part fund the Acquisition and includes a revolving credit facility of £148.0 million with the remaining term loan element providing sufficient flexibility for sales, acquisitions and early repayment. Further details about the Combined AUK Portfolio are set out in paragraph 14 of Part 15 (Additional information) of this document.
5. CURRENT TRADING AND PROSPECTS The Combined AUK Portfolio The Combined AUK Portfolio comprises 19 properties (following the disposal of 16 Grosvenor Street, London, as described above), of which five assets are single-let and the balance multi-let. The portfolio comprises largely institutional quality assets which have strong property fundamentals and scope for adding capital value through active asset management. At the time of this document, the Company has identified numerous asset management opportunities to reduce voids and associated carrying costs, notwithstanding already high overall occupancy of 96.69 per cent. (by area). At 31 August 2015, the topped up net initial yield, excluding 16 Grosvenor Street, London and reflecting actual purchaser’s costs, was approximately 5.8 per cent. Further, as set out in the 2015 Annual Report (as amended to exclude the sale of 16 Grosvenor Street, London), the Combined AUK Portfolio showed the following characteristics:
Gross Net Rever- Combined AUK No. of Value Rental Initial sionary WAULT Portfolio summary Properties £m Income £m Yield % Yield % (years) Tranche 1 (incl. Banbury Cross Retail Park) Retail 6 158.3 11.2 6.7% 6.0% 9.4 Offices 1 5.4 0.5 8.5% 6.9% 5.1 Distribution 3 86.9 5.7 6.2% 5.9% 4.6 ——– ——– ——– ——– ——– ——– Sub Total 10 250.6 17.4 6.5% 6.0% 7.7 ——– ——– ——– ——– ——– ——– Tranche 2 Retail 3 73.9 4.3 5.5% 5.0% 11.3 Offices 5 123.2 5.8 3.8% 6.6% 5.0 Distribution 1 11.2 0.7 6.2% 6.6% 6.8 ——– ——– ——– ——– ——– ——– Sub Total 9 208.3 10.9 4.6% 6.0% 7.6 ——– ——– ——– ——– ——– ——– Total Retail 9 232.2 15.5 6.3% 5.7% 10.0 Offices 6 128.6 6.3 4.0% 6.6% 5.0 Distribution 4 98.1 6.5 6.2% 6.0% 4.8 ——– ——– ——– ——– ——– ——– Sub Total 19 458.9 28.3 5.6% 6.0% 7.7 ——– ——– ——– ——– ——– ——–
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The valuation carried out on the portfolio in January 2016 valued the Combined AUK Portfolio (excluding 16 Grosvenor Street, London) at £462.1 million, which is a £3.2 million increase when compared to the £458.9 million valuation (excluding 16 Grosvenor Street, London) at the time of the announcement in September 2015. This is a particularly pleasing result as it is only four months since the last valuation. As was highlighted in the Circular, the Combined AUK Portfolio presents several opportunities to recycle capital from certain lower yielding assets into higher yielding assets, as reflected in the decision to dispose of 16 Grosvenor Street in London’s Mayfair. While it is a prime asset, it is also low yielding and, as such, was deemed to sit outside the Company’s immediate, income-focused strategy. 16 Grosvenor Street was originally to be purchased for £29.0 million but was sold for £35.6 million (as announced by the Company on 21 December 2015). The asset was part of the Tranche 2 Properties and subject to a 50 per cent. profit share in the event that it was sold for more than £35.0 million. The sale, including profits realised, has reduced the consideration payable for the Tranche 2 Properties by £32.0 million to £201.7 million (£210.2 million including costs). To date asset management efforts have largely been focused on letting of vacant space and lease renewals. Four new lettings and renewals totalling £0.5 million have been agreed and negotiations on three new lettings are nearing completion at or above estimated rental value. Two rent reviews have been agreed at Charing Cross, London totalling £0.8 million (£0.2 million above passing rent). In addition, good progress is being made on vacancies in other vacant regional office assets. Overall progress to date in the delivery of asset management initiatives on the overall portfolio has exceeded the Company’s initial expectations.
The Company sees further asset management opportunities around modest rental growth, reconfiguration and optimisation of limited space and further development and expansion activities.
The Group The investment market, both in the UK and Germany, continues to benefit from strong demand, albeit that levels of investment have normalised following record investment volumes in the second quarter of 2015. International investors continue to dominate the UK investment market with a similar trend now evident in Germany.
Rental values in the UK have continued on an upward trend although this has been driven to a large extent by the office and distribution sectors, principally in London and the South East. Growth in retail rents has been more muted although there has been some encouraging data in the second half of 2015. Demand from retailers in Germany continued to strengthen during the year, with interest improving from both local and international brands. Demand continues to outweigh supply in prime locations which is having a positive knock-on effect on secondary locations.
With performance in the next phase of the property cycle likely to be more heavily weighted to income returns and rental growth, the Group’s approach toward recycling capital into assets with strong fundamentals and occupier demand is as important as ever.
Reshaping the portfolio The Group’s geographic exposure has been streamlined following the sale of its remaining investment in the Cromwell Group and the Swiss COOP portfolio. The Group’s core portfolio is now wholly focused on the UK and Germany, Europe’s two strongest economies and its largest real estate investment markets. Capital recycling and new investment have also significantly repositioned the portfolio to locations with stronger economic fundamentals and improved occupier demand.
Notwithstanding the proposed completion of the acquisition of Tranche 2, the Group’s recent acquisition and disposal activities have improved the overall quality of the portfolio and enhanced expectations of rental and income growth. The Group’s pro-forma portfolio, incorporating 100 per cent. ownership of the Combined AUK Portfolio, increases the average lot size and the quality of our assets, providing enhanced liquidity.
UK Retail Occupancy improved markedly during the year to 97.1 per cent. (2014: 95.4 per cent) following 119,000 sq ft of lettings. 25 lease events were completed, generating a gross rent of £1.3 million. Two rent
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reviews were agreed, providing a total rent of £0.1 million, 7.9 per cent. above the previous passing rent. 23 new lettings or renewals were completed, providing a total rent of £1.2 million, 1.7 per cent. below the estimated rental value.
Successful letting activity at Grand Arcade, Wigan increased occupancy to 99.8 per cent. with the final unit currently under offer to an international retailer. New Look introduced one of their first menswear stores in the UK at a passing rent of £120,000 per annum reflecting a 27 per cent. premium to estimated rental value. There were also new lettings to Clarks and Holland & Barrett at a combined passing rent of £150,000.
Pep & Co, a new entrant to the discount clothing market in the UK, signed new leases at Birchwood and Coventry totalling 8,900 sq ft on a turnover basis. Sports Direct signed a new lease over 6,000 sq ft at Birchwood on a turnover rental basis, taking the last remaining retail space at the centre.
The majority of the Group’s shopping centres are now near full occupancy and, with steady improvements in the economy and improving retail trends, the outlook for rents and rental growth for quality assets continues to improve.
Footfall for the year was down by 0.8 per cent. which compares favourably with national indices which were 1.3 per cent. down over the same period. The trend appears to have stabilised with footfall increasing by 1.1 per cent. across the portfolio in the three months to 31 August 2015.
UK Hotels Underlying performance from the Redefine BDL managed portfolio was broadly in line with management’s expectations. Revenue increased by 6.0 per cent. which translated into a 7.9 per cent. increase in EBITDA. The rental level for the 2016 financial year has been set at £14.3 million, a 4.0 per cent. increase on last year.
The DoubleTree by Hilton, Edinburgh was acquired in September 2014 for £25.3 million (excluding transaction costs) reflecting a net initial yield of approximately 6.9 per cent. The hotel has delivered strong underlying results since acquisition, driven by higher room rates. Revenue and EBITDA increased by 30.5 per cent. and 65.1 per cent. respectively.
Works at Enfield to fit out a 6,800 sq ft extension to the Travelodge have been completed. The additional rent of £113,400 p.a. will increase the net initial yield from 4.5 per cent. to 5.4 per cent. The lease for the extension is co-terminus with the existing lease to 2047, and will include retail price index escalations.
Planning was approved for a 12-bedroom extension to the Southwark Holiday Inn Express, London. Construction has commenced with completion set for the third quarter in 2016. The total cost of £2.8 million includes a full enhancement and recladding of the existing hotel façade.
UK Commercial Occupancy improved to 99.3 per cent. (2014: 98.3 per cent) following 6,600 sq ft of lettings. 53 lease events were completed during the year generating additional gross rent of £4.7 million. 47 rent reviews were agreed providing a total rent of £4.0 million, 8.9 per cent. above the previous passing rent. Six new lettings or renewals were completed providing a total rent of £0.7 million, 4.9 per cent. below estimate rental value. The portfolio has 58.5 per cent. of leases subject to fixed uplifts or inflation-linked uplifts.
Planning is expected to be granted at the Crescent Centre, Bristol to reconfigure the entrance and introduce new amenity space. Works are planned to commence in early 2016 with completion expected in the third quarter of 2016. The Crescent Centre is well located within the Bristol office market with current rents of £12.0 per sq ft at favourable levels against neighbouring prime rents of £28.5 per sq ft. A material improvement in rental levels is anticipated following the reconfiguration.
Terms have been agreed with Oxford Brookes University to refurbish 28,412 sq ft of vacant office space in Swindon. Rent has been agreed at £286,000 against an estimate rental value of £216,000 in return for a capital contribution of £0.9 million.
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Europe Occupancy declined marginally to 98.2 per cent. (2014: 99.4 per cent). 72 lease events were completed during the year generating additional gross rent of £2.5 million. 39 rent reviews were agreed providing a total rent of £1.0 million, 3.2 per cent. above the previous passing rent. 33 new lettings or renewals were completed, providing a total rent of £1.5 million, 12.7 per cent. above the estimated rental value. The portfolio has 94.9 per cent. of leases subject to fixed uplifts or inflation-linked leases. A number of leases were renewed during the year at the Bahnhof Centre in Altona, Hamburg. Leases totalling 3,500 sq ft have been extended providing a rent of €0.45 million per annum, 28.6 per cent. above the estimate rental value. Ongoing asset management initiatives at the Schloss Strasse Centre, Berlin have successfully introduced additional revenue streams from media points and improved utilisation of commercialisation space.
6. KEY DETAILS OF THE POTENTIAL PLACING Placing If the Placing proceeds, the Company would seek to raise a minimum of £100.0 million (approximately £94.5 million net of expenses) and up to approximately £150.0 million (approximately £143.9 million net of expenses) by way of a potential Placing of up to 375,000,000 Placing Shares, representing, in aggregate, up to 20.0 per cent. of the Enlarged Share Capital (if the Maximum Placing Shares were issued). Any issue of Placing Shares pursuant to the Placing would be on a non pre-emptive basis, primarily to institutional investors only, so Placing Shares would only be issued to Existing Shareholders if they participated in the Placing. The potential Placing would comprise two separate but simultaneous and co-ordinated placings. Placees would be able to participate outside of South Africa and subscribe for Placing Shares in Pounds Sterling pursuant to the UK Placing or participate in South Africa and subscribe for Placing Shares in Rand pursuant to the South African Placing. Investors who participated in the UK Placing would be required to take up Placing Shares in Pounds Sterling. Investors who participated in the South African Placing would be required to take up for Placing Shares in Rand. The South African Placing would be subject to a minimum application of R1 million per investor, acting as principal, except for those categories of exempted persons contemplated in section 96(1)(a) of the South African Companies Act. The South African Placing would be undertaken with certain existing shareholders and new institutional investors. Members of the public (other than any member of the South African public who acts as principal and offers to subscribe for a minimum of R1 million worth of Placing Shares and those categories of exempted persons contemplated in section 96(1)(a) of the South African Companies Act) would not be entitled to participate in the South African Placing. Similarly the UK Placing would be undertaken with certain existing and new institutional investors. The Placing would be conducted, subject to the satisfaction of certain conditions, through an accelerated bookbuild process to be carried out by the Joint UK Bookrunners (in respect of the UK Placing) and Java Capital (in respect of the South African Placing). Assuming the Resolutions are passed at the Extraordinary General Meeting and the Board elects (in consultation with the Bookrunners) to proceed with the Placing, it is expected that the book would open on 16 February 2016 and would close at any time thereafter. The timing of the closing of the book, the Placing Price and the number of Placing Shares would be agreed between the Bookrunners and the Company following completion of the Bookbuild and announced as soon as practicable on a Regulatory Information Service in the UK and the Stock Exchange News Service of the JSE. It is expected that a Pricing Statement containing the Placing Price and the number of Placing Shares issued, would (subject to certain restrictions) be published at the same time and be available on the Company’s website at www.redefineinternational.com. In connection with the potential Placing, if it were to proceed, Redefine Properties has irrevocably agreed to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate subscription amount of up to £70.0 million pursuant to the RPL Equity Commitment (as described in paragraph 21.4 of Part 15 (Additional Information) of this document). The RPL Equity Commitment is subject to the Placing Price not being higher than the Maximum RPL Price. If the Placing were to proceed, the Company would seek to raise a minimum additional aggregate £30.0 million from other Placees in order to raise an aggregate minimum amount of £100.0 million
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(gross) through the Placing. If there was the successful procurement of Placees (other than Redefine Properties), the Board expects to scale back Redefine Properties’ maximum participation of up to £70.0 million on a pound for pound basis, for every pound raised from other Placees in excess of the additional aggregate £30.0 million, subject to Redefine Properties’ entitlement to participate in the Placing at the level which would maintain its current 30.07 per cent. shareholding in the Company. If the Placing proceeds and there is sufficient demand from Placees (including from Redefine Properties, to the extent that it seeks to participate in excess of its pro-rata entitlement in the Placing, subject to its terms and conditions), the Board may then decide to increase the size of the Placing up to a maximum amount of £150.0 million. If the Placing proceeds, the Joint Bookrunners will be underwriting credit risk on the Placees under the UK Placing (other than Redefine Properties). Java Capital will not be underwriting credit risk on the Placees under the South African Placing. Accordingly, to the extent that South African Placees do not take up and pay for their allocation in full, the amount raised by the Company may be less than the amount announced as having been allocated. However, the Placing will be conditional on the gross proceeds received by the Company being £100 million or more. If the Placing proceeds, the Placing Price per UK Placing Share would be determined by the Directors and the Bookrunners, following their assessment of market conditions and discussions with a number of institutional investors during the course of the Bookbuild. In any event, in accordance with Listing Rule 9.5.10R, the Placing Price would not be at a discount of more than 10 per cent. to the middle market price of the Ordinary Shares at the time of agreeing the Placing. The Placing Price per South African Placing Share will be the equivalent price of a UK Placing Share in Rand (subject only to adjustment in terms of the prevailing exchange rate agreed between the Bookrunners and the Company at the time of the Bookbuild). The RPL Equity Commitment is subject to the Placing Price not being higher than the Maximum RPL Price. As this document does not constitute or form part of any offer to buy or any invitation to sell or issue, or any solicitation of any offer to buy or subscribe for, Placing Shares in any jurisdiction, no maximum price is included in this document. If the Placing proceeds and if there is sufficient demand from investors to subscribe for Placing Shares at a higher price than the Maximum RPL Price, such that the Company can raise the minimum proceeds of £100.0 million without recourse to the RPL Equity Commitment, then the Placing Price may be set at a higher price than the Maximum RPL Price and Redefine Properties would not be obliged to subscribe for any Placing Shares under the RPL Equity Commitment unless it agrees to subscribe for Placing Shares at the higher price. If the Company and the Joint Bookrunners agree that the UK Placing will proceed, the UK Placing Agreement is conditional upon, inter alia, the following: • the Resolutions being passed by the relevant Shareholders at the Extraordinary General Meeting (without material amendment); • the Company raising proceeds of at least £100.0 million through the Placing; • the Placing Agreement becoming unconditional; and • Admission becoming effective by not later than 8.00 a.m. (London time) on 23 February 2016 or such later time and/or date as the Company and the Joint UK Bookrunners may agree (being not later than 8.00 a.m. (London time) on 31 May 2016). Accordingly, if any of such conditions were not satisfied, or, if applicable, waived, the proposed UK Placing would not proceed, and the Company will utilise the RPL Loan in order to complete the acquisition of the Tranche 2 Properties, to the extent that the South African Placing has not otherwise taken place and raised sufficient funds. If the Company and Java agree that the South African Placing will proceed, the South African Placing would be conditional upon, inter alia, the following: • the Resolutions being passed by the relevant Shareholders at the Extraordinary General Meeting (without material amendment);
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• the Company raising proceeds of at least £100.0 million through the Placing;
• the South African Placing Agreement becoming unconditional; and
• Admission becoming effective by not later than 9.00 a.m. (South African time) on 23 February 2016 or such later time and/or date as the Company and the Bookrunners may agree (being not later than 9.00 a.m. (South African time) on 31 May 2016).
Accordingly, if any of such conditions were not satisfied, or, if applicable, waived, the proposed South African Placing would not proceed, and the Company will utilise the RPL Loan in order to complete the acquisition of the Tranche 2 Properties, to the extent the UK Placing has not otherwise taken place and raised sufficient funds.
Admission It is proposed that, subject to Shareholder approval of the Resolutions and the Board (in consultation with the Bookrunners) electing to proceed with the Placing, application will be made for the Placing Shares to be (a) admitted to listing on the premium segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities and (b) listed and traded on the Main Board of the JSE. It is expected that Admission of the Placing Shares would become effective and dealings would commence by 8.00 a.m. (London time) on 23 February 2016 in respect of the UK Placing Shares and 9.00 a.m. (South African time) on 23 February 2016 in respect of the South African Placing Shares whereupon an announcement will be made by the Company to a Regulatory Information Service and on SENS.
As the Placing would not involve a pre-emptive offer of shares to Existing Shareholders, Existing Shareholders who do not or are not permitted to participate in the potential Placing would suffer a maximum dilution of up to 20 per cent. to their interests in the Company (assuming a fundraising of £150.0 million where 375,000,000 Placing Shares are issued pursuant to the potential Placing at the Minimum Placing Price).
Consequences of the Placing not proceeding If the Resolutions are not approved by Shareholders at the EGM or prevailing market conditions mean that the Board (in consultation with the Bookrunners) elects not to proceed with the Placing or if, inter alia, the Company is unable to raise the minimum gross proceeds of £100.0 million through the Placing, the Placing will not proceed and the Company will utilise the RPL Loan to fund the completion of the acquisition of the Tranche 2 Properties. In such circumstances the Company would then have three months from the date of drawdown in which to either: • repay the proceeds from any subsequent debt or equity fundraising, again should market conditions permit the Company to raise such funds after completion of Tranche 2; or • failing that, elect to convert the loan (or otherwise allow the loan to convert automatically at the end of the three-month period) in either case leading to Redefine Properties taking a 50 per cent. equity interest in the Acquisition SPVs and Redefine Banbury Cross Limited, through an allotment of new shares by Redefine AUK representing 50 per cent. of the then enlarged issued share capital of Redefine AUK. If the Company has to utilise the RPL Loan to fund the completion of Tranche 2 (and the Company elects not to raise funds through a debt or equity fundraising prior to the repayment date of the RPL Loan), the Company may elect for the Conversion (or Conversion would occur automatically on the repayment date of the RPL Loan if it was not otherwise repaid before then), which would result in the Disposal. The RPL JV would be formed at that stage, as the Company and Redefine Properties would then each own 50 per cent. of Redefine AUK, subject to the provisions of the RPL JV Agreement which would then apply. Redefine AUK would, at that stage, own Banbury Cross Retail Park and 100 per cent. of the Tranche 1 Properties and Tranche 2 Properties by virtue of completion of the Acquisition Agreements. The RPL JV in respect of Redefine AUK would be a 50:50 joint venture, with neither the Company nor Redefine Properties capable of forcing the other to sell its shareholding in Redefine AUK. Further details of the RPL JV Agreement are set out in paragraph 21.6 of Part 15 (Additional information) of this document.
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7. WAIVER OF OBLIGATION UNDER RULE 9 OF THE UK TAKEOVER CODE The potential issue of the Placing Shares to Redefine Properties gives rise to certain considerations under the UK Takeover Code.
The purpose of the UK Takeover Code is to supervise and regulate takeovers and other matters to which it applies. The UK Takeover Code is issued and administered by the Takeover Panel. On the basis that the Company’s registered offices are in the Isle of Man and its shares are admitted to trading on a regulated market in the UK, it is a company to which the UK Takeover Code applies and as such its Shareholders are therefore entitled to the protections afforded by the UK Takeover Code.
Under Rule 9 of the UK Takeover Code, any person who acquires an interest (as defined in the UK Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the UK Takeover Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.
Similarly, where any person who, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person.
An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.
Currently, the Company has one large shareholder, Redefine Properties, which has an interest of 30.07 per cent. in the Company at the date of this document. For the purposes of the UK Takeover Code, Michael Watters, Marc Wainer and Bernard Nackan are also members of the Concert Party, as they are directors of Redefine Properties, and are also interested in Ordinary Shares. Furthermore, Stephen Carlin is also a member of the Concert Party as a result of his directorship of, and interest, in Redefine BDL. This results in the Concert Party having an aggregate holding of 30.80 per cent. of the Company’s Existing Ordinary Shares as at the Latest Practicable Date.
If the Company raises the minimum gross proceeds of £100.0 million through the Placing, such that Redefine Properties subscribes for the RPL Equity Commitment in full and additional Placees subscribe for Placing Shares for an aggregate value of £30.0 million (including the proposed participation of Michael Watters and Marc Wainer (and his wife) in the Placing, as described in notes (3) and (5) in the table below), the Concert Party would have an interest in up to 636,177,210 Ordinary Shares representing up to 36.45 per cent. of the issued share capital of the Company following Admission (assuming the Placing Price is set at the Minimum Placing Price).
A table showing the beneficial interests in Ordinary Shares of the Concert Party and the relevant related parties both before and upon Admission is set out below:
Shareholding in the Maximum shareholding Company as at the date in the Company as of this document at Admission(1) Percentage Percentage of the of the Number of Existing Number of Enlarged Ordinary Ordinary Ordinary Share Shareholder Shares Shares Shares Capital Redefine Properties 449,757,285 30.07 624,757,285 35.79 Michael Watters(2) 6,162,697 0.41 6,537,697(3) 0.37 Marc Wainer(4) 1,481,545 0.10 1,676,545(5) 0.10 Bernard Nackan(6) 19,023 0.00 19,023 0.00 Stephen Carlin 3,186,660 0.21 3,186,660 0.18 —————— —————— —————— —————— TOTAL 460,607,210 30.80 636,177,210 36.45 —————— —————— —————— ——————
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Notes: (1) Figures are calculated assuming that (a) the Placing Price is set at the Minimum Placing Price, (b) Redefine Properties subscribes for the RPL Equity Commitment in full, (c) the other Placees subscribe for Placing Shares for an aggregate value of £30.0 million and (d) no further issues of Ordinary Shares occur between publication of this document and Admission. (2) Michael Watters’ shareholding is held indirectly through two pension fund structures. (3) Michael Watters has irrevocably undertaken to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate amount of £150,000, if the Placing proceeds. (4) Marc Wainer’s beneficial interest is held through the 103,774 shareholding in the name of his wife and the 2,755,541 shareholding held by Ellwain Investments (Pty) Limited, of which he is a 50 per cent. shareholder. (5) Marc Wainer has irrevocably undertaken to subscribe for 175,000 Placing Shares at the Placing Price (to be held through his Drawood Trust) and procure that his wife subscribes for 20,000 Placing Shares at the Placing Price, if the Placing proceeds.
(6) Bernard Nackan’s percentage interest in the Ordinary Share capital rounds down to 0.00 per cent. Following an application by the Directors, the Takeover Panel has agreed, subject to the Rule 9 Waiver Resolution being passed on a poll by Rule 9 Independent Shareholders, to waive the requirement for the Concert Party to make an offer to Shareholders as would otherwise arise under Rule 9 of the UK Takeover Code as a result of the issue of up to a maximum aggregate amount of 175,000,000 Placing Shares to Redefine Properties and 375,000 Placing Shares to Michael Watters (assuming the Placing Shares are issued at the Minimum Placing Price) and 175,000 Placing Shares to Marc Wainer and 20,000 Placing Shares to Marc Wainer’s wife. The potential Placing would therefore be conditional on the approval of the Rule 9 Waiver Resolution by Rule 9 Independent Shareholders being obtained.
In addition, Michael Watters may be entitled to receive further Ordinary Shares in the future (as approved at the extraordinary general meeting of the Company held on 29 November 2013) by virtue of any awards granted under and pursuant to the terms of the Performance Share Plan. The maximum number of new Ordinary Shares which may be issued to Michael Watters (if the maximum possible awards were granted by the Remuneration Committee under the Performance Share Plan and all conditions to the awards were satisfied in full) is 7,000,000 Ordinary Shares.
Therefore, assuming the award and subsequent issue of the maximum amount of 7,000,000 Ordinary Shares to Michael Watters and the issue of the Placing Shares (assuming the minimum proceeds of £100 million are raised through the Placing, that Redefine Properties subscribes for the RPL Equity Commitment in full and that the Placing Price is set at the Minimum Placing Price), the maximum interest of Michael Watters would be 13,537,697 Ordinary Shares (representing 0.77 per cent. of the issued share capital of the Company) and the maximum interest of the Concert Party would be 643,177,210 Ordinary Shares (representing 36.70 per cent. of the issued share capital of the Company).
Further details about Redefine Properties and the other members of the Concert Party are set out in Part 14 (Waiver of Rule 9 of the UK Takeover Code and Information on the Concert Party) of this document.
The UK Takeover Code requires the Independent Directors to obtain competent independent advice regarding the merits of the transaction which is the subject of the Rule 9 Waiver Resolution, the controlling position which it will create, and the effect which it will have on the Shareholders generally.
Accordingly, Peel Hunt, as the Company’s UK sponsor, has provided formal advice to the Independent Directors regarding the Placing. Peel Hunt confirms that it is independent of the Concert Party and has no commercial relationship with any member of the Concert Party.
Shareholders should note that, following the Placing, the Concert Party would not be entitled to increase its interest in the voting rights of the Company without incurring a further obligation under Rule 9 of the UK Takeover Code to make a general offer (unless a dispensation from this requirement has been obtained from the Takeover Panel in advance).
If the Rule 9 Waiver Resolution is passed by the Rule 9 Independent Shareholders at the Extraordinary General Meeting, the Concert Party will not be restricted from making an offer for the Company.
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8. RELATED PARTY TRANSACTION By virtue of Redefine Properties’ 30.07 per cent. shareholding in the Company, Redefine Properties is a related party due to it being a substantial shareholder of the Company under the UK Listing Rules. Redefine Properties’ proposed subscription of such number of Placing Shares under the Placing as equals an aggregate amount of £70.0 million constitutes a related party transaction under Chapter 11 of the UK Listing Rules.
Consequently, the Related Party Transaction is conditional upon, and must be approved by, the Related Party Independent Shareholders before it can be completed. Accordingly, the approval of the Related Party Independent Shareholders will be sought at the EGM to be held on 15 February 2016. The notice convening the EGM is set out at the end of this document. Redefine Properties will not vote on the Related Party Resolution and has undertaken to take all reasonable steps to ensure that its associates will not vote on the Related Party Resolution to be proposed at the EGM.
9. SUMMARY OF EXTRAORDINARY GENERAL MEETING The Placing is subject to a number of conditions, including Shareholders’ approval of the Resolutions to be proposed at the Extraordinary General Meeting (without material amendment). If any of those Resolutions are not approved at the Extraordinary General Meeting, the Company would be unable to complete the Placing.
A notice convening the Extraordinary General Meeting to be held at 2nd Floor, 30 Charles II Street, London SW1Y 4AE at 9.30 a.m. on 15 February 2016 is set out at the end of this document.
First Resolution The First Resolution, which is subject to and conditional on the passing of the Second Resolution, the Rule 9 Waiver Resolution and the Related Party Resolution, authorises the Directors to allot up to 375,000,000 Ordinary Shares, representing approximately 25.1 per cent. of the Company’s current issued share capital as at the Latest Practicable Date). This will enable the Company to allot sufficient Placing Shares to satisfy its obligations in connection with the potential Placing. This authority will expire at the conclusion of the next annual general meeting of the Company in 2017 (unless previously revoked or varied by the Company). The authority granted under the First Resolution, which will be proposed as an ordinary resolution requiring a simple majority of votes in favour, is in addition to the authority to allot Ordinary Shares which was granted to the Directors at the Company’s annual general meeting on 26 January 2016, and which will expire on the date of the annual general meeting of the Company to be held in 2017 unless previously revoked or varied by the Company.
Second Resolution The Second Resolution, which is subject to and conditional on the passing of the First Resolution, the Rule 9 Waiver Resolution and the Related Party Resolution, grants the Directors authority to allot equity securities for cash pursuant to the authority conferred on them by the First Resolution as if the pre- emption provisions in Article 10 of the Articles of Association did not apply to such allotment.
It should be noted that whilst the provisions of Article 10 of the Articles of Association confer on Shareholders rights of pre-emption on the allotment of equity securities for cash, the Second Resolution seeks to disapply this right for the purpose of the potential Placing.
The Second Resolution will be proposed, as a special resolution requiring the approval of at least 75 per cent. of the votes cast. The authority granted under the Second Resolution is in addition to the authority which was granted to the Directors at the Company’s annual general meeting on 26 January 2016, and will (unless previously revoked or varied by the Company in general meeting) expire on the date 15 months from the passing of such resolution.
Third Resolution: Rule 9 Waiver Resolution The Rule 9 Waiver Resolution, which will be proposed as an ordinary resolution, and which is conditional on the First Resolution, the Second Resolution and the Related Party Resolution, proposes that the grant by the Takeover Panel of the waiver of the Concert Party’s obligations under Rule 9.1 of the UK Takeover Code (which is explained in paragraph 7 above) be approved. This resolution must be
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approved by Rule 9 Independent Shareholders by a simple majority. Under the UK Takeover Code, this resolution must be conducted by way of a poll.
Fourth Resolution: Related Party Resolution The Related Party Resolution, which will be proposed as an ordinary resolution and which is conditional on the First Resolution, the Second Resolution and the Rule 9 Waiver Resolution being passed, proposes that the Related Party Transaction, which constitutes a related party transaction under the UK Listing Rules, be approved and that the Directors be authorised to implement the Related Party Transaction as they deem fit. This resolution must be approved by the Related Party Independent Shareholders by a simple majority.
Your attention is again drawn to the fact that the potential Placing is conditional and dependent upon each of the Resolutions being passed.
For further information in relation to the Resolutions to be proposed at the Extraordinary General Meeting, please see the Notice of Extraordinary General Meeting at the end of this document.
10. IRREVOCABLE UNDERTAKINGS Redefine Properties has irrevocably undertaken to vote in favour of the Share Authority Resolutions at the EGM, representing approximately 30.07 per cent. of all votes capable of being cast in respect of those Resolutions.
Those Directors who own Ordinary Shares have irrevocably undertaken to vote in favour of the Share Authority Resolutions and the Related Party Resolution at the EGM, representing approximately 0.58 per cent. of all votes capable of being cast in respect of those Resolutions.
Save for Michael Watters, Marc Wainer, Bernard Nackan, Gavin Tipper, Robert Orr and Adrian Horsburgh, those Directors who own Ordinary Shares have irrevocably undertaken to vote in favour of the Rule 9 Waiver Resolution, representing 0.04 per cent. of all votes capable of being cast in respect of such Resolution.
If the Placing proceeds:
• Michael Watters and Robert Orr have irrevocably undertaken to subscribe for such number of Placing Shares at the Placing as equals an aggregate amount of £150,000 and £10,000 respectively;
• Gavin Tipper and Adrian Horsburgh have irrevocably undertaken to subscribe for 100,000 Placing Shares and 10,000 Placing Shares at the Placing Price respectively; and
• Marc Wainer has irrevocably undertaken to subscribe for 175,000 Placing Shares at the Placing Price (to be held through his Drawood Trust) and procure that his wife subscribes for 20,000 Placing Shares at the Placing Price.
11. FINANCIAL IMPACT OF THE PLACING A pro forma statement of the net assets of the Group and illustrations of the effect of the potential Placing and the completion of the acquisition of the Tranche 2 Properties on the Group as at 31 August 2015 is set out in Part 12 (Unaudited Pro Forma Financial Information of the Group) of this document.
12. DIVIDEND POLICY The Company’s dividend policy is consistent with the UK-REIT regime, as applicable from time to time. Currently, as a UK-REIT the Company is required to distribute at least 90 per cent. of its UK property rental profits to Shareholders.
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13. LISTING, DEALINGS AND SETTLEMENT If the Placing proceeds, it is expected that the result of the potential Placing, including the Placing Price, would be announced on 16 February 2016 (depending on when the Bookbuild is closed). The potential Placing Shares would be issued credited as fully paid and would rank pari passu in all respects with the Existing Ordinary Shares. The Placing Shares would be created under the Companies Act 2006 and the legislation made thereunder, would be issued in registered form and would be capable of being held in both certificated and uncertificated form. The other rights attached to the potential Placing Shares are set out in paragraph 17 of Part 15 (Additional Information) of this document.
It is proposed that, subject to Shareholder approval of the Resolutions and the Board (in consultation with the Bookrunners) electing to proceed with the Placing, applications would be made to (a) the UK Listing Authority for the Placing Shares to be admitted to the Official List with a premium listing and to the London Stock Exchange for the Placing Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities and (b) the JSE for the Placing Shares to be listed and traded on the Main Board of the JSE. If the Placing proceeds, it is expected that Admission would become effective and that dealings for normal settlement in the Placing Shares would commence on the London Stock Exchange by 8.00 a.m. (London time) on 23 February 2016 and on the JSE by 9.00 a.m. (South African time) on 23 February 2016.
The Existing Ordinary Shares are already admitted to (a) the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities and to CREST and (b) listing and trading on the Main Board of the JSE and the Strate system in South Africa. It is expected that all of the Placing Shares, when issued and fully paid, will be capable of being held and transferred by means of CREST and the Strate system in South Africa. The ISIN number of the potential Placing Shares will be IM00B8BV8G91, the SEDOL code will be B8BV8G9 and the JSE share code will be RPL and the LSE share code will be RDI.
14. OVERSEAS PERSONS
14.1 United States The potential Placing Shares have not been, and will not be, registered under the US Securities Act or under the securities laws of any state, district or other jurisdiction of the United States. Accordingly, the potential Placing Shares may not be offered, sold, resold, delivered, distributed or otherwise transferred, directly or indirectly, within the United States unless the offer and sale of Placing Shares has been registered under the US Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The potential Placing Shares are being offered or sold outside the United States, in reliance on Regulation S.
None of the securities referred to in this document have been approved or disapproved by the SEC, any state securities commission in the United States or any other US regulatory authority, nor have such authorities passed upon or determined the adequacy or accuracy of this document. Any representation to the contrary is a criminal offence in the United States.
14.2 Other jurisdictions This document and the Form of Proxy are not being made available to Overseas Shareholders with registered addresses in any Restricted Jurisdiction and may not be treated as an invitation to subscribe for any Placing Shares by any person resident or located in such jurisdictions or any other Restricted Jurisdiction.
The potential Placing Shares have not been, and will not be, registered under the applicable securities laws of any Restricted Jurisdiction. Accordingly, the potential Placing Shares may not be offered, sold, delivered or transferred, directly or indirectly, in or into any Restricted Jurisdiction to or for the account or benefit of any national, resident or citizen of any Restricted Jurisdiction.
This document has been prepared to comply with English law, the UK Prospectus Rules, the UK Listing Rules and the JSE Listings Requirements, and the information disclosed may not be the same as that which could have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.
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NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.
15. TAXATION Information regarding United Kingdom taxation with regard to the potential Placing is set out in paragraph 18 of Part 15 (Additional Information) of this document. If you are in any doubt as to your own tax position you should contact your professional adviser immediately.
16. RISKS AND ADDITIONAL INFORMATION Your attention is drawn to the risks and additional information contained in the summary and risk factors sections of this document. You are advised to read the whole of the document and not rely only on the summary information presented in this Part 7 of this document.
17. ACTION TO BE TAKEN In respect of the General Meeting Enclosed with this document is a Form of Proxy for use at the Extraordinary General Meeting or any adjournment thereof by Shareholders on the UK share register and by Shareholders on the SA share register (as applicable).
Shareholders on the UK share register CREST members who wish to appoint a proxy or proxies through the CREST electronic appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed (a) service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
Whether or not you intend to be present in person at the Extraordinary General Meeting:
(a) if you hold your Ordinary Shares in certificated form on the UK share register, you are requested to complete and sign the Form of Proxy in accordance with the instructions printed on it and return it as soon as possible, but in any event, so as to be received by the Company’s Registrar, Capita Asset Services, PXS 1, 34 Beckenham Road, Beckenham BR3 4ZF; or
(b) if you hold your Ordinary Shares in uncertificated form on the UK share register, you are requested to transmit the relevant CREST message, which must be properly authenticated in accordance with Euroclear UK’s specifications and must contain the information required for such instruction as described in the CREST Manual, so as to be received by the issuer’s agent (ID RA10), in each case, by no later than 10.00 a.m. (London time) on 12 February 2016.
If the Form of Proxy is not returned or the relevant CREST message is not transmitted by 10.00 a.m. (London time) on 12 February 2016, your proxy vote will not count.
Shareholders wishing to vote online should visit www.capitashareportal.com and follow the instructions.
The lodging of a Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending and voting at the Extraordinary General Meeting in person if you so wish.
The Resolutions will be taken on a poll rather than on a show of hands. The Company believes a poll is more representative of the Shareholders’ voting intentions because Shareholder votes are counted according to the number of shares held and all votes tendered are taken into account. The results of the poll will be announced to the London Stock Exchange via a Regulatory Information Service and available on the Company’s website as soon as practicable following the conclusion of the Extraordinary General Meeting.
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Shareholders on the SA share register If you hold your Ordinary Shares in uncertificated form on the SA share register and do not have “own name” registration you should not complete the Form of Proxy. In order to vote at or attend the Extraordinary General Meeting you should be in contact with your CSDP or broker. If you have not been contacted by your CSDP or broker, it is advisable for you to contact your CSDP or broker immediately and furnish your CSDP or broker with your voting instructions in the manner and by the cut-off time stipulated by your CSDP or broker in terms of the custody agreement between you and your CSDP or broker.
If your CSDP or broker does not obtain voting instructions from you, your CSDP or broker will be obliged to act in accordance with the instructions contained in the custody agreement between you and your CSDP or broker.
Should you wish to attend, speak and vote, or to send a proxy to represent you at the Extraordinary General Meeting, you must, in accordance with the custody agreement between you and your CSDP or broker, advise your CSDP or broker. Your CSDP or broker should then issue the necessary letter of representation to you for you or your proxy to attend, speak and vote at the Extraordinary General Meeting.
If you have not dematerialised your shares, or if you have “own name” registration Dematerialised Shares, you may attend the Extraordinary General Meeting in person.
Alternatively, you will find enclosed with this document a Form of Proxy which you are asked to complete in accordance with the instructions printed thereon and return as soon as possible, but in any event so as to be received by Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, South Africa or posted to PO Box 61051, Marshalltown, 2107, South Africa or faxed to fax number +27(11) 688 5238 or emailed to [email protected] at least 48 hours prior to the Extraordinary General Meeting. However, the Form of Proxy for the Extraordinary General Meeting cannot be handed to the Chairman of the Extraordinary General Meeting and will be invalid if it is received after the time mentioned above. The return of completed Form of Proxy will not prevent Shareholders from attending the Extraordinary General Meeting and voting in person if they so wish and if they are entitled to do so.
Shareholders on the SA share register who wish to be assisted in completing or forwarding their Forms of Proxy in accordance with the above instructions should contact Computershare Investor Services Proprietary Limited as soon as possible and those who wish to revoke or replace their Forms of Proxy should contact Computershare Investor Services Proprietary Limited on +27(11) 370 5000.
If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manager or other independent financial adviser authorised under FSMA if you are in the United Kingdom or, if you are not, from another appropriately authorised independent financial adviser.
Your attention is drawn to Part 2 of this document headed “Risk Factors”. You should read all of the information contained in, or incorporated by reference into, this document before deciding the action to take in respect of the Resolutions.
The results of the votes cast at the Extraordinary General Meeting will be announced as soon as possible once known through a Regulatory Information Service and on the SENS, and on the Redefine International website (www.redefineinternational.com). It is expected that this will be on 15 February 2016.
18. RECOMMENDATION Placing and Share Authority Resolutions Subject to favourable prevailing market conditions, the Board believes that the potential Placing and the Share Authority Resolutions are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that you vote in favour of the Share Authority Resolutions, as those Directors who are Shareholders intend to do in respect of their own beneficial holdings, comprising 8,645,431 Ordinary Shares, representing, in aggregate, 0.58 per cent. of the Company’s issued share capital as at the Latest Practicable Date. As noted in paragraph 10 above,
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Redefine Properties has also irrevocably undertaken to vote in favour of the Share Authority Resolutions at the EGM, representing approximately 30.07 per cent. of all votes capable of being cast in respect of those Resolutions.
Rule 9 Waiver The Independent Directors, who have been so advised by Peel Hunt, consider the terms of the Placing to be fair and reasonable and in the best interests of the Rule 9 Independent Shareholders and the Company as a whole. In providing such advice to the Independent Directors, Peel Hunt has taken account of the Board’s commercial assessment of the Placing. None of Michael Watters, Marc Wainer and Bernard Nackan have taken part in the Independent Directors’ consideration of the Rule 9 Waiver Resolution, as they are members of the Concert Party. None of Gavin Tipper, Robert Orr and Adrian Horsburgh have taken part in the Independent Directors’ consideration of the Rule 9 Waiver Resolution, as they have irrevocably undertaken to participate in the Placing.
Accordingly, the Independent Directors unanimously recommend that all Rule 9 Independent Shareholders vote in favour of the Rule 9 Waiver Resolution to be proposed at the Extraordinary General Meeting, as the Independent Directors who own Ordinary Shares intend to do in respect of their own beneficial holdings, comprising 573,536 Ordinary Shares in aggregate, representing approximately 0.04 per cent. of the existing issued share capital of the Company as at the Latest Practicable Date.
Related Party Transaction The Board, having been so advised by Peel Hunt, consider the terms of the Related Party Transaction to be fair and reasonable as far as Shareholders are concerned and in the best interests of the Company and Shareholders as a whole. In providing financial advice to the Board, Peel Hunt has taken account of the Board’s commercial assessment of the Related Party Transaction. None of Michael Watters, Marc Wainer and Bernard Nackan have taken part in the Board’s consideration of the Related Party Resolution. Redefine Properties (being the related party for the purpose of the UK Listing Rules) has irrevocably undertaken (a) that it will not vote on the Related Party Resolution and (b) to take all reasonable steps to ensure that each of its associates who are beneficially interested in Ordinary Shares will not vote on the Related Party Resolution, in each case to be proposed at the EGM.
Accordingly, the Board consider that the passing of the Related Party Resolution would be in the best interests of Shareholders as a whole and unanimously recommend that all Shareholders vote in favour of the Related Party Resolution to be proposed at the Extraordinary General Meeting, as those Directors who own Ordinary Shares intend to do in respect of their own beneficial holdings comprising 8,645,431 Ordinary Shares in aggregate, representing approximately 0.58 per cent. of the existing issued share capital of the Company as at the Latest Practicable Date.
Yours faithfully,
Gregory Clarke Chairman
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PART 8
INFORMATION ON THE POTENTIAL PLACING SHARES
1. Description of the type and class of securities admitted The potential Placing Shares would be Ordinary Shares with a nominal value of 8.0 pence each. The ISIN of the potential Placing Shares will be IM00B8BV8G91, the SEDOL code will be B8BV8G9, the JSE share code will be RPL and the LSE share code will be RDI, being the same ISIN, SEDOL code, JSE share code and LSE share code as that of the Existing Ordinary Shares. The Placing Shares would be created under the Companies Act 2006 and the Articles of Association. Following the Placing, if it proceeds, the Company will have one class of Ordinary Shares, the rights of which are set out in the Articles of Association.
The potential Placing Shares would be credited as fully paid and free from all liens, equities, charges, encumbrances and other interests. The Placing Shares issued pursuant to the potential Placing will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Redefine International.
2. Listing It is proposed that, subject to Shareholder approval of the Resolutions and the Board electing to proceed with the Placing, application will be made to (a) the UK Listing Authority for the Placing Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the Placing Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities and (b) to the JSE for the Placing Shares to be listed and traded on the Main Board of the JSE. It is expected, if the Placing proceeds, that Admission will become effective and dealings in the Placing Shares will commence by 8.00 a.m. (London time) on 23 February 2016 in respect of the UK Placing Shares and 9.00 a.m. (South African time) on 23 February 2016 in respect of the South African Placing Shares (in each case depending on when the Bookbuild is closed).
Listing of the potential Placing Shares will not be sought on any stock exchange in connection with the Placing other than the London Stock Exchange and the JSE.
3. Form and currency of the Placing Shares The Placing Shares resulting from the potential Placing will be issued in registered form and will be capable of being held in certificated and uncertificated form, as is the case for the Existing Ordinary Shares.
Title to the certificated Placing Shares will be evidenced by entry in the register of members of the Company and title to uncertificated Placing Shares will, in respect of Shareholders, be evidenced by entry in the operator register maintained by Euroclear (which forms part of the register of members of the Company), as is the case for the Existing Ordinary Shares. The registrar of the Company is Capita.
If any Placing Shares are converted to be held in certificated form, share certificates will be issued in respect of those shares in accordance with the Articles of Association and applicable legislation.
The potential Placing Shares will be denominated in pence, as is the case for the Existing Ordinary Shares.
4. Rights attached to the Placing Shares The Placing Shares issued pursuant to the potential Placing will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Redefine International. Each Placing Share will have the same voting rights, rights on a return of capital and restrictions as the other Ordinary Shares, as set out in the Articles of Association. These rights are set out in paragraph 17 of Part 15 (Additional Information) of this document.
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5. Resolution, authorisations and approvals relating to the Placing Shares The Placing Shares under the potential Placing will be created, allotted and issued pursuant to the authority to be granted under the Share Authority Resolutions proposed at the Extraordinary General Meeting.
6. Dates of issue and settlement If the Placing proceeds, the potential Placing Shares are expected to be issued and allotted on 23 February 2016.
7. Description of restrictions on free transferability The following restrictions apply to the free transferability of the Ordinary Shares:
• If any Shareholder has been served with a request notice under Article 162 of the Articles of Association and does not within the 14-day period prescribed therein supply to the Company the information thereby requested, the Company may (at the absolute discretion of the Directors) at any time thereafter by a restriction notice to such Shareholder direct that no transfer of any of the shares held by such member (the “Default Shares”) shall be recognised or registered by the Directors unless:
(i) the transfer is a permitted transfer; or
(ii) the member is not himself in default as regards supplying the requisite information required under Article 162 and, when presented for registration, the transfer is accompanied by a certificate by the member in a form satisfactory to the Directors to the effect that after due and careful enquiry the member is satisfied that none of the shares the subject of the transfer are Default Shares under the Articles,
provided the Default Shares represent at least 0.25 per cent. (in nominal value) of the issued shares of the same class as the Default Shares.
• The Board may refuse to register a transfer if in their opinion (and with the concurrence of the FCA or the JSE or such other competent authority) exceptional circumstances so warrant.
• Transfers of shares to a prohibited person under the Articles will not be registered.
8. Mandatory takeover bids, squeeze-out and sell-out rules
8.1 Mandatory bids The UK Takeover Code applies to the Company. Under the UK Takeover Code, if an acquisition of interests in shares were to increase the aggregate holding of an acquirer and persons acting in concert with it to an interest in shares carrying 30 per cent. or more of the voting rights in the Company, the acquirer and, depending upon the circumstances, persons acting in concert with it, would be required (except with the consent of the Takeover Panel) to make a cash offer for the outstanding shares in the Company at a price not less than the highest price paid for any interest in shares by the acquirer or his concert parties during the previous 12 months. A similar obligation to make such a mandatory offer would also arise on the acquisition of an interest in shares by a person holding (together with any persons acting in concert) an interest in shares carrying between 30 per cent. and 50 per cent. of the voting rights in the Company if the effect of such acquisition were to increase that person’s percentage of the voting rights.
8.2 Squeeze-out rules Under the Companies Act 2006, where a scheme or contract involving the transfer of shares or any class of shares in a company to another person (the “transferee”), has within 16 weeks of making the offer been approved by the holders of at least 90 per cent. in value of the shares affected, then the transferee may at any time within eight weeks after the transferee has acquired or contracted to acquire shares necessary to satisfy the 90 per cent. threshold, give notice to any dissenting shareholder that it desires to acquire such dissenting shareholders’ shares.
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Where a notice is given by the transferee to a dissenting shareholder, the transferee shall be entitled and bound to acquire those shares on the terms on which under the scheme or contract the shares of the approving shareholders are to be transferred (subject to limited exceptions). A dissenting shareholder may apply to the Isle of Man Court within one month from the date on which notice is given for an order to the contrary.
8.3 Takeover bids No public takeover bid has been made in relation to the Company during the last financial year or the current financial year.
9. Taxation Please see paragraph 18 of Part 15 (Additional Information) of this document for information relating to UK taxation (including a discussion of UK stamp duty and SDRT which is relevant to holders of Ordinary Shares irrespective of their tax residence).
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PART 9
INFORMATION ON REDEFINE INTERNATIONAL
1. INTRODUCTION The Company is an Isle of Man registered property investment company which was incorporated under the 1931 Act on 28 June 2004, with registered number 111198C. On 3 December 2013, the Company re-registered under the Isle of Man Companies Act 2006 with registered number 010534V.
Currently, the Company holds a primary listing on the London Stock Exchange’s main market for listed securities, within the premium listing segment (LSE share code: RDI) and a secondary listing in the “Real Estate – Real Estate Holdings and Development” sector of the Main Board of the JSE (JSE Share code: RPL). The Company operates under the Companies Act 2006 and adheres to the UK Corporate Governance Code 2014.
The Company is an income focused diversified UK-REIT with exposure to a broad range of properties and geographical areas. The Company has direct and indirect property investments in the UK and Germany, providing exposure to the retail, office, industrial and hotel sectors.
2. HISTORY AND DEVELOPMENT Key milestones in the Group’s development include the following:
2009 – Redefine Properties acquired a controlling stake in Redefine International’s Investment Adviser, RIFM.
2010 – Redefine Properties acquired a majority shareholding in Ciref plc, a company listed on the Alternative Investment Market. Ciref plc subsequently changed its name to Redefine International plc (“RIHL”). During the same year RIHL acquired its initial stake in Wichford P.L.C. (“Wichford”), a company listed on the London Stock Exchange’s main market for listed securities.
July 2011 – The boards of Wichford and RIHL announced that they had reached agreement on a reverse acquisition in terms of which Wichford made an all share offer for the entire issued ordinary share capital of RIHL (the “reverse acquisition”). RIHL’s shareholders received 7.2 ordinary shares of one penny each in the capital of Wichford for each RIHL share held. The share register was subsequently consolidated on the basis of one new ordinary share of 7.2 pence for every ordinary share of one penny held.
August 2011 – The Company announced that the reverse acquisition had become unconditional in all respects and on 23 August 2011 announced the admission of 543,890,859 ordinary shares of 7.2 pence each to trading on the London Stock Exchange’s main market for listed securities. Wichford subsequently changed its name to Redefine International P.L.C.. Following further acceptances of the offer and the final squeeze out of non-controlling shareholders in RIHL, a total of 567,643,792 Redefine International ordinary shares of 7.2 pence each were in issue as at 6 October 2011.
October 2012 – The Company announced that it had conditionally raised, through a firm Placing, gross proceeds of £127.5 million. Following admission of 490,384,616 new ordinary shares issued pursuant to the firm placing, the Company’s issued ordinary share capital comprised 1,069,839,408 ordinary shares of 7.2 pence each in the capital of the Company. As a result, Redefine Properties International’s shareholding in Redefine International was reduced to 65.73 per cent.
The share register was then consolidated on a 9 for 10 basis following which the Company’s issued ordinary share capital comprised 962,855,467 ordinary shares of 8.0 pence each in the capital of the Company.
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October 2013 – Redefine Properties International unitholders approved the unbundling by Redefine Properties International of its sole asset, being a 61.8 per cent. holding in Redefine International and the delisting of Redefine Properties International from the JSE and the winding up of Redefine Properties International. Redefine Properties direct shareholding in Redefine International then stood at 33 per cent.
Following receipt of approval from the South African Reserve Bank, the Company secured a secondary listing on the JSE by way of introduction, and now holds (i) a primary listing on the premium listing segment of the Official List and the London Stock Exchange’s main market for listed securities; and (ii) a secondary listing on the “Real Estate – Real Estate Holdings and Development” sector of the Main Board of the JSE.
January 2015 – The Company announced the €156.8 million acquisition of a portfolio of 56 German retail properties in a 50:50 joint venture with Redefine Properties.
February 2015 – The Company transferred its listing from a premium listing under Chapter 15 (investment company) to a premium listing under Chapter 6 (commercial company) of the UK Listing Rules and replaced its investment policy with a business strategy, as set out in paragraph 3 below.
The Company also completed a placing of new shares, raising gross proceeds of £70.9 million.
August 2015 – The Company sold its remaining stake in the Cromwell Group and its Swiss COOP portfolio.
September 2015 – On 5 September 2015, the Company entered into a conditional agreement with Aegon UK Property Fund to acquire the AUK Portfolio for an aggregate consideration of £437.2 million. The Company completed the acquisition of Tranche 1 of the AUK Portfolio on 2 October 2015.
The diagram below provides a high level summary of the Group’s current structure:
Redefine Properties Ltd Other Shareholders (SA: 1999/018591/06) Listed on JSE
30.07% 69.93%
Redefine International P.L.C. (IOM: 010534V)
Listed on LSE and JSE
UK RETAIL UK HOTELS UK EUROPE COMMERCIAL
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3. THE BUSINESS 3.1 Business strategy The Group’s business strategy has four elements:
Superior income focused returns The Group aims to provide Shareholders with consistent and growing income returns and exposure to capital growth through asset management and development of our assets. The Group is disciplined in its investment approach, ensuring capital is invested in assets that can deliver returns in excess of its cost of capital. The Directors believe that cash based income returns are fundamental to overall property returns and, in the long term, growth in capital values is dependent on sustainable rental growth.
Distribution growth The Group is focused on all areas of its business that contribute to bottom line income growth including rental growth, cost reduction and efficient financing costs. Through investing in well located assets that meet occupiers’ requirements, the Group aims to generate demand that supports sustainable rental growth. By generating returns in excess of its cost of capital, the Group seeks to achieve distribution growth in excess of inflation. The Group aims to provide Shareholders with an attractive return on capital through the regular payment of dividends and the potential for capital (share price) appreciation over time.
Enhancing the quality of the Group’s portfolio The Group targets property investments which provide occupiers with well configured space of the right size and specification and in locations which support economic rents. The Group aims to create value through managing its assets well, investing in its portfolio and selling mature assets at the right point in the property cycle. The Group consistently looks to recycle capital and reinvest into assets within its business segments expected to provide the best risk adjusted returns. Capital is reinvested into both new investments and within the Group’s existing portfolio where opportunities arise.
Reducing the cost of capital A lower cost of capital enables the Group to be more competitive in the investment market and to invest in quality assets with the potential to deliver sustainable rental and capital growth. The ratio of net debt funding to the current market value of the Group’s investments is monitored closely to ensure an effective balance between the use of leverage and reducing its overall cost of capital. The Group carefully monitors the cost and maturity profile of its borrowings and the expected future liquidity and cost of borrowing in the capital markets. The Group’s policy is to fix the interest rates on at least 75 per cent. of overall borrowings to ensure we have visibility on future interest costs.
3.2 Details on the Group As at 31 August 2015, the Group had interests in 164 properties valued at £1,044.6 million (including the Group’s share of joint venture interests), with a gross rentable area of approximately 521,425 square metres and generating an annualised gross rental income of £76.0 million.
3.3 Investment markets The Group is focused on real estate investment in large, well developed economies with established and transparent real estate markets. The investment portfolio is geographically diversified across the UK and Germany providing exposure to the retail, office, industrial and hotel sectors.
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3.4 Business segments The Group’s business is split into four distinct yet complementary key business segments: UK Commercial, UK Retail, Europe and UK Hotels. The resources of the Group are allocated across the identified reportable business segments set out below:
UK Retail The Group’s UK Retail portfolio consists of six wholly-owned regional and community district shopping centres in the UK, being St George’s in Harrow, Weston Favell in Northampton, West Orchards in Coventry, Birchwood in Warrington, Grand Arcade in Wigan and Byron Place in Seaham, County Durham.
UK Commercial The UK Commercial portfolio comprises 63 properties diversified across the office, motor trade and service stations sectors. Geographically spread throughout the UK, the portfolio includes 22 office properties, 14 petrol filling stations and 27 motor trade properties. Office buildings are predominantly government-let tenancies, whereas national and international brands, including BP and Kwik-Fit, occupy the service station and motor trade properties.
UK Hotels The UK Hotels portfolio comprises eight hotels in Greater London and the South East. These are branded Holiday Inn, Holiday Inn Express, Crowne Plaza and Travelodge. The portfolio also includes the DoubleTree by Hilton in Edinburgh. The Group has a 25.3 per cent. shareholding in Redefine BDL, the UK’s largest independent hotel manager, which leases and manages all of the Group’s hotel properties with the exception of the Travelodge, Enfield.
Europe The European portfolio is focused in Germany and consists of 86 properties including three shopping centres: Schloss Strassen Center located in Berlin, Bahnhof Center in Hamburg and City Arcaden in Ingolstadt. Other assets include retail parks, discount supermarkets and government let offices.
4. THE PROPERTY PORTFOLIO The analysis of the property portfolio, which is set out below, reflects the composition of the portfolio as at the date of this document. The analysis is based on market values effective as at 31 August 2015. The portfolio is representative of the Group’s entire portfolio of properties (including the Group’s share of jointly controlled entities).
Market Value Segmental 31 August Split by Net Initial No. of Lettable 2015 Value Yield Business Segments – Market Values Properties Area (m2) £m % % UK Retail 6 159,076 349.6 33.5 6.4 UK Commercial 63 112,601 162.2 15.5 7.3 UK Hotels 9 41,323 234.7 22.5 5.8 ––––––– ––––––– ––––––– ––––––– ––––––– Total UK 78 313,000 746.5 71.5 6.4 Europe 85 195,547 293.5 28.1 5.6 ––––––– ––––––– ––––––– ––––––– ––––––– Total (excl. non-core assets) 163 508,547 1,040.0 99.6 6.2 ––––––– ––––––– ––––––– ––––––– ––––––– Non-core portfolio 1 12,878 4.6 0.4 34.4 ––––––– ––––––– ––––––– ––––––– ––––––– Total 164 521,425 1,044.6 100.0 6.3 ––––––– ––––––– ––––––– ––––––– ––––––– Notes: (1) Figures reflect the Group’s share of jointly controlled entities. (2) The non-core portfolio relates to the Justice Centre in the Hague. (3) Valuations are stated as at 31 August 2015.
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Market Value Annualised Occupancy 31 August Gross Rental by Lettable 2015 Income Area Lettable Business Segments – Income £m £m % Area (m2) UK Retail 349.6 27.0 97.1 159,076 UK Commercial 162.2 13.1 99.3 112,601 UK Hotels 234.7 14.4 98.5 41,323 ––––––– ––––––– ––––––– ––––––– Total UK 746.5 54.5 98.1 313,000 Europe 293.5 19.8 98.2 195,547 ––––––– ––––––– ––––––– ––––––– Total (excl. non-core assets) 1,040.0 74.3 98.1 508,547 ––––––– ––––––– ––––––– ––––––– Non-core portfolio 4.6 1.7 100.0 12,878 ––––––– ––––––– ––––––– ––––––– Total 1,044.6 76.0 98.2 521,425 ––––––– ––––––– ––––––– ––––––– Notes: (1) Figures reflect the Group’s share of jointly controlled entities. (2) The non-core portfolio relates to the Justice Centre in the Hague. (3) Valuations are stated as at 31 August 2015.
Market Value Annualised Occupancy 31 August Gross Rental by Lettable 2015 Income Area Lettable Sector Portfolio Overview £m £m % Area (m2) Retail 609.5 43.9 97.7 332,504 Hotels 234.7 14.4 98.5 41,323 Offices 155.5 13.4 98.5 86,318 Industrial 40.3 2.6 100.0 48,402 ––––––– ––––––– ––––––– ––––––– Total (excl. non-core assets) 1,040.0 74.3 98.1 508,547 ––––––– ––––––– ––––––– ––––––– Notes: (1) Figures reflect the Group’s share of jointly controlled entities. (2) Valuations are stated as at 31 August 2015.
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Valuation Movement from 1 September Proportion Market Value 2015 Business Segment – of Portfolio as at 15 to 15 January Valuation Movement by Value January 2016 2016 % £m % UK Retail 23 346.1 (1.0) UK Hotels 16 235.8 0.5 UK Commercial 10 157.0 3.6 Combined AUK Portfolio 31 462.0 0.7 ––––––– ––––––– ––––––– Total UK 79 1,200.9 0.6 ––––––– ––––––– ––––––– Europe 20 308.9 (0.1) ––––––– ––––––– ––––––– Total (excl. non-core assets) 100 1,509.8 1.8 ––––––– ––––––– ––––––– Non-core portfolio 0 5.0 3.2 ––––––– ––––––– ––––––– Total 100 1,514.8 1.8 ––––––– ––––––– –––––––
Valuation movements The following description of valuation movements reflects movements since the Company’s audited consolidated financial statements for the year ended 31 August 2015, except for the Combined AUK Portfolio which reflects movements since the valuation on 19 August 2015, which was included in the Circular.
The UK Retail portfolio valuation remained broadly stable. The small overall decline of 1.0 per cent. was driven largely by a loss of income at Weston Favell, Northampton while redevelopment and asset management initiatives are completed.
The Hotel portfolio valuation increased marginally by 0.5 per cent. principally due to the completion of an agreement for lease and subsequent building works for 12 additional rooms at the Enfield, Travelodge.
The UK Commercial portfolio valuation increased by 3.6 per cent. on a like-for-like basis after taking into account the contracted sale of 10 properties since 31 August 2015. The change was impacted by positive asset management initiatives as well as growth in rental values for Newington House situated near Elephant & Castle, London.
The Combined AUK Portfolio remained broadly stable increasing 0.7 per cent. Small variances reflect asset management initiatives and completed rent reviews. The valuation movement excludes 16 Grosvenor Street, London which was sold in December 2015 prior to the Company taking ownership but resulting in a profit share of £3 million.
The European portfolio remained broadly unchanged in local currency terms. The Sterling equivalent increased by approximately 5.3 per cent. as a result of the Euro strengthening against Sterling since 31 August 2015.
68 166810 Proof 7 Wednesday, January 27, 2016 23:08 72.2 27.6 17.6 12.2 – – 136.7 – – 23.4––– BNP 4–––– 6–––– e. 7––––– 4––––– 7––––– 1––––– 0––––– 0––––– 7–––––– 2–––––– 7–––––– 1–––––– 5–––––– 9–––––– 0–––––– Parker Limited GmbH Limited LLP Netherland Kollegen 6–––––– 6–––––– 7–––– 2–––––– 5––––––5.5 2–––– (2) 2016 (1) 2016 – 462.1 462.1 – 462. (1) 4.75.09.9––––––9.9 4.14.38.5––––––8.5 2.52.65.2––––––5.2 4.65.05.0–––––5.0– 11.911.723.4––– 64.833.6 68.3 35.4 136. 72. 2015 Market Market Market Total Savills Savills Real Cushman & 1,040.01,044.6 1,509.9 1,514.9 1,638.5 1,643.5 363.1 363.1 813.9 813.9 142.7 142.7 23.4 23.4 148.9 148.9 5.0 146.6 146.6 Value at Value at Value at Advisory Advisory Estate Cushman & Wakefield 31 August31 15 January 15 January Strutt & Services Services (Jersey) Wakefield LLP Schlicht & Proportionate Proportionate Paribas (3) (3) (3) (3) (3) (3) (4) UK Hotels London Portfolio by Hilton, EdinburghDoubleTree Enfield TravelodgeEurope 26.4 195.4 26.4 12.9 26.4 195.7 13.7 195.7 – 13.7 – 26. – 195. 13. Premium PortfolioOBI PortfolioCity Arkaden, IngolstadtHucklehoven 14.7 26.3 16.7 14.7 27.6 17.6 14.7 27. 17. – – 14.7 – – – Bahnhof Altona, Hamburg 55.9 59.4 59.4 – – 59. VBG Portfolio Supermarket Portfolio, Germany Schloss Centre, BerlinKaiserslautern (excl. non-core assets) Total Non-core assets 64.9Total 68.6 68.6 – – 68. Waldkraiburg Bremen/LindenhoffNotes: actual percentage ownership of the relevant joint venture entity. reflect the Group’s Values (1) assume 100 per cent. ownership notwithstanding where the property is held in a joint venture. Values (2) Property held in a joint venture. (3) The valuations were reported in Euros only and have been converted externally into Sterling for the purposes of this tabl (4) 5.3 5.5 5. Segmental Property Market ValuesUK –AUK Portfolio Combined UK Retail Grand Arcade, Wigan Favell, NorthamptonWeston HarrowSt. George’s, £millionBirchwood, Warrington Orchards, CoventryWest Byron Place, Seaham £millionUK Commercial OfficesMalthurst Portfolio 90.0 102.2 £million 71.2 34.5 31.3 87.2 £million 100.7 20.4 £million 72.7 87.2 35.1 30.5 100.7 £million 19.9 23.3 £million 72.7 100. 87. 35.1 30.5 96.6 19.9 12.2 72. 35. 30. 19. 99.0 12. £million 99.0 – 99. Kwik-Fit PortfolioNewington HouseThe Esplanade, Jersey 17.0 13.4 17.0 17.0 17.0 17.0 17. – 17.
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5. VALUATION POLICY Investment properties owned by the Group are carried at fair value as determined primarily by the Group’s external valuers on the basis of market value.
The NAV attributable to the Ordinary Shares is determined by the Company and is published at the time of publication of the Group’s interim and annual financial results, based on the most recent valuations and calculated in accordance with IFRS.
6. NAV The Company’s fully diluted NAV per Ordinary Share was 41.0 pence as at 31 August 2015.
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PART 10
OPERATING AND FINANCIAL REVIEW OF THE GROUP
You should read the following review in conjunction with the rest of this document, including the financial information contained in Part 11 (Historical Financial Information relating to the Group) and should not rely solely on the information contained in this Part 10. This discussion contains forward-looking statements that involve risks and uncertainties that could cause the Group’s actual results to differ from those expressed or implied by such forward-looking statements. These risks and uncertainties are discussed in Part 3 (Important Information) and Part 2 (Risk Factors).
The discussion contained in this Part 10 relates to, and all financial information has been extracted without material adjustment from, the Historical Financial Information set out in Part 11 of this document, which has been prepared in accordance with IFRS as endorsed by the European Union. See Part 3 of this document for further information.
This section discusses the historical financial information of the Group for the years ended 31 August 2015, 31 August 2014 and 31 August 2013. The periods covered by this information are also referred to in this Part 10 as the “period under review”.
1. THE GROUP’S RESULTS OF OPERATIONS AND FINANCIAL CONDITION A discussion of the Group’s operating results and financial condition for the period covered by the Historical Financial Information of the Group is incorporated into this document by reference to the Annual Report of the Group for the years ended 31 August 2015, 2014 and 2013.
The business review of the Group for the year ended 31 August 2013 is incorporated by reference into this document. This business review can be found in the Group’s financial statements for the year ended 31 August 2013 in the sections “Chairman’s Statement”, “Strategic Review” and “Performance”.
The business review of the Group for the year ended 31 August 2014 is incorporated by reference into this document. This business review of the Group can be found in the Group’s annual report for the year ended 31 August 2014 in the sections “Chief Executive’s Report”, “Strategy”, “Performance Review” and “Financial Review”.
The business review of the Group for the year ended 31 August 2015 is incorporated by reference into this document. This business review of the Group can be found in the Group’s annual report for the year ended 31 August 2015 in the sections “Chief Executive’s Report”, “Strategic Priorities”, “Performance Review” and “Financial Review”.
2. BUSINESS REVIEW 2.1 Introduction Further information on the business of the Group and description of the Group’s strategy going forward is set out in Part 9 (Information on Redefine International) of this document.
A discussion on the business review of the Group for the period under review is incorporated into this prospectus by reference to the above-mentioned sections.
During the period under review, the Group’s revenue was generated primarily from the rental income of the Group’s investment property portfolio, investment income and other income earned on development and project management fee income.
At 31 August 2014, the Group’s consolidated net assets were £509.7 million and at 31 August 2015 this had grown to £636.8 million, largely as a result of the valuation uplift of the Group’s property portfolio, the equity placing completed in March 2015 and the repayment of certain of the Group’s debt facilities. For the financial year ended 31 August 2015, the Group reported an operating profit before tax of £84.0 million. Earnings available for distribution for the Group increased by 13.6 per cent. to £44.4 million for the financial year ended 31 August 2015 compared with the prior financial year.
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2.2 Business segments During the period under review, the Group was organised into five business segments, UK Retail, UK Commercial, UK Hotels, Europe and Cromwell. However, at the end of August 2015, the Group disposed of its equity investment in the Cromwell Group, an Australian real estate Group and also completed the sale of the COOP portfolio in Switzerland thus re-focusing the Group on its core markets of the UK and Germany, Europe’s two strongest economies and its most liquid real estate markets. Refer to paragraph 3.4 of Part 9 (Information on Redefine International) for the make-up of each segment.
The period under review also contains a segmental analysis by business segment for each of the business segments and the discussion below includes an analysis of the financial conditions and results of operations of the Group by each of the above business segments.
3. FACTORS AFFECTING THE GROUP’S RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following are the principal factors, in addition to general economic and market conditions and government policy, legislation and regulation, which have had and are likely to continue to have a material effect on the Group’s results of operations and financial condition. Investors should also read Part 2 (Risk Factors) of this document for a discussion of the risks and uncertainties which the Enlarged Group’s business faces (including information on governmental, economic, fiscal, monetary or political policies which could materially affect, directly or indirectly, the Enlarged Group’s operations), Part 9 (Information on Redefine International) of this document for information relating to the property portfolio and the information incorporated by reference into this document as set out in paragraph 1 of this Part 10 for further discussion of these factors (including the section entitled “Financial Risk Management” in paragraph 6 of this Part 10.
3.1 Revenue Revenue comprises rental income, service charges and other recoveries from tenants of the Group’s investment properties, investment income from the Group’s investment in the Cromwell Group and other income earned on development and project management fee income.
Rental income from investment property leased out under an operating lease is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore recognised on the same, straight-line basis.
Cash is usually generated in line with revenue, dependent on the length of possible rent-free periods granted to induce certain tenants to enter into certain leases.
Generally, rental income benefits from the UK and German lease structure (long leases with terms of between five and 25 years and upwards-only rent reviews). The principal risks to rental income are from tenants defaulting on their obligations, and the empty property not being re-let (becomes void) and the failure to let completed developments.
3.2 Revaluation surplus/(deficit) of investment properties The fair value of the Group’s investment properties is arrived at on the basis of a valuation performed by the external valuer on the basis of market value. The valuation conforms to the RICS Valuation Standards and UK Practice Standard 2.1 and is arrived at by reference to a variety of sources set out in Section 6 “Estimates of Fair Value of investment properties.”
The difference between the fair value of an investment property at the reporting date and its carrying amount prior to re-measurement is included in the income statement as a valuation gain or loss.
The fair value of investment properties is driven by external factors such as the overall economic environment, interest rates, nature of the occupier and investor demand.
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3.3 Interest A significant charge to the income statement for the Group is the net interest charge. Increases in interest rates have a corresponding impact on the net interest charge. The Group uses interest rate swaps and similar instruments (forward rate agreements, forward starting swaps and gilt locks) to manage its interest rate exposure. Refer to paragraph 8.3 below for the Group’s policy on interest rate exposure.
4. CAPITALISATION AND INDEBTEDNESS The following table shows the Group’s gross indebtedness as at 30 November 2015.
£m Non-current Loan borrowings 558.5 Aviva profit share(1) 3.0 Finance Leases 11.9 –––––– Total non-current –––––– 573.4 Current Loan borrowings 96.8 Aviva profit share(1) 1.2 Finance Leases 0.7 –––––– Total current –––––– 98.7 Note: (1) As part of the terms of the Aviva debt restructure in 2013, Aviva have retained the right to participate in 50 per cent. of the income and capital growth generated by Grand Arcade Wigan (after all costs, expenses and interest). This profit share is deemed to be a financial liability since it varies in relation to a non-financial variable specific to a party to the contract. It has been recognised initially at fair value and thereafter will be carried at amortised cost. The following table shows the capitalisation of the Group as at 30 November 2015.
£m Equity Share capital 117.9 Share premium 395.0 Reverse acquisition reserve 134.3 Retained loss (43.2) Other reserves 2.1 Foreign currency translation reserve (6.3) –––––– Total capitalisation –––––– 599.8
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The following table shows the Group’s net indebtedness as at 30 November 2015.
£m A. Cash 47.3 B. Cash equivalents – C. Trading Securities – –––––– D. Liquidity (A) + (B) + (C) 47.3 –––––– E. Current financial receivables – F. Current bank debt 94.6 G. Current portion of non-current debt 1.7 H. Other current financial debt 0.5 –––––– I. Current financial debt (F) + (G) + (H) 96.8 –––––– J. Net current financial indebtedness (I) – (D) 49.5 –––––– K. Non-current bank debt 558.5 L. Bonds issued – M. Other non-current bank debt – –––––– N. Non-current financial indebtedness (K) + (L) + (M) 558.5 –––––– O. Net financial indebtedness (J) + (N) 608.0 ––––––
5. CAPITAL RESOURCES AND LIQUIDITY For additional information on the existing debt obligations of Redefine International, see Part 11 (Historical Financial Information on the Group), as well as paragraph 16 of Part 15 (Additional Information) for a summary of the major facilities of the Group. The Company’s borrowings are not seasonal in nature and the amount of such debt obligations as at the date of this document was £603.0 million (including the Group’s share of jointly controlled entities). The Company’s debt maturity profile is £61.8 million for the year ending 31 August 2016, £60.2 million for the year ending 31 August 2017, £49.4 million for the year ending 31 August 2018, £87.5 million for the year ending 31 August 2019 and £344.1 million for the year ending 31 August 2020 onwards.
The debt of each senior debt facility is secured on a discrete set of properties with no individual property used as security for more than one facility. The Group owns three unsecured properties.
The nominal value of the Group’s debt facilities at 31 August 2015 was £567.8 million (£636.8 million including its share of debt in jointly controlled entities).
The key financing statistics are summarised in the table below:
31 August 31 August 2015 2014 Key financing statistics £m £m Investment portfolio at market value 1,044.6 1,100.9 Nominal value of drawn debt 636.8 705.4 Cash and short-term deposits (95.9) (91.3) –––––– –––––– Net debt 540.9 614.1 Weighted average debt maturity (years) 7.8 7.7 Weighted average interest rate (%) 3.9 4.2 Debt with interest rate protection (%) 94.7 97.5 Loan-to-value (%) 51.8 55.8 –––––– ––––––
Details of the Group’s cash flows for the years ended 31 August 2015, 2014 and 2013 are discussed in the information incorporated by reference into this document as set out in paragraph 1 of this Part 10.
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6. FINANCIAL RISK MANAGEMENT The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk;
• market risk;
• currency risk;
• interest rate risk; and
• commercial property price risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included in the financial information contained in Part 11 (Historical Financial Information relating to the Group) of this document.
The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board is responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies require the identification and analysis of the risks faced by the Group, the setting of appropriate risk limits and controls, and the monitoring of risks and adherence to limits. Risk management policies and systems are reviewed regularly and adjusted to reflect changes in market conditions and the Group’s activities.
The Group’s Audit Committee oversees management’s monitoring of compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
6.1 Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from tenants.
The Board monitors the concentration of credit risk with individual tenants and counterparties across the portfolio. An allowance is made where there is an identified loss event which is evidence of a reduction in the recoverability of the future cash flows.
The Group also limits its exposure to credit risk by only investing in liquid deposits and only with counterparties that have a credit rating of A or A2 or above from Standard & Poor’s or Moody’s, except where specific exemptions are granted by the Board.
6.2 Liquidity risk The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient resources to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient rental income to service its financial obligations when they fall due. The monitoring of liquidity risk is assisted by the monthly review of financial covenants imposed by financial institutions, such as interest and loan-to-value covenant ratios. Renegotiation of loans takes place in advance of any potential covenant breaches insofar as the factors are within the control of the Board. In periods of increased market uncertainty the Board will ensure sufficient cash resources are available for potential loan repayments/cash deposits as may be required by financial institutions.
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6.3 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its investments in financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
The Group enters into derivative financial instruments in the ordinary course of business, and incurs financial liabilities, in order to manage market risks. The Board receives reports on a quarterly basis with regards to currency exposures as well as interest rate spreads and takes the necessary steps to hedge/limit the risk the Group is exposed to. The Group does not apply hedge accounting.
6.4 Currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro (“EUR”), Australian Dollar (“AUD”) and Swiss Franc (“CHF”). Following disposals during the year the Group no longer has exposure to AUD or CHF. Foreign exchange risk arises from current exposures the Group has to foreign currencies, recognised monetary assets and liabilities and net investments in foreign operations.
The Group’s investments in foreign subsidiaries and associates are not hedged as the currency positions are considered to be long-term in nature.
6.5 Interest rate risk The Group’s exposure to the risk of the changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The Group uses interest rate derivatives to mitigate its exposure to interest rate fluctuations. As at 31 August 2015, as a result of the use of interest rate swaps and caps, the majority of the Group’s borrowings were at fixed interest rates.
The Group’s EPRA earnings has limited exposure to interest rate fluctuations until the repayment dates of the loans for which the interest rate swaps and caps have been arranged.
6.6 Commercial property price risk The Board draws attention to the risks associated with commercial property investments. Although over the long-term property is considered a low risk asset, investors must be aware that significant short and medium-term risk factors are inherent in the asset class.
Investments in property are relatively illiquid and usually more difficult to realise than listed equities or bonds and this restricts the Group’s ability to realise value in cash in the short-term.
7. SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL JUDGEMENTS AND ESTIMATES The financial statements of the Group are prepared in accordance with IFRS. New standards/amendments to standards are adopted by the Group as and when required by IFRS and their effects on the Group disclosed at each reporting date.
7.1 Significant accounting policies The accounting policies applied by the Group in the audited consolidated financial statements for the year ended 31 August 2015 are the same as those applied by the Group in its audited financial statements as at and for the year ended 31 August 2014, except for the new standards adopted during the year and additional policies arising from changes to the business during the year.
7.2 Key judgements and estimates The preparation of financial statements in conformity with IFRS requires the use of judgements and estimates that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the year. Although these estimates are
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based on the Directors’ best knowledge of the amount, event or actions, actual results may differ from those estimates.
The principal areas where such judgements and estimates have been made are the same as those applied to the consolidated financial statements in the year ended 31 August 2014 and are:
7.2.1 Investment property valuation The Group uses the valuations performed by its independent valuers in accordance with IFRS 13 as the fair value of its investment properties. The valuations are based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties.
7.2.2 Fair value of restructured or acquired liabilities New borrowings or existing borrowings which have been substantially modified are recognised at fair value. The determination of fair value involves the application of judgement.
The Group determines fair value by discounting cash flows associated with the liability at a market discount rate. The key judgement surrounds the determination of an appropriate market discount rate. Management determine the discount rate on a loan by loan basis having regard to the term, duration and security arrangements of the new liability and an estimation of the current rates charged in the market for similar instruments issued to companies of similar sizes.
This judgement is made more difficult given the bespoke nature of certain loans obtained by the Group. Any difference between the nominal value of the loan and the deemed fair value will be accreted through profit or loss over the term of the loan through the effective interest rate method.
7.2.3 Classification of UK Hotels as investment property The UK Hotels properties are held for capital appreciation and to earn rental income. The properties have been let to Redefine Hotel Management Limited (“RHML”) and Redefine Earls Court Management Limited (“RECML”) for a fixed rental which is subject to annual review. The annual review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level. RHML and RECML operate the hotel business and are exposed to the fluctuations in the underlying trading performance of the hotels. They are responsible for the day-to-day upkeep of the properties and retain the key decision making responsibility for the businesses.
Redefine International holds a 25.3 per cent. shareholding in Redefine BDL, which in turn owns RHML and RECML. Having considered the guidance in IFRS 10, the respective rights of each of the shareholders in Redefine BDL and the size of the Company’s shareholding compared with other shareholders, management have determined that Redefine International does not control Redefine BDL and hence does not control RHML or RECML.
Aside from the payment of rental income to Redefine International, which resets annually, and the Group’s shareholding in Redefine BDL, Redefine International is not involved with the hotel management business and there are limited transactions between the two entities. As a result, Redefine International classifies the hotel properties as investment properties in line with IAS 40.
7.2.4 Property acquisitions Where properties are acquired through the acquisition of corporate interests, the Directors have regard to the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.
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Where such acquisitions are not judged to be an acquisition of a business the transactions are accounted for as if the Group had acquired the underlying property directly. Accordingly, no goodwill arises, rather the cost of the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date.
Otherwise corporate acquisitions are accounted for as business combinations.
8. TREASURY POLICY 8.1 Bank deposits, certificates of deposit and money market funds The surplus cash of the Group is invested in call or fixed bank deposits, certificates of deposit (“CDs”) or money market funds. The maturity dates of the bank deposits or CDs will be staggered taking into consideration the cash flow requirements of the Company. Where possible, “break clauses” will be negotiated with the bank to allow fixed deposits to be terminated at short notice.
The following must be adhered to on all deposits and CDs (unless specific approval is sought from the Board):
• long-term credit rating of the bank (counterparty) should be at least Standard & Poor’s A+ (Moody’s A1). The rating must be that of the bank/branch where the deposit is made and not the rating of the ultimate parent company;
• maximum deposit at any one bank may not exceed £10 million (excluding capitalised interest on the deposit); and
• no more than 10 per cent. of funds in the collective investment vehicle may be invested in instruments with a maturity of greater than six months and all investments of the collective vehicle would qualify for investment if the Company invested in them directly.
Authorised signatures required The authorised signatories that are required to make payments or deposits are:
• up to £1 million – one authorised signatory; and
• £1 million plus – requires two authorised signatories.
8.2 Foreign exchange exposure The policy of the Company is to hold a minimum of 80 per cent. of shareholder funds in Pounds Sterling.
Foreign currency exposures will be hedged on a case-by-case basis taking into consideration the perceived risk and the overall currency exposures of the Company.
For non-Pounds Sterling investments the financing portion of the investment must match the currency of the asset being financed while the equity portion of the investment may remain unhedged subject to the 80 per cent. policy above.
8.3 Interest rate exposure The Company follows a policy of hedging floating interest rate exposure into fixed interest rate exposure on loans that exceed one year. Where the Company believes that floating interest rate exposure is appropriate it will not hedge the interest rate risk (e.g. development expenditure). The policy is that at least 75 per cent. of all interest rate exposure exceeding one year will be on a fixed rate basis. The Group will use various instruments to hedge interest rate risk including interest rate swaps, options and caps and collars.
8.4 Non-recourse funding The policy is to raise finance on a non-recourse basis to the Company and where the loan will have recourse only to the underlying asset being financed. Bilateral guarantees may only be given by the Company if specific board approval is obtained. Total external borrowings shall not
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at any time, without the previous sanction of an ordinary resolution of the Company, exceed 10 times the aggregate of:
• the amount paid up on the issued share capital for the time being of the Company; and
• the total of capital and revenue reserves (including any share premium account, capital redemption reserve, all as shown in the latest balance sheet of the Company).
Wherever possible the maturity of loan financing will match the duration of the project or the intended holding period for the investment.
8.5 Investor policy The Company will seek to limit unnecessary exposure wherever possible when dealing with treasury instruments. These should include, but not be limited to taxation (both corporate, withholding and VAT), exchange control, derivative instruments (e.g. swaps, collars, cap, etc).
9. RECENT TRENDS AND DEVELOPMENTS The Directors believe that the trends and developments described in paragraph 3 above have continued to affect, or be considerations relevant to, the Group between 31 August 2015 and the date of this document. The Directors also believe that these trends and developments are reasonably likely to continue to have a potentially material effect on the Company’s prospects for the current financial year.
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PART 11
HISTORICAL FINANCIAL INFORMATION RELATING TO THE GROUP
The following documents are incorporated by reference into this document:
• the consolidated financial statements of the Group included in the 2015 Annual Report together with the audit report thereon;
• the consolidated financial statements of the Group included in the 2014 Annual Report together with the audit report thereon; and
• the consolidated financial statements of the Group included in the 2013 Annual Report together with the audit report thereon.
KPMG of 1 Harbourmaster Place, IFSC, Dublin 1, Ireland, has issued an unqualified audit opinion on the consolidated financial statements of the Group for the year ended 31 August 2015, the year ended 31 August 2014 and the year ended 31 August 2013.
The 2015 Annual Report, the 2014 Annual Report and the 2013 Annual Report are available for inspection in accordance with paragraph 28 of Part 15 (Additional Information) of this document and contain information which is relevant to this document.
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PART 12
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP
Part A: Unaudited pro forma net assets statement Set out below is the unaudited pro forma net asset statement (the “unaudited Pro Forma Financial Information”) of the Group as at 31 August 2015 which is based on the audited condensed consolidated financial statements for the year ended 31 August 2015 including the accounting policies adopted therein. The unaudited Pro Forma Financial Information has been prepared on the basis of the notes set out below to illustrate the effect of the AUK Facility, the acquisition of the Combined AUK Portfolio (being the acquisition of Banbury Cross Retail Park and the AUK Portfolio), the potential Placing, the anticipated disposal of 10 petrol filling stations and the Cromwell and Swiss COOP sales.
The unaudited Pro Forma Financial Information has been prepared pursuant to paragraph 13.3.3R of the Listing Rules and it is shown for illustrative purposes only to indicate how the adjustments might have affected the financial position of the Group as at 31 August 2015 if they had occurred on that date.
Due to its nature, the unaudited Pro Forma Financial Information addresses a hypothetical situation and does not represent the Group’s actual financial position or results after 31 August 2015.
In particular, the unaudited Pro Forma Financial Information does not address asset or derivative impairments after 31 August 2015.
Shareholders should read the whole of this document and should not rely solely on the unaudited Pro Forma Financial Information contained in this Part 12.
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Unaudited statement of pro forma net assets as at 31 August 2015
Adjustments ––––––––––––––––––––––––––––––––––––––––––––––––––––– Group Petrol Cromwell as at Acquisition filling and Swiss Adjusted 31 August New of AUK Capital Stations sales pro forma 2015 facility Portfolio raise disposal proceeds net assets Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 £m £m £m £m £m £m £m Assets Investment Property 934.4 460.7 (12.0) 1,383.1 Investments in joint ventures 14.6 14.6 Loans to joint ventures 33.6 33.6 Investment in associates 8.0 8.0 Intangible assets 1.5 1.5 Property, plant and equipment 0.1 0.1 Derivative financial instruments 1.8 1.8 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total non-current assets 994.0 – 460.7 – (12.0) – 1,442.7 Current assets Cash and cash equivalents 93.6 248.9 (478.1) 94.5 6.6 68.8 34.3 Trade and other receivables 139.2 (102.6) 36.6 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total current assets 232.8 248.9 (478.1) 94.5 6.6 (33.8) 70.9 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total assets 1,226.8 248.9 (17.4) 94.5 (5.4) (33.8) 1,513.6 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Equity and liabilities Share capital 117.9 15.7 133.6 Share premium 395.0 78.8 473.8 Reverse acquisition reserve 134.3 134.3 Retained loss (48.8) (17.4) (0.2) (66.4) Foreign currency translation reserve 2.0 2.0 Other reserves (2.4) (2.4) ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total equity attributable to equity shareholders 598.0 – (17.4) 94.5 (0.2) – 674.9 Non-controlling interest 38.8 38.8 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total equity 636.8 – (17.4) 94.5 (0.2) – 713.7 Non-current liabilities Borrowings 520.5 248.9 (5.2) (33.8) 730.4 Derivatives 3.4 3.4 Deferred tax 2.2 2.2 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total non-current liabilities 526.1 248.9 – – (5.2) (33.8) 736.0 Current liabilities Borrowings 39.4 39.4 Derivatives 0.9 0.9 Trade and other payables 23.6 23.6 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total current liabilities 63.9 – – – – – 63.9 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total liabilities 590.0 248.9 – – (5.2) (33.8) 799.9 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Total equity and liabilities 1,226.8 248.9 (17.4) 94.5 (5.4) (33.8) 1,513.6 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– Notes: 1 The net assets of the Group have been extracted from the consolidated statement of financial position contained in the published financial statements for the year ended 31 August 2015. 2 On 5 September 2015, as described in paragraph 21.8 of Part 15 (Additional information) of this document, the Group entered into a conditional £303 million debt facility agreement with a syndicate of banks secured against the Combined AUK Portfolio. Up to £253.0 million of this facility will be drawn down to part fund the Acquisition. The costs of arranging the bank debt are £4.1 million which, in line with accounting standards, have been offset against the debt balance. 3 This adjustment reflects the combined impact of the following: • On 4 September 2015 the Group acquired Banbury Cross Retail Park for £52.5 million and on 5 September 2015 members of the Group entered into the Acquisition Agreements with the Seller to acquire the AUK Portfolio for £437.2 million. • As described in paragraph 1 of Part 7 (Letter from the Chairman of Redefine International P.L.C.) of this document, on 21 December 2015 the Company announced the sale of 16 Grosvenor Street, London, a property included within the AUK Portfolio, for £35.6 million. The property was to be purchased as part of the acquisition of the Tranche 2 Properties for £29 million but will not now form part of the portfolio following this sale. Disposal costs associated with the disposal
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of 16 Grosvenor Street, London are estimated at £0.6 million. In accordance with the profit-share provisions included in the Acquisition Agreements with the Seller, 50 per cent. of the profits on disposal, being £3 million, will be paid to Redefine AUK on completion of the acquisition of the Tranche 2 Properties. • Acquisition costs associated with the acquisition of Banbury Cross Retail Park and the AUK Portfolio. These costs were originally estimated at £20.7 million. These costs are now estimated at £19.6 million. • Costs in relation to the Circular totalling £0.8 million. 4 This adjustment reflects the receipt of the net proceeds of the Placing. This represents gross proceeds of £100.0 million less estimated transaction costs totalling £5.5 million. The transaction costs include a fee of £2.5 million payable to Redefine Properties in consideration for Redefine Properties providing the RPL Equity Commitment and the RPL Loan. This is described further in paragraphs 21.4 and 21.5 of Part 15 (Additional information) of this document respectively. 5 This adjustment reflects the disposal of the Group’s interest in 10 petrol filling stations, which is anticipated to complete on 19 February 2016. The sale is expected to give rise to gross proceeds totalling £12 million. Transaction costs are expected to total £0.2 million, resulting in net proceeds of £11.8 million. Net proceeds are expected to be used to repay borrowings totalling £5.2 million. Cash receipts will be used to fund the acquisitions as described in Note 3 above. 6 This adjustment reflects the combined impact of the following: • As announced on 1 September 2015, the Group sold its interest in the Cromwell Group on 31 August 2015. As at 31 August 2015, the Group’s trade and other receivables balance included amounts owing from the sale. Sales proceeds totalling AUD$172.4 million/£80.2 million were received on 3 September 2015 and were used to repay borrowings of AUD$50 million/£23.3 million. Cash receipts will be used to fund the acquisitions as described in Note 3 above; • On 31 August 2015, the Group sold its interest in two Swiss properties, Brig and Vich. As at 31 August 2015, the Group’s trade and other receivables balance included amounts owing from the sale. Sales proceeds totalling CHF33.1/£22.4 million (net of capital gains tax) were received on 2 and 3 September 2015 and were used to repay borrowings of CHF15.7 million/£10.5 million. Cash receipts will be used to fund the acquisitions as described in Note 3 above. 7 No adjustments have been made to reflect any trading or other transactions since 31 August 2015.
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Part B: Accountant’s report on unaudited pro forma net assets statement
The Directors Redefine International P.L.C. Merchants House 24 North Quay Douglas Isle of Man IM1 4LE
28 January 2016
Ladies and Gentlemen
Redefine International P.L.C. (the ‘Company’) We report on the pro forma financial information (the ‘Pro forma financial information’) set out in Part 12 of the prospectus dated 28 January 2016 (the ‘Prospectus’), which has been prepared on the basis described in the notes thereto, for illustrative purposes only, to provide information about how the AUK Facility, the acquisition of the Combined AUK Portfolio (being the acquisition of Banbury Cross Retail Park and the AUK Portfolio), the potential Placing, the anticipated disposal of 10 petrol filling stations and the Cromwell and Swiss COOP sales might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the period 31 August 2015. This report is required by paragraph 20.2 of Annex I of the Commission Regulation (EC) No. 809/2004 (the ‘Prospectus Directive Regulation’) and is given for the purpose of complying with that paragraph and for no other purpose.
Responsibilities It is the responsibility of the directors of the Company to prepare the Pro forma financial information in accordance with paragraph 20.2 of Annex I of the Prospectus Directive Regulation.
It is our responsibility to form an opinion, as required by paragraph 7 of Annex II of the Prospectus Directive Regulation, as to the proper compilation of the Pro forma financial information and to report that opinion to you.
In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.
Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there 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 paragraph 23.1 of Annex I of the Prospectus Directive Regulation, consenting to its inclusion in the Prospectus.
Basis of Opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board of the United Kingdom and Ireland. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the directors of the Company.
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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 Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.
Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion In our opinion:
• the Pro forma financial information has been properly compiled on the basis stated; and
• such basis is consistent with the accounting policies of the Company.
Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with paragraph 1.2 of Annex I of the Prospectus Directive Regulation.
Yours faithfully
KPMG Chartered Accountants Dublin, Ireland
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PART 13
PROPERTY VALUATION REPORTS
SECTION 1
VALUATION REPORT PREPARED BY SAVILLS RELATING TO THE COMBINED AUK PORTFOLIO 28 January 2016
The Directors Redefine International P.L.C. (“RI PLC”) Merchants House 24 North Quay Douglas Isle of Man E: [email protected] IM1 1JA DL: 020 7409 8115
J.P. Morgan Securities plc (“JP Morgan”) 33 Margaret Street 25 Bank Street London W1G 0JD London T: +44 (0) 20 7499 8644 E14 5JP savills.com Peel Hunt LLP (“Peel Hunt”) Moor House 120 London Wall London EC2Y 5ET
Dear Sirs REDEFINE INTERNATIONAL P.L.C. – AUK PROPERTY PORTFOLIO VALUATION AS AT 15 JANUARY 2016
1. INSTRUCTIONS In accordance with instructions received from Redefine International P.L.C. (RI PLC), J.P. Morgan Securities plc (JP Morgan) and Peel Hunt LLP (Peel Hunt), dated 22 January 2016, Savills Advisory Services Limited (“Savills”, “we” or “us”) we have undertaken a valuation of the properties described in Schedule 1 (the “Properties”) (together the ‘’Portfolio’’). We understand that this Valuation Report is required for inclusion in an approved prospectus and circular (the “Document”) to be prepared in accordance with the Prospectus Rules and the Listing Rules to be published by Redefine International P.L.C. in the Document in connection with the proposed capital raising exercise, approval of the Waiver of Rule 9 of the Takeover Code and other related matters. This Valuation Report has been prepared in accordance with the Royal Institution of Chartered Surveyors (the “RICS’’) Valuation – Professional Standards January 2014 (the “RICS Red Book”) published in November 2013 and effective from January 2014 and revised in April 2015. The valuation is a Regulated Purpose Valuation as defined in the Red Book. This Valuation Report has also been prepared in accordance with and on the basis of Rule 29 of the UK City Code on Takeovers and Mergers and it complies with the requirements of the UK Listing Authority and also paragraphs 128 to 130 of ESMA’s recommendations on the consistent implementation of the European Commission’s Regulation on Prospectuses No. 809/2004. We confirm that we consent in principle to this Report being presented to investors in a prospectus (a “Prospectus”) and/or any ongoing investor materials including, but not limited to, any analyst presentation, press announcement or investor presentation (together, the “Investor Materials”) to be put on public display on RI PLC’s website and made available for inspection at its registered office and that of its appointed firm of solicitors (Nabarro LLP), in connection with, among other things, (i) a potential Placing of new ordinary shares in the capital of RI PLC (the “Placing Shares”) as a result of which the Placing Shares will be admitted to the premium segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange’s main market for listed securities
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and (ii) approval of the waiver of Rule 9 of the UK City Code on Takeovers and Mergers (together, the “Transaction”), provided that: a. the Report or any summary shall not be published until such time as we have first approved the form and context in which the Report appears (such approval not to be unreasonably withheld or delayed); b. the Prospectus or Investor Materials, as the case may be, shall make clear that with the exception of this Report, Savills does not accept any responsibility for any part of the Prospectus or any other information issued by RI PLC or any other party to shareholders or prospective shareholders in connection with the Transaction; c. such Report or summary complies in all respects with the requirements of the Red Book and any applicable regulations or directives; d. if any part of our Report becomes misleading or inaccurate between the date of issue of the Report and the date of the Prospectus or the date of issue of any Investor Materials we reserve the right to revisit and update our Report prior to it being published.
2. DATE OF VALUATION Our opinions of Market Value are as at 15 January 2016. We are not aware of any material changes in circumstances between the date of the valuation and the date of this valuation report that would affect the valuation and we are not aware, as a result of our role as External Valuer of the Properties, of any matter which is not disclosed in the Document or which has not been disclosed to RI PLC, JP Morgan and Peel Hunt in writing and which is required to be brought to their attention.
3. TERMS OF REFERENCE The Portfolio comprises 19 properties held for investment purposes and located throughout the UK. 16 are held freehold/heritable, one is held freehold and part leasehold and two are long leasehold (over 50 years). The Properties are principally retail warehouse parks, offices or industrial/warehouses together with a high street retail parade, a department store and a car showroom. The majority comprise good quality institutional investment stock let, for the most part, on standard institutional full repairing and insuring lease terms. All the properties are identified and described briefly on the attached schedule.
4. SOURCES OF INFORMATION In undertaking our valuations we have been provided with, and have relied upon, information supplied to us by RI PLC and their advisors. We have assumed that this information is full and correct. It follows that if it is found to contain errors then our opinions of value may change. Legal Documentation: We have relied on title documentation and leases together with a tenancy schedule provided by your legal property advisors, Messrs Pinsent Masons. We understand that all the Properties have good and marketable title which is free from any onerous or restrictive conditions. We have not undertaken credit enquiries into the financial status of the tenants and have assumed that they are capable of meeting all of their obligations under the terms of their leases. Inspections: We have carried out full inspections of each of the Properties and the dates of these are noted on the attached Schedule. As agreed, except where we have been advised to the contrary, we have assumed that there have been no material changes to any of the properties or their surroundings that could have a material effect on the value of the RI PLC’s interest since our inspections. Floor Areas: We have relied upon floor areas for a number of the Properties provided, and certified, by Plowman Craven, which we understand were calculated in accordance with the current RICS Code of Measuring Practice (6th Edition) and upon which we have relied. The remaining properties have been measured by us in accordance with the above Code. Building Surveys: We have been provided with, and have relied upon, building surveys on each of the Properties produced by Trident Building Consultancy or Paragon Building & Project Consultants. Energy Performance Certificates: EPC ratings have been assessed for each property by Arcadis AYH PLC. Environmental Surveys: We have been provided with, and have relied upon, Phase 1 Environmental Assessment and Surface Water Sampling surveys produced by Delta Simons. A number of
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environmental surveys are included in the Building Surveys produced by Paragon Building and Project Consultancy Planning: We have relied on information on relevant planning consents provided to us. In situations where there is no record, we have assumed all construction was carried out in accordance with a valid planning permission and there are no outstanding planning issues relating to any of the Properties.
5. STATUS OF VALUER This valuation has been prepared by a number of surveyors under the supervision of John Rhodes MRICS. We confirm that they are all RICS Registered Valuers and have the knowledge, skills and understanding to undertake this valuation competently and we are acting in the capacity of External Valuer. We are required by the Red Book (UKPS5.4) to disclose the following: • Savills (UK) Limited provides property management services for all of the Properties together with some lease advisory and other professional and agency services on behalf of RI PLC. Savills (UK) Limited also provides ongoing regular valuation services to RI PLC for annual accounts and debt funding purposes. In the 12 month period preceding the date of this Report, the total fees payable by RI PLC were less than 5% of the total combined fee income of Savills (UK) Limited and Savills Advisory Services Limited. We do not consider any of the above constitutes a conflict of interest or in any way conflicts with our responsibility to provide an independent and objective opinion of value.
6. VALUATION 6.1 Basis of Valuation Our valuations have been prepared on the basis of Market Value in accordance with the latest edition of the RICS Valuation – Professional Standards (“RICS Red Book”), and which is defined in VPS4 1.2 of the RICS Red Book 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 a 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. 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. Our valuations are exclusive of VAT (if applicable). 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 complied with the relevant EEC legislation.
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6.2 Market Value We are of the opinion that the aggregate Market Value of the Properties in the Portfolio, as at 15 January 2016, is: Properties held for investment: Freehold/Heritable £371,650,000
Freehold/part long leasehold £39,000,000
Long leasehold (over 50 years) £51,500,000 –––––––––––– TOTAL £462,150,000
FOUR HUNDRED AND SIXTY TWO MILLION ONE HUNDRED AND FIFTY 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 were to be sold as a single holding. Each valuation reflects the costs of acquisition but not realisation. The largest property by value in the Portfolio is Banbury Cross Retail Park, Banbury, which represents 10.88% of the total. The aggregate value of the properties has increased, on a like for like basis, by £3,250,000 from the valuation carried out for RI PLC for acquisition purposes and detailed in RI PLC's accounts as at 31 August 2015. This increase is the result of a combination of asset management initiatives, new lettings and current market evidence.
7. CONFIDENTIALITY The contents of this Report and Valuation may be used for the specific purpose to which they refer. 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. For the purpose of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information within this Report and Valuation and declare that we have taken all reasonable care to ensure that the information contained in the Report and Valuation is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Document in compliance with Annex 1 item 1.2 of the Prospectus Directive Regulation.
Yours faithfully
John Rhodes MRICS Adam Whereat MRICS RICS Registered Valuer RICS Registered Valuer
For and on behalf of Savills Advisory Services Limited
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SCHEDULE A: FREEHOLD/HERITABLE PROPERTY IN THE UK HELD FOR INVESTMENT
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Banbury The property comprises a Majority The property is fully let on 20 July £50,300,000 Cross Retail purpose built open A1 constructed 20 leases with an average 2015 Park retail warehouse park of in the mid weighted unexpired term of Lockheed 17 units totalling circa 1980s with 5.00 years. The current Close 169,842 sq ft (15,779 some contractual rent is Banbury sqm) arranged as three additions in £3,564,180 per annum, OX16 1LX terraces around a large 2008 and although there are a central car park. The units 2010. number of tenants are largely of steel portal benefitting from rent free frame construction. periods. There are also several tenants negotiating In addition, there are two lease renewals. restaurant pod units within the car park, at least one of which appears to be of more modern construction.
St Davids The property comprises a 2003 Unit A is occupied by B&M 16 July £14,900,000 Retail Park purpose built retail Retail Limited under a lease 2015 Caernarfon warehouse parade which was assigned from Road arranged as three units. It DSG Retail Limited. The Bangor is of steel portal frame term is 20 years from LL57 4TJ construction and the 29/09/2002. The rent accommodation totals passing on this 15,672 sq ft 72,058 sq ft (6,694 sqm). unit is £242,250 per annum Its planning classification reflecting £15.46 per sq ft. is Open A1 (non-food). The next rent review is 29/09/2017. The DW Sports unit includes a swimming pool Units B&C are combined at ground floor level along and both occupied by Dave with a full cover Whelan Sports Limited mezzanine. under a lease which was assigned from JJB Sports Plc. The term is 20 years from 29/09/2002. The rent passing on this 20,735 sq ft unit is £305,000 per annum reflecting £14.71 per sq ft. The next rent review is 29/09/2017. Unit D is let to Matalan Retail Limited under a 15 year lease from 13/02/2014. The rent passing is £493,798 per annum reflecting £13.85 per sq ft based on a floor area of 35,651 sq ft. The next rent review is 13/02/2019 and this is capped at £558,667 per annum. The total current income amounts to £1,041,048 per annum.
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Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Units 1, The property comprises a Phased The property is let to three 22 July £41,500,000 2/2a, 3a, 3b five unit industrial estate construction tenants on five leases with 2015 and 5 totalling 508,905 sq ft between an average weighted Express (47,278 sqm). The units 2002 and unexpired term of 5.13 Park Bristol are of steel portal frame 2006 years (to earliest Road construction. Each unit is determination). The rent Bridgwater a distribution warehouse passing is £2,863,214 per TA6 4RN and benefits from annum;there is an dedicated loading and outstanding review in yard facilities. respect of Unit 3b.
Camino The property comprises a Phased The property is let to three 22 July £42,000,000 Park James five unit industrial estate construction tenants on four leases for a 2015 Watt Way totalling 384,698 sq ft between money weighted unexpired Crawley (35,738 sqm). Each unit 1990 and term of 3.56 years. The RH10 9TZ is a distribution 2000. current rent is £2,431,725 warehouse and benefits per annum and there is a from dedicated loading rent review outstanding on and yard facilities. Unit 1.
7-14 Albion The property comprises a Early 1990s The property is let to nine 15 July £3,650,000 Street secondary retail block tenants on nine leases. The 2015 Derby located within Derby City average money weighted DE1 2PR Centre. It extends to unexpired term certain is 50,103 sq ft (4,655 sqm), 3.21 years. The gross with extensive upper passing rent is £545,400. floors and some basement areas. There is a shared service area to the rear of the property.
7 Lochside This property comprises a 2002 The property is let to four 14 July £11,000,000 View high quality office building tenants on four leases and 2015 Edinburgh constructed in 2002. It is includes two vacant suites Park arranged over basement which account for Edinburgh (car park), ground and approximately 18% of the EH12 9DH two upper floors total floor area. extending to an area of Ground Floor South is let to 60,567 sq ft (5,627 sqm). WSP UK Ltd for a term of 10 years subject to a tenant break option on 07/01/18. The current rent is £121,646 per annum. The next rent review is 07/01/18. First Floor is let to Scottish Water Business Stream Ltd for a term of 14 years expiring 29/09/23 subject to a tenant break option on 30/09/19. The current rent is £294,861 per annum. The next rent review is 30/09/19. Second Floor South is let to JDSU UK Ltd for a term of 10 years expiring 25/06/20 subject to a tenant break option on 25/06/18. The current rent is £213,945 per annum with a rent free period until 23/12/15. There are no rent reviews.
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Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Second Floor North is let to Scottish Water Business Stream Ltd for a term of 10 years expiring 29/09/23 subject to a tenant break option on 30/09/19. The current rent is £114,142.50 per annum. The next rent review is 30/09/19. In addition, short term car parking licences are in place. The aggregate gross rent derived from the property is £752,095.
The Range The property comprises a 1985 The property is let to CDS 14 July £10,000,000 25 Milton retail warehouse unit (Superstores International) 2015 Link extending to 96,734 sq ft Ltd t/a The Range for a Edinburgh (8,987 sqm) including a term of 20 years expiring EH15 3QH garden centre. The unit 30/05/33 at a rent of has Class 1 (Non-Food) £754,780 per annum. There planning consent. is a rent free period expiring 31/05/16. The next rent review is on 31/05/18 and is calculated on the basis of the greater of Market Rent or 1% per annum compounded. The lease is subject to a Schedule of Condition.
Sytner The property comprises a 2004 Let to Sytner Properties Ltd 23 July £24,900,000 London purpose-built vehicle (guaranteed by Sytner 2015 Road High dealership facility, Group Ltd) for 35 years Wycombe including separate BMW from 29/03/05. There is a HP11 1EZ and MINI dealership tenant’s break option buildings of steel 28/03/25. The lease allows portalframed construction, for five-yearly upwards-only which together extend to rent reviews to Market Rent, 64,758 sq ft (6,016.2sqm) with the 29/03/15 review to on an irregular-shaped the greater of Market Rent site of 3.683 acres (1.49 or £1,397,741 per annum. hectares). We have assumed that the outstanding review will be settled at the latter.
House of The property comprises a 1952 Let to House of Fraser 22 July £17,500,000 Fraser purpose built department (Stores) Ltd for a term of 40 2015 1 Paragon store constructed in 1952. years from 30/07/99, Square Hull It is arranged over lower expiring 29/07/39. The HU1 3JZ ground to fourth floors, current rent is £1,164,700 with the tenant trading per annum with 5 yearly from lower ground to upwards only reviews to second floor and the third Market Rent. and fourth floors providing ancillary accommodation. The building extends to 188,457 sq ft (17,509 sqm).
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Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Kingsthorne The property comprises a 1993 The property is let to five 21 July £11,300,000 Distribution five unit industrial estate tenants on five leases with 2015 Park totalling 154,745 sq ft an average money weighted Henson (14,376 sqm). The units unexpired term of 6.13 Way are of steel portal frame years (to earliest Kettering construction. Each unit is determination). The passing NN16 8PX a distribution warehouse rent is £740,986 per annum. and benefits from dedicated loading and yard facilities. Unit 5 is a production facility for baked goods.
Queens The property comprises 1997 The property is let under 14 July £24,400,000 Drive Retail an Open Class 1 eight occupational leases 2015 Park (nonfood) retail park and one agreement for Queens currently configured to lease, as follows: Drive provide eight units which Unit 1 is let to Next Group Kilmarnock in total extend to 113,551 Plc for a term expiring KA1 3XB sqft (10,550 sqm). The 21/09/21. The passing rent Park is anchored by a is £173,000 per annum. The 39,368 sqft (3,658 sqm) next rent review is 21/11/16. B&Q store, with the remaining units each Unit 2 is let to DSG Retail being c.10,000 sq ft (929 Limited for a term expiring sqm), with the exception 28/08/22. The passing rent of the recently completed is £173,500. The next rent Unit 8 (15,000 sqft) let to review is 27/10/17. Smyths Toys UK Limited from 5 October 2015. Unit 3 is let to Carpetright PLC for a term expiring 28/08/22. The passing rent is £173,500 per annum. The next rent review is 05/08/17. Unit 4 is let to Harry Corry Limited for a term expiring 27/08/22. The passing rent is £175,000 per annum. Unit 5 is let to A Share & Sons Ltd for a term expiring 02/08/26. The passing rent is £185,000 per annum. The next rent review is 03/08/16. Unit 6 is let to Opus Homewares Limited for a term expiring 28/08/26. The passing rent is £165,000 per annum. The next rent review is 15/09/18. There is a landlord’s break option at any time after 10/04/09 on not less than three months’ notice. Unit 7 is let to B&Q PLC for a term expiring 29/08/22. The passing rent is £478,056 per annum. The next rent review is 06/08/17.
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Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Unit 8 is let to Smyths Toys UK Limited for a term of 15 years expiring 04/10/30, with tenant break on the 10th anniversary of the date of entry. The rent is £232,500 per annum. The tenant is currently benefitting from a 12 month rent free period. The aggregate current passing rent is £1,523,056 per annum. This will increase to £1,755,556 per annum on 31/10/16 upon commencement of Smyths Toys UK Limited’s rent.
City Point The property comprises a 2006 Multi-let to seven tenants on 21 July £22,000,000 King Street purpose built Grade A nine leases at a contractual 2015 Leeds office building of steel rent of £764,788 per LS1 2HL frame construction. It is annum. The whole of the arranged over 7 floors second floor and eight car (plus basement including parking spaces within the car parking) and totals basement are currently 61,404 sq ft (5,704 sqm) vacant. There is also a of accommodation. An lease relating to an A1/A3 unit forms part of electricity substation. the ground floor.
127/133 The property comprises a 1970s The property is multi-let to 16 July £47,000,000 Charing mixed use building with five different tenants on six 2015 Cross Road two retail units at ground leases with an average London floor (front) a nightclub at weighted unexpired term of WC2H 0LA ground floor (rear) and 5.62 years (to earliest basement (rear); there are determination). The passing offices arranged over first rent is £1,348,258 per to third floors. It extends to annum. 39,994 sq ft (3,716 sqm) and is of concrete frame construction variously with brick or glazed elevations.
201 The property comprises a 1995 Subject to seven leases to 15 July £26,000,000 Deansgate purpose built detached five tenants. The contractual 2015 Manchester office property of a rent is £1,625,066 per M3 3NW predominantly six storey annum with a weighted framed construction, unexpired term of 4.73 having facing elevations of years. One of the office brickwork and stonework floors, 13 car parking cladding beneath a flat spaces and part of the roof. In total the basement store is currently accommodation extends vacant. to 79,375 sq ft (7,374 sq m) and is arranged as a retail unit to the ground floor and a self contained office suite to each of the 5 upper floors. There are a total of 92 on site car parking spaces across ground floor and basement levels.
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Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Omnibus The property comprises a 2001 The property is multi-let to 14 July £19,800,000 Building modern office building two tenants on five separate 2015 Lesbourne arranged over ground, leases with an average Road first and second floors money weighted unexpired Reigate with associated term of 4.50 years (to RH2 7LD multistorey car park and earliest determination). forecourt areas. It is Approximately 43% of predominantly of steel building, by floor area, is framed construction. The vacant. The passing rent is south, east and west £882,994 per annum. elevations are formed in aluminium glazed curtain walling; the north part of the building comprises a retained Grade II listed façade incorporating exposed timber beams with traditional clay tile covered pitched roof over. The building extends to 63,274 sq ft (5,878 sqm) and there is car parking for 230 vehicles.
Lakeview The property comprises a 1990s Let to Countryside 16 July £5,400,000 Lakeside purpose built detached Properties (UK) Ltd for a 2015 Drive office providing three term expiring 30/09/24 at a Centre Park floors of accommodation passing rent of £488,000 Warrington and extending to 30,536 per annum, subject to five Cheshire sq ft (2,837 sqm). It is of a yearly upwards only WA1 1RW steel frame construction reviews. The tenant benefits having facing elevations from a break option on of brickwork beneath a 30/09/20. Part of the predominantly sheet steel accommodation is sublet to clad roof. There are 98 two tenants. onsite car parking spaces. ——————— Sub Total £371,650,000
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SCHEDULE B: FREEHOLD/PART LONG LEASEHOLD PROPERTY IN THE UK HELD FOR INVESTMENT
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Priory Retail The property comprises a 1999 The property is let to six 15 July £39,000,000 Park seven unit retail park, tenants on seven leases for 2015 Christchurch arranged as a terrace of an average weighted Road Merton four units and three solus unexpired term of 9.12 London units. It totals 76,392 sq ft years. There are an SW19 2PP (7,097 sqm). additional two leases for advertising hoardings. The The planning permission passing rent is £2,160,372 is bulky goods with per annum and there are exceptions. five rent reviews outstanding. Part of the yard located adjacent to Unit 1 is held on a long leasehold basis for a term of 999 years from 29 September 1987 at a peppercorn rent (without review). ——————— Sub Total £39,000,000
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SECTION C: LONG LEASEHOLD PROPERTY IN THE UK HELD FOR INVESTMENT
Address Description Approx Head Lease Tenancies Date of Market Age Inspection Value 15 January 2016
2, Wyncolls The property 1988 The property is held Let to Polestar UK 20 July 2015 £3,500,000 Road comprises a single on a long leasehold Print Limited, with a Severalls storey industrial basis for a term of guarantee from The Industrial facility, previously 1,000 years from Polestar Company Estate used as a printing 6 March 1989 at a Limited, for a term Newcomen factory, totalling peppercorn rent expiring 28/09/20. Way 56,503 sqft (without review). The passing rent is Colchester (5,249 sqm). £300,000 per CO4 9TG annum with an outstanding rent review on 29/09/15. The tenant is currently not in occupation of the property.
The The property Early The property is held The property is let 20 July 2015 £48,000,000 Arches comprises a 1990s on a ground lease in its entirety to Retail Park purpose built Open for a term of 999 B&Q PLC on four Lower A1 retail warehouse years from 07/01/93 coterminus leases High Street park of six units from Watford expiring 31/01/27 Watford totalling circa Borough Council at providing an WD17 2SD 124,636 sqft a fixed peppercorn average money (11,579 sqm). It is rent. weighted unexpired arranged as two term of 11.04 years. terraces and Two of the units are benefits from sublet to Kwik Fit extensive car and Mothercare. parking. There is an additional lease to a catering van in the car park. The aggregate passing rent is £3,045,047 per annum. —————— Sub Total £51,500,000 —————— Grand Total £462,150,000——————
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SECTION 2
VALUATION REPORT PREPARED BY SAVILLS RELATING TO THE UK COMMERCIAL PORTFOLIO 28 January 2016
The Directors Redefine International P.L.C. (“RI PLC”) Merchants House 24 North Quay Douglas Isle of Man E: [email protected] IM1 1JA DL: 020 7409 8115
J.P. Morgan Securities plc (“JP Morgan”) 33 Margaret Street 25 Bank Street London W1G 0JD London T: +44 (0) 20 7499 8644 E14 5JP savills.com Peel Hunt LLP (“Peel Hunt”) Moor House 120 London Wall London EC2Y 5ET Dear Sirs REDEFINE INTERNATIONAL P.L.C. – UK COMMERCIAL PORTFOLIO VALUATION AS AT 15 JANUARY 2016
1. INSTRUCTIONS In accordance with instructions received from Redefine International P.L.C. (RI PLC), J.P. Morgan Securities plc (JP Morgan) and Peel Hunt LLP (Peel Hunt), dated 22 January 2016, Savills Advisory Services Limited (“Savills”, “we” or “us”) we have undertaken a valuation of the properties described in Schedule 1 (the “Properties”) (together the “Portfolio”). We understand that this Valuation Report is required for inclusion in an approved prospectus and circular (the “Document”) to be prepared in accordance with the Prospectus Rules and the Listing Rules to be published by Redefine International P.L.C. in the Document in connection with the proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters. This Valuation Report has been prepared in accordance with the Royal Institution of Chartered Surveyors (the “RICS”) Valuation – Professional Standards January 2014 (the “RICS Red Book”) published in November 2013 and effective from January 2014 and revised in April 2015. The valuation is a Regulated Purpose Valuation as defined in the Red Book. This Valuation Report has also been prepared in accordance with and on the basis of Rule 29 of the UK City Code on Takeovers and Mergers and it complies with the requirements of the UK Listing Authority and also paragraphs 128 to 130 of ESMA’s recommendations on the consistent implementation of the European Commission’s Regulation on Prospectuses No. 809/2004. We confirm that we consent in principle to this Report being presented to investors in a prospectus (a “Prospectus”) and/or any ongoing investor materials including, but not limited to, any analyst presentation, press announcement or investor presentation (together, the “Investor Materials”) to be put on public display on RI PLC’s website and made available for inspection at its registered office and that of its appointed firm of solicitors (Nabarro LLP), in connection with, among other things, (i) a potential Placing of new ordinary shares in the capital of RI PLC (the “Placing Shares”) as a result of which the Placing Shares will be admitted to the premium segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange’s main market for listed securities and (ii) approval of the waiver of Rule 9 of the UK City Code on Takeovers and Mergers (together, the “Transaction”), provided that: a. the Report or any summary shall not be published until such time as we have first approved the form and context in which the Report appears (such approval not to be unreasonably withheld or delayed);
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b. the Prospectus or Investor Materials, as the case may be, shall make clear that with the exception of this Report, Savills does not accept any responsibility for any part of the Prospectus or any other information issued by RI PLC or any other party to shareholders or prospective shareholders in connection with the Transaction; c. such Report or summary complies in all respects with the requirements of the Red Book and any applicable regulations or directives; d. if any part of our Report becomes misleading or inaccurate between the date of issue of the Report and the date of the Prospectus or the date of issue of any Investor Materials we reserve the right to revisit and update our Report prior to it being published.
2. DATE OF VALUATION Our opinions of Market Value are as at 15 January 2016. We are not aware of any material changes in circumstances between the date of the valuation and the date of this valuation report that would affect the valuation and we are not aware, as a result of our role as External Valuer of the Properties, of any matter which is not disclosed in the Document or which has not been disclosed to RI PLC, JP Morgan and Peel Hunt in writing and which is required to be brought to their attention.
3. TERMS OF REFERENCE The Portfolio comprises 20 properties held for investment purposes and located throughout the UK. 15 are held freehold/heritable, and five are long leasehold (over 50 years). The Properties are principally offices with a number of Driving Standards Agency test centres. The majority are let, on standard institutional full repairing and insuring leases, to the Government. All the properties are identified and described briefly on the attached schedule.
4. SOURCES OF INFORMATION In undertaking our valuations we have been provided with, and have relied upon, information supplied to us by RI PLC and their advisors. We have assumed that this information is full and correct. It follows that if it is found to contain errors then our opinions of value may change. Legal Documentation: We have relied on title documentation and leases provided by RI PLC. We understand that all the Properties have good and marketable title which is free from any onerous or restrictive conditions. We have not undertaken credit enquiries into the financial status of the tenants and have assumed that they are capable of meeting all of their obligations under the terms of their leases. Inspections: We have carried out full inspections of each of the Properties and the dates of these are noted on the attached Schedule. As agreed, except where we have been advised to the contrary, we have assumed that there have been no material changes to any of the properties or their surroundings that could have a material effect on the value of RI PLC’s interest since our inspections. Floor Areas: The floor areas have been provided to us and which we understand were calculated in accordance with the RICS Code of Measuring Practice (6th Edition) and upon which we have relied. A number of properties have been measured by us in accordance with the above Code. Building Surveys: We have not been provided with building surveys on each of the Properties and have relied upon our inspections which were carried out for valuation purposes. Environmental Surveys: We have not been provided with environmental surveys and have been informed that none of the properties are in any way adversely affected by any sort of environmental issues. Planning: We have relied on information on relevant planning matters from verbal enquiries of the relevant local authorities planning departments.
5. STATUS OF VALUER This valuation has been prepared by a number of surveyors under the supervision of John Rhodes MRICS. We confirm that they are all RICS Registered Valuers and have the knowledge, skills and understanding to undertake this valuation competently and we are acting in the capacity of External Valuer.
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We are required by the Red Book (UKPS5.4) to disclose the following: • Savills (UK) Limited provides ongoing regular valuation services to RI PLC for annual accounts and debt funding purposes. • In the 12 month period preceding the date of this Report, the total fees payable by RI PLC were less than 5% of the total combined fee income of Savills (UK) Limited and Savills Advisory Services Limited. We do not consider any of the above constitutes a conflict of interest or in any way conflicts with our responsibility to provide an independent and objective opinion of value.
6. VALUATION 6.1 Basis of Valuation Our valuations have been prepared on the basis of Market Value in accordance with the latest edition of the RICS Valuation – Professional Standards (“RICS Red Book”), and which is defined in VPS4 1.2 of the RICS Red Book 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 a 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. 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. Our valuations are exclusive of VAT (if applicable). 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 complied with the relevant EEC legislation. 6.2 Market Value We are of the opinion that the aggregate Market Value of the Properties in the Portfolio, as at 15 January 2016, is: Properties held for investment: Freehold/Heritable £89,540,000
Long leasehold (over 50 years) £9,475,000 –––––––––––– TOTAL £99,015,000
NINETY NINE MILLION AND FIFTEEN 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 were to be sold as a single holding. Each valuation reflects the costs of acquisition but not realisation. The largest property by value in the Portfolio is The Crescent Centre, Temple Back, Bristol, which represents 13.74% of the total. The aggregate value of the properties has increased by £2,450,000 from the valuation carried out for accounts purposes on behalf of RI PLC as at 31 August 2015. This increase is the result of a combination of asset management initiatives, current market evidence and shortening occupational leases.
7. CONFIDENTIALITY The contents of this Report and Valuation may be used for the specific purpose to which they refer. 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.
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For the purpose of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information within this Report and Valuation and declare that we have taken all reasonable care to ensure that the information contained in the Report and Valuation is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Document in compliance with Annex 1 item 1.2 of the Prospectus Directive Regulation.
Yours faithfully
John Rhodes MRICS Adam Whereat MRICS RICS Registered Valuer RICS Registered Valuer For an on behalf of Savills Advisory Services Limited
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SCHEDULE A: FREEHOLD/HERITABLE PROPERTY IN THE UK HELD FOR INVESTMENT
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
DSA The property comprises a 2009 Entire let on a full repairing 8 January £3,200,000 Gibfield Park driving test centre totalling and insuring lease to The 2016 Avenue 1,852 sq ft (172 sq m). Secretary of State for Atherton Built in 2009, the property Communities and Local ME46 0SY is a single storey framed Government for 40 years building including gas fired from January 2009, subject central heating, to a tenant only break suspended ceilings and an option in January 2034. The air handling system. 27 annual rent is £214,241 per car parking spaces and an annum. external tarmacadamed test area (extending to 3.36 acres) are provided.
The The property comprises a 1985 The main building is let to 5 January £12,000,000 Woodlands, four storey office building The First Secretary of State 2016 Manton with additional stand for a period of 15 years from Lane, alone single storey 12 August 2005, subject to a Bedford, annexe, both of which tenant only break option in MK41 7LW provide open plan August 2015, at a rent of accommodation. The £600,000 per annum. office accommodation The fourth floor of the main totals 102,779 sq ft (9,549 building is leased back from sq m) and the annexe The Secretary of State to provides a further 9,850 the freeholder for a period of sq ft (915 sq m) of self- 15 years less one day from contained space. 12 August 2005 at a peppercorn rent, and is subsequently underlet to R.K. Harrison for a period expiring 7 August 2020, subject to a tenant only break option in September 2017, at a rent of £367,375 per annum. The Annexe is let to Amey LG Limited on a ten year lease from 26 November 2005 expiring 31 March 2016 at a passing rent of £105,000 per annum. The total current income derived from the property is £1,072,375 per annum.
Crescent The property comprises 1970s The property is multi let to a 4 January £13,600,000 Centre, an office building number of tenants. The 2016 Temple arranged in five blocks. It majority of the income is Back, Bristol extends to 87,854 sq ft derived from The Secretary BS1 6EZ (8,162 sq m). The of State for Communities specification includes and Local Government until refurbished common 2023, subject to a tenant parts, air conditioning, only break option in 2021. perimeter trunking and The total income is Category II lighting. £1,031,954 per annum.
102 166810 Proof 7 Wednesday, January 27, 2016 23:09
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
7/15 A purpose built office 1980s Entire let to The First 21 December £700,000 Buccleuch building on ground and Secretary of State on a full 2015 Street, two upper floors. The repairing and insuring lease Dalkeith property interconnects at expiring on 31 March 2023 EH22 1HB ground floor level with 15 subject to a tenant option to Buccleuch Street (not break at 31 March 2018. owned). The accommodation extends The current rent is to 7,119 sqft (661 sqm) £133,667 per annum and is and has raised floors, gas subject to five yearly central heating and a reviews, the next being on passenger lift. There are 28 February 2020 eight car parking spaces (assuming break not onsite. exercised) in line with CPI.
Driving The property comprises a 2010 Entire let to The Secretary 5 January £1,800,000 Standards driving test centre of of State Communities and 2016 Agency, 1,118 sqft (104 sqm), Local Government for a Kilspindie together with a term of 40 years expiring Road, tarmacadamed test area 25 November 2050. There Dundee, and ancillary car parking. is a tenant break on DD2 3QH 26 November 2025 and 5 yearly thereafter. The current rent is £150,000 per annum which is reviewed in line with RPI. The November 2015 rent review is outstanding with the subsequent rent review being in November 2020. Our valuation assumes that the outstanding rent review is agreed at £171,825 per annum.
1A The property is a Grade A 1845 Entire let on a full repairing 21 December £3,650,000 Parliament listed building arranged and insuring lease to The 2015 Square, over basement, ground, City of Edinburgh Council Edinburgh first and second floors. until January 2022 at a rent EH1 1RF Refurbished in 2009, it of £395,261 per annum. provides 9,404 sqft (874 The rent is subject to five sqm) of court and office yearly rent reviews linked to accommodation, the the increase in the RPI, specification of which subject to a collar of 3% includes gas fired central and a cap of 7%. The next heating, LG7 lighting and rent review being 25th comfort cooling. January 2017.
Unit 1, The property comprises 2010 Entire let on a full repairing 5 January £3,450,000 Astra Park, a single storey and insuring lease to The 2016 Courteney office building of 1,572 Secretary of State for Road, sq ft (146 sq m) and Communities and Local Gillingham a tarmacadamed Government until January motorcycle manoeuvring 2050, subject to a tenant ME8 0RZ area. only break option on 1 March 2025. The passing rent is £295,298 per annum and is subject to five yearly rent reviews linked to RPI.
103 166810 Proof 7 Wednesday, January 27, 2016 23:09
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
21/22 Park The property is arranged 1970s Entire let on a full repairing 22 January £6,000,000 Place and on basement, ground and and insuring lease to The 2016 71/77 St three upper floors, Secretary of State for the Paul’s Street providing 39,169 sq ft Environment for an 18 year Leeds (3,639 sq m) of office term from 1 April 2000 at a LS1 2SL accommodation. The rent of £635,719 per annum specification includes gas reviewed at every fifth year central heating, perimeter of the term to a Market rent. trunking and suspended ceilings.
Waterside The property comprises 1800s Let on a full repairing and 22 January £3,900,000 House, three former mill buildings insuring lease to The 2016 Waterside converted in 2000 to Secretary of State For The Court, provide office Environment which expired Kirkstall accommodation. Two of on 30 September 2015, Road, the buildings, Waterside which was at a passing rent Leeds East and Waterside West, of £527,000 per annum. We LS4 2QB are connected via a have been informed that the glazed reception area. tenant is currently holding The third, Waterside II, is over. Terms for a lease detached. The whole extension have been agreed property provides 35,996 but this has not completed sq ft (3,344 sq m) of net and therefore we have not internal space together reflected the terms in the with 126 car parking valuation. The interest spaces. includes an advertising hoarding which currently generates an income of £1,650 per annum.
63/67 The property comprises 1980s Ground, first and second 5 January £9,000,000 Newington an early 1980s, self- floors are let to Trillium 2016 Causeway contained office building (Prime) Property GP Ltd for London arranged over basement, a term commencing on SE1 6LS ground and three upper 21 December 2010 and floors with landscaping expiring on 24 December and ancillary car parking. 2023, subject to a tenant’s The building provides break option in 2018. The 23,799 sq ft (2,211 sq m) rent is reviewed in of accommodation and 7 December 2015 to the car parking spaces. higher of the Market Rent or £336,000 per annum. The current rent is £315,000 per annum. The rent review is currently in progress. The third floor is let to InterHealth Worldwide for a term of 10 years from 6 July 2012, subject to a tenant’s break option in July 2019, at a rent of £69,313 per annum. The basement, which comprises 926 sq ft (86 sq m) of accommodation, is vacant and unlet.
104 166810 Proof 7 Wednesday, January 27, 2016 23:09
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
64 Exeter The property comprises a c.2000 The majority is let to Trillium 4 January £9,500,000 Street and detached eight-storey (PRIME) Property GP 2016 63/65 building of steel frame Limited on a full repairing Bretonside, construction. The building and insuring basis until May Plymouth comprises 61,357 sq ft 2021, subject to a tenant PL4 0AJ (5,700 sq m) of office break option in March 2018, accommodation. There is at a rent of £946,113 per undercroft car parking for annum. The rent is reviewed 30 cars. in accordance with the CPI. One office suite is let to Hagthorn Parry until January 2017 at £49,324 per annum. The total income derived from the property is £995,437 per annum.
West Point The property comprises 1980s The majority of West Point is 4 January £2,900,000 and Centre two interlinking buildings let to The Secretary of State 2016 Court, upon a sloping site. until March 2024, subject to Ebrington Centre Court is a two a tenant only break option in Street, storey building fronting April 2021, at £136,500 per Plymouth Exeter Street, and West annum. PL4 9RF Point is a four storey UKBA occupies part of the building fronting Ebrington second floor of West Point Street. The on a lease expiring in March accommodation totals 2016 at £32,300 per annum. 27,815 sq ft (2,584 sq m). Car parking is at surface The ground floor of Centre and basement level. Court is let to the Primary Care Trust until February 2016 at a rent of £70,732 per annum Co-Op Insurance Society Ltd leases the first floor of Centre Court until March 2016 at a passing rent of £100,200 per annum. The total rent derived from the property is, £339,732 per annum.
DSA, Kier The property comprises a 2010 Entire let on a full repairing 5 January £5,650,000 Park, Cowley single storey office and insuring lease to The 2016 Mill Road, building of 1,818 sq ft Secretary of State for Uxbridge (169 sq m) together with Communities and Local UB8 2QB a tarmacadamed external Government until April yard used for motorcycle 2050, subject to a tenant testing only break option in April 2030. The rent is £390,251 per annum which is subject to five yearly upward only rent reviews based on the increase in the RPI.
105 166810 Proof 7 Wednesday, January 27, 2016 23:09
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016
Exchange The property comprises a 1960s Entire let on a full repairing 5 January £12,000,000 House, 60 five storey office building and insuring lease to Trillium 2016 Exchange extending to 62,926 sq ft (Prime) Property GP Limited Road, (5,846 sq m). until 2023, subject to a Watford tenant only break option in WD18 0JJ March 2018, at £978,845 per annum. The next rent review is due in September 2019 and is linked to the increase in the CPI.
Westwey A purpose built office 1971 Entire let on a full repairing 5 January £2,190,000 House building on ground to third and insuring lease to The 2016 Westwey floors and extending to Secretary of State for Road 28,856 sq ft (2,681 sq m). Communities and Local Weymouth In 2009 the third floor was Government for a term of DT4 8TE refurbished and extended 99 years less 3 days by the tenant increasing expiring on 3 May 2070 at a the floor area to 33,721 current rent of £110,000 per sq ft (3,133 sq m). annum. The property is fitted out with suspended floors, under floor trunking, suspended ceilings and air conditioning. There are 120 car parking spaces. —————— Sub Total £89,540,000
106 166810 Proof 7 Wednesday, January 27, 2016 23:09
SCHEDULE B: LONG LEASEHOLD PROPERTY IN THE UK HELD FOR INVESTMENT
Address Description Approx Head Lease Tenancies Date of Market Value Age Inspection 15 January 2016
The The property 1994 Leasehold. Part of the ground 5 January £3,700,000 Observatory, comprises a self- floor is let to Chatham 2016 Held for a Brunel, contained office Maritime Trust for a term of 125 Chatham building arranged term of 10 years from years from Maritime, over ground, first 9 June 2014 with a 5 April 1993 Chatham and second floors tenant option to break at a ME4 4AF and extending to a on 8 June 2019 at a peppercorn net internal area of rent of £16,475 per rent without 21,404 sq ft (1,988 annum rising to review. sq m). It was £32,949 per annum on constructed in 1994 9 June 2016. and has 126 car parking spaces. Part of the ground floor is let to the Secretary of State for a term of 10 years from 3 February 2014 with a tenant break option on 3 February 2019 at a rent of £76,151 per annum. The first floor is tenanted by Railmaster.com Ltd from May 2013 for a term of seven years, with a tenant only break option on 8 May 2016. The rent passing is £115,274 per annum. The second floor is let to the Secretary of State for a term of 10 years from 29 March 2012, subject to a tenant’s break option in March 2017, at a rent of £112,738 per annum. The total income amounts to £320,638 per annum.
2 Duchess Purpose built office 1970s Leasehold Entire under-let to 4 January £1,500,000 Place, building of eight for a term Trillium (Prime) 2016 Edgbaston floors. The of 125 Property GP Ltd on B16 8NS accommodation years from full repairing and extends to 46,377 25 March insuring terms on a sq ft (4,309 sq m) 2003 at a lease expiring on and is centrally rent of 7.5% 31 March 2018 at a heated with of the rents current rent of suspended ceilings received £565,128 per annum. and two passenger above a The net rent is lifts. There are 104 base rent of £522,743 per annum. on site car parking £42,385 per spaces. annum.
107 166810 Proof 7 Wednesday, January 27, 2016 23:09
Address Description Approx Head Lease Tenancies Date of Market Value Age Inspection 15 January 2016
Centralofts, 1 The property c.1920 Leasehold Entire under-let to The 22 December £1,025,000 Waterloo comprises part of and for a Secretary of State for 2015 Square, the ground floor early term of 175 Communities and Newcastle within a larger 2000s years from Local Government for Upon Tyne complex part of 1 January a term of 15 years NE1 4DR which dates back to 2003 at a from 12 October 2006 the 1920s and has peppercorn on an effective full undergone complete rent without repairing and insuring refurbishment. The review. basis. The current rent accommodation passing is £89,712 per extends to a net annum. internal area of 5,607 sqft (521 sqm) and has been fitted out to a high specification. The upper floors are used as residential units and retained by the freeholder.
Heynesfield A ‘T’ shaped 1995 Leasehold Entire under-let on a 6 January £1,250,000 House purpose built office for a term full repairing and 2016 10 Stoney building, constructed of 125 insuring lease to The Lane in 1995. It is years from Secretary of State of Sparkhill arranged on ground 1 December the Environment until B12 8AF and first floors, and 1995 at a March 2023, subject extends to 11,712 peppercorn to a break on sq ft (2,120 sq m). rent without 31 March 2018. The review. current rent is £171,794 per annum and is reviewable every fifth year of the term, in line with CPI.
Delta 900, The property c.1989 Leasehold Let to Oxford Brookes 11 January £2,000,000 Delta comprises a self- for a term of University from May 2016 Business contained two storey 125 years 2016 for fifteen years Park, Great office building from 27 of at a gross rent of Western providing 30,495 February £286,251 per annum. Way, sq ft (2,833 sq 1987. The tenant benefits Swindon m) of office from a break option in The current SN5 7XQ accommodation, the tenth year. A six rent is with 90 car parking month rent free period £12,615 per spaces. has been granted. annum and The specification is geared to includes raised the higher of floors, suspended 5.5% of the ceilings with rental recessed Category income or II lighting and air £12,615 per handling units. annum. —————— Sub Total £9,475,000 —————— Grand Total—————— £99,015,000
108 SECTION 3
VALUATION REPORT PREPARED BY SAVILLS RELATING TO THE UK HOTEL PROPERTY PORTFOLIO 28 January 2016
The Directors Redefine International P.L.C. (“RI PLC”) Merchants House 24 North Quay Douglas Isle of Man IM1 1JA Tim Stoyle FRICS E: [email protected] J.P. Morgan Securities plc (“JP Morgan”) DL: +44 (0) 20 7409 8842 25 Bank Street F: +44 (0) 20 7409 9909 London E14 5JP 33 Margaret Street Peel Hunt LLP (“Peel Hunt”) London W1G 0JD Moor House T: +44 (0) 20 7499 8644 120 London Wall savills.com London EC2Y 5ET
Dear Sirs,
REDEFINE INTERNATIONAL P.L.C. – UK HOTEL PROPERTY PORTFOLIO VALUATION AS AT 15 JANUARY 2016
1. INSTRUCTIONS In accordance with instructions received from Redefine International P.L.C. (RI PLC) and Peel Hunt LLP, dated 2 December 2015, we have undertaken a valuation of the properties described in Schedule 1 (the “Properties”) (together the “Portfolio”). We understand that this Valuation Report is required for inclusion in an approved prospectus and circular (the “Document”) to be prepared in accordance with the Prospectus Rules and the Listing Rules to be published by RI PLC in the Document in connection with the proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters. This Valuation Report has been prepared in accordance with the Royal Institution of Chartered Surveyors (the “RICS”) Valuation – Professional Standards January 2014 (the “RICS Red Book”) published in November 2013 and effective from January 2014 and revised in April 2015. The valuation is a Regulated Purpose Valuation as defined in the Red Book. This Valuation Report has also been prepared in accordance with and on the basis of Rule 29 of the Takeover Code and complies with the requirements of the UK Listing Authority and also paragraphs 128 to 130 of ESMA’s recommendations on the consistent implementation of the European Commission’s Regulation on Prospectuses No. 809/2004. Furthermore, we confirm that we consent in principle to this Report being presented to investors in a prospectus (a “Prospectus”) and/or any ongoing investor materials including, but not limited to, any analyst presentation, press announcement or investor presentation (together, the “Investor Materials”) to be put on public display on RI PLC’s website and made available for inspection at its registered office and that of its appointed firm of solicitors (Nabarro LLP), in connection with, among other things, (i) a potential Placing of new ordinary shares in the capital of RI PLC (the “Placing Shares”) as a result of which the Placing Shares will be admitted to the premium segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange’s main market for listed securities and (ii) approval of the waiver of Rule 9 of the UK City Code on Takeovers and Mergers (together, the “Transaction”), provided that:
109 a. the Report or any summary shall not be published until such time as we have first approved the form and context in which the Report appears (such approval not to be unreasonably withheld or delayed); b. the Prospectus or Investor Materials, as the case may be, shall make clear that with the exception of this Report, Savills does not accept any responsibility for any part of the Prospectus or any other information issued by RI PLC or any other party to shareholders or prospective shareholders in connection with the Transaction; c. such Report or summary complies in all respects with the requirements of the Red Book and any applicable regulations or directives; d. if any part of our Report becomes misleading or inaccurate between the date of issue of the Report and the date of the Prospectus or the date of issue of any Investor Materials we reserve the right to revisit and update our Report prior to it being published.
2. DATE OF VALUATION Our opinions of Market Value are as at 15 January 2016. We are not aware of any material changes in circumstances between the date of the valuation and the date of this valuation report that would affect the valuation and we are not aware, as a result of our role as External Valuer of the Properties, of any matter which is not disclosed in the Document or which has not been disclosed to RI PLC, JP Morgan or Peel Hunt in writing and which is required to be brought to their attention.
3. TERMS OF REFERENCE The Portfolio comprises nine hotels held for investment purposes. Seven are held freehold and two are long leasehold (over 50 years). The Properties are all hotels, of which eight are operated subject to Franchise Agreements (one Holiday Inn, five Holiday Inn Express’s, one Crowne Plaza and one Doubletree by Hilton) and one subject to lease to Travelodge Hotels Limited. The majority of the hotels are situated within central London with the Crowne Plaza situated in Reading and the Doubletree by Hilton located in Edinburgh. All the properties are identified and described briefly on the attached schedule. The majority of the hotels are situated within central London with the Crowne Plaza situated in Reading and the Doubletree by Hilton located in Edinburgh. All the properties are identified and described briefly on the attached schedule.
4. SOURCES OF INFORMATION In undertaking our valuations we have been provided with, and have relied upon, information supplied to us by RI PLC and their advisors. We have assumed that this information is full and correct. It follows that if it is found to contain errors then our opinions of value may change. Legal Documentation: We understand that all the Properties have good and marketable title which is free from any onerous or restrictive conditions. We have previously been provided with summaries of the title documentation for each of the properties as well as details of the individual Franchise Agreements. For the purpose of our valuation we assume that these have not be amended. We understand that the properties are operated subject to internal lease agreements and have been informed that these can be collapsed and the properties offered to the market with vacant possession (besides the Travelodge Enfield) subject to the individual Franchise Agreements. Inspections: We carried out full inspections of each of the Properties in August 2015. A summary of the dates of our inspections are set out in attached schedule. As part of this exercise we interviewed General Management. As agreed, except where you have advised us to the contrary, we have assumed that there have been no material changes to any of the properties or their surroundings that could have a material effect on the value of RI PLC’s interest since our inspections. Where there are either works proposed (Crowne Plaza Reading and Holiday Inn Express Southwark) or works have recently been completed (Travelodge Enfield) we re-inspected the properties in December 2015. Management Profit and Loss Accounts: We have been provided with management accounts for the properties for the last 3 years alongside Budget and Forecast accounts for 2016. For the purpose of our valuation we have assumed that the accounts provided are correct and there are no further costs
110 associated with the operation of the hotels which a hypothetically efficient operator may be expected to incur. Planning: We have relied upon information of relevant planning consents provided by RI PLC. In situations where there is no record, we have assumed all construction was carried out in accordance with a valid planning permission and there are no outstanding planning issues relating to any of the Properties.
5. STATUS OF VALUER This valuation has been prepared by Tim Stoyle FRICS and Ben Packard MRICS. We confirm that they are all RICS Registered Valuers and have the knowledge, skills and understanding to undertake this valuation competently and we are acting in the capacity of External Valuer. We are required by the Red Book (UK Appendix 7 FCA Listing Rules) to disclose the following: • Tim Stoyle has supervised the valuation of this portfolio since 2011 and Savills (UK) Limited has been undertaking the instruction since this time. We have agreed that the authorised signatory on this instruction will be rotated at least every seven years. • Savills (UK) Limited provides ongoing regular valuation services to RI PLC for annual accounts and debt funding purposes. • In the 12 month period preceding the date of this Report, the total fees payable by RI PLC were less than 5% of the total combined fee income of Savills (UK) Limited and Savills Advisory Services Limited. We do not consider any of the above constitutes a conflict of interest or in any way conflicts with our responsibility to provide an independent and objective opinion of value.
6. VALUATION
6.1 Basis of Valuation Our valuations have been prepared on the basis of Market Value in accordance with the latest edition of the RICS Valuation – Professional Standards (“RICS Red Book”), and which is defined in VPS4 of the RICS Red Book 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 a 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). 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 complied with the relevant EEC legislation.
6.2 Market Value – Individual Properties We are of the opinion that the aggregate Market Value of the Properties in the Portfolio, as at 15 January 2016, is: Properties held for investment:
Freehold/Heritable £189,000,000
Long leasehold (over 50 years) £36,200,000 ––––––––––––– TOTAL £225,200,000
TWO HUNDRED AND TWENTY FIVE MILLION TWO HUNDRED THOUSAND POUNDS
111 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 were to be sold as a single holding. Each valuation reflects the costs of acquisition but not realisation. The largest property by value in the Portfolio is £38,500,000, which represents 17.1% of the total.
6.3 Market Value – Portfolio Sale Further to current market sentiment and recent comparable evidence for the sale of hotel portfolios where assets are of a similar brand and specification, we are of the opinion that the sale of the portfolio as a single holding would derive additional value to the aggregate of the sale of the individual assets. We would expect a portfolio, such as the eight operational properties contained within the subject portfolio, to be placed onto the market as a single lot to derive the highest possible value for the assets. This would exclude the Travelodge Enfield which is operated subject to a lease to Travelodge Hotels Limited and is likely to achieve best value if sold as a standalone asset. Based on the assumption that the eight properties would be sold as a single lot, we are of the opinion that the Market Value, as at 15 January 2016 is:
Eight Operational Assets: £222,075,000 (TWO HUNDRED AND TWENTY TWO MILLION AND SEVENTY FIVE THOUSAND POUNDS)
Travelodge Enfield: £13,700,000 (THIRTEEN MILLION SEVEN HUNDRED THOUSAND POUNDS)
The combined value above of the overall portfolio has increased by £1,100,000 from the equivalent figure in the Annual Report published by the Company as a result of better than expected performance at the Holiday Inn Express Royal Docks and the opening of the additional 21 bedrooms at the Travelodge Enfield following a £740,000 refurbishment.
7. CONFIDENTIALITY The contents of this Report and Valuation may be used for the specific purpose to which they refer. 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. For the purpose of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information within this Report and Valuation and declare that we have taken all reasonable care to ensure that the information contained in the Report and Valuation is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Document in compliance with Annex 1 item 1.2 of the Prospectus Directive Regulation.
Yours faithfully
Tim Stoyle FRICS Ben Packard MRICS RICS Registered Valuer RICS Registered Valuer
For and on behalf of Savills Advisory Services Limited
112 SCHEDULE A
THE PROPERTIES
113 Individual Market Date of Hotel Bedrooms Facilities Tenure Value Inspection 15 January 2016 Holiday Inn Brentford Opened in 2005. Long Leasehold Lock Hotel comprising 134 bedrooms, 999 years from 21 August High Street 134 £21,400,000 6 meeting rooms, restaurant, bar, mini 2005, paying a 2015 Brentford gym and parking for up to 75 cars. peppercorn rent Middlesex TW8 8JZ Opened in 2003. A limited service/budget standard hotel Holiday Inn Express comprising 150 bedrooms with four Limehouse 21 August 150 meeting rooms, bar and the Great Freehold £31,500,000 469-475 The Highway 2015 Room dining area. There is also a self London E1 3HN contained ground floor retail unit which has been leased to a third party. Opened in 2003. A limited service hotel comprising 108 Holiday Inn Express bedrooms. There has recently been a Park Royal full refurbishment of the ground floor 21 August Victoria Road 108 Freehold £18,000,000 public areas providing two meeting 2015 North Acton rooms, bar/breakfast dining area. There London W3 6XU is also a small retail unit let to a third party.
Holiday Inn Express Opened in 2000. Royal Docks A limited service hotel comprising 136 21 August 136 Freehold £27,000,000 Silvertown Way bedrooms with four meeting rooms, bar 2015 London E16 1EA and the Great Room dining area.
The hotel opened in 1999 as a Holiday Inn Express franchised hotel with 88 Holiday Inn Express bedrooms. The property has been Southwark converted to provide an additional 48 14 December 103-109 Southwark 136 Freehold £38,500,000 bedrooms and basement level meeting 2015 Street room. Planning permission has also London SE1 been granted for 12 additional guestrooms at a cost of £2,758,856. Holiday Inn Express Opened in 2005. Earl’s Court, A limited service/budget hotel 21 August 150 Freehold £33,900,000 295 North End Road comprising 150 bedrooms with two 2015 London W14 9NS meeting rooms, bar and restaurant. Opened in approx 1985. A full service 4 star hotel, with 122 Crowne Plaza Reading Bedrooms, Business Centre, Long Leasehold Caversham Bridge conference facilities and leisure club. 125 years from 29 December Richfield Avenue 122 £14,800,000 We understand management propose 1986. Rent 2015 Reading to refurbish the ground floor restaurant £20,000 per annum Berkshire RG1 8BD and bar at a cost of approximately £500,000. Converted to the Doubletree brand in Doubletree by Hilton March 2014. 138 bedroom full service Edinburgh City Centre, 17 August 139 hotel with conference facilities and a Freehold £26,400,000 34 Bread Street, 2015 ground floor unit let as The Chanter Edinburgh, EH3 9AF public house extending to 4,777 sq ft. Opened in 2012. 132 bedroom budget hotel let to Travelodge Hotels Ltd at a passing rent of £611,160 per annum. Travelodge Enfield, Planning consent was granted for 21 Lumina Park, Great additional bedrooms at ground floor 17 December Cambridge Road, 153 Freehold £13,700,000 level, replacing the vacant retail unit. 2015 Greater London, We are advised that Travelodge have EN1 1FS now taken the rooms at an additional rent of £113,400 pa. The total rent received is now £724,560.
Total £225,200,000
114 SECTION 4
VALUATION REPORT PREPARED BY SAVILLS RELATING TO THE GERMAN PORTFOLIO 28 January 2016
The Directors Redefine International P.L.C. (“RI PLC”) Merchants House 24 North Quay Douglas Isle of Man Simon Kempf IM1 4LE E: [email protected] DL: +49 69 273 000 30 J.P. Morgan Securities plc (“JP Morgan”) 25 Bank Street Taunusanlage 19 Canary Wharf 60325 Frankfurt London E14 5JP Germany Peel Hunt LLP (“Peel Hunt”) savills.de Moor House 120 London Wall London EC2Y 5ET
Dear Sirs REDEFINE INTERNATIONAL P.L.C. – GERMAN PROPERTY PORTFOLIO VALUATION AS AT 15 JANUARY 2016
1. INSTRUCTIONS In accordance with instructions received from Redefine International P.L.C. (RI PLC), JP Morgan Securities plc and Peel Hunt LLP, dated 22 January 2016, Savills Advisory Services Germany GmbH & Co. KG (“Savills”, “we” or “us”) have undertaken a valuation of the properties described in Schedule 1 (the “Properties”) (together the “Portfolio”). We understand that this Valuation Report (the “Report”) is required for inclusion in an approved prospectus and circular (the “Document”) to be prepared in accordance with the Prospectus Rules and the Listing Rules to be published by RI PLC in the Document in connection with the proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters. This Valuation Report has been prepared in accordance with the Royal Institution of Chartered Surveyors (the “RICS”) Valuation – Professional Standards January 2014 (the “RICS Red Book”) published in November 2013 and effective from January 2014 and revised in April 2015. The valuation is a Regulated Purpose Valuation as defined in the Red Book. This Valuation Report has also been prepared in accordance with and on the basis of Rule 29 of the Takeover Code and complies with the requirements of the UK Listing Authority and also paragraphs 128 to 130 of ESMA’s recommendations on the consistent implementation of the European Commission’s Regulation on Prospectuses No. 809/2004. Furthermore, we confirm that we consent in principle to this Report being presented to investors in a prospectus (a “Prospectus”) and/or any ongoing investor materials including, but not limited to, any analyst presentation, press announcement or investor presentation (together, the “Investor Materials”) to be put on public display on RI PLC’s website and made available for inspection at its registered office and that of its appointed firm of solicitors (Nabarro LLP), in connection with, among other things, (i) a potential Placing of new ordinary shares in the capital of RI PLC (the “Placing Shares”) as a result of which the Placing Shares will be admitted to the premium segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange’s main market for listed securities and (ii) approval of the waiver of Rule 9 of the UK City Code on Takeovers and Mergers (together, the “Transaction”), provided that: a. the Report or any summary shall not be published until such time as we have first approved the form and context in which the Report appears (such approval not to be unreasonably withheld or delayed);
115 b. the Prospectus or Investor Materials, as the case may be, shall make clear that with the exception of this Report, Savills does not accept any responsibility for any part of the Prospectus or any other information issued by RI PLC or any other party to shareholders or prospective shareholders in connection with the Transaction; c. such Report or summary complies in all respects with the requirements of the Red Book and any applicable regulations or directives; d. if any part of our Report becomes misleading or inaccurate between the date of issue of the Report and the date of the Prospectus or the date of issue of any Investor Materials we reserve the right to revisit and update our Report prior to it being published.
2. DATE OF VALUATION Our opinions of Market Value are as at 15 January 2016. We are not aware of any material changes in circumstances between the date of the valuation and the date of this valuation report that would affect the valuation and we are not aware, as a result of our role as External Valuer of the Properties, of any matter which is not disclosed in the Document or which has not been disclosed to RI PLC, Peel Hunt or JP Morgan in writing and which is required to be brought to their attention.
3. TERMS OF REFERENCE We understand the portfolio comprises 3 properties held for investment purposes, let to a variety of retail tenants, and located in Berlin, Hamburg, and Ingolstadt. One is held freehold, and two are held on a part freehold and part long leasehold basis. All the properties are identified on the attached schedules. As agreed, although we have reflected our knowledge of market trends in the locality, except where you have advised us to the contrary, we have assumed that there have been no material changes to any of the properties or their surroundings that could have a material effect on the value of RI PLC’s interest since our most recent inspections. All the properties are identified and described briefly on the attached schedules.
4. SOURCES OF INFORMATION In undertaking our valuations we have been provided with, and have relied upon, information supplied to us by RI PLC and their advisors. We have assumed that this information is full and correct. It follows that if it is found to contain errors then our opinions of value may change. Legal Documentation: With regard to legal matters, we were provided with information regarding: • Land register • Public encumbrances • Historical listings • Soil contamination • Planning law, zoning specification. Inspections: We have carried out full inspections of each of the Properties between 30 July 2015 and 04 August 2015. A summary of the dates of our inspections are set out in the attached schedule. As agreed, except where you have advised us to the contrary, we have assumed that there have been no material changes to any of the properties or their surroundings that could have a material effect on the value of the vendors interest since our inspections. Rent Roll Information: Our valuation is based on the tenancy schedules dated December 2015, provided on 03 December 2015 by the instructing party via email. We assume that the document reflects the status quo of all tenancies as at the valuation date of 15 January 2016 to a true and comprehensive extent. Please note that we cannot accept any reliance on the correctness nor the completeness of the provided information of tenancies. Furthermore we were provided with the future lease contract of Primark (Ingolstadt), which we considered in our valuation. Technical Aspects: For technical matters, we relied on the provided capital expenditure overviews dated December 2015 received by the instructing party via email. Furthermore, we have provided with costs estimations regarding current / future development measures. We have considered these costs
116 in our valuation approach. Please refer to the detailed valuation overviews for more details of individual aspects. Environmental Surveys: We have been provided with, information regarding soil contamination from the relevant authorities. Planning: We have relied on information on relevant planning consents, which were provided by the instructing party. In situations where there is no record, we have assumed all construction was carried out in accordance with a valid planning permission and there are no outstanding planning issues relating to any of the Properties.
5. STATUS OF VALUER This valuation has been prepared by a number of valuers under the supervision of Klaus Trautner MRICS – CIS HypZert (F), Director Valuation Germany. We confirm that all RICS qualified valuers involved are also RICS Registered Valuers and have the knowledge, skills and understanding to undertake this valuation competently and we are acting in the capacity of External Valuer. We are required by the Red Book (UK Appendix 7 FCA Listing Rules) to disclose the following: • Klaus Trautner has supervised the valuation of this portfolio since August 2013, and Savills Immobilien Beratungs GmbH has been undertaking the instruction since this time. We have agreed that the authorised signatory on this valuation will be rotated at least every seven years. • Savills Immobilien Beratungs GmbH provided acquisition advice to RI PLC in respect of these properties in summer 2013. Savills Immobilien Beratungs GmbH also provides ongoing regular valuation services to RI PLC for accounts purposes. • In the 12 month period preceding the date of this Report, the total fees payable by RI PLC were less than 5% of the total combined fee income of Savills Advisory Services Germany GmbH & Co. KG and Savills Immobilien Beratungs GmbH. We do not consider any of the above constitutes a conflict of interest or in any way conflicts with our responsibility to provide an independent and objective opinion of value.
6. VALUATION
6.1 Basis of Valuation Our valuations have been prepared on the basis of Market Value in accordance with the latest edition of the RICS Valuation – Professional Standards (“RICS Red Book”), and which is defined in VPS4 of the RICS Red Book 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 a 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. 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. Our valuations are exclusive of VAT (if applicable). 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 complied with the relevant EEC legislation.
117 6.2 Market Value We are of the opinion that the aggregate Market Value of the Properties in the Portfolio, as at 15 January 2016, is: Properties held for investment: Freehold €89,100,000
Freehold and long leasehold €92,900,000
(€96,200,000 Under Special Assumptions)
TOTAL €182,000,000
(ONE HUNDRED EIGHTY TWO MILLION EURO) TOTAL UNDER SPECIAL ASSUMPTIONS €185,300,000 (ONE HUNDRED EIGHTY FIVE MILLION THREE HUNDRED THOUSAND EURO) 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 were to be sold as a single holding. Each valuation reflects the costs of acquisition but not realisation. The largest property by value in the portfolio is Berlin, Schloss-Strassen-Center, which represents 49% of the total (48% of the total under Special Assumptions).
Development of Market Value EUR 31-Aug-15 15-Jan-16 % Change Hamburg Market Value (EUR) 76,600,000 (£55,900,000) 77,100,000 (£58,747,333) 0.65% Berlin Market Value (EUR) 88,900,000 (£64,900,000) 89,100,000 (£67,890,887) 0.22% Ingolstadt* Market Value (EUR) 20,200,000 (£14,700,000) 19,100,000 (£14,553,490) –5.45%
* Currently under redevelopment/with future anchor tenants Primark and H&M. Our valuations in August 2015 and January 2016 have been prepared in Euros only, and conversion to GBP has been determined externally. The combined value of the Properties has decreased by EUR 400,000 (-0.22%) overall from the previous valuation undertaken for RI PLC as at 31 August 2015. This is mainly as a result of higher development costs for the asset “City Arcaden”, Ingolstadt. The value of the property “Bahnhof Altona”, Hamburg has increased by EUR 500,000 (0.65%). This is mainly due to the recently improved investment market conditions. The value of the property “Schloss-Strassen Centre”, Berlin has increased by EUR 200,000 (0.22%). This is mainly as a result of successful lettings, slightly increased current rent and the recently improved investment market conditions. The value of the property “City Arcaden”, Ingolstadt has decreased by EUR 1,100,000 (-5.45%). This is mainly due to the higher development costs and rent reductions of the current tenants (H&M and I.K. Hofmann) during the construction works. The development costs increased from EUR 9.41m to EUR 12.03m. Despite the recently improved investment market conditions, these higher development costs cannot be compensated.
118 6.3 Special Assumptions We draw your attention to the fact that the property in Hamburg has been valued subject to Special Assumptions, as agreed with yourselves, whereby the lease with Primark is signed and the development takes place as per the provided updated information. • Primark will sign a 10-year lease for the property in Hamburg generating a rental income of EUR 2.0m p.a • The above mentioned lease with Primark will make a (partial) redevelopment necessary. Based on cost estimates the redevelopment costs for the Hamburg property are assumed to amount to EUR 23m incl. professional fees, capital contribution to new anchor tenant (Primark) and the development programme is expected to start in Q3 2018. • The planned development in Hamburg is in accordance with all applicable guidelines, regulations, and laws and can therefore be carried out as planned.
7. CONFIDENTIALITY The contents of this Report and Valuation may be used for the specific purpose to which they refer. 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. For the purpose of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information within this Report and Valuation and declare that we have taken all reasonable care to ensure that the information contained in the Report and Valuation is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Document in compliance with Annex 1 item 1.2 of the Prospectus Directive Regulation. With the exception of this Report, Savills does not accept any responsibility for any part of the Prospectus or any other information issued by RI PLC or any other party to shareholders or prospective shareholders in connection with the Transaction. For and on behalf of
Savills Advisory Services Germany GmbH & Co. KG
Klaus Trautner MRICS – CIS HypZert (F) Christian Glock MRICS RICS Registered Valuer RICS Registered Valuer
119 SCHEDULE A: FREEHOLD PROPERTY IN GERMANY HELD FOR INVESTMENT
Address Description and Date of Approx Tenancies Market Value Inspection Age 15 January 2016
Walther The property is a shopping 2007 The property is €89,100,000 Schreiber centre which opened in March multitenanted. The anchor Platz 1, 2007. It is arranged over six tenant is Primark Mode Ltd. 12161 Berlin floors (basement, ground floor, Co. KG, with an annual and four upper floors) extending gross rent of € 2 million to 18,181 sq m. The second, (ca. 39 % of the rental third, and fourth floors are partly income), and a remaining occupied by a car park lease term of ca. 7.29 (365 parking spaces). years. Overall, the property generates a GRI of ca. Inspected on 4 August 2015 € 5.14 million including turnover rent, and has a WARLT of 4.96 years.
SUB TOTAL €89,100,000
120 SCHEDULE B: FREEHOLD AND LONG LEASEHOLD PROPERTY IN GERMANY HELD FOR INVESTMENT
Address Description and Approx Tenancies Market Comments Date of Inspection Age Value 15 January 2016
Paul- The asset is a retail Refur. The main tenant is Media €73,800,000 The converted Nevermann property located at 2004/ Markt TV-Hifi-Elektro GmbH (€77,100,000 department store is -Platz 15, the Hamburg-Altona 2005 Hamburg Altona, with a under Special held primarily on the 22765 train station. It current GRI of € 749,526 Assumptions) German equivalent of Hamburg consists of a per annum and a remaining freehold title. The converted fourstorey lease term of 4.26 years multi-storey car park is department store, expiring on 30 April 2020. held primarily on the and a separate Other major retail tenants German equivalent of multi-storey car park include Lidl Vertriebs-GmbH long leasehold title. with ground floor & Co. KG, BHG Bahnhofs- The leasehold is for a retail. The property Handels-Vertriebs GmbH, term of 100 years from has a total lettable and Dirk Rossmann GmbH. 03 November 2004 area of 15,074 sq The property generates a (contract dated m. The multi-storey total GRI of € 4,567,843 per 28 December 2001). car park has 496 annum including turnover We have assumed parking spaces. rent, and has a WARLT of that the lump sum 5.56 years. ground rent has been Inspected on 31 paid as per the long July 2015 leasehold contract.
Ludwigsstr The asset is a Various The main tenant is H & M €19,100,000 According to the asse 25, former department Hennes & Mauritz B.V. & Co. provided the property 85049 store converted to a KG, with a current GRI of on the German Ingolstadt high street shopping € 317,999 per annum equivalents of centre in 2009. The (reduced rent until June freehold and property is arranged 2016) and a remaining lease leasehold title until over five floors term of 3.96 years. The 1 January 2048. The (basement, ground property generates a total annual ground rent floor, and three GRI of € 341,129 per annum, amounts to upper floors) and has a WARLT of 3.98 EUR 107,110.20. The extending to 10,419 years. Currently the rent will be adjusted sq m. development take place and by 100%. We have will be completed in Q3/Q4 considered the annual Inspected on 30 2016 as per the provided ground rent in our July 2015 information. We have applied valuation approach. total development costs of The leasehold expiries ca. € 13.4 million as per the in 2048, we provided information. recommend an early According to the information prolongation of the provided, the property will be leasehold or anchored by Primark, with a conversion into GRI of € 1.5 million per freehold. annum and a 10-year lease term, and H & M Hennes & Mauritz B.V. & Co. KG, with a current GRI of € 530,998 per annum and a lease term expiring on 31 December 2019. (€92,900,000 SUB (€96,200,000 TOTAL under Special Assumptions)
(€182,000,000 GRAND (€185,300,000 TOTAL under Special Assumptions)
121 SECTION 5
VALUATION REPORT PREPARED BY BNP PARIBAS REAL ESTATE RELATING TO 25-26 ESPLANADE, ST HELIER, JERSEY
Private & Confidential Valuation
Redefine International P.L.C. (“RI PLC”) Phil Dawes MRICS Merchants House BNP Paribas Real Estate Jersey Limited 24 North Quay Gnd Floor Dialogue House Douglas 2 – 6 Anley Street Isle of Man St Helier, Jersey. IM1 1JA JE4 8RD J.P. Morgan Securities plc (“JP Morgan”) Tel: +44 (0) 1534 815200 25 Bank Street Fax: +44 (0) 1534 629011 London E-mail: [email protected] E14 5JP Peel Hunt LLP (“Peel Hunt”) Moor House 120 London Wall London EC2Y 5ET Our Ref: 202 100980B Date 28 January 2016 Dear Sirs
NAME: REDEFINE INTERNATIONAL PLC (CLIENT) ADDRESSEES: REDEFINE INTERNATIONAL PLC, JP MORGAN SECURITIES PLC, PEEL HUNT LLP ADDRESS: 25-26 ESPLANADE, ST HELIER, JERSEY (THE “PROPERTY”)
1. TERMS OF REFERENCE 1.1 Instructions The freehold interest in the Property, comprising a modern multi-let office building let to seven tenants, is held by Redefine International PLC as an investment and our valuation is prepared in accordance with the terms of engagement letter dated 28 January 2016 and the Valuation Procedures and Assumptions/Terms and Conditions of Business enclosed with that letter. Copies of these documents are enclosed in Appendix 1. We understand that the purpose of the valuation report is for its inclusion in an approved Prospectus in connection with the Client’s proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters. This valuation report constitutes a Regulated Purpose valuation. We are required by RICS regulations to disclose the following: In our financial year ending 31 December 2015 the total fees earned from the Client account for less than 5% of the company’s turnover. The valuer has continuously been the signatory to valuations provided to the Client for financial reporting purposes since 2008. Prior to this neither the valuer nor BNP Paribas Real Estate Jersey Limited had any involvement with the Client.
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 122 BNP Paribas Real Estate Jersey Limited has recently concluded the 2013 rent review negotiations pertaining to the Property on behalf of the Client and have recently negotiated a lease restructure. We do not expect there to be a material increase in the fees payable by the Client to BNP Paribas Real Estate Jersey Limited during the current year ending 31 December 2016.
1.2 Date of valuation The Date of Valuation is 15th January 2016. The importance of the valuation date must be stressed as property values may change over a relatively short period. We are not aware of any material changes in circumstances between the date of the valuation and the date of this valuation report that would affect the valuation and we are not aware of, as a result of our role as External Valuer of the Property, any matter which is not disclosed in the Prospectus or which has not been described to the Client in writing and which is required to be brought to their attention.
1.3 Standards I can confirm that the valuation will be undertaken in accordance with the International Financial Reporting Standards (IFRS), and prepared in accordance with the 2014 edition of the RICS Valuation – Professional Standards, (the “Red Book”) effective 6 January 2014 – VPGA 1 (Valuations for Inclusion in Financial Statements). In addition we have prepared our valuation report in compliance with the relevant provisions of the Listing Rules and rule 5.6.5G of the Prospectus Rules and paragraphs 128-130 of ESMA’s update of CESR’s recommendations on prospectuses (no 809/2004). Our valuation will also be prepared in compliance with and on the basis of the requirement of rule 29 of the UK City Code on Takeovers and Mergers. International Financial Reporting Standards require property assets to be valued to Fair Value. It is explained in International Accounting Standard (IAS) 16 that the Fair Value of property, plant and equipment is normally based on “market based evidence”. For this reason both the International Valuation Standards and the RICS Red Book require valuers undertaking valuations for inclusion in a financial statement prepared under IFRS to report the asset’s Market Value. We will therefore provide you with our opinion of Market Value of the Property as at the Date of Valuation in accordance with the definition provided under Valuation Standard VPS 4 paragraph 1.2 of the Red Book.
1.4 Independence and Objectivity We confirm that we have had no material involvement with the Property or the Client (save for the fact we have valued the Property for the Client for the purpose of reporting the figure within their 2008, 2009, 2010, 2011, 2012, 2013, 2014 & 2015 financial statements and for the purpose of seeking a listing on the Johannesburg Stock Exchange in connection with a merger. BNP Paribas Real Estate Jersey Limited was recently instructed to undertake the negotiation and settlement of the outstanding 2013 rent reviews and recent AIB lease restructure pertaining to the Property. We are acting in our capacity as External Valuers as defined in the Red Book.
1.5 Valuer details This report has been prepared by Phil Dawes BSc MRICS (RICS Registered Valuer) under the supervision of Chris Hamilton MRICS (RICS Registered Valuer). We confirm that they have the knowledge, skills and understanding to undertake this valuation competently.
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 123 2. EXTENT OF DUE DILIGENCE & INFORMATION SOURCES 2.1 Inspection The property and the general environs were inspected externally on 5th January 2016 by Philip Dawes. We have assumed no material changes to the physical characteristics of the Property since the date of the last internal inspection on 30th September 2015 and on the 8th January 2016 in respect of the demise occupied by JFSC. The Client has not reported any such changes.
2.2 Floor areas The Net Internal Area (NIA’s) for each unit of occupation within the Property is detailed in the respective leasehold documents. We have previously undertaken check measurements at the Property in accordance with the current edition of the RICS Code of Measuring Practice and are satisfied the areas adopted for the purpose of this valuation are fair and reasonable.
2.3 Condition We were not instructed to carry out a structural survey, nor test any of the services installations. We have assumed there are no structural issues concerning the building and the plant and machinery has been well maintained in accordance with manufacturers guidelines and is in good working order.
2.4 Environmental investigation We have not carried out detailed investigations and information is based on known prior use of the Property.
2.5 Tenure, title and tenancies We have not been provided with reports on title and our opinion of value is on the basis that no onerous restrictions, covenants, servitudes or rights of way which may adversely affect the Property exist. The commentary provided in this report is based on our understanding of the respective Freehold title. We have received and reviewed copies of the occupational leases relevant to the Property.
2.6 Sale Costs We have assumed the sale to be a share transfer. As a result we have assumed that acceptable institutional corporate warranties will be provided by the Vendor.
3. PROPERTY INFORMATION 3.1 Location The Property is located in a prime office location in the heart of Jersey’s evolving new professional and financial centre along the Esplanade area of St Helier. More specifically the Property is situated at the junction of The Esplanade and Castle Street with frontage to the Esplanade to the front elevation, Castle Street to the side elevation and La Rue des Mielles to the rear elevation.
3.2 Description The Property comprises an imposing, modern, self contained, multi-storey, purpose built office building completed circa 2007 to BCO Cat A standard throughout, with office accommodation generally arranged over five storeys together with car parking provision at basement level. The Property is multi let to seven tenants, and in general the specification includes raised floor, suspended ceiling, VRV air conditioning & lift access to all floors.
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 124 3.3 Accommodation The floor areas detailed in the occupational leases are detailed below:
Description Net Internal Area M2 Sq Ft
C5 Alliance Ground 307.51 3,310 Car Spaces 2
Nordic Capital Ltd / C5 First 402.18 4,329 Car spaces 2
Pentura Trust Company Ltd Second 385.46 4,149 Car spaces 4
Capita Fiduciary Group Ltd Third 384.06 4,134 Car Spaces 2
Rathbone Investment Management Ltd Fourth 358.61 3,860 Car Spaces 2
JFSC Property Holdings No.1 Limited Ground – Second Floor 1,609.64 17,326 Car Spaces 16
Capita Fiduciary Group Limited Ground – Fourth Floor 2,066.53 22,144 Car Spaces 8
Total Area 5,513.99 59,352
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 125 3.4 Repair Internally and externally the Property is considered to be in a good state of repair and condition throughout commensurate with its age and use. The Property is managed by a UK company to ensure the common parts are properly maintained in accordance with the terms of the respective leases. An effective programme of planned preventive maintenance will ensure the condition of the Property is maintained going forward. It is also important that regular maintenance is carried out in accordance with the manufacturers guidelines concerning the VRV air conditioning system. The external cladding was replaced in 2013 at the expense of the developer, due to faulty installation, when the property was originally constructed. The Managing Agents report no further material issues with the Property, particularly relating to the cladding, as at the Date of Valuation. We understand the roof is still covered under warranty.
3.5 Tenure The interest being valued in the Property is freehold subject to the existing occupational leases to the tenants. We have not been provided with a copy of a report on title however would welcome the opportunity of commenting on it if one should become available.
4. TENANCY 4.1 Occupational leases The Property is currently multi-tenanted with seven separate leasehold interests, being C5 Alliance Group Ltd, Nordic Capital Ltd (subject to a new lease on expiry to C5 Alliance Group Ltd), Pentura Trust Company Ltd, Capita Fiduciary Group Ltd and Rathbone Investment Management International Ltd, JFSC Property Holdings Ltd and Capital Fiduciary Group Ltd . The leases to C5 Alliance Group Ltd, Nordic Capital Ltd, Pentura Trust Company Ltd, Capita Fiduciary Group Ltd and Rathbone Investment Management International Ltd were originally sub tenants of AIB CI Ltd. On 18th December 2015 AIB surrendered their lease and the sub tenants became direct tenants of the landlord. Following the lease restructure the terms of the respective leases are as follows: C5 Alliance Group Limited Tenant: C5 Alliance Group Ltd. Guarantor provided by Mark Beaufort Loane. Lease commencement date 11th April 2014 with a termination date of 1st July 2025. Current rent £95,100 (based on £27 psf for the office space & £3000 per car space). Next Review 13th August 2016. Effective FRI terms via a fully recoverable service charge provision. 3 yearly, upward only rent reviews to the greater of the passing rental or market rent. Assumed term of 15 years at review to exclude the benefit of a Break option. The areas to be adopted for the purposes of the review are contained within the Rent Calculation Certificate. Tenant only Break options effective from 10th October 2020.
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 126 Nordic Capital Ltd, subject to C5 Alliance Group Ltd taking a new lease on expiry Current tenant: Nordic Capital Ltd. Guarantor provided by NC V Ltd. Lease commencement date 13th August 2007 with a termination date of 12th August 2016. C5 Alliance Group Ltd have entered into a lease that will commence on expiry of Nordic’s lease and once they have complied with the requirements of the Licence of Alterations dated 24 August 2007. We have assumed the new lease will therefore run from 13th August 2016 expiring 1st July 2025. The starting rent will be £122,613 pa, subject to immediate review. Current rent passing £122,613 (based on £27 psf for the office space & £3000 per car space). Next Review 13th August 2016. Effective FRI terms via a fully recoverable service charge provision. 3 yearly, upward only rent reviews to the greater of the passing rental or market rent. Assumed term of 15 years at review to exclude the benefit of a Break option. The areas to be adopted for the purposes of the review are contained within the Rent Calculation Certificate. C5 tenant only Break option effective from 6.5 years from lease commencement. Assuming lease commencement 13th August 2016 this will be on 12th February 2023.
Pentera Trust Company Limited Tenant: Pentera Trust Company Ltd. Lease commencement date 23th March 2014 with a termination date of 1st July 2025. Current rent passing £123,753 (based on £27 psf for the office space & £3000 per car space). Next Review 13th August 2016. Effective FRI terms via a fully recoverable service charge provision. 3 yearly, upward only rent reviews to the greater of the passing rental or market rent. Assumed term of 15 years at review to exclude the benefit of a Break option. The areas to be adopted for the purposes of the review are contained within the Rent Calculation Certificate. Tenant only Break options effective from 23rd March 2020.
Capita Fiduciary Group Ltd Tenant: Capita Fiduciary Group Ltd. Lease commencement date 30th September 2011 with a termination date of 4th November 2037. Current rent passing £117,348 (based on £27 psf for the office space & £3000 per car space). Next Review 13th August 2016. Effective FRI terms via a fully recoverable service charge provision. 3 yearly, upward only rent reviews to the greater of the passing rental or market rent. Assumed term of 15 years at review to exclude the benefit of a Break option. The areas to be adopted for the purposes of the review are contained within the Rent Calculation Certificate. Tenant only Break options effective from 4th November 2022, 2027 & 2032 with landlords break options on 12th August 2025, 2031 and 2037.
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 127 Rathbone Investment Management International Ltd Tenant: Rathbone Investment Management International Ltd. Guarantor: Rathbone Brothers Plc. Lease commencement date 25th March 2013 with a termination date of 1st July 2025. Current rent passing £110,220 (based on £27 psf for the office space & £3000 per car space). Next Review 13th August 2016. Effective FRI terms via a fully recoverable service charge provision. 3 yearly, upward only rent reviews to the greater of the passing rental or market rent. Assumed term of 15 years at review to exclude the benefit of a Break option. The areas to be adopted for the purposes of the review are contained within the Rent Calculation Certificate.
Capita Fiduciary Group Limited Landlord is Castle Street (Jersey) Limited. Tenant is Capita Fiduciary Group Limited. Guarantor provided by Capita Group Plc. 30 year lease from lease commencement date 5 November 2007 with a termination date of 4 November 2037. Rent commencement date 5 May 2008. Current rent reserved £597,092 wef 5 November 2010 rent review. We have assumed the 5 November 2013 rent is settled at £609,199 pa (£26.50 psf and £3000 pa per car space) and have used this figure in our assessment. Effective FRI terms via a fully recoverable service charge provision. 3 yearly, upward only rent reviews to the greater of the passing rental or market rent. Assumed term of 15 years at review to exclude the benefit of a Break option. The areas to be adopted for the purposes of the review are contained with Schedule 1 of the lease. Tenant only Break options effective from 4 November 2022, 4 November 2027 and 4 November 2032 subject to 12 months prior written notice.
JFSC Property Holdings No.1 Limited Landlord is Castle Street (Jersey) Limited. Tenant is JFSC Property Holdings No.1 Limited. Guarantor provided by The Jersey Financial Services Commission. 21 year lease from lease commencement date 1 May 2007 with a termination date of 30 April 2028. Rent commencement date 1 November 2007. Current rental of £490,476 wef 1 May 2010 (office rate of £26 psf and car parking rate of £2,500 per space). We have assumed the 1st May 2013 rent review is settled at £507,139 pa (£26.50 psf and £3000 pa per car space) and have used this figure in our assessment. Effective FRI terms via a fully recoverable service charge provision. 3 yearly, upward only rent reviews to the greater of the passing rental or market rent.
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 128 Assumed term of 21 years at review with assumed option to Break at year 15. The areas to be adopted for the purposes of the review are contained with Schedule 1 of the lease. Tenant only Break option effective from 30 April 2022.
4.2 Income Gross Income £1,685,373 per annum Net Income £1,685,373 per annum The gross and net rentals have been calculated based on the basis the outstanding 2013 rent reviews for both Capita Fiduciary Group Ltd and JFSC Property Holdings No.1 Limited are settled at our anticipated rental values.
5. VALUATION 5.1 Valuation We are aware that the property was purchased by the client for a consideration of £27.1 million in mid 2007 reflecting a net initial yield of 5.9% (allowing for acquisition costs of 1.5% based on a share transfer transaction). We are of the opinion that upon the basis described above, the market value of the freehold interest in the property, subject to the existing leasehold interests, as at the date of valuation, is in the region of: £23,500,000 (Twenty three million five hundred thousand pounds sterling) We have valued the Property using the traditional income capitalisation approach and have applied a net initial yield of 7% and equivalent yield of 7.16% to the existing and estimated cash flows (reflecting what we believe the JFSC and Capita outstanding 2013 rent reviews will be settled at, and imminent 2016 reviews). In the event the JFSC and Capita 2013 rent reviews are settled at below our estimated rental value, then this may result in a decrease in value. The value of the Property has decreased by £300,000 from the half yearly valuation undertaken for the Client as at 31 August 2015. This is mainly a result of a slight yield adjustment based on recent comparable evidence. We have estimated the reversionary Market Rent (2016) for the Property will increase to an office rate based on circa £27.5 per square foot for C5 Alliance Group Ltd, Nordic Capital Ltd, Pentura Trust Company Ltd, Capita Fiduciary Group Ltd and Rathbone Investment Management International Ltd and £27 psf for the JFSC and Capita leasehold interests. We have assumed purchaser’s acquisition costs of 1.5% assuming a transaction by Share Transfer. Redefine International PLC has confirmed that the Property was purchased by way of Share Transfer and that any proposed sale of the Property would also be on the basis of Share Transfer. We have assumed that institutional corporate warranties will be provided on sale. In arriving at an appropriate yield to apply to the current and projected cash flows we have had regard to recent market evidence in the Jersey office market, in addition to reviewing the Guernsey market, the appetite for investment properties at this projected level and the general trend in yield profiles in Jersey, Guernsey and the UK in the last 18 months. The valuer’s opinion of Market Value was primarily derived using comparable recent letting and investment market transactions on arm’s length terms. Property values may change significantly over a relatively short period. Consequently our valuation may not be valid on a date other than the stated valuation date.
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 129 Market Value is an internationally recognised basis and is defined 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. The market value is our estimate of the price that would be agreed, with no adjustment made for the costs that would be incurred by the parties in any transaction, including any liability for GST or VAT, stamp duty or other taxes. It is also gross of any mortgage or similar financial encumbrance.
6. GENERAL CONDITIONS This report and valuation has been prepared on the basis that there has been full disclosure of all relevant information and facts which may affect the valuation. It has been prepared solely for inclusion in an approved prospectus in connection with Redefine International P.L.C. and will be relied upon by investors in making their investment decisions in connection with any fundraising and may not be suitable for any other purpose. The contents of this report and valuation may be used only for the specific purpose to which they refer. For the purpose of Prospectus Rule 5.5.3(2)R(f), we accept responsibility for the information within this report only and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
Yours faithfully
Phil Dawes Chris Hamilton Director Associate Director RICS Registered Valuer RICS Registered Valuer
For and on behalf of BNP Paribas Real Estate (Jersey) Limited
25-26 Esplanade, St Helier, Jersey Regulated by RICS Redefine International Plc Valuation Date: 15th January 2016 130 SECTION 6
VALUATION REPORT PREPARED BY CUSHMAN & WAKEFIELD RELATING TO 56 RETAIL PROPERTIES LOCATED THROUGHOUT GERMANY
Summary Appraisal Report Estimate of Market Values in accordance with the definition as settled by the International Valuation Standards Committee and the Royal Institution of Chartered Surveyors for an existing portfolio of 56 retail properties located throughout the Federal Republic of Germany Effective Dates of Appraisal
Valuation date: January 15, 2016 Assumed date for state of property: January 15, 2016
Client Joint Bookrunners Redefine International P.L.C. Peel Hunt LLP (“Peel Hunt”) (“Redefine International”) Merchants House Moor House 24 North Quay 120 London Wall Douglas London Isle of Man EC2Y 5ET IM1 4LE and J.P. Morgan Securities plc (“J.P. Morgan”) 25 Bank Street London E14 5JP
Prepared by (Contractor) Cushman & Wakefield LLP Rathenauplatz 1 60313 Frankfurt am Main Germany
Date of Report issue: January 28, 2016
131 1. BASIS 1.1 Scope of Instructions 1.1.1 On behalf of the client Redefine International P.L.C. Merchants House, 24 North Quay, Douglas, Isle of Man, (“Client”), Cushman & Wakefield LLP (“C&W”) has prepared a valuation report to assess the Market Values (in accordance with the International Valuation Standards) of the properties listed below. 1.1.2 We are pleased to submit our valuation report, which we understand is required for inclusion in an approved prospectus and circular (the “Prospectus”) to be published by Redefine International in connection with the proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters (the “Transaction”). 1.1.3 We have undertaken a valuation of the properties described in the Schedule. 1.1.4 The subject properties have been valued in Euro. 1.1.5 Redefine International intends to implement a potential Placing of new ordinary shares in the capital of Redefine International as a result of which, such shares will be admitted to the premium segment of the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange’s main market for Listed Securities. 1.1.6 Our expert services are only to be used by the Client as well as the joint bookrunners, J.P. Morgan and Peel Hunt (“Addressees”), a) to be published as part of the prospectus and b) to be submitted to UK Listing Authority for the approval of the prospectus.
1.2 Basis of valuation 1.2.1 The value of the individual properties have been assessed in accordance with the Market Value definition relevant to international property valuations. 1.2.2 The definition of Market Value (MV) used in this appraisal report is that settled by the International Valuation Standards Committee (IVSC International Valuation Standards (IVS) 2013) as well as the Royal Institution of Chartered Surveyors, London. Accordingly: “The Market Value is 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.” 1.2.3 The Market Value does not directly reflect incidental acquisition costs, tax liabilities (including any VAT) and capital costs (including interest payments). A current market value (‘Verkehrswert’) in accordance with §194 BauGB has not been calculated. 1.2.4 The Market Value applies to individual subjects of the appraisal, regardless of the fact that the portfolio consists of a number of valuation objects. Accordingly, no portfolio discounts or premiums, if any, have been taken into account (i.e. the Market Value of the portfolio represents the sum of the individual market values of individual valuation objects). 1.2.5 We have carried out inspections of each of the subject properties and the dates of these inspections are detailed in the Schedule. 1.2.6 The valuation date is January 15, 2016. The valuation date is relevant to the general value ratios of the property market and to the nature and condition of the subject properties. 1.2.7 We have assumed that there are no changes between the date of inspection and the date of valuation which could have an impact on the Market Value. Further we are not aware of any material changes in circumstances between the date of the valuation and the date of this valuation report that would affect the valuation and we are not aware, as a result of our role as External Valuer of the properties, of any matter which is not disclosed in the Prospectus or which has not been disclosed to Redefine International, Peel Hunt and JP Morgan in writing and which is required to be brought to their attention.
132 1.3 Compliance with professional standards 1.3.1 The appraisal documented in this Report has been prepared in accordance with the International Valuation Standards and the Valuation Standards of the Royal Institution of Chartered Surveyors. In the context of the valuation Cushman & Wakefield acted as an external valuer working in a service provider capacity for the named Client. The valuers do not have any direct or indirect personal or business relationships with the properties that is the subject of this appraisal or company and that might lead to a potential conflict of interest. Furthermore, the agreed compensation for provision of expert services is not contingent upon the valuation result in any respect. 1.3.2 We confirm that our Report is prepared in accordance with and on the basis of Rule 29 of the UK City Code on Takeovers and Merger. 1.3.3 This engagement has been performed independently and without bias toward the Client or others. We have complied with the code of conduct and adhered to the ethical standards set out in the International Valuation Standards.
1.4 Performance of Instruction 1.4.1 The valuation has been performed by a number of valuers under the supervision of Dipl.-Ing. Martin Belik MRICS. We confirm that all valuers involved have the knowledge, skills and understanding to undertake this valuation competently and have acted in the capacity of External Valuer.
1.5 Disclosure of previous involvement 1.5.1 Cushman & Wakefield LLP last prepared a valuation on a desktop basis of these properties as at August 31, 2015. 1.5.2 Cushman & Wakefield LLP has no other material relationship with the Client.
1.6 Limiting Conditions 1.6.1 Our assessment is based on information which has been supplied to us by the Client or which we have obtained from our enquiries and inspections. We have relied in our assessment on the provided documents being correct and complete, and on there being no undisclosed matters which would affect the nature of our advice. 1.6.2 We have not carried out a measurement survey of the properties and relied upon the information supplied to us in respect of floor areas. We have not tested any technical or other installations. Observations made by the valuers during the property inspections were made on the basis of a visual inspection only. 1.6.3 We have not made any investigations into the structural integrity of the buildings involving the removal or destruction of construction elements. Any remarks relating to covered building elements or building materials are based solely on information or documents provided to us or are the result of intuitive analysis. We have not carried out a structural survey and have not inspected woodwork or other such parts of the properties which are covered, unexposed or inaccessible. We have assumed, that such parts are in a good state of repair and utilisable condition. All statements regarding the characteristics and actual state of the buildings are solely based on documentation provided by the Client and adopted as the basis of this appraisal without further investigation. No specialist technical investigation of building defects or damage was undertaken. 1.6.4 We have assumed without further investigation that the properties do not contain any building materials and the ground and soil do not have any characteristics that would affect the long term use of the properties or negatively affect or endanger the health of residents and/or users. 1.6.5 We have assumed that there are no regulations under public law (including permits, approvals, burdens, etc.) or any private regulations relating to the existing building or to the use of the ground and soil. 1.6.6 We have assumed that all public charges and other such financial liabilities have been met in full as at the valuation date.
133 1.6.7 This valuation was carried out on the unverified assumption that there are no potential VAT losses to be considered resulting from letting to tenants who are not entitled to deduct input tax. 1.6.8 We have assumed without further investigation that the subject properties have been appropriately insured both in terms of the type of potential damage and of the sum of likely damages. 1.6.9 For the assessment of the Market Values we have assumed that the existing predominant use of the subject properties remains unchanged in substance and dimension for the full term of the economic useful life of the buildings implied by the choice of capitalisation rates applied or that comparable firms are available as users. It is assumed that the existing type and scope of use of the subject properties as at the valuation date reflects the Highest & Best Use in accordance with the International Valuation Standards (IVS Concepts Fundamental to Generally Accepted Valuation Principles (GAVP) No. 6.0). 1.6.10 Comments made and information provided to us by civil servants and civil representatives may not be considered as being legally binding in accordance with German legal precedents. The valuers therefore assume no liability for the use of such statements in their assessment. 1.6.11 Rights, encumbrances and limitations have been reflected in our calculations only in so far as a recognisable effect which needs to be particularly considered on the income of the subject properties can be identified. 1.6.12 Usual landlord’s fixtures such as central heating have been treated as an integral part of the building and are included as part of the assets valued. Tenant’s trade fixtures and fittings were excluded from our valuation. 1.6.13 No allowances have been made for tax liabilities or any expenses arising from a sale of the properties. 1.6.14 Our valuation has not made allowance either for the cost of transferring sale proceeds outside of Germany or for any restrictions on doing so. 1.6.15 We have not undertaken investigations into the financial strength of any tenants. Unless we become aware by general knowledge or we are specifically advised to the contrary, it will be assumed that the tenants are financially in a position to meet their obligations and that there are no rent arrears or other breaches of contract. 1.6.16 It has been assumed without investigation as of the valuation date that all relevant requirements under planning law, building law and other public or private law requirements with respect to the nature and extent of construction of any planned projects, as well as any public or private law requirements regarding intended use, unrestricted planned usage and management of all building structures have been fulfilled. It has been assumed without investigation as of the valuation date that all building structures to be constructed have been planned, constructed and completed to the highest quality and without any defects. In this context the planning and execution of construction work is particularly assumed to be completed to a level that is capable of being let at a sustainable rental level.
1.7 Assumptions and Reservations 1.7.1 We have made no Special Assumptions. 1.7.2 We have made no Departures from the Red Book except that the properties have been inspected before the date of valuation. The valuation is not subject to a reservation.
1.8 Sources of Information 1.8.1 In addition to information established by us, we have relied on the information obtained from the persons below: Information: Source: 1. Tenancy Schedule Redefine International PLC 2. Details of current negotiations in hand, e.g. rent reviews Kintyre Management GmbH and active management issues We have been provided with further information (land registry extracts, cadastral maps, etc) for the recent revaluation as at August 31, 2015 and have used this information for the current valuation.
134 1.8.2 Cushman & Wakefield LLP accepts responsibility for the information contained in the Valuation Report (other than information contained in the Valuation Report which is stated to have been obtained from a third party as set out in the table above). To the best of the knowledge of Cushman & Wakefield LLP (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 (in the reasonable opinion of Cushman & Wakefield LLP) does not omit anything likely to affect the import of such information.
2. GENERAL 2.1 Our opinion of value is based on an analysis of recent market transactions, supported by market knowledge derived from our agency experience. Our valuation is supported by this market evidence. 2.2 Where there are outstanding or forthcoming reviews, rental value has been assessed in accordance with the terms of the occupational lease review provisions. Otherwise, rental value has been assessed on the basis of Market Rent, assuming a new lease drawn on terms appropriate to current practice in the relevant market. 2.3 All valuations are professional opinions on a stated basis, coupled with any appropriate assumptions or special assumptions. A valuation is not a fact, it is an estimate. The degree of subjectivity involved will inevitably vary from case to case, as will the degree of certainty, or probability, that the valuer’s opinion of market value would exactly coincide with the price achieved were there an actual sale at the valuation date. 2.4 The purpose of the valuation does not alter the approach to the valuation. 2.5 Property values can change substantially, even over short periods of time, and so our opinion of value could differ significantly if the date of valuation was to change. If you wish to rely on our valuation as being valid on any other date you should consult us first. 2.6 Should a sale be contemplated, we strongly recommend that the property is given proper exposure to the market. 2.7 We recommend that you keep the valuation of these properties under frequent review. 2.8 You should not rely on this report unless any reference to tenure, tenancies and legal title has been verified as correct by your legal advisers.
3. VALUATION RESULT 3.1 Definition 3.1.1 As described in section 1.2 of this Summary Appraisal Report the Market Value is 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.
3.2 Market Value 3.2.1 We are of the opinion that the aggregate Market Value of the existing portfolio, as at January 15, 2016, is: Freehold €146,970,000 Long leasehold €14,510,000 Total: €161,480,000 (in words: One Hundred Sixty One million Four Hundred and Eighty Thousand Euro) The combined value of the portfolio has decreased by €50,000 (-0.03%) overall from the year end valuation undertaken for the Client as at August 31, 2015. This is mainly the result of the shorter remaining lease terms for the properties as well as market conditions remaining fairly constant throughout this period.
135 4. VALUATION FOR A REGULATED PURPOSE 4.1 This valuation is classified by the Red Book as a Regulated Purpose Valuation and we are therefore required to disclose the following information: 4.2 Cushman & Wakefield LLP provides other professional or agency services to you from time to time and has done so for a period of more than 1 year. In our most recent financial year, Cushman & Wakefield LLP received less than 5 per cent of its total fee income from you. 4.3 We have provided annual valuations on the subject properties for the past four years to the current owners, the Company, as well as for the former owner for accounting purposes.
5. FCA COMPLIANCE 5.1 For the purposes of Prospectus Rule 5.5.3(R)(2)(f), we are responsible for this Report and we will 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 Rule 5.6.5G of the Prospectus Rules and paragraphs 128 to 130 of CESR’s recommendations for the consistent implementation of the European Commission’s Regulation on Prospectuses no. 809/2004. 5.2 We also confirm that for the purposes of the Listing Rules issued by the Financial Conduct Authority, neither the signatories to this report or Cushman & Wakefield LLP has an interest (material or otherwise) in the entity.
6. DISCLOSURE AND PUBLICATION 6.1 You must not disclose the contents of this valuation report to a third party in any way without first obtaining our written approval to the form and context of the proposed disclosure. You must obtain our consent, even if we are not referred to by name or our valuation report is to be combined with others. We will not approve any disclosure that does not refer sufficiently to any Special Assumptions or Departures that we have made. 6.2 You must not modify, alter (including altering the context in which the report is displayed) or reproduce the contents of this valuation report (or any part) without first obtaining our written approval. Any person who contravenes this provision shall be responsible for all of the consequences of the same. Cushman & Wakefield LLP accepts no liability for any use of the Report that is in contravention of this section.
Cushman & Wakefield LLP Chartered Surveyors
Dipl.-Ing. Martin Belik MRICS i.A. Anne-Kathrin Laier MRICS, CIS HypZert (F) Partner Associate
136 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market
(rounded)
€1,860,000
€1,440,000
€1,370,000
€5,180,000 €1,540,000 Rental
Market
€117,396
€110,670
€119,244
€188,650 €429,144 Income - p.a. Rental
Current
€117,396
€110,670
€152,439
€385,685 €123,637 Income - p.a.
uses)
4,110 m² 4,110
1,978 m² 1,978
1,087 m² 1,087
1,085 m² 1,085 1,046 m² 1,046 antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special
Date of Inspection
January 13, 2016 13, January
January 05, 2016 05, January
January 12, 2016 12, January
January 08, 2016 08, January
January 08, 2016 08, January
WALT: 8.2 years 8.2 WALT:
vacancy rate of 21.4%. of rate vacancy
of 2 tenancies and has a has and tenancies 2 of
currently let under the terms the under let currently
The subject property is property subject The
Freehold
WALT: 9.5 years 9.5 WALT:
of 1 tenancy and is fully let. fully is and tenancy 1 of
currently let under the terms the under let currently
The subject property is property subject The
Freehold
WALT: 9.6 years 9.6 WALT:
of 1 tenancy and is fully let. fully is and tenancy 1 of
currently let under the terms the under let currently
The subject property is property subject The
Freehold
WALT: 7.7 years. 7.7 WALT:
vacancy rate of 12.3% of rate vacancy
of 6 tenancies and has a has and tenancies 6 of
currently let under the terms the under let currently
The subject property is property subject The
Freehold
WALT: 9.6 years 9.6 WALT:
of 1 tenancy and is fully let. fully is and tenancy 1 of
currently let under the terms the under let currently
The subject property is property subject The Freehold
Tenure/Occupational Status/WALT
storey buildings with a total lettable area of area lettable total a with buildings storey
pitched roofs. All general services and facilities are provided. are facilities and services general All roofs. pitched
properties have reinforced concrete frame structures and structures frame concrete reinforced have properties
Marken Discount AG & Co. KG as the only tenant. The subject The tenant. only the as KG Co. & AG Discount Marken
GmbH & Co. KG, the other building accommodates Netto accommodates building other the KG, Co. & GmbH
Schlecker) and accommodates Getränkeland Heidebrecht Getränkeland accommodates and Schlecker)
Whereas one building includes a vacant area (former area vacant a includes building one Whereas
1,978site. on spaces parking 85 approximately and m²
two single- single- two
The subject property was constructed in 2010 and comprises and 2010 in constructed was property subject The
services and facilities are provided. are facilities and services
concrete frame structure and a pitched roof. All general All roof. pitched a and structure frame concrete
parking spaces on site. The subject property has a reinforced a has property subject The site. on spaces parking
with a total lettable area of 1,087 m² and approximately 66 approximately and m² 1,087 of area lettable total a with
Marken Discount AG & Co. KG appears as the only tenant only the as appears KG Co. & AG Discount Marken
a single-storey discount supermarket unit, whereby Netto whereby unit, supermarket discount single-storey a
The subject property was constructed in 2010 and comprises and 2010 in constructed was property subject The
services and facilities are provided. are facilities and services
concrete frame structure and a pitched roof. All general All roof. pitched a and structure frame concrete
parking spaces on site. The subject property has a reinforced a has property subject The site. on spaces parking
with a total lettable area of 1,085 m² and approximately 58 approximately and m² 1,085 of area lettable total a with
Marken Discount AG & Co. KG appears as the only tenant only the as appears KG Co. & AG Discount Marken
a single-storey discount supermarket unit, whereby Netto whereby unit, supermarket discount single-storey a
The subject property was constructed in 2010 and comprises and 2010 in constructed was property subject The
facilities are provided. are facilities
frame structures and pitched roofs. All general services and services general All roofs. pitched and structures frame
only tenant. The subject properties have reinforced concrete reinforced have properties subject The tenant. only
building accommodates Penny-Markt GmbH/REWE as the as GmbH/REWE Penny-Markt accommodates building
Klier GmbH and a vacant unit (former Schlecker), the smaller the Schlecker), (former unit vacant a and GmbH Klier
Vertriebs GmbH, TEDI GmbH & Co. KG as well as Friseur as well as KG Co. & GmbH TEDI GmbH, Vertriebs
AG & Co. KG, Kik Textilien and Non-Food GmbH, NKD GmbH, Non-Food and Textilien Kik KG, Co. & AG
larger main building accommodates Netto Marken Discount Marken Netto accommodates building main larger
4,110The site. on spaces parking 163 approximately and m²
two single-storey buildings with a total lettable area of area lettable total a with buildings single-storey two
The subject property was constructed in 2010 and comprises and 2010 in constructed was property subject The
services and facilities are provided. are facilities and services
concrete frame structure and a pitched roof. All general All roof. pitched a and structure frame concrete
parking spaces on site. The subject property has a reinforced a has property subject The site. on spaces parking
with a total lettable area of 1,046 m² and approximately 85 approximately and m² 1,046 of area lettable total a with
Marken Discount AG & Co. KG appears as the only tenant only the as appears KG Co. & AG Discount Marken
a single-storey discount supermarket unit, whereby Netto whereby unit, supermarket discount single-storey a The subject property was constructed in 2010 and comprises and 2010 in constructed was property subject The
Property Description
̈ hle
ee 82a, 82b 82a, ee
Kastanienall
16307 Gartz, 16307
Strasse 50 Strasse
Dr. Schmitt- Dr.
Freigericht,
63579
48
Strasse 46, Strasse
Wormser
Flomborn,
55234
6, 8 6,
Windmu
An der An
59469 Ense, 59469
Eselskamp 6 Eselskamp
59929 Brilon, 59929
5
4
3
2 1 ID Address
137 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €1,390,000 €1,630,000 €1,210,000 €2,300,000 €1,330,000 Rental Market €110,772 €117,000 €103,356 €156,774 €126,594 Income - p.a. Rental Current €111,424 €116,415 €103,982 €160,800 €129,000 Income - p.a. uses) 1,082 m² 1,044 m² 1,537 m² 1,300 m² 1,086 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection September 09, 2015 January 12, 2016 January 05, 2016 January 12, 2016 January 14, 2016 Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 14.1 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.5 years WALT: Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 8.8 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.2 years WALT: storey discount supermarket unit, whereby Netto Property Description The subject property was constructed in 2010 and comprises a single-storey supermarket, whereby Netto Marken Discount AG & Co. KG appears as the only tenant with a total lettable area of 1,086 m² and approximately 67 parking spaces on site. The subject property has a reinforced concrete frame All general services and facilities structure and a pitched roof. are provided. Marken Discount AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,044 m² and approximately 67 The subject property has a reinforced parking spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. The subject property was constructed in 2009 and comprises a single- The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appear as the tenant with a Marken Discount total lettable area of 1,300 m² and approximately 84 parking The subject property has a reinforced concrete spaces on site. All general services and frame structure and a pitched roof. facilities are provided. The subject property was constructed in 2008 and 2010 comprises a single-storey discount supermarket unit, whereby AG & Co. KG appear as the tenant Netto Marken Discount with a total ettable area of 1,537 m² and approximately 79 The previously vacant unit (formerly parking spaces on site. Schlecker) has been taken over by Netto and now The subject property accommodates a bulk beverage store. All general has a blockwork structure and pitched roof. services and facilities are provided. The subject property was constructed in 2008 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,082 m² and approximately 80 The subject property has a reinforced parking spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. ̈ ndau- 26935 Stadtland- Rodenkirch en, Markstrasse 4-16, 29-45 63584 Gru Lieblos, Meerholzen er Landweg 6 39624 Kalbe, Wernstedter Strasse 1 04523 Pegau, Carsdorfer strasse 8 99958 Gräfentonna, Erfurter strasse 2 8 ID Address 6 7 9 10
138 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €4,880,000 €1,670,000 €1,320,000 €1,210,000 €1,280,000 Rental Market €110,670 €149,612 €393,988 €103,455 €104,256 Income - p.a. Rental Current €110,670 €140,126 €103,455 €105,559 €391,044 Income - p.a. uses) 3,828 m² 1,086 m² 1,085 m² 1,573 m² 1,045 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 12, 2016 January 07, 2016 January 13, 2016 January 12, 2016 January 12, 2016 Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.6 years WALT: Freehold The subject property is currently let under the terms of 7 tenancies and is fully let. 5.7 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.6 years WALT: Freehold The subject property is currently let under the terms of 2 tenancies and has a vacancy rate of 5.9%. 6.3 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.5 years WALT: Tenure/Occupational Status/WALT Food GmbH, Rossmann Dirk Deichmann- The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,085 m² and approximately 67 The subject property has a reinforced parking spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. The subject property was constructed in 2010 and comprises two single-storey buildings with a total lettable area of 1,573 m² and approximately 100 parking spaces on site. Whereas one building accommodates Markgrafen Getränke GmbH GmbH), the other and a vacant unit (former Metzgerei Weiss AG & Co. KG building accommodates Netto Marken Discount The subject properties have reinforced as the only tenant. All general concrete frame structures and pitched roofs. services and facilities are provided. The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,045 m² and approximately 66 The subject property has a reinforced parking spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,086 m² and approximately 76 The subject property has a reinforced parking spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. The subject property was constructed in 2010 and comprises two single-storey buildings with a total lettable area of 3,828 m² and approximately 184 parking spaces on site. Textilien Whereas the larger main building accommodates Kik and Non- Holding GmbH, Takko Schuhe Heinrich GmbH & Co. KG, Thiel GmbH, Friseur Trend TEDI GmbH & Co. KG as well the smaller building accommodates Netto Marken Discount The subject properties have AG & Co. KG as the only tenant. All reinforced concrete frame structures and pitched roofs. general services and facilities are provided. Property Description ̈ nchenber 04889 Schildau, Eilenburger Strasse 3 56743 Mendig, Robert- Bosch- Strasse 34 95512 Neudrossenf eld, Kulmbacher Strasse 53 49545 Tecklenburg- Ledde, Ledder dorfstrasse 14 07589 Mu nsdorf, Geschwister- €152,439 Scholl- Strasse 14 11 12 13 14 15 ID Address
139 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €1,910,000 €1,230,000 €1,610,000 €2,020,000 €1,310,000 Rental Market €193,754 €129,948 €106,896 €107,514 €123,804 Income - p.a. Rental Current €112,075 €133,770 €106,896 €126,410 €200,006 Income - p.a. uses) 1,086 m² 1,274 m² 1,048 m² 2,122 m² 1,086 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 08, 2016 September 14, 2015 January 13, 2016 January 13, 2016 January 12, 2016 Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.7 years WALT: Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 3 tenancies and is fully let. 4.7 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 13.8 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 6.8 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.5 years WALT: and approximately 63 and approximately 66 and approximately 85 2 2 2 The subject property was constructed in 2007 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,048 m The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,086 m The subject property was constructed in 2010 and comprises whereby MEDIMAX Zentrale a single-storey retail property, Electronic GmbH, Fressnapf Immobilien- und Vermögens- Ralf Martini appear as Tierarztpraxis GmbH and Verwaltung the tenants with a total lettable area of 2,122 m² and The subject approximately 62 parking spaces on site. property has a black reinforced concrete frame structure and All general services and facilities are provided. a flat roof. The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appear as the tenant with a Marken Discount total lettable area of 1,274 m² and approximately 87 parking The subject property has a reinforced spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,086 m parking spaces on site. The subject property has a brickwork parking spaces on site. All general services and facilities structure and a pitched roof. are provided. The subject property has a reinforced parking spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. parking spaces on site. The subject property has a reinforced parking spaces on site. All general services concrete frame structure and a shed roof. and facilities are provided. Property Description 59929 Brilon, Freilade strasse 17 99887 Georgenthal, Bahnhof strasse 17 76891 Bundenthal, Rumbacher Strasse 1, 3, 5 21385 Ameling- hausen, Grenzweg 1 72359 Dotternhaus en, Robert- Koch-Strasse 3 19 ID Address 18 20 16 17
140 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €1,410,000 €1,200,000 €1,230,000 €1,400,000 €2,490,000 Rental Market €111,672 €114,030 €185,850 €104,160 €106,590 Income - p.a. Rental Current €115,985 €113,533 €185,000 €106,590 €104,160 Income - p.a. uses) 1,086 m² 1,045 m² 1,034 m² 1,475 m² 1,085 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 14, 2016 January 13, 2016 January 08, 2016 January 12, 2016 January 13, 2016 Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.7 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.9 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.6 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Tenure/Occupational Status/WALT The subject property was constructed in 2008 and comprises a single-storey supermarket, whereby the EDEKA-MIHA Immobilien-Service GmbH appears as the only tenant with a total lettable area of 1,034 m² and approximately 78 parking All The subject property has a gable roof. spaces on site. general services and facilities are provided. The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,085 m² and approximately 67 The subject property has a reinforced parking spaces on site. All general concrete frame structure and a pitched roof. services and facilities are provided. The subject property was constructed in 2010 and comprises a single-storey discount supermarket unit, whereby Netto AG & Co. KG appears as the only tenant Marken Discount with a total lettable area of 1,045 m² and approximately 81 The subject property has a reinforced parking spaces on site. All general services concrete frame structure and a shed roof. and facilities are provided. The subject property was built in 2009 and comprises a Immobilien-Service supermarket, whereby the EDEKA-MIHA GmbH appears as the only tenant with a total lettable area of The building consists mainly of a main hall under 1,475 m². The building has one storey above ground which is flat roof. The roof is erected as a wave used for administrative offices. The car park is located in front steel and metal construction. All general 87 parking spaces. of the building, offering services and facilities are provided. The subject property was constructed in 2009 and comprises a single-storey building with total lettable area of 1,086 m² parking spaces on site. Netto Marken and approximately 115 The building has a AG & Co. KG is the only tenant. Discount All reinforced concrete frame structure and pitched roof. general services and facilities are provided. Property Description ̈ ltgraben 39171 Altenwedding en, Breite Strasse 28 31707 Bad Eilsen Bahnhof strasse 16 63695 Glauburg, Glauburger strasse 45a,b,c 06388 Gröbzig, Am Wörbziger Wege 39606 Osterburg, Am Bu 1a 22 25 21 23 24 ID Address
141 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €3,070,000 €1,170,000 €1,590,000 €4,590,000 €2,960,000 Rental Market €97,416 €239,112 €318,735 €214,368 €128,385 Income - p.a. Rental Current €98,223 €245,000 €129,028 €316,739 €215,746 Income - p.a. uses) 951 m² 902 m² 3,321 m² 2,361 m² 1,624 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 13, 2016 January 14, 2016 January 13, 2016 January 12, 2016 January 07, 2016 Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.9 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: The subject property was built and opened in 1992, with an The building has one storey extension being added in 2002. The subject property has a lettable area of and a gabled roof. 902 m²All general services and 69 parking spaces. and offers facilities are provided. The subject single-storey property was built in 2010. The car The subject single-storey property was built in 2010. The total site area is 2,898 park has 40 spaces for customers. m²The load bearing structure with a lettable area of 951 m². comprises a masonry construction under pitched roof with All general services and facilities are modern insulation. provided. The subject property is a single-storey building with flat roof and a total lettable area of 2,361 m² and was constructed in The car park is located in front of the building, offering 2010. All general services and facilities 86 spaces for customers. are provided. with a The single-storey subject property was built in 2011. The facade of the property is lettable area of 3,321 m². The car blockwork with a gabled roof and concrete tiling. All general 100 parking spaces for customers. park offers services and facilities are provided. The subject property was built and opened in 2000, with a The main building building extension being erected in 2006. whereas the front of building is two- is single storey, The lettable area of the subject property is 1,624 m². storey. All general 51 parking spaces (external). The car park offers services and facilities are provided. Property Description 12629 Berlin, Gothaer Strasse 45- 47 29640 Schneverdin gen, Bahnhof strasse 39- 41 39629 Bismark, Warten berger strasse 1 10367 Berlin, Berhnhard- Bästlein- Strasse 5 06458 Hedersleben, Magdeburger Strasse 1 ID Address 29 28 30 26 27
142 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €3,020,000 €3,630,000 €1,360,000 €1,980,000 €1,710,000 Rental Market €149,310 €260,814 €132,741 €224,844 €109,248 Income - p.a. Rental Current €147,354 €304,686 €225,641 €108,019 €133,358 Income - p.a. uses) 1,828 m² 1,138 m² 1,659 m² 2,557 m² 1,029 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 12, 2016 January 08, 2016 January 12, 2016 January 12, 2016 January 13, 2016 Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 9.8 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: The subject property was built in 2010 with a lettable area of The property has a masonry load bearing structure 1,209 m². 47 parking The car park offers with a low angle pitched roof. All general services and facilities are provided. spaces. The subject property was built in 2003 and comprises a a main hall and flat roof single-storey building offering The car park has The lettable area is 1,828 m². construction. The building is founded on 85 parking spaces for customers. a strip foundation with floor slab, an external structure All general services of solid masonry with a clinker facade. and facilities are provided. The subject property was constructed in 1993 and comprises The lettable a single-storey construction with ridged roof. 60 parking The subject property also offers area is 1,138 m². All general services and facilities are spaces for customers. provided. The subject property is a four-storey building with flat roof, The a basement, and parking deck above the supermarket. The car park has subject property was built in 1971. 24The total lettable area is parking spaces for customers. All general services and facilities are provided. 1,659 m². The total The building is single-storey with a pitched tiled roof. The year of construction is lettable area is 2,557 m². The car park has 109 parking spaces for unknown. All general services and facilities are provided. customers. Property Description ̈ blings ̈ ggelschlö ̈ tzen, 12559 Berlin, Mu sschenweg 42 14199 Berlin, Berkaer Strasse 1 06686 Lu Gustav- Adolf- Strasse 32 39240 Calbe, Salzer Strasse 18 31275 Lehrte, Schwu er Strasse 5a ID Address 31 33 34 32 35
143 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €2,090,000 €4,250,000 €6,060,000 €1,940,000 €6,270,000 Rental Market €340,515 €140,466 €437,184 €489,600 €160,344 Income - p.a. Rental Current €140,360 €498,000 €341,000 €160,840 €435,000 Income - p.a. uses) 4,048 m² 6,800 m² 1,572 m² 1,142 m² 4,935 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 14, 2016 January 12, 2016 January 07, 2016 January 07, 2016 January 07, 2016 Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: The subject property was built in 2004 and comprises a main The main hall building with a lightly inclined roof construction. with a large delivery zone and ramp building is single-storey, The subject property with several spaces for truck deliveries. 272 car parking spaces and comprises a total area of offers All general 17,107 m², with a lettable area of 4,048 m². services and facilities are provided. The subject property was constructed in 1989 and is currently The main building comprises a used as supermarket. singleThe lettable area is storey with a multi-gable tiled roof. The car park has 70 parking spaces for customers. 1,527 m². All general services and facilities are provided. The subject property was built in 1988 and comprises a prefabricated concrete structure under a flat single-storey, profiled metal sheeting roof and is used for wholesale The car park offers The lettable area is 6,800 m². purposes. All general services and parking spaces for customers. 119 facilities are provided. The subject property was built in 2010 and has two storeys The car park is located in front of the and a ridged roof. The lettable area is building with 21 car parking spaces. The building is on a strip foundation with floor 1,142 m². All The floor slabs and pillars are reinforced concrete. slab. general services and facilities are provided. The subject property was constructed in 1987 and comprises 2 hall-sections which are currently being used as a wholesale The car park offers The lettable area is 4,935 m². store. 91All general services and facilities are parking spaces. provided. Property Description 31595 Steyerberg, Kirchstrasse 4 31137 Hildesheim, Hafenstrasse 24c 12279 Berlin, Marienfelder Allee 101 48432 Rheine, Am Stadtwal de 1-3 29378 Wittingen, Celler Strasse 37 38 39 ID Address 37 40 36
144 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €2,670,000 €5,970,000 €2,180,000 €4,590,000 €2,360,000 Rental Market €201,756 €173,652 €423,687 €314,985 €170,190 Income - p.a. Rental Current €202,200 €435,470 €160,000 €321,050 €172,000 Income - p.a. uses) 3,817 m² 1,996 m² 1,564 m² 3,750 m² 1,830 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 13, 2016 January 05, 2016 January 14, 2016 September 14, 2015 January 13, 2016 Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 10.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 14.2 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: The subject property was constructed in 2005 and is currently The The lettable area is 1,830 m². utilized as a supermarket. load bearing structure comprises a reinforced concrete frame The under a pitched, insulated roof. with infill masonry, All general 103 parking spaces. subject property also offers services and facilities are provided. The subject property was constructed in 2005 and is partially The exterior walls two-storey with a flat profiled sheeting roof. comprise prefabricated aerated concrete elements with a The lettable area is 3,871 m² of non-load bearing facing. The car park offers which 500 m² was constructed in 2013. All general services and facilities are 235 parking spaces. provided. The subject property was constructed in 1976 and consists of a solid masonry structure under flat roof construction which The lettable area is based on concrete columns and girders. 42 car parking The subject property also offers is 1,564 m². All general services and facilities are provided. spaces. The subject property was built in 1972 and extended 1995. The property is currently Modernization took place in 2002. being utilised as a supermarket and comprises reinforced concrete load bearing structure under a pitched zinc sheeting The car park has The lettable area is 3,750 m². roof. 129All general services and parking spaces for customers. facilities are provided. The subject property comprises a single-storey supermarket, which was constructed in 2004, as well an additional plot The The lettable area of the supermarket is 1,996 m². of land. structure of the supermarket property comprises a reinforced The car park concrete frame under a flat membrane roof. All general services and facilities 123 parking spaces. offers are provided. Property Description ̈ rth, ̈ ttel, ̈ benberge, 38302 Wolfenbu Schweiger- strasse 5 63619 Bad Orb, Gewerbe strasse 16-18 64658 Fu Heppenheim- er Strasse 70 73574 Iggingen- Brainkofen, Osterwiesen strasse 47 31535 Neustadt am Ru An der Landwehr 66-68 ID Address 41 44 42 43 45
145 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €2,550,000 €2,050,000 €2,060,000 €1,740,000 €2,900,000 Rental Market €129,114 €204,573 €182,592 €151,275 €153,036 Income - p.a. Rental Current €149,000 €217,000 €186,000 €150,000 €129,000 Income - p.a. uses) 1,417 m² 2,017 m² 1,843 m² 1,902 m² 1,594 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 12, 2016 January 13, 2016 January 14, 2016 January 13, 2016 January 06, 2016 Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: The subject property was built in 2004 and is currently being The building utilized as a discount retail supermarket. comprises a masonry load-bearing structure, with pitched The car park has The lettable area is 1,594 m². insulated roof. All general services and 89 parking spaces for customers. facilities are provided. The subject property was built in 2005 and is currently utilized The load The lettable area is 1,902 m². as a supermarket. bearing structure comprises a masonry construction, with The car park offers mix of flat and pitched insulated roofing. All general services and 100 parking spaces for customers. facilities are provided. The subject property was constructed in 2005 and comprises a concrete frame structure under pitched roof, with The wooden truss structure as well 135 parking spaces. lettable area is 2,017 m², which currently being utilised as All general services and a discount retail supermarket. facilities are provided. The subject property was constructed in 2000 and is currently The property comprises a masonry utilised as a supermarket. The structure under a pitched roof covered in concrete tiles. The subject property also offers lettable area is 1,417 m². 66All general services and facilities are parking spaces. provided. The subject property was constructed in 2005 and is currently The load being utilized as a discount retail supermarket. bearing structure comprises a reinforced concrete frame with The lettable is 1,843 m², under a pitched roof. infill masonry, All general services and with 122 car parking spaces. facilities are provided. Property Description 78126 Königsfeld, Mönchweiler Strasse 77839 Lichtenau, Im Gewerbege- biet 64385 Reich- elsheim, Sudeten- strasse 67067 Ludwigshaf- en, Leininger Strasse 1 66640 Namborn, Allerburg 15 49 ID Address 47 50 46 48
146 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €4,360,000 €1,760,000 €2,860,000 €3,550,000 Rental Market €317,130 €130,788 €233,601 €259,560 Income - p.a. Rental Current €315,000 €128,000 €244,990 €250,000 Income - p.a. uses) 3,410 m² 1,038 m² 2,290 m² 2,060 m² antenna, m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 12, 2016 January 12, 2016 January 06, 2016 January 13, 2016 Tenure/Occupational Status/WALT Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. years 11.2 WALT: The subject property was constructed in 2000 and is currently The property comprises reinforced utilised as a supermarket. The concrete frame load bearing structure with a pitched roof. The subject property offers lettable area is 1,038 m². 40All general services and facilities are parking spaces. provided. The subject property was constructed in 2004 and is currently The load bearing utilized as a discount retail supermarket. structure comprises a reinforced concrete frame with infill The lettable under a flat membrane covered roof. masonry, All general area is 3,410 m², with 202 parking spaces. services and facilities are provided. The subject property was constructed in 2004 and extended in 2015 and is currently utilized as a discount retail The load bearing structure comprises aerated supermarket. The concrete with masonry walling, under a pitched roof. lettable area is 2,290 m² and there are 122 parking spaces. All general services and facilities are provided. The subject property was constructed in 2005 and offers a The subject property was constructed in 2005 and offers The lettable area of 2,060 m² with 131 parking spaces. property comprises a reinforced concrete frame structure All general services under a pitched roof. with infill masonry, and facilities are provided. Property Description ̈ sselsheim, ̈ lzheim, 66636 St. Tholey, Wendeler Strasse 11 65428 Ru Konrad- Adenauer- Ring 65 71554 im Weissach Tal, Welzheimer Strasse 58 76761 Ru Germershei- mer Strasse 9 ID Address 51 52 53 54
147 166810 Proof 7 Wednesday, January 27, 2016 23:10 Value Market (rounded) €14,510,000 €14,260,000 €161,480,000 Rental Market €1,163,721 €1,215,346 €12,593,888 Income - p.a. Rental Current €1,186,000 €1,239,000 €12,650,431 Income - p.a. uses) antenna, 12,412 m² 10,208 m² 125,328 m² m² (excluding Lettable area – parking spaces, advertising areas and other special Date of Inspection January 07, 2016 January 07, 2016 Freehold small undeveloped part of A the site (1,101m²) is held under a leasehold structure. The annual ground rent amounts to € 20,000. The subject property is currently let under the terms of 1 tenancy and is fully let. 7.5 years WALT: Freehold The subject property is currently let under the terms of 1 tenancy and is fully let. 7.5 years WALT: Tenure/Occupational Status/WALT The Bielefeld property was constructed in 1953 and extended The property comprises two retail warehouse units in 2001. which are linked together providing a rental area of 12,412 The property is accessible from the car m², split over 2 levels. park, which provides a total of 451 parking spaces, 37 which are based on a leasehold plot of land situated adjacent From the external inspection it was noted that to the property. the property comprises a reinforced concrete and masonry structure with an aluminium panelling facade on the retail All general services and store, under a low pitched roof. facilities are provided. The Uelzen property was constructed in 1992 and extended The property is a lettable area of 10,208 m². in 1996, offering currently utilized as a retail store and is accessible from 3 a total entrances leading from the main car park which offers The retail store is accommodated on of 400 parking spaces. with technical and service rooms on the first the ground floor, The retail store comprises a steel frame structure with floor. and The office reinforced concrete facade and a flat roof. service room section comprises a brickwork structure under All general services and facilities a pitched and gabled roof. are provided. Property Description ̈ tersloher 29525 Uelzen, Fischerhofs- rasse 6 33649 Bielefeld, Gu Strasse 122 ID Address 55 56 TOTAL
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SECTION 7
VALUATION REPORT PREPARED BY CUSHMAN & WAKEFIELD RELATING TO A PORTFOLIO OF FOUR FUEL STATION INVESTMENT PROPERTIES
The Directors Email [email protected] Redefine International P.L.C (the “Company”) Direct +44(0) 121 697 7225 Merchants House Fax +44(0) 121 200 3022 24 North Quay Douglas Isle of Man Your Ref IM1 4LE Our Ref 161RU100 Peel Hunt LLP Moor House 120 London Wall London EC2Y 5ET JP Morgan Securities Plc 25 Bank Street Canary Wharf London E14 5JP 28 January 2016
Dear Sirs REDEFINE INTERNATIONAL PLC FUEL STATION INVESTMENT PORTFOLIO 4 PROPERTIES VALUATIONS AS AT 15 JANUARY 2016
1 Introduction In accordance with your instructions, which were confirmed in our letter dated 25 January 2016, we have inspected the 4 investment properties owned by the Company and referred to in the appendices, in order to advise you of our opinion of the Market Value of the freehold interests in each of the properties as at 15 January 2016.
2 Purpose of the valuation We understand that this Report and Valuation is required for inclusion in the approved prospectus and circular in connection with the Company’s proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters and will be relied on by investors in making their investment decisions in connection with the proposed fundraising. This Report and Valuation has been drawn up to comply with Rule 5.6.5G of the Prospectus Rules, paragraphs 128 to 130 of ESMA’s recommendations for the consistent implementation of the European Commission’s Regulation of Prospectuses No. 809/2004 and is in accordance with UK Practice Standards contained within the Red Book as detailed below.
3 Report Format The Appendices to this Valuation Report comprise details of the properties.
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4 Inspections The properties were inspected internally and externally by Gary C Stephens FRICS and Jeremy D Payne MRICS. We were able to inspect all parts of the properties.
Report Address Inspection Date No.
1 Jorvick Lawrence Street, York, YO1 3EB 4 January 2016
2 Egerton Park Melton Mowbray, Leicestershire, LE13 0DA 30 December 2015
3 St Ives St Ives, Cambridgeshire, PE27 5WM 30 December 2015
4 Blue Boys Hastings Road, Tonbridge, Kent, TN12 7HE 8 January 2016
5 Standards and Compliance with RICS Valuation – Professional Standards 2014 We confirm that the valuation has been prepared in accordance with the appropriate sections of the RICS Professional Standards (“PS”), RICS Global Valuation Practice Statements (“VPS”), RICS Global Valuation Practice Guidance – Applications (“VPGAs”) and United Kingdom Valuation Standards (“UKVS”) contained within the RICS Valuation – Professional Standards 2014, (the “Red Book”). Compliance with RICS standards also gives assurance of compliance with IVS. We confirm that our Report is prepared in accordance with, and on the basis of rule 29 of the UK City Code on Takeovers and Mergers.
6 Status of valuer and conflicts of interest We confirm that we have the knowledge, skills and understanding to undertake these valuations competently and that we have undertaken the valuations acting as External Valuers qualified for the purpose of the valuation.
7 Disclosures required under the provisions of UKPS 5.4
7.1 Name of Signatory Jonathan K Crawford MRICS has not previously been the signatory of Valuation Reports provided to the Company.
7.2 Cushman & Wakefield’s relationship with client We confirm we have previously valued the subject properties as part of a larger portfolio. We have recently provided regular valuations on the portfolio including valuations for 31 August 2014 and 28 February 2015 and 31 August 2015.
7.3 Fee income from the Company DTZ Debenham Tie Leung Limited was a UGL Company until 5 November 2014. In UGL’s financial year ending 30 June 2014, the proportion of fees payable by the Company to the total fee income of UGL was less than 5%. The DTZ group became a stand-alone, private global property services company on 5 November 2014, following the sale to a consortium of investors led by TPG Capital Management. On 1 September 2015, DTZ acquired Cushman & Wakefield and the combined group now trades under the Cushman & Wakefield brand. Cushman & Wakefield’s financial year end is 31 December. We anticipate that the proportion of fees payable by the Company to the Cushman & Wakefield group in the financial year to 31 December 2015 will remain at less than 5%.
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7.4 Cushman & Wakefield’s involvement in any of the properties in the previous 12 months We have undertaken valuations on 28 February 2015 and 31 August 2015 within the previous 12 months.
8 Basis of valuation Our opinion of the Market Value of the properties has been primarily derived using comparable recent market transactions on arm’s length terms. In accordance with your instructions, we have undertaken our valuations on the Basis of Market Value, the definition of which is set out below.
8.1. Market Value The value of the property has been assessed in accordance with the relevant parts of the current RICS Valuation – Professional Standards 2014. In particular, we have assessed Market Value in accordance with VPS 4.1.2. Under these provisions, the term “Market Value” means “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 undertaking our valuation on the basis of Market Value, we have applied the conceptual framework which is set out in IVS Framework paragraphs 30-34.
8.2. Taxation and costs We have not made any adjustments to reflect any liability to taxation that may arise on disposals, nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, taxation allowance or lottery funding that may arise on disposals. We have made a deduction to reflect a purchaser’s acquisition costs.
9 VAT The capital valuations and rentals included in this Valuation Report are net of value added tax at the prevailing rate.
10 Assumptions and sources of information An Assumption is stated in the Glossary to the Red Book to be a “supposition taken to be true” (“Assumption”). In this context, Assumptions are facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, need not be verified by a valuer as part of the valuation process. In undertaking our valuations, we have made a number of Assumptions and have relied on certain sources of information. Where appropriate, the Company has confirmed that our Assumptions are correct so far as they are aware. In the event that any of these Assumptions prove to be incorrect then our valuations should be reviewed. The Assumptions we have made for the purposes of our valuations are referred to below:
10.1 Title We have not had access to the title deeds of any of the properties. We have made an Assumption that the Company is possessed of good and marketable freehold/ leasehold title and in each case that the properties are free from rights of way or easements, restrictive covenants, disputes or onerous or unusual outgoings. We have also assumed that the properties are free from mortgages, charges or other encumbrances.
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10.2 Condition of structure and services, deleterious materials, plant and machinery and goodwill Due regard has been paid to the apparent state of repair and condition of each of the properties, but condition surveys have not been undertaken, nor have woodwork or other parts of the structures which are covered, unexposed or inaccessible, been inspected. Therefore, we are unable to report that the properties are structurally sound or free from any defects. We have made an Assumption that the properties are free from any rot, infestation, adverse toxic chemical treatments, and structural or design defects other than such as may have been mentioned in the body of our Valuation Report and Appendix. We have not arranged for investigations to be made to determine whether high alumina cement concrete, calcium chloride additive or any other deleterious materials have been used in the construction or any alterations, and therefore we cannot confirm that the properties are free from risk in this regard. For the purposes of these valuations, we have made an Assumption that any such investigation would not reveal the presence of such materials in any adverse condition. We have not carried out an asbestos inspection and have not acted as an asbestos inspector in completing the valuation inspection of properties that may fall within the Control of the Asbestos at Work Regulations 2002. We have not made an enquiry of the duty holder (as defined in the Control of Asbestos of Work Regulations 2002), of the existence of an Asbestos Register or of any plan for the management of asbestos to be made. Where relevant, we have made an Assumption that there is a duty holder, as defined in the Control of Asbestos of Work Regulations 2002 and that a Register of Asbestos and Effective Management Plan is in place, which does not require any immediate expenditure, or pose a significant risk to health, or breach the HSE regulations. We advise that such enquiries be undertaken by a lawyer during normal pre-contract enquiries. No mining, geological or other investigations have been undertaken to certify that the sites are free from any defect as to foundations. We have made an Assumption that the load bearing qualities of the sites of the properties are sufficient to support the buildings constructed thereon. We have also made an Assumption that there are no services on, or crossing the sites in a position which would inhibit development or make it unduly expensive and that there are no abnormal ground conditions, nor archaeological remains present, which might adversely affect the present or future occupation, development or value of any of the properties. No tests have been carried out as to electrical, electronic, heating, plant and machinery, equipment or any other services nor have the drains been tested. However, we have made an Assumption that all services, including gas, water, electricity and sewerage, are provided and are functioning satisfactorily. No allowance has been made in this valuation for any items of plant or machinery not forming part of the service installations of the buildings. We have specifically excluded all items of plant, machinery and equipment installed wholly or primarily in connection with the occupants’ businesses. We have also excluded furniture and furnishings, fixtures, fittings, vehicles, stock and loose tools. Further, no account has been taken in our valuations of any business goodwill that may arise from the present occupation of any of the properties. It is a condition of Cushman & Wakefield or any related company, or any qualified employee, providing advice and opinions as to value, that the client and/or third parties (whether notified to us or not) accept that the Valuation Report in no way relates to, or gives warranties as to, the condition of the structure, foundations, soil and services.
10.3 Areas We have measured the properties on site or from scale plans and have calculated the floor areas in accordance with the current Code of Measuring Practice prepared by the Royal Institution of Chartered Surveyors.
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10.4 Statutory requirements and planning Online enquiries have been made of the relevant planning authority in whose area the properties lie as to the possibility of highway proposals, comprehensive development schemes and other ancillary planning matters that could affect property values. In this regard we would advise that there are none. We have made an Assumption that the buildings have been constructed in full compliance with valid town planning and building regulations approvals, that where necessary they have the benefit of a current Fire Risk Assessments compliant with the requirements of the Regulatory Reform (Fire Safety) Order 2005. Similarly, we have also made an Assumption that the properties are not subject to any outstanding statutory notices as to their construction, use or occupation. Unless our enquiries have revealed the contrary, we have made a further Assumption that the existing uses of the properties are duly authorised or established and that no adverse planning condition or restriction applies. No allowance has been made for rights, obligations or liabilities arising under the Defective Premises Act 1972, and we have made an Assumption that the properties comply with all relevant statutory requirements. In England and Wales, the Government has implemented the Energy Performance of Buildings Directive requiring Energy Performance Certificates (“EPC”) to be made available for all properties, when bought or sold, subject to certain exemptions. In respect of any of the subject properties which are not exempt from the requirements of this Directive, we have made an Assumption that an EPC is made available, free of charge, to a purchaser of the interests which are the subject of our valuation. In addition, the Energy Act 2011 includes a provision whereby from April 2018 it will be unlawful to rent out a premises with an EPC rating which, according to Government proposals issued in February 2015, falls below an E rating. Unless our enquiries have revealed to the contrary if any of the properties are not exempt from these requirements, we have made an Assumption that the properties meet the minimum requirements to enable them to be let after April 2018. We would draw your attention to the fact that employees of town planning departments now always give information on the basis that it should not be relied upon and that formal searches should be made if more certain information is required. We assume that, if you should need to rely upon the information given about town planning matters, your solicitors would be instructed to institute such formal searches.
10.5 Leasing Subject to the provisions of the paragraph below, we have read all the leases and related documents provided to us by Redefine for the purposes of our past valuations We have made an Assumption that copies of all relevant documents have been sent to us and that they are complete and up to date. We have not undertaken investigations into the financial strength of the tenants. Unless we have become aware by general knowledge, or we have been specifically advised to the contrary, we have made an Assumption that the tenants are financially in a position to meet their obligations. Unless otherwise advised we have also made an Assumption that there are no material arrears of rent or service charges, breaches of covenants, current or anticipated tenant disputes. However, our valuations reflect the type of tenants actually in occupation or responsible for meeting lease commitments, or likely to be in occupation, and the market’s general perception of their creditworthiness. We have also made an Assumption that wherever rent reviews or lease renewals are pending or impending, with anticipated reversionary increases, all notices have been served validly within the appropriate time limits.
10.6 Information We have made an Assumption that the information the Company has supplied to us in respect of each of the properties is both full and correct.
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It follows that we have made an Assumption that details of all matters likely to affect value within your collective knowledge such as prospective lettings, rent reviews, outstanding requirements under legislation and planning decisions have been made available to us and that the information is up to date.
11 Environmental matters Jorvick has been investigated, as part of a larger portfolio, by SLR Consulting, Environmental Consultants who prepared a detailed environmental package which included an investigation, risk assessment and, where required, remedial action to a recognised standard suitable for use. SLR then issued a Certificate of Suitability for Use which provided SLR’s binding opinion on the condition of the site. Egerton Park, St Ives and Blueboys are let to BP Oil UK Ltd and in all three cases the Tenant is required to yield up in no worse condition than as recorded at the start of the lease within a base line environmental survey. We have made an Assumption that the information and opinions we have been given are complete and correct in respect of the properties and that further investigations would not reveal more information sufficient to affect value. We consider that this Assumption is reasonable in the circumstances. However, purchasers may cause such further investigations to be made and if these were to reveal additional contamination then this might reduce the values now being reported.
12 Flooding We have made enquiries of the Environment Agency website. Egerton Park and Blue Boys are within areas designated as having a very low risk of flooding, categorised as being less than 0.1%. Jorvick is in an area outside the area of extreme flood equivalent to 0.1% and St Ives is in an area designated as low risk, categorised as being between 0.1% and 1%.
13 Tenure All the sites are held freehold.
14 Tenancies As detailed within the Appendices.
15 Valuation We are of the opinion that the aggregate Market Value, as at 15 January 2016, of the four freehold properties scheduled below subject to the assumptions and comments in this Valuation Report and in the appendices is in the sum of £12,225,000 (Twelve million Two Hundred and Twenty Five Thousand pounds). The individual property values are set out below:
Petrol Filling Market Value Report Number Tenure Station £
1 Jorvick Freehold 1,150,000
2 Egerton Park Freehold 3,285,000
3 St Ives Freehold 3,500,000
4 Blue Boys Freehold 4,290,000
The aggregate value of the above four properties has increased, on a like for like basis, from £12,050,000 as at 31 August 2015 to £12,225,000 as at 15 January 2016. This valuation as at
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15 January 2016 therefore shows an increase of £175,000. This increase is marginal and representative of the movements in the property investment market for this sector throughout this period.
16 Confidentiality and disclosure The contents of this Valuation Report and Schedule may be used only for the specific purpose to which they refer. Before this Valuation Report, or any part thereof, is reproduced or referred to, in any document, circular or statement, and before its contents, or any part thereof, are disclosed orally or otherwise to a third party, the valuer’s written approval as to the form and context of such publication or disclosure must first be obtained. For the avoidance of doubt such approval is required whether or not Cushman & Wakefield is referred to by name and whether or not the contents of our Valuation Report are combined with others. For the purposes of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information within this Report and Valuation and declare that we have taken all reasonable care to ensure that the information contained within Report and Valuation is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Document in compliance with Annex 1, item 1.2 of the Prospectus Directive Regulation.
Yours faithfully
Jonathan K Crawford MRICS RICS Registered valuer Director
For and on behalf of Cushman & Wakefield
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APPENDIX 1 PROPERTIES
REDEFINE INTERNATIONAL PLC PORTFOLIO
Report No. Tenure Name of Site Address
1. Freehold Jorvick Lawrence Street, York, YO1 3EB 2. Freehold Egerton Park Melton Mowbray, Leicestershire, LE13 0DA 3. Freehold St Ives St Ives, Cambridgeshire, PE27 5WM 4. Freehold Blue Boys Hastings Road, Tonbridge, Kent, TN12 7HE
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Appendix 2
Property summary reports
Address Description Approx Tenancies Market Value Age 15 January 2016 Jorvik Service The subject property Substantial Jorvik Service Station was £1,150,000 Station, occupies an irregular shaped upgrading originally subject to a 20 year Lawrence Street, site extending to with occupational lease to York, approximately 0.12 hectares C-store Malthurst Limited, guaranteed North Yorkshire, (0.299 acres), with frontage October by Malthurst (UK) Limited. YO1 3EB to Lawrence Street of 2015 The lease is on a tenant approximately 45 metres. repairing and insuring basis and runs from June 2005. The tenant has undertaken an upgrade of the forecourt The five yearly rent reviews to include a new canopy, have fixed uplifts based on forecourt, pump and 2.5% per annum compound. forecourt shop. The There was a tenant only forecourt has a modern break option at the end of the starting gate layout with 3no 15th year. A deed of 8 point pumps. The C-store amendment has altered the has a M&S Simply Food and terms extending the lease by a Wild Bean concept fit out 2 years, removing the and is of brick and steel Tenant’s option to break at frame construction with an the 15th year. The lease has integrated ATM. been extended to 11 July 2032 and has been assigned The shop extends to 219.01 to BP Oil UK Limited. The sq m (2,357 sq ft). passing rent is £53,764 per annum exclusive.
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Address Description Approx Tenancies Market Value Age 15 January 2016 Egerton Park Service The subject property 2013 20 year lease to BP Oil UK £3,285,000 Station, occupies a regular shaped Ltd commenced on Leicester Road, site extending to 0.281 23 September 2013 on FRI Melton Mowbray, hectares (0.70 acres) with a terms. The passing rent is LE13 0DA frontage to Leicester Road £160,000 per annum and Dalby Road of exclusive, with fixed approximately 96.4 m. increases to: The property is a large £181,025 per annum corner site developed by the exclusive 23 September Tenant to include a new 2018 forecourt shop and underground fuel system. £204,814 per annum The forecourt is a four exclusive 23 September square layout with 4no 8 2023 point pumps under a new Upward only to open market canopy with 5.3m clear rent 23 September 2028 height. The forecourt has outlying parking and The lease provides for the circulation areas with up to disregard of Tenant’s works 14 parking spaces and a at rent review in 2028 which service road serving the car are scheduled as Excluded wash. The forecourt shop is Works which include the new of C-store concept with Wild shop and new underground Bean and M&S Simply Food. fuel station, tanks and pipe The shop is of single storey work. brick and steel construction with a flat roof and an ATM. Located to the side of the shop there is a drive through carwash. The C-store shop extends to a gross internal area of 201.6 sq m (2,170 sq ft).
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Address Description Approx Tenancies Market Value Age 15 January 2016 St Ives Service The subject property 2013 20 year lease to BP Oil UK £3,500,000 Station, occupies a regular shaped Ltd commencing 2 July 2013 Needleworth Road, corner site extending to on FRI terms. The passing St Ives, 0.421 hectares (1.04 acres) rent is £200,000 per annum PE27 5WN with a frontage to exclusive, with fixed Needleworth Road and increases to: Somersham Road of approximately 122.5 m. £226,281 per annum exclusive 2 July 2018 The property has a large £256,016 per annum corner site and has been exclusive 2 July 2023 redeveloped by the Tenant to Upward only to open market include a new forecourt shop rent 2 July 2028 building and underground fuel system. The forecourt is The lease provides for the in starting gate layout with disregard of Tenant’s works 4no 8 point pumps under a at rent review in 2028 which narrow canopy. The are scheduled as Excluded forecourt is concrete Works which include the new surfaced with tarmac shop and new underground surfaced outlying parking fuel system, tanks and pipe and circulation areas. The work. There is a schedule forecourt shop is of C-store with photographs recording concept and has a Wild the original specification. Bean and an M&S Simply Food. The shop is of single storey brick and steel construction with a flat roof, ceramic floors, open ceilings with suspended air conditioning, lighting and an Integral ATM. Located to the side of the shop is a separate commercial fuel forecourt with 2No fast fill pumps. Located to the rear of the shop there is a double drive through carwash and jet wash building. The C-store shop extends to a gross internal area of 269.95 sq m (2,906 sq ft).
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Address Description Approx Tenancies Market Value Age 15 January 2016 Blue Boys Service The subject property 2006 25 year lease to BP Oil UK £4,290,000 Station, occupies an irregular shaped Ltd commencing 19 June Hastings Road site extending to 0.79 2006 on FRI terms. The Matfield, hectares (1.95 acres) it is passing rent is £209,775 per Tonbridge, approached over a service annum exclusive, with fixed TN12 7HE road with a roundabout increases to: junction to the Hastings Road. £231,609 per annum exclusive 19 June 2016 The property comprises a £255,715 per annum large self contained service exclusive 19 June 2021 station in a starting gate £282,330 per annum layout with four 8 point exclusive 19 June 2026 pumps under a narrow canopy with large facing shop trading as M&S Simply Food. There are two offset commercial pumps and separate car and commercial vehicle parking areas together with a picnic area. The forecourt shop is constructed in cavity brick with a pitch tile roof. Internally the ceiling is suspended with integral lighting and air conditioning. The accommodation includes office, kitchen and store room with WC and built in ATM. The forecourt shop has a gross internal area of 371.47 sq m (3,999 sq ft).
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SECTION 8
VALUATION REPORT PREPARED BY CUSHMAN & WAKEFIELD RELATING TO HAAGSE VESTE 1, SAMUSSTRAAT, THE HAGUE, HOLLAND
The Directors Email [email protected] Redefine International P.L.C. (the “Company”) Direct +44(0) 20 3296 4455 Merchants House Fax +44(0) 20 3296 3100 24 North Quay Douglas Your Ref Isle of Man Our Ref IM1 4LE Peel Hunt LLP Moor House 120 London Wall London EC2Y 5ET JP Morgan Securities Plc 25 Bank Street Canary Wharf London E14 5JP 28 January 2016
Dear Sirs REDEFINE INTERNATIONAL PLC HAAGSE VESTE 1, SAMUSSTRAAT 9, THE HAGUE VALUATIONS AS AT 15 JANUARY 2016
1 Introduction In accordance with your instructions, which were confirmed in our letter dated 27 January 2016, we have inspected the above mentioned property owned by the Company and referred to in the appendices, in order to advise you of our opinion of the Market Value of the freehold interests in each of the properties as at 15 January 2016.
2 Purpose of the valuation We understand that this Report and Valuation is required for inclusion in the approved prospectus and circular in connection with the Company’s proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters and will be relied on by investors in making their investment decisions in connection with the proposed fundraising. This Report and Valuation has been drawn up to comply with Rule 5.6.5G of the Prospectus Rules, paragraphs 128 to 130 of ESMA’s recommendations for the consistent implementation of the European Commission’s Regulation of Prospectuses No. 809/2004 and is in accordance with UK Practice Standards contained within the Red Book as detailed below.
3 Report Format The Appendices to this Valuation Report comprise details of the properties, and our General Assumptions and Conditions.
4 Inspections The property was inspected internally and externally by Mark Berlee. We were able to inspect all parts of the properties. 161 166810 Proof 7 Wednesday, January 27, 2016 23:11
Report Address Inspection Date No. 1 Haagse Veste 1 Samusstraat 9, 2516 AD, The Hague, Holland 18 January 2016
5 Standards and Compliance with RICS Valuation – Professional Standards 2014 We confirm that the valuation has been prepared in accordance with the appropriate sections of the RICS Professional Standards (“PS”), RICS Global Valuation Practice Statements (“VPS”), RICS Global Valuation Practice Guidance – Applications (“VPGAs”) and United Kingdom Valuation Standards (“UKVS”) contained within the RICS Valuation – Professional Standards 2014, (the “Red Book”). Compliance with RICS standards also gives assurance of compliance with IVS. We confirm that our Report is prepared in accordance with, and on the basis of rule 29 of the UK City Code on Takeovers and Mergers.
6 Status of valuer and conflicts of interest We confirm that we have the knowledge, skills and understanding to undertake these valuations competently and that we have undertaken the valuations acting as External Valuers qualified for the purpose of the valuation.
7 Disclosures required under the provisions of UKPS 5.4
7.1 Name of Signatory Jeremy Lock MRICS has not previously been the signatory of Valuation Reports provided to the Company. Cushman & Wakefield has previously valued this property for internal purposes.
7.2 Cushman & Wakefield’s relationship with client We confirm we have previously valued the subject property as part of a larger portfolio, which has now been sold, apart from this remaining asset. We have recently provided regular valuations on the property including valuations for 31 August 2014 and 28 February 2015 and 31 August 2015.
7.3 Fee income from the Company DTZ Debenham Tie Leung Limited was a UGL Company until 5 November 2014. In UGL’s financial year ending 30 June 2014, the proportion of fees payable by the Company to the total fee income of UGL was less than 5%. The DTZ group became a stand-alone, private global property services company on 5 November 2014, following the sale to a consortium of investors led by TPG Capital Management. On 1 September 2015, DTZ acquired Cushman & Wakefield and the combined group now trades under the Cushman & Wakefield brand. Cushman & Wakefield’s financial year end is 31 December. We anticipate that the proportion of fees payable by the Company to the Cushman & Wakefield group in the financial year to 31 December 2015 will remain at less than 5%.
7.4 Cushman & Wakefield’s involvement in any of the properties in the previous 12 months We have undertaken valuations on 28 February 2015 and 31 August 2015 within the previous 12 months.
8 Basis of valuation Our opinion of the Market Value of the properties has been primarily derived using comparable recent market transactions on arm’s length terms. In accordance with your instructions, we have undertaken our valuations on the Basis of Market Value, the definition of which is set out below.
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8.1. Market Value The value of the property has been assessed in accordance with the relevant parts of the current RICS Valuation – Professional Standards 2014. In particular, we have assessed Market Value in accordance with VPS 4.1.2. Under these provisions, the term “Market Value” means “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 undertaking our valuation on the basis of Market Value, we have applied the conceptual framework which is set out in IVS Framework paragraphs 30-34.
8.2 Taxation and costs We have not made any adjustments to reflect any liability to taxation that may arise on disposals, nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, taxation allowance or lottery funding that may arise on disposals. We have made a deduction to reflect a purchaser’s acquisition costs.
9 VAT The capital valuations and rentals included in this Valuation Report are net of value added tax at the prevailing rate.
10 Assumptions and sources of information An Assumption is stated in the Glossary to the Red Book to be a “supposition taken to be true” (“Assumption”). In this context, Assumptions are facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, need not be verified by a valuer as part of the valuation process. In undertaking our valuations, we have made a number of Assumptions and have relied on certain sources of information. Where appropriate, the Company has confirmed that our Assumptions are correct so far as they are aware. In the event that any of these Assumptions prove to be incorrect then our valuations should be reviewed. The Assumptions we have made for the purposes of our valuations are referred to below:
10.1 Title We have not had access to the title deeds of any of the properties. We have made an Assumption that the Company is possessed of good and marketable freehold/ leasehold title and in each case that the properties are free from rights of way or easements, restrictive covenants, disputes or onerous or unusual outgoings. We have also assumed that the properties are free from mortgages, charges or other encumbrances.
10.2 Condition of structure and services, deleterious materials, plant and machinery and goodwill Due regard has been paid to the apparent state of repair and condition of each of the properties, but condition surveys have not been undertaken, nor have woodwork or other parts of the structures which are covered, unexposed or inaccessible, been inspected. Therefore, we are unable to report that the properties are structurally sound or free from any defects. We have made an Assumption that the properties are free from any rot, infestation, adverse toxic chemical treatments, and structural or design defects other than such as may have been mentioned in the body of our Valuation Report and Appendix. We have not arranged for investigations to be made to determine whether high alumina cement concrete, calcium chloride additive or any other deleterious materials have been used in the construction or any alterations, and therefore we cannot confirm that the properties are free from risk in this regard. For the purposes of these valuations, we have made an Assumption that any such investigation would not reveal the presence of such materials in any adverse condition.
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We have not carried out an asbestos inspection and have not acted as an asbestos inspector in completing the valuation inspection of properties. We have not made an enquiry of the duty holder, of the existence of an Asbestos Register or of any plan for the management of asbestos to be made. Where relevant, we have made an Assumption that there is a duty holder, and that a Register of Asbestos and Effective Management Plan is in place, which does not require any immediate expenditure, or pose a significant risk to health, or breach regulations. We advise that such enquiries be undertaken by a lawyer during normal pre-contract enquiries. No mining, geological or other investigations have been undertaken to certify that the sites are free from any defect as to foundations. We have made an Assumption that the load bearing qualities of the sites of the properties are sufficient to support the buildings constructed thereon. We have also made an Assumption that there are no services on, or crossing the sites in a position which would inhibit development or make it unduly expensive and that there are no abnormal ground conditions, nor archaeological remains present, which might adversely affect the present or future occupation, development or value of any of the properties. No tests have been carried out as to electrical, electronic, heating, plant and machinery, equipment or any other services nor have the drains been tested. However, we have made an Assumption that all services, including gas, water, electricity and sewerage, are provided and are functioning satisfactorily. No allowance has been made in this valuation for any items of plant or machinery not forming part of the service installations of the buildings. We have specifically excluded all items of plant, machinery and equipment installed wholly or primarily in connection with the occupants’ businesses. We have also excluded furniture and furnishings, fixtures, fittings, vehicles, stock and loose tools. Further, no account has been taken in our valuations of any business goodwill that may arise from the present occupation of any of the properties. It is a condition of Cushman & Wakefield or any related company, or any qualified employee, providing advice and opinions as to value, that the client and/or third parties (whether notified to us or not) accept that the Valuation Report in no way relates to, or gives warranties as to, the condition of the structure, foundations, soil and services.
10.3 Areas We have not measured the properties but have assumed the areas provided to be correct and calculated in accordance with local market practice.
10.4 Statutory requirements and planning Department of City Planning Den Haag www.ruimtelijkeplannen.nl We have made enquiries with the Department of City Planning Den Haag (dated 5 January 2016) and they have advised us that planning permission for the property’s current use as office was granted and that the property is not subject to any enforcement action. We have made enquiries with a view to identifying any highway or development proposals which are likely to affect the value of the property. In this regard we have been advised that there are none. Planning policy for the area is contained within the Binckhorst (Nieuw Binckhorst Zuid) Plan, which was adopted in 2012. The property is located in an area zoned for office uses predominantly. We have made an Assumption that the buildings have been constructed in full compliance with valid town planning and building regulations approvals, that where necessary they have the benefit of a current Fire Risk Assessments compliant with the requirements of the local relevant legislation. Similarly, we have also made an Assumption that the properties are not subject to any outstanding statutory notices as to their construction, use or occupation. Unless our enquiries have revealed the contrary, we have made a further Assumption that the existing uses of the properties are duly authorised or established and that no adverse planning condition or restriction applies.
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10.5 Leasing Subject to the provisions of the paragraph below, we have read all the leases and related documents provided to us by the Company for the purposes of our past valuations We have made an Assumption that copies of all relevant documents have been sent to us and that they are complete and up to date. We have not undertaken investigations into the financial strength of the tenants. Unless we have become aware by general knowledge, or we have been specifically advised to the contrary, we have made an Assumption that the tenants are financially in a position to meet their obligations. Unless otherwise advised we have also made an Assumption that there are no material arrears of rent or service charges, breaches of covenants, current or anticipated tenant disputes. However, our valuations reflect the type of tenants actually in occupation or responsible for meeting lease commitments, or likely to be in occupation, and the market’s general perception of their creditworthiness. We have also made an Assumption that wherever rent reviews or lease renewals are pending or impending, with anticipated reversionary increases, all notices have been served validly within the appropriate time limits.
10.6 Information We have made an Assumption that the information the Company has supplied to us in respect of the property is both full and correct. It follows that we have made an Assumption that details of all matters likely to affect value within your collective knowledge such as prospective lettings, rent reviews, outstanding requirements under legislation and planning decisions have been made available to us and that the information is up to date.
11 Environmental matters Department of City Planning Den Haag www.bodemloket.nl We have made enquiries at the relevant Local Authority or its website (dated 5 January 2016), in order so far as reasonably possible, to establish the potential existence of contamination arising out of previous or present uses of the site and any adjoining sites. Our enquiries and inspection have provided no evidence that there is a significant risk of contamination in respect of the property. Accordingly, you have instructed us to make an Assumption that no contamination or other adverse environmental matters exist in relation to the property sufficient to affect value. Other than as referred to above, we have not made any investigations to establish whether there is any contamination or potential for contamination to the subject property. A purchaser in the market might, in practice, undertake further investigations than those undertaken by us. If it is subsequently established that contamination exists at the property or on any neighbouring land, or that the premises have been or are being put to any contaminative use, then this might reduce the value now reported. You are advised to ensure your legal adviser takes up the usual enquiries on your behalf, in respect of possible contamination, before entering into a financial commitment concerning the property.
12 Tenure The site is held freehold.
13 Tenancies Please refer to Appendix 2
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14 Valuation We are of the opinion that the Market Value, as at 15 January 2016, of the subject property scheduled below subject to the assumptions and comments in this Valuation Report and in the appendices is in the sum of €6,500,000 (Six million Five Hundred Thousand Euros). The individual property values are set out below:
Market Value Report Number Property Tenure £ 1 Haagse Veste 1 Freehold 6,500,000 The value of the property has increased by €200,000 (£151,027) (3.17%) overall from the year end valuation undertaken for the Company as at 31 August 2015. This increase is due to the recent extension of the lease by an additional year. Our valuations as at 31 August 2015 and 15 January 2016 have been prepared in Euros only, and conversion to GBP has been determined externally for comparison purposes only.
15 Confidentiality and disclosure The contents of this Valuation Report and Schedule may be used only for the specific purpose to which they refer. Before this Valuation Report, or any part thereof, is reproduced or referred to, in any document, circular or statement, and before its contents, or any part thereof, are disclosed orally or otherwise to a third party, the valuer’s written approval as to the form and context of such publication or disclosure must first be obtained. For the avoidance of doubt such approval is required whether or not Cushman & Wakefield is referred to by name and whether or not the contents of our Valuation Report are combined with others. For the purposes of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information within this Report and Valuation and declare that we have taken all reasonable care to ensure that the information contained within Report and Valuation is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Document in compliance with Annex 1, item 1.2 of the Prospectus Directive Regulation.
Yours faithfully
Jeremy Lock MRICS RICS Registered valuer Senior Director
For and on behalf of DTZ Debenham Tie Leung
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APPENDIX 1
PROPERTIES
REDEFINE INTERNATIONAL P.L.C. PORTFOLIO
Report Tenure Name of Site Address No. 1 Freehold Haagse Veste 1 Samusstraat 9, 2516 AD, The Hague, Holland
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Appendix 2
Individual property summary reports
Address Description Approx Age Tenancies Date of Market Value Inspection 15 January 2016 Haagse Haagse Veste 1 is part of 2008 The subject property is fully 18 January € 6,500,000 Veste 1 a high density office leased at valuation date to 2016 Samusstraat sector consisting of the “De Staat der Nederlanden” 9 2516 AD Haagse Veste 1 to 4, The (Dutch Government) and The Hague Haagse Arc and the KPN produces a current gross Holland Maanplein offices. The contracted income of EUR building comprises 2,394,189 per annum. In approximately 12 878 sq accordance with the signed m of offices, a restaurant lease extension dated and storage space, as September 2015, the lease well as approximately 153 will be extended as of 15 parking spaces. The July 2016 for 11.5 months building height varies from for a revised rent of EUR 6 to 8 upper floors. There 1,800,000. are 2 underground parking levels.
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SECTION 9
VALUATION REPORT PREPARED BY SCHLICHT UND KOLLEGEN RELATING TO 28 PROPERTIES IN GERMANY
Redefine International P.L.C. Merchants House 24 North Quay Douglas Isle of Man IM1 4LE United Kingdom Peel Hunt LLP (“Peel Hunt”) Moor House 120 London Wall London EC2Y 5ET J.P. Morgan Securities plc (“JP Morgan”) 25 Bank Street Canary Wharf London E14 5JP For the attention of the Directors: 28 January 2016
Dear Sirs,
Client: Redefine International P.L.C. (the “RI PLC”) Property: RI PLC German Portfolio – 28 properties as set out in the attached schedule (the “Portfolio” or “properties” as the context requires) Valuation Date: 15th January 2016
1. Terms of reference
1.1 Our Appointment This Valuation Certificate is prepared in accordance with our appointment by RI PLC and the Valuation Procedures and Assumptions enclosed within our Engagement Letter dated 18th December 2015.
1.2 Purpose of Valuation We understand that the Report and Valuation is required for inclusion in an approved prospectus and circular (the “Document”) in connection with RI PLC’s proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters.
1.3 The Properties The Portfolio comprises 28 retail, office and mix-use buildings located in Germany. Four of the properties (which account for approximately half of the value of the Portfolio are office buildings located in Berlin, Bergisch-Gladbach (Cologne), Dresden, Ludwigsburg (Stuttgart), leased to a state-owned insurance company.
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1.4 Compliance with Valuation Standards We confirm that the valuation has been prepared in accordance with the appropriate sections of the Professional Standards, latest edition of the RICS Rules, the “Red Book”, published in November 2013 and effective from January 2014 and revised in April 2015, in accordance with local market practice. In addition, the Report has been prepared in accordance with and on the basis of requirements in Rule 29 of the UK City Code on Takeovers and Mergers and in compliance with the Listing Rules and Prospectus Rules.
1.5 Status of Valuer and Conflicts of Interest These valuations have been prepared under the supervision of Klaus Schlicht, MRICS öbuv SV (IHK Stuttgart). We confirm that the valuers involved in these valuations all have the knowledge, skills and understanding to undertake the valuations competently. We are required by RICS regulations to disclose the following: • Klaus Schlicht has supervised the valuation and coordination of the properties within the portfolio since February 2013. We agree that the authorised signatory on this valuation will be rotated every seven years. • Schlicht&Kollegen have had no other current or recent fee earning relationship with RI PLC apart from the valuation service. We confirm that we do not consider that any conflict of interest arises with our duty to provide you with objective and independent valuations. We confirm that we do not have any material interest in RI PLC, its subsidiaries or any of the Properties. We further confirm that we have no material interest in the property and that we have undertaken this valuation in the capacity of External Valuers. We would draw your attention to our Terms and Conditions.
1.6 Fee Income from RI PLC During the financial year to 31st December 2015, the proportion of total fees payable by RI PLC to our total fee income was less than 10%.
1.7 Inspections The properties were each inspected internally and externally during November/December 2015 by our local valuers and a summary of the dates of our inspections are set out in the Appendix. All our valuers are satisfied that this provided a representative view of the properties. For the purpose of this valuation, we have made the assumption that there have been no material changes to any of the properties or their surroundings that could have a material effect on value since the most recent inspections.
1.8 Basis of Valuation Our opinion of the Market Value of the properties has been primarily derived using comparable recent market transactions on arm’s length terms. Following your instructions, we have undertaken our valuation on the following basis:
Market Value: We have set out the definitions of the above bases of valuation in Appendix B. Our valuations are subject to our standard Valuation Terms, Conditions and Assumptions, which are included in the Report and the Appendix. Where appropriate you have confirmed that our Assumptions are correct so far as you are aware through your counter-signature of our Engagement Letter. In the event that any of our Assumptions prove to be incorrect then our valuations should be reviewed.
1.9 Market Value The value of the property has been assessed in accordance with the relevant parts of the current RICS Valuation Standards, shown in latest edition (see above 1.4) of the RICS Rules (“Red Book”) and according to local market practice. 170 166810 Proof 7 Wednesday, January 27, 2016 23:11
However we have assessed Market Value in accordance with PS 3.2 Red Book 5th Edition Under these provisions, the term “Market Value” means: The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”
1.10 Report Format In accordance with your requirements and our Appointment Letter, our Report takes the form of a certificate and schedule which should be read in conjunction with our previous Reports and Valuations (See Section 1.1 of this Report).
1.11 Assumptions An Assumption is stated in the Glossary to the Red Book to be a “supposition taken to be true” (“Assumption”). Assumptions are facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, need not be verified by a valuer as part of the valuation process. In undertaking our valuations, we have made a number of Assumptions and have relied on certain sources of information. Where appropriate, you have confirmed that our Assumptions are correct so far as you are aware. In the event that any of these Assumptions prove to be incorrect, our valuations should be reviewed. The Assumptions we have made for the purposes of our valuations are referred to below:-
Title We have not had access to the title deeds of any of the properties. We have made an Assumption that RI PLC is in possession of a good and marketable freehold title in each case with the exception of the property located in Frankfurt and Kaiserslautern which have been valued on a leasehold basis. We have assumed that the properties are free from rights of way or easements, restrictive covenants, disputes or onerous or unusual outgoings. We have also assumed that the properties are free from mortgages, charges or other encumbrances.
Condition of structure and services, deleterious materials, plant and machinery and goodwill Due regard has been paid to the apparent state of repair and condition of each of the properties, but condition surveys have not been undertaken, nor have woodwork or other parts of the structures which are covered, unexposed or inaccessible, been inspected. Therefore, we are unable to report that the properties are structurally sound or free from any defects. We have made an Assumption that the properties are free from any rot, infestation, adverse toxic chemical treatments, and structural or design defects other than such as may have been mentioned in the body of our Valuation Report and the Appendices. We have not arranged for investigations to be made to determine whether high alumina cement concrete, calcium chloride additive or any other deleterious materials have been used in the construction or any alterations, and therefore we cannot confirm that the properties are free from risk in this regard. For the purposes of these valuations, we have made an Assumption that any such investigation would not reveal the presence of such materials in any adverse condition. No mining, geological or other investigations have been undertaken to certify that the sites are free from any defect as to foundations. We have made an Assumption that the load bearing qualities of the sites of the properties are sufficient to support the buildings constructed or to be constructed thereon. We have also made an Assumption that there are no abnormal ground conditions, nor archaeological remains present, which might adversely affect the present or future occupation, development or value of any of the properties. No tests have been carried out as to electrical, electronic, heating, plant and machinery, equipment or any other services nor have the drains been tested. However, we have made an Assumption that all services are functioning satisfactorily. No allowance has been made in these valuations for any items of plant or machinery not forming part of the service installations of the buildings. We have specifically excluded all items of plant, machinery
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and equipment installed wholly or primarily in connection with the occupants’ businesses. We have also excluded furniture and furnishings, fixtures, fittings, vehicles, stock and loose tools. Further, no account has been taken in our valuations of any goodwill that may arise from the present occupation of any of the properties. It is a condition of Schlicht&Kollegen and any related company, or any qualified employee, providing advice and opinions as to value, that RI PLC and/or third parties (whether notified to us or not) accept that the Valuation Report in no way relates to, or gives warranties as to, the condition of the structure, foundations, soil and services.
Environmental matters We have been instructed not to make any investigations in relation to the presence or potential presence of contamination in land or buildings, and to make an Assumption that if investigations were made to an appropriate extent then nothing would be discovered sufficient to affect value. We have not carried out any investigation into past uses, either of the properties or any adjacent land to establish whether there is any potential for contamination from such uses or sites, and have therefore made an Assumption that none exists. In practice, purchasers in the property market do require knowledge about contamination. A prudent purchaser of these properties may require appropriate investigations to be made to assess any risk before completing a transaction. Should it be established that contamination does exist, this might reduce the values now reported. We have no basis upon which to assess the reasonableness of this Assumption. If it were to prove invalid then the value would fall by an unspecified amount.
Sustainable development is currently a highly publicized subject (pressure from public opinion, changing regulations and a greater general awareness of market players) which could have an effect on future values. In our valuations, we are unable to predict the future changes in perception by market players on this subject, nor the impact of any changes to public regulation.
Areas RI PLC has provided us with the floor areas of the properties that are relevant to our valuation. As instructed, we have relied on these areas and have not checked them on site. We have made an Assumption that the floor areas supplied to us have been calculated in accordance with local market practice. Planning Information and Statutory Requirements We have not made enquiries as to the local planning information for the purpose of this analysis; we have assumed that the properties are not subject to any planning related issues that may have an effect on our analysis. Site We have not made enquiries as to the cadastral references and site area of the subject properties. Leasing We have read all the leases and related documents provided to us by you. We have made an Assumption that copies of all relevant documents have been sent to us and that they are complete and up to date. We have not undertaken investigations into the financial strength of the tenants. Unless we have become aware by general knowledge, or we have been specifically advised to the contrary we have made an Assumption that the tenants are financially in a position to meet their obligations. Unless otherwise advised we have also made an Assumption that there are no material arrears of rent or service charges, breaches of covenants, current or anticipated tenant disputes. However, our valuations reflect the type of tenants currently in occupation or responsible for meeting lease commitments, or likely to be in occupation, and the market’s general perception of their creditworthiness. 172 166810 Proof 7 Wednesday, January 27, 2016 23:11
We have also made an Assumption that wherever rent reviews or lease renewals are pending or impending, with anticipated reversionary increases, all notices have been served validly within the appropriate time limits.
Portfolios and Letting No reduction or allowance has been made in analysis to reflect possible effect of flooding the market were the portfolio, or a substantial number of properties within it, to be placed on the market at the same time.
Taxation and Costs We have not made any adjustments to reflect any liability to taxation that may arise on disposals, nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, taxation allowance or lottery funding that may arise on disposals. We have made deductions to reflect purchaser’s acquisition costs, where appropriate for local market practice.
1.12 Information Received Property information including updated tenancy schedules and Capex information has been provided under separate cover by the local RI PLC asset managers to our local valuers. Where there have been new leases signed since our previous valuation update, we have been provided with these leases. We have been provided with all information requested and have relied upon this information for the purpose of this valuation update.
1.13 Information not provided We have made an Assumption that the information RI PLC and its professional advisers have supplied to us in respect of the properties is both full and correct. It follows that we have made an Assumption that details of all matters likely to affect value within your collective knowledge such as prospective lettings, rent reviews, outstanding requirements under legislation and planning decisions have been made available to us and that the information is up to date.
1.14 Our use of Information provided by RI PLC Our intervention consists of taking into consideration the relevant and useful documents or information for our valuation. We have not carried out a full examination or an audit of all documents provided.
2.1 Market Value We are of the opinion that the Market Value (5th Edition Red Book) of the freehold and leasehold interest in the properties within the portfolio as at 15th January 2016 (the “Valuation Date”), subject to the Assumptions and other terms, conditions and comments in this Report is: Freehold € 197,130,000 Long leasehold € 9,600,000 (Frankfurt/M+Kaiserslautern) –––––––––––– TOTAL (under the special assumptions detailed € 206.730.000 below) Market Values are reported net of purchaser’s costs as dictated by local market practice. The approximate rates are between 7-11% depending on transfer tax (significantly increased in the last years) and are paid by the purchaser in addition to the net purchase price of a real estate asset.
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In addition we confirm that: • there has been no material change in circumstances between the date of the valuation and the date of this valuation report that would affect the valuation; and • we are not aware, as a result of our role as an independent valuer of the Portfolio, of any matter which is not disclosed in the Document or which has not been disclosed to RI PLC, Peel Hunt and JP Morgan in writing and which is required to be brought to their attention. There has been no material change in the combined values of the properties from the year end valuation for RI PLC as at 31 August 2015 and the values stated in this report. The value as at 31 August 2015 was €206,630,000 and the value as at 15 January 2016 is €206,730,000, being an increase of 0.05%. This small increase is mainly due to small changes in the market conditions and very few rent reviews throughout this period.
2.2 General Conditions This report and valuation has been prepared on the basis that there has been full disclosure of all relevant information and facts which may affect the valuation. The contents of this Valuation Certificate and Appendices are confidential to the party to whom they are addressed for the specific purposes set out herein. Consequently, and in accordance with current practice, no responsibility is accepted to any other party in respect of the whole or any part of their contents. Before this Valuation Report, or any part thereof, is reproduced or referred to, in any document, circular or statement, and before its contents, or any part thereof, are disclosed orally or otherwise to a third party, the valuer’s written approval as to the form and context of such publication or disclosure must first be obtained. Such consent shall always be given where disclosure is required, pursuant to RI PLC’s regulatory or legal obligations. For the avoidance of doubt such approval is required whether or not Schlicht&Kollegen is referred to by name and whether or not the contents of our report are combined with others. In the case of dispute, any legal issues arising from this instruction should be referred to the local Courts for resolution. For the purpose of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information within this Report and Valuation and declare that we have taken all reasonable care to ensure that the information contained in the Report and Valuation is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
2.3 Special Assumptions We bring to your attention the Property in Eilenburg that has been valued subject to Special Assumptions whereby the lease contract with REWE is signed by both parties and a development will take place as per the provided information: The new rental contract with REWE will last for 15-years, generating a rental income of EUR 347.8k p.a.. The above mentioned lease with REWE will allow for a necessary (partial) redevelopment. Based on current available cost estimates the capital expenditure for the development of the Property is assumed to amount to ca. EUR 2.25 million. We were told by REWE that they by themselves will invest ca. EUR 1.2 million in their modernized shop. The development programme has already started and the application for the building permission has been submitted and the approval is expected in Q2 2016. We were told by RI PLC that the planned development in Eilenburg will be in accordance with all necessary and relevant guidelines, regulations, and laws and it is assumed that it can therefore be carried out as planned.
Yours sincerely,
Klaus Schlicht MRICS öbuv SV (IHK Stuttgart) Managing Director
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3. Appendices Appendix A Valuation Referring to information we were provided, the two properties in Frankfurt and Kaiserslautern (Properties No 8, 11) in the table below are leasehold properties, all other Properties shown in the table below are freehold properties. Market Value for Redefine Portfolio Germany 15.01.2016
No. Property Address Property Type Value SK Value SK Date of Purchasers Gross Gross Net Inital Yield Indicative Value Costs Town 15.01.2015 15.01.2015 Inspection Multiplier Multiplier at Market - €/m2 lettable (Tax; Agent, with special without special at Current - at Market - special Area - assumption assumption Notary) - special special special assumption special assumption assumption assumption assumption 1 Aachen 52078 Aachen, Mixed Use, Food 3.880.000,00 € 3.880.000,00 € 05.12.2015 10,00% 11,66 13,50 6,22% 1.433,00 €/m2 Heusstr. 4 - Retail, Gym, Reha Center 2 Aldenhoven 52457 Aldenhoven, Beverage Shop, 490.000,00 € 490.000,00 € 05.12.2015 10,00% 8,48 11,16 7,14% 803,00 €/m2 Blumenstr. 3 - Standard Building, in a rural town 3 Brandenburg 14776 Brandenburg, Pet + Beverage 370.000,00 € 370.000,00 € 30.11.2015 10,00% 5,08 7,25 10,16% 432,00 €/m2 Potsdamerstr 23 - Shop, Standard Building 4 Bremen 28237 Bremen- Neighborhood 7.130.000,00 € 7.130.000,00 € 28.11.2015 8,50% 15,25 13,00 6,40% 1.676,00 €/m2 Gropelingen, Center, Mixed Use, Lindenhofcenter - Retail, Office, Anchor Tenant Food Discounter Aldi 5 Bruckmühl 83052 Bruckmühl, Modern DIY Market 6.970.000,00 € 6.970.000,00 € 28.11.2015 7,00% 13,11 13,11 6,42% 1.062,00 €/m2 Pettenkoferstr, 15 a - Franchise HAGEBAU, good southern Bavaria; rural town south-west border to Rosenheim, north- east of Munich 6 Bünde 32257 Bünde, Lidl Food Discounter, 3.590.000,00 € 3.590.000,00 € 28.11.2015 10,00% 14,91 14,91 5,78% 2.197,00 €/m2 Lübbecker Str. 74 - Standard Building, rural town 7 Eilenburg 04838 Eilenburg, Borough Center, 3.720.000,00 € 3.290.000,00 € 27.11.2015 7,00% 11,11 11,40 6,83% 1.131,00 €/m2 Grenzstr./Mittelstr. - Mixed Use, Retail, Anchor Tenant Food Shop REWE and Cloths Discounter TAKKO. New rental contract REWE finalized since a few days but not yet signed by tenant, Special Assumption it will be signed. 8 Frankfurt 60311 Frankfurt, NETTO Food 2.790.000,00 € 2.790.000,00 € 05.12.2015 9,50% 14,74 14,74 5,47% 2.564,00 €/m2 Battonstr. 10 - Discounter, at Allerheiligenstr. 7 - Innercity Building 9 Herzogenrath 52134 Herzogenrath, Modern Retail Park 12.620.000,00 € 12.620.000,00 € 05.12.2015 10,00% 13,35 13,35 6,44% 1.138,00 €/m2 Nordstern-Park 11- with OBI DIY Shop as Anchor, good smaller nationwide retailer like e.g. DÄNISCHES BETTENLAGER 10 Hückelhoven 41836 Hückelhoven, Modern DIY Market 12.910.000,00 € 12.910.000,00 € 12.12.2015 10,00% 14,66 14,66 5,94% 1.236,00 €/m2 Am Landabsatz 10 - OBI 11 Kaiserslautern 67655 Kaiserslautern Borough Center 6.810.000,00 € 6.810.000,00 € 05.12.2015 8,50% 15,09 14,84 5,72% 1,941,00 €/m2 Merkurstraße 36-38 - Mixed Use, Retail, Office, Anchor Tenant Food Discounter PENNY + Drugstore DM 12 Leipzig 04357 Leipzig, Borough Center 9.400.000,00 € 9.400.000,00 € 27.11.2015 7,00% 13,77 13,67 6,01% 1.563,00 €/m2 Mockauerstr - mixed use, Retail, Office, REWE Anchor Tenant 13 Marne 25709 Marne, KiK Cloths 320.000,00 € 320.000,00 € 12.12.2015 11,00% 8,30 9,18 6,29% 771,00 €/m2 Westerstr. 30 - Discounter, Standard Building, rural town, large structural vacancy 14 Mölln 23879 Mölln, Mixed Use Building, 4.970.000,00 € 4.970.000,00 € 28.11.2015 10,00% 13,00 12,24 6,41% 969,00 €/m2 Wasserkrügerweg Retail and 127 - Residential, Anchor Tenant Food Discounter NORMA
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Market Value for Redefine Portfolio Germany 15.01.2016
No. Property Address Property Type Value SK Value SK Date of Purchasers Gross Gross Net Inital Yield Indicative Value Costs Town 15.01.2015 15.01.2015 Inspection Multiplier Multiplier at Market - €/m2 lettable (Tax; Agent, with special without special at Current - at Market - special Area - assumption assumption Notary) - special special special assumption special assumption assumption assumption assumption 15 München 81540 Munich, Mixed Use Retail, 8.400.000,00 € 8.400.000,00 € 28.11.2015 7,00% 21,39 20,41 4,30% 4.481,00 €/m2 Tegenseer platz 1 - Residential, Office, small Landmark 16 Neumünster 24536 Neumunster, Pet Food + 1.030.000,00 € 1.030.000,00 € 12.12.2015 11,00% 9,28 12,11 6,73% 1.036,00 €/m2 Kielerstr 385 - Beverage Shop, Standard Building 17 Reckling- 45663 Pet Shop, Standard 540.000,00 € 540.000,00 € 12.12.2015 11,00% 9,00 10,59 7,35% 635,00 €/m2 hausen Recklinghausen, Building Marienstr 1 B - 18 Sassenberg 48336 Sassenberg, PENNY Food 870.000,00 € 870.000,00 € 12.12.2015 11,00% 10,11 10,83 7,77% 1.039,00 €/m2 Lappenbrink 53 - Discounter, Standard Building, rural town 19 Schwandorf 92421 Schwandorf, Modern DIY Market 10.250.000,00 € 10.250.000,00 € 28.11.2015 7,00% 13,67 13,67 6,42% 1.267,00 €/m2 Am Brunnfeld 6 - OBI 20 Tarp 24963 Tarp, KIK Cloths 540.000,00 € 540.000,00 € 12.12.2015 11,00% 10,98 10,98 6,88% 551,00 €/m2 Wanderuperstr. 17 - Discounter, rural town, Standard Building 21 Ülzen 1 29525 Uelzen, Lidl Food 3.670.000,00 € 3.670.000,00 € 28.11.2015 8,50% 14,89 14,89 5,80% 2,230,00 €/m2 Hauenriede 1 - Discounter, Standard Building, rural town 22 Ülzen 2 29525 Uelzen, Old Retail building, 380.000,00 € 380.000,00 € 28.11.2015 9,50% 18,03 4,05 19,69% 179,00 €/m2 Hauenriede 17 - Office 1. Floor, rural town - no parking space. Mostly vacant - small space rented - underrented 23 VBG 51429 Bergisch- Office for 9.860.000,00 € 9.860.000,00 € 05.12.2015 10,00% 8,89 13,66 6,18% 1.519,00 €/m2 Bergisch- Gladbach, Kölnerstr. stateowned accident Gladbach 20 - inscurance, good location in Region Cologne 24 VBG Berlin 10969 Berlin, Modern Office for 25.980.000,00 € 25.980.000,00 € 30.11.2015 9,50% 16,92 19,54 4,56% 4.014,00 €/m2 Markgrafenstraße state-owned 17/18 - accident inscurance, Central District Mitte 25 VBG 01069 Dresden, Modern Office for 29.290.000,00 € 29.290.000,00 € 27.11.2015 7,00% 9,99 15,60 5,59% 1.889,00 €/m2 Dresden Wiener platz 6 - state-owned accident inscurance, Central District 26 VBG 71636 Ludwigsburg, Modern Office for 28.600.000,00 € 28.600.000,00 € 05.12.2015 8,50% 11,46 20,95 4,19% 2.747,00 €/m2 Ludwigsburg Martin-Luther-Str. state-owned 79 - accident inscurance, good back office location Region Stuttgart 27 Waldkraiburg 84478 Innercity Shopping 11.060.000,00 € 11.060.000,00 € 28.11.2015 7,00% 15,49 15,49 5,56% 1.965,00 €/m2 Waldkraiburg, Center at smaller Friedländerstr./ Southeast Bavarian Berliner Str, - Town close to Austria, Anchor Tenants Food Store EDEKA and Cloths Shop C&A 28 Windeck 51570 Windeck, Beverage Shop, 290.000,00 € 290.000,00 € 05.12.2015 11,00% 6,85 6,85 10,07% 320,00 €/m2 Gerhard- Standard Building in Hauptmannstr 2-6- rural town Total 206.730.000 € 206.300.000 € with special without special assumption assumption 93.730.000 € 93.730.000 € (only VBG) (only VBG) 113.000.000 € 112.570.000 € (without VBG) (without VBG)
The aggregate Market Value of the portfolio is apportioned between the freehold and leasehold tenures as follows: Freehold € 197,130,000 Long leasehold € 9,600,000 (Frankfurt/M+Kaiserslautern) ––––––––––––– TOTAL (under special assumption) € 206,730,000
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Appendix B
Definitions of the Bases of Valuation
Market value Market Value as defined in PS 3.2 of the RICS Appraisal and Valuation Standards (“the Red Book”, 5th Edition) Under PS 3.2., the term “Market Value” means: “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” Nonetheless we still have an economic crisis (Euro/Currency Crisis). So we can say with confidence that any property valuations reported at the present time contain “abnormal uncertainty” caused by “market instability”. RICS Guidance Note 5 (GN5) refers to such circumstances thus: “Unforeseen macroeconomic or political crises can have a sudden and dramatic effect on markets. This could manifest itself by either panic buying or selling, or simply disinclination to trade until it is clear how prices in the market will be affected in the longer term. If the valuation date coincides with the immediate aftermath of such an event, the data on which any valuation is based may be confused, incomplete or inconsistent, with an inevitable effect on the certainty that can be attached to it”. The RICS considers that, where uncertainty could have a material effect on the valuation, the Valuer should draw attention to this, indicating the cause of the uncertainty and the degree to which this is reflected in the reported valuation. Accordingly, please be advised that such circumstances exist and that we have advised you in the context above, and that in our opinion the value of the Property is fairly stated.
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Appendix C
Additional Valuation Terms, Conditions and Assumptions
1.1 Statutory requirements and planning Save as disclosed in a Certificate of Title or unless otherwise advised, and unless otherwise referred to in this Valuation Report we have made the Assumption that the building has been constructed in full compliance with valid town planning and building regulations approvals and that where necessary has the benefit of current Fire Risk Assessments compliant. Similarly, we have also made the Assumption that the property is not subject to any outstanding statutory notices as to its construction, use or occupation and that the existing use(s) of the property is/are duly authorised or established and that no adverse planning conditions or restrictions apply. We have made the Assumption that the property complies with all relevant statutory requirements. Please note the fact that employees of town planning departments now always give information on the basis that it should not be relied upon and that formal searches should be made if more certain information is required. We assume that, if you should need to rely upon the information given about town planning matters, your solicitors would be instructed to institute such formal searches. In instances where we have valued a property with the benefit of a recently granted planning consent or on the Special Assumption that planning consent is granted, we have made an assumption that it will not be challenged under Judicial Review. Such a challenge can be brought by anyone (even those with only a tenuous connection with the property, or the area in which it is located) within a period of three months of the granting of a planning consent. If a planning consent is subject to Judicial Review, we must be informed and asked to reconsider our opinion of value. Advice would be required from your lawyer and a town planner, to obtain their opinion of the potential outcomes of such a Judicial Review, which we will reflect in our reconsideration of value.
1.2 Properties in the course of development or requiring refurbishment Unless otherwise referred to in the Valuation Report, we have relied upon information relating to construction and associated costs in respect of both the work completed and the work necessary for completion, together with a completion date, as advised by the owner of the property or their professional advisers.
1.3 Legal issues Legal issues, and in particular the interpretation of matters relating to title and leases, may have a significant bearing on the value of an interest in property. No responsibility or liability will be accepted for the true interpretation of the legal position of our client or other parties. Where we express an opinion upon legal issues affecting the valuation, then such opinion should be subject to verification by the client with a suitable qualified lawyer. In these circumstances, we accept no responsibility or liability for the true interpretation of the legal position of the client or other parties in respect of the valuation of the property and our Valuation Report will include a statement to this effect.
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SECTION 10
VALUATION REPORT PREPARED BY STRUTT & PARKER RELATING TO THE SHOPPING CENTRES, KWIK-FITS AND MIXED USE PORTFOLIO
The Directors Redefine International P.L.C. (“RI PLC”) Merchants House 24 North Quay Douglas Isle of Man IM1 4LE
J.P. Morgan Securities plc (“JP Morgan”) Strutt & Parker LLP 25 Bank Street 13 Hill Street London Berkeley Square E14 5JP London W1J 5LQ Peel Hunt LLP (“Peel Hunt”) Direct Dial: 020 7318 5106 Moor House Mobile: 07968 172 539 120 London Wall E-Mail: [email protected] London EC2Y 5ET Fax: 020 7318 5088
28 January 2016 Dear Sirs, DESK TOP PORTFOLIO VALUATION REDEFINE INTERNATIONAL P.L.C. SHOPPING CENTRES, KWIK FIT AND MIXED USE PORTFOLIO (the ‘Portfolio’). VALUATIONS AS AT 15 JANUARY 2016
1 Instructions 1.1 In this Report, the “Issuer” shall mean Redefine International P.L.C. (“RI PLC”). 1.2 In accordance with instructions received from the Issuer and as confirmed in our Terms of Engagement letter dated 26 January 2016, we have considered the investment properties, as outlined in the Schedule of Assets attached to our engagement letter, (the “Properties” and each a “Property”) which are currently held by RI PLC in order to provide our opinion on a Desk Top basis of the aggregate Market Value and Market Rent (in each case as defined below) of the 35 freehold and long leasehold interests in each of the Properties, subject to and with the benefit of the various occupational leases to which the Properties may be subject, as at 15 January 2016. 1.3 We understand that our Valuation Report is required for inclusion in the approved Prospectus to be published by RI PLC in connection with the proposed capital raising exercise, approval of the waiver of Rule 9 of the Takeover Code and other related matters, which will be relied on by investors as part of their investment decision process. 1.4 This Report is addressed to and capable of being relied upon by: (a) Redefine International P.L.C.; (b) JP Morgan Securities; and (c) Peel Hunt LLP, (together, the Addressees) provided that, in relying on this Report, each of the Addressees acknowledges and agrees that: (i) the valuation provided in this Report refers to the position at the date it was originally issued and, unless otherwise confirmed by us in writing, we have not taken any action nor are we obliged to take any action to review or update this Report since the date it was originally issued;
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(ii) Our aggregate liability to any one or more or all of the Addressees or any other party who otherwise becomes entitled to rely upon the Report under or in connection with this agreement and our Valuation, however that liability arises (including, without limitation, a liability arising by breach of contract, arising by tort, including, without limitation, the tort of negligence, or arising by breach of statutory duty) shall be limited to £100 million, providing that no liability cap shall apply in the case of fraud or where we are liable under the Financial Services and Markets Act 2000. (iii) You acknowledge and agree that we shall not be liable under or in connection with this agreement and the provision of our Valuation in tort (including negligence), breach of contract, breach of statutory duty or otherwise due to, under and/or arising out of or in connection with this agreement to the extent such loss or damage is indirect, special or punitive. (iv) Our liability shall not increase by reason of a shortfall in recovery from any other party, whether that shortfall arises from an agreement between you and them, your difficulty in enforcement, or otherwise. (v) You acknowledge and agree that none of our employees, partners or consultants individually has a contract with you or owes you a duty of care or personal responsibility. You agree that you will not bring a claim against any such individuals personally in connection with our services. (vi) Nothing in this agreement shall exclude or limit our liability for death or personal injury caused by our negligence or for any other liability that cannot be excluded or limited by law. (vii) Each Addressee shall have the right to join or counterclaim against us under or in connection with this agreement in any proceeding brought by a third party in any jurisdiction to which that Addressee is or will be enjoined or a party in relation to the Transaction. (viii) this Report is subject to the terms and conditions set out in our Engagement Letter with, RI PLC, JP Morgan Securities and Peel Hunt LLP.
2 Compliance with Appraisal and Valuation Standards 2.1 We have prepared our Valuation in accordance with the RICS Valuation – Professional Standards (January 2014 Edition) (the Red Book) issued by the Royal Institution of Chartered Surveyors (“RICS”), and in accordance with the relevant provisions of the listing rules made by the UK Listing Authority pursuant to Part VI of the Financial Services and Markets Act 2000 (the “Listing Rules”), the prospectus rules made by the UK Listing Authority pursuant to Part VI of the Financial Services and Markets Act 2000 (the “Prospectus Rules”) and ESMA’s current update of the CESR recommendations for the consistent implementation of the European Commission’s Regulation on Prospectuses No 809/2004 (the “ESMA Guidelines”).
3 Status of Valuer 3.1 The Valuation has been undertaken by Mark Whittingham MRICS and John Smith MRICS, both RICS Registered Valuers and National Partners at Strutt & Parker LLP. 3.2 We are acting as an External Valuer (as defined in the Red Book); 3.3 We have the necessary market knowledge, skills and understanding to undertake the Valuation competently.
4 Disclosures Required Under the Provisions of UKPS 5.3 4.1 We confirm in the financial year to 31 December 2015, the proportion of total fees payable by the addresses to the total fee income of Strutt & Parker LLP was less than 5%.
5 Conflict of Interest 5.1 We confirm that we undertake half yearly valuations of the portfolio on the 28 February and 31 August for RI PLC and on the basis that all interested parties are aware of this role, we do not consider there to be a conflict of interest.
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6 Information 6.1 In preparing this desk top valuation we have relied on the following information and assumed all are valid for the purposes of our Report but should any information prove to be incorrect or inadequate, then this could affect the accuracy of the valuations: (a) our files relating to each of the Properties we have inspected previously; (b) leases and/or summaries, floor plans and other relevant information where available; (c) copy leases and floor plans, where available; (d) updated information regarding any material changes to the Properties including lettings, rents, layout, and proposed terms of occupation where vacant space is under negotiation or in construction; and (e) previous Certificates of Title prepared by RI PLC’s solicitors (although these are now regarded as historic).
7 The Portfolio 7.1 The Properties we have valued comprise 35 investments, which are held on a mixed freehold and leasehold basis, subject to and with the benefit of various occupational leases and agreements, but otherwise with vacant possession. The Portfolio is mixed in nature but comprises predominantly Shopping Centres and trade counter uses spread geographically throughout the UK. The properties comprise six Shopping Centres and 28 trade counters (27 of which are let to Kwik Fit Properties Ltd) and a single office building in London. 7.2 The Properties have been valued individually and do not reflect the potential for a premium if disposed of as a single lot or broken up into its component parts being Shopping Centres, KwikFit units and a single Central London asset. We have assumed that there would be a reasoned disposal having regard to lotting, as appropriate, to achieve the best price. However, there is limited stock and recent investment interest in portfolios would suggest that a premium may be secured at the present time particularly if the Kwik Fit units were marketed as a single portfolio. However, our valuations do not include any premium value. 7.3 We have carried out inspections of each of the Properties and the dates of these are noted on the attached Schedule of Assets.
8 Tenure and Tenancies 8.1 The Properties are held on a mixed freehold, and long leasehold basis, subject to various leases. We have assumed they are held free from encumbrances and we have not been advised of any outstanding notices or disputes affecting them. 8.2 We have relied upon the details of tenure, tenancies and other information provided by the Issuer. 8.3 No account has been taken of any mortgages, debentures or other security which may now or in the future exist over any of the Properties.
9 Basis of Valuation 9.1 Our Valuation has been prepared in accordance with the RICS Red Book which sets out the following definitions: Market Value (MV) 9.2 Valuation Practice Standard VPS 4 (1.2) of the Red Book defines Market Value (MV) 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.” Market Rent (MR) 9.3 Valuation Practice Standard VPS 4 (1.3) of the Red Book defines Market Rent (MR) as: “The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion.” 181 166810 Proof 7 Wednesday, January 27, 2016 23:11
9.4 Our valuations are exclusive of any Value Added Tax (VAT) and no allowances have been made for any expenses of realisation nor for taxation which might arise in the event of a disposal of a Property. Our valuations are, however, net of the usual acquisition costs payable by a buyer of a property based on 5.80% adopting 20% VAT on fees.
10 Assumptions and Sources of Information Net Annual Rent 10.1 When assessing the values of these Properties we have had regard to the annual rents receivable for each Property and the definition of ‘net annual rent’ given in the Listing Rules made by the Financial Conduct Authority pursuant to section 73A of the Financial Services and Markets Act, as amended. Further, our valuation based on the annual rent of the Properties: (a) ignores any special receipts or deductions arising from the Property; (b) excludes Value Added Tax and before taxation (including tax on profits and allowances for interest on capital or loans); (c) makes deductions for superior rents (but not for amortisation), and any disbursements including, if appropriate, expenses of managing the property and allowances to maintain it in a condition to command its rent; and (d) deducts void holding costs as provided to us by RI PLC for the Shopping Centre assets. Where premises are let on effective full repairing and insuring leases, the net annual rents receivable are the presently contracted rents payable under those leases without any deduction for the cost of management or any other expenses. The rental value reflects the terms of the leases where the Properties, or parts thereof, are let at the date of valuation. Where Properties, or parts thereof, are vacant at the date of valuation, the rental value reflects the rent we consider would be obtainable on an open market letting as at the date of valuation. Floor Areas 10.2 We have not measured any part of the Properties and have assumed the measurements provided to us are in accordance with the RICS Property Measurement (1st edition, May 2015) that incorporates the provisions of the RICS Code of Measuring Practice. Environmental Investigations and Ground Conditions 10.3 We were not instructed to undertake an Environmental Audit, and are therefore unable to warrant that the Properties will not be adversely affected by the provisions and implementation of the Environmental Protection Act 1990 and Environment Act 1995. We have not investigated whether the sites of the Properties are, or have been in the past, contaminated and are therefore unable to warrant that the Properties are free from any defect or risk in this respect. We have not however been advised of any contamination effecting these Properties or, of any neighbours, or other investigation or soil survey which may have been carried on the Properties which may draw attention to contamination or the possibility of such contamination. 10.4 We have assumed that, except to the extent disclosed to us by RI PLC, that there are no abnormal ground conditions, nor archaeological remains present, which might adversely affect the present or future occupation, development or value of any of the Properties. Town Planning and Statutory Requirements 10.5 We have not made Town Planning enquiries for the purposes of this Report and have assumed (a) that there are no adverse town planning or highway issues nor other schemes or proposals and (b) that all relevant planning consents exist for the Properties and their respective present uses. Tenants’ Covenants 10.6 We have not conducted credit enquiries into the financial status of any of the tenants of the Properties (the “Tenants”). However, in undertaking our valuations we have reflected our understanding of the market’s perception of the financial status of the Tenants and the rent reimbursement process. We have also assumed that each Tenant is capable of meeting its lease obligations, and that there are no material undisclosed breaches of covenant.
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11 Valuation 11.1 We are of the opinion that the aggregate Market Value calculated on a desk top basis of the mixed freehold and long leasehold interests, subject to the various existing and proposed leases in their current condition can be fairly stated at £380,095,000 (Three Hundred and Eighty million, and Ninety Five Thousand Pounds). 11.2 This is apportioned between freehold and long leaseholds as shown below: Tenure Market Value Freehold £159,185,000 Long Leasehold £220,910,000 –––––––––– Total £380,095,000 –––––––––– 11.3 The valuation changes from our last Valuation on 31 August 2015 are as follows: Market Value Market Value 31st August 15th January 2015 2016 Difference Shopping Centres £349,598,112 £346,130,000 –£3,468,112 Kwik Fit Units £16,965,000 £16,965,000 No Change Mixed Use Portfolio £13,410,000 £17,000,000 +£3,590,000 –––––––––– –––––––––– –––––––––– Total £379,973,112 £380,095,000 +£121,888 –––––––––– –––––––––– –––––––––– The combined values of the properties has increased by £121,888 (0.03%) overall from the Valuation undertaken for the Issuer as at 31 August 2015.
The value of the Shopping Centres has fallen over the period by £3,468,112 (-0.99%). This is due to yield adjustments to reflect weaker investor sentiment towards non-prime assets outside London and the South East. The value fall has been mitigated by the improved overall net income across the Centres.
The value of the Kwik Fit units has remained unchanged reflecting the long income profile with fixed rental uplifts.
The value of the Central London property, Newington House, held in the mixed use portfolio, has increased by £3,590,000 due to continued occupational and investor demand for Central London offices and also the more imminent rental reversion in September 2017.
11.4 The aggregate gross passing rent for the Properties contracted under the terms of the leases as provided to us by RI PLC as at 15 January 2016 and stated before deduction of any Landlord’s non recoverable expenditure is £28,939,868 per annum. 11.5 We have valued the income producing Properties individually on a traditional investment basis applying a mix of net initial, hardcore or term and reversion yields to the net rents receivable under the various leases and having regard to the quality of each building, tenant covenant strength, length of lease, location and whether the Property is regarded as reversionary by reference to our assessment of Market Rent. The leases are on a mix of either full repairing and insuring terms (or with effective full recovery through service charges) or a tenant internal repairing basis and our assessment of net rent and resulting valuations have been adjusted for head rents and Landlord’s non recoverable costs on external repairs and insurance etc. Our valuation also has regard to the fixed minimum uplifts on the Kwik Fit Units. Where there is vacant space, we have reflected extended void periods of up to 18 months and risk adjusted yields together with fit out costs as appropriate. 11.6 The aggregate figures provided relate to the total of the individual Property Market Values and Market Rents at the date of valuation being 15 January 2016. We are not aware of any material changes to the aggregate valuation from that date to the date of this letter. 11.7 The Market Value figures adopted take into account the Net Annual Rent and the Market Rent and anticipated income profile over the life of the investments.
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11.8 Despite the limited evidence of recent open market transactions, we consider our valuations are well supported by reference to our analysis of transactional evidence, where available, and our direct experience of the relevant markets and buying criteria of potential purchasers with appropriate adjustments to reflect current market conditions. Accordingly, we consider our opinion of Market Value as detailed above can be reported with a reasonable degree of confidence.
12 General Assumptions
12.1 Exclusions The valuations do not make any allowance or take into account any legal fees, costs or other expenses, which would be incurred on the sale or purchase of the Properties, other than usual purchaser’s costs as set out above. We have excluded from our consideration any special purchaser who, due to special interest or circumstances, may wish to purchase the Properties. Whilst we have had regard to the general effects of taxation on market value, we have not taken into account any liability for tax which may arise on a disposal, whether actual or national, and neither have we made any deduction for Capital Gains Tax, Value Added Tax or any other tax liability. The valuation figures in this report are exclusive of VAT. We have not undertaken any enquiries to ascertain whether or not a sale of the Properties would attract VAT.
12.2 Structural and Decorative Condition This valuation and Report is not a structural survey and we therefore value on the assumption that each Property is of sound design and construction, and free from any inherent defect. We have not inspected any covered or inaccessible areas, nor were any detailed inspections carried out of woodwork or structural members. We did not carry out any investigation to determine whether or not high alumina cement, calcium chloride additives, asbestos or other potentially deleterious or hazardous materials have been used in the construction of the Properties or have since been incorporated in the Properties.
12.3 Services, Plant and Equipment No detailed inspection or tests have been carried out by us on any of the services or items of equipment, therefore no warranty can be given with regard to their serviceability, efficiency, safety or adequacy for their purpose. We have assumed all services, plant and machinery are in full working order and comply with all statutory requirements and standards.
12.4 Compliance with Statutory Matters In the absence of contrary statements we have assumed that the buildings fully comply with all statutory requirements to include Fire Office approval, environmental health and health and safety etc without any conditions or onerous costs to the owner.
12.5 Confidentiality, Reliance and Publication (i) We acknowledge that the Addressees will rely on the Report. We further acknowledge that shareholders or prospective shareholders of RI PLC may, inter alia, rely on the Report in the form that is incorporated into the Prospectus for the purpose of enabling it to make an informed assessment of the assets and liabilities, financial position, profits, losses and prospects of RI PLC and the rights attaching to the ordinary shares. Subject to the foregoing, our Report shall be confidential to, and for the use only of, the Addressee(s) and no responsibility shall be accepted to any third party for the whole or any part of its contents. (ii) Neither the whole nor any part of our 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. We confirm that we consent in principle to the Report or a summary prepared by us being presented to investors in the Prospectus and/or any ongoing investor materials including, but not limited to, any analyst presentation, press announcement or investor presentation (together, the ‘Investor Materials’) in connection with the proposed Transaction and being put on public display, provided that: a The Report or any summary shall not be published until such time as we have first approved the form and context in which the Report appears (such approval not to be unreasonably withheld or delayed); 184 166810 Proof 7 Wednesday, January 27, 2016 23:11
b The Prospectus or Investor Materials, as the case may be, shall make clear that we accept responsibility for our Report or summary only and for no other part of such materials; c Such Report or summary complies in all respects with the requirements of the Red Book and any applicable regulations or directives; d If any part of our Report becomes misleading or inaccurate, between the date of issue of the Report and the date of the Prospectus, or the date of issue of any Investor Materials we reserve the right to revisit and update our Report prior to it being published. (iii) We agree, subject to us having been first provided with a copy of the Prospectus, approved the form and context in which the Valuation is included in such Prospectus (acting reasonably) and satisfied ourselves that the following statements are true and correct and not misleading, that (i) on or immediately prior to the date of publication of the Prospectus; (ii) immediately prior to the release of the announcement confirming the launch of the Placing; (iii) immediately prior to the date of admission of the Placing Shares to the Official List of the Financial Conduct Authority; and (iv) (if applicable) prior to the date of any supplementary prospectus issued by RI PLC, we will provide a letter addressed to the Addressees in a form satisfactory to such Addressees confirming that: a We consent to the inclusion of the Valuation in the Prospectus and the reference to our name in the form and context in which they are included in the Prospectus (as the case may be) (subject to us first approving the form and context in which our Valuation will appear); b We consent to the Report and the letter of consent being put on public display; c Information contained in the Prospectus which is extracted from the Report is accurate, balanced and complete and is not misleading or inconsistent with the Report as prepared by us and has been properly extracted, derived or computed from the Report; d We have no material interest in RI PLC and we have acted as an External Valuer for the purpose of valuing the Properties pursuant to the terms of this letter of engagement; e We are not aware of any material change in the Valuation since the Valuation date; f We are not aware, as a result of our role as an External Valuer of the Properties and preparing the Report (but having made no further enquiries), of any matter which would affect the Valuation which is not disclosed in the Report (subject to any assumptions set out in such Report); g For the purpose of Prospectus Rule 5.5.3R(2)(f), we are responsible for the Valuation Report and will accept responsibility for the information contained in the Valuation Report (only) and to the best of our knowledge, having taken all reasonable care to ensure that such is the case, the information contained in the Valuation Report is in accordance with the facts and contains no omissions likely to affect its import; h The Valuation Report complies with Rule 5.6.5G of the Prospectus Rules, paragraphs 128 to 130 of the ESMA Guidelines, the Listing Rules and Rule 29 of the Takeover Code; i We consent to the publication and reproduction of the Report as required under Rules 26 and 29 of the Takeover Code. The Report has been prepared in accordance with and on the basis of the requirements of Rule 29 of the Takeover Code; and j We are not aware of any matter which is required to be disclosed in the Prospectus which is not disclosed in the Prospectus and which is required to be drawn to the attention of Peel Hunt in its capacity as sponsor to RI PLC in the context of its confirmation to the FCA pursuant to Listing Rule 8.4.9R. In the event that we are not able to satisfy ourselves on the date of publication of the Prospectus that the foregoing statements are true and correct, you acknowledge that we will be obliged to update our Valuation as a pre-condition to such Valuation being included in the Prospectus or Investor Materials.
12.6 Responsibility Statement Save for any responsibility arising under the Listing Rules, the City Code on Takeovers and Mergers or Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent there 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 accordance with the Report or our statement, required by and given solely for the purposes of complying with the Listing Rules, the City Code on Takeovers and Mergers and Annex IX item 13.1 of the Prospectus Directive Regulation, consenting to its inclusion in the Prospectus. 185 166810 Proof 7 Wednesday, January 27, 2016 23:11
For the purpose of Prospectus Rule 5.5.3R(2)(f), we accept responsibility for the information contained within this Report and declare that we have taken all reasonable care to ensure that the information contained in this Report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
Yours faithfully,
Mark Whittingham John Smith Head of Commercial Valuation National Partner [email protected] [email protected]
186 020 7318 5106 020 7318 4632 07905098778 077471215093 Redefine Portfolio – Schedule of Assets Strutt & Parker LLP Strutt & Parker LLP January 2016 Shopping Centres Date of Inspection 1 West Orchards Shopping Centre June 2015 2 Birchwood Shopping Centre July 2015 3 Byron Place Shopping Centre July 2015 4 St George’s Centre June 2015 5 Grand Arcade July 2015 6 Weston Favell Shopping Centre May 2015 Kwik Fit Portfolio Date of Inspection 7 7 Quarry Road, Irvine July 2015 8 7 Chesser Avenue, Edinburgh July 2015 9 70-90 Dalrymple Street, Greenock July 2015 10 27-31 Canal Street, Perth July 2015 11 50 Union Street, Hamilton July 2015 12 65-67 Main Street, Bridgend, Perth July 2015 13 151 Forton Road, Gosport, Hants June/July 2015 14 1 Telford Road, East Kilbride July 2015 15 2196 Paisley Road West, Cardonald, Glasgow July 2015 16 291-295 Bearwood Road, Smethwick, West Midlands June/July 2015 17 Bo’Ness Road, Grangemouth July 2015 18 244 Henver Road, Newquay, Cornwall May/June 2015 19 Swan Street, Spalding, Lincolnshire July/August 2015 20 123 Causeway End, Aberdeen July 2015 21 40 Milburn Road, Inverness July 2015 22 11-43 Hospital Hill, Dunfermline July 2015 23 East Road, Elgin July 2015 24 Watling Street, Gillingham, Kent July/August 2015 25 Carmondean Centre, Livingston July 2015 26 Callander Road, Falkirk July 2015 27 94 Baillieston Road, Mount Vernon, Glasgow July 2015 28 47-53 Hull Road, Hull, Humberside June/July 2015 29 Metropolitan Drive, Blackpool August/September 2015 30 Richmond Walk, Plymouth, Devon May/June 2015 31 180 Washway Road, Sale, Trafford August/September 2015 32 179 Heaton Lane, Stockport July/August 2015 33 Lichfield Road, Stafford July/August 2015 34 Johnson Dry Cleaners,Lichfield Road,Stafford July/August 2015 Mixed Use Portfolio Date of Inspection 35 Newington House, 239-251, Southwark Bridge Road, SE1 6NP January 2016
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PART 14
WAIVER OF RULE 9 OF THE UK TAKEOVER CODE AND INFORMATION ON THE CONCERT PARTY
1. INFORMATION ON THE CONCERT PARTY AND RESPONSIBILITY 1.1 The information set out in this Part 14 which relates to Redefine Properties has been accurately reproduced from information provided by Redefine Properties. As far as the Company is aware and is able to ascertain from information provided by Redefine Properties, no facts have been omitted which would render the information in this Part 14 which relates to Redefine Properties inaccurate or misleading.
1.2 For the purposes of Rule 19.2 of the Takeover Code only, Redefine Properties and the directors of Redefine Properties, whose names are set out in paragraph 2.2 below, accept responsibility for the information on Redefine Properties contained in this Part 14. To the best of the knowledge and belief of Redefine Properties and the directors of Redefine Properties (who have taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information.
2. INFORMATION ON REDEFINE PROPERTIES 2.1 As at the Latest Practicable Date, Redefine Properties is a corporate SA-REIT and is one of the largest property companies listed on the JSE. It was founded in 1999 and listed on the JSE in 2000. Redefine Properties owns 30.07 per cent. of the issued capital of Redefine International.
2.2 The directors of Redefine Properties are as follows:
Marc Wainer Chairman David Rice Chief Operating Officer Andrew Konig Chief Executive Officer Leon Kok Financial Director Mike Ruttell Executive Director – Development Harish Mehta Non-Executive Director Bernard Nackan Lead Independent Non-Executive Director Marius Barkhuysen Independent Non-Executive Director Ntombi Langa-Royds Independent Non-Executive Director Phumzile Langeni Independent Non-Executive Director David Nathan Independent Non-Executive Director Gunter Steffans Independent Non-Executive Director Michael Watters Non-Executive Director
2.3 The registered office of Redefine Properties is Redefine Place, 2 Arnold Road, Rosebank, Johannesburg, 2196, South Africa. Redefine Properties was incorporated in 1999 in the Republic of South Africa with registration number 1999/018591/06.
2.4 The issued share capital of Redefine Properties comprises 4,850,488,789 shares of which 305,876,766 shares are held in treasury.
3. INFORMATION ON THE CONCERT PARTY DIRECTORS AND OTHERS
Information on the Concert Party Directors Michael Watters Michael Watters is a qualified engineer with a BSc Eng (Civil) Degree and an MBA. He has over 27 years’ experience in the investment banking and real estate industries. He has held directorships of some of South Africa’s top rated listed property funds including Sycom Property Fund and Hyprop Investments Limited as well as the Sapphire Retail Fund in the United Kingdom. He is the CEO of the Group, a non-executive director of Redefine Properties and International Hotel Group Limited and Chairman of Redefine BDL.
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Marc Wainer Marc Wainer has over 35 years’ experience in the property industry in South Africa, including founding Investec Property Group, Investec Bank’s property division. He is the founder and executive chairman of Redefine Properties, a non-executive director of Cromwell Property Group and has served on numerous other listed property boards, including Hyprop Investments Limited and Fountainhead Property Trust Managers Trust.
Bernard Nackan Bernard Nackan was financial editor of the Rand Daily Mail and an executive director of Sage Group from 1974 until his retirement in 2003 and was a member of the Collective Investment Schemes Advisory Committee. He serves on Redefine Properties’ audit and risk committee and is chairman of the remuneration and nominations committee. He is also a non-executive director of Redefine Properties and Fountainhead Property Trust Managers Trust.
Information on the other member of the Concert Party
Stephen Carlin Stephen Carlin is a qualified engineer with over 30 years’ experience in the real estate industry. He has been involved in many aspects of the industry, including property services, project management and development. He is a director of Redefine BDL.
4. CONCERT PARTY INTERESTS Shareholding in the Maximum shareholding Company as at the date in the Company of this document as at Admission(1)
Percentage of Percentage of Number of the Existing Number of the Enlarged Ordinary Ordinary Ordinary Share Shareholder Shares Shares Shares Capital Redefine Properties 449,757,285 30.07 624,757,285 35.79 Michael Watters(2) 6,162,697 0.41 6,537,697(3) 0.37 Marc Wainer(4) 1,481,545 0.10 1,676,545(5) 0.10 Bernard Nackan(6) 19,023 0.00 19,023 0.00 Stephen Carlin 3,186,660 0.21 3,186,660 0.18 –––––––––– –––––––––– –––––––––– –––––––––– TOTAL 460,607,210 30.80 636,177,210 36.45
Notes: (1) Figures are calculated assuming that (a) the Placing Price is set at the minimum Placing Price, (b) Redefine Properties subscribes for the RPL Equity Commitment in full, (c) the other Placees subscribe for Placing Shares for an aggregate value of £30.0 million and (d) no further issues of Ordinary Shares occur between publication of this document and Admission. (2) Michael Watters’ shareholding is held indirectly through two pension fund structures. (3) Michael Watters has irrevocably undertaken to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate amount of £150,000, if the Placing proceeds. (4) Marc Wainer’s beneficial interest is held through the 103,774 shareholding in the name of his wife and the 2,755,541 shareholding held by Ellwain Investments (Pty) Limited, of which he is a 50 per cent. shareholder. (5) Marc Wainer has irrevocably undertaken to subscribe for 175,000 Placing Shares at the Placing Price (to be held through his Drawood Trust) and procure that his wife subscribes for 20,000 Placing Shares at the Placing Price, if the Placing proceeds.
(6) Bernard Nackan’s percentage interest in the Ordinary Share capital rounds down to 0.00 per cent.
In addition Michael Watters may be entitled to receive further Ordinary Shares in the future (as approved at the extraordinary general meeting of the Company held on 29 November 2013) subject to any awards granted under and pursuant to the terms of the Performance Share Plan. The maximum number of new Ordinary Shares which may be issued to Michael Watters (if the maximum possible awards were granted by the Remuneration Committee under the Performance Share Plan and all conditions to the awards were satisfied in full), is 7,000,000 Ordinary Shares.
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Therefore assuming the award and subsequent issue of the maximum amount of 7,000,000 Ordinary Shares to Michael Watters and the issue of the Placing Shares (assuming the minimum proceeds of £100 million are raised through the Placing, that Redefine Properties subscribes for the RPL Equity Commitment in full and that the Placing Price is set at the Minimum Placing Price), the maximum interest of Michael Watters would be 13,537,697 Ordinary Shares (representing 0.77 per cent. of the issued share capital of the Company) and the maximum interest of the Concert Party would be 643,177,210 Ordinary Shares (representing 36.70 per cent. of the issued share capital of the Company).
5. IRREVOCABLE UNDERTAKINGS Redefine Properties has entered into an irrevocable undertaking to vote in favour of the Share Authority Resolutions only.
Michael Watters, Marc Wainer and Bernard Nackan have entered into irrevocable undertakings to vote in favour of the Share Authority Resolutions only.
If the Placing proceeds:
• Michael Watters has irrevocably undertaken to subscribe for such number of Placing Shares at the Placing as equals an aggregate amount of £150,000; and • Marc Wainer has irrevocably undertaken to subscribe for 175,000 Placing Shares at the Placing Price (to be held through his Drawood Trust) and procure that his wife subscribes for 20,000 Placing Shares at the Placing Price.
6. MATERIAL CHANGE Save as disclosed in this document, there has been no material change in the financial or trading prospects of Redefine Properties since 31 August 2015 (the date to which the last annual results of Redefine Properties were prepared).
7. FINANCIAL EFFECT OF THE PLACING If Redefine Properties subscribes for the RPL Equity Commitment in full, the potential Placing is not expected to have a material effect on Redefine Properties’ earnings, assets or liabilities.
8. CONCERT PARTY’S INTENTIONS FOLLOWING THE PLACING Each of Redefine Properties, Michael Watters, Marc Wainer, Bernard Nackan and Stephen Carlin have confirmed that following the Placing they are not intending to seek any changes in respect of: (i) the future business of the Company; (ii) the continued employment of the employees and management of the Company and its subsidiaries; (iii) their strategic plans for the Company; (iv) the locations of the Company’s places of business; (v) the redeployment of the Company’s fixed assets; (vi) contributions into the Company’s pension scheme(s), the accrual of benefits to existing members and the admission of new members; and (vii) the Company’s existing trading facilities for the Ordinary Shares.
Redefine Properties has also confirmed that following the Placing, it is not intending to seek any changes in respect of: (i) its future business; (ii) the continued employment of the employees and management of Redefine Properties and its subsidiaries; and (iii) its strategic plans in relation to itself.
9. MATERIAL CONTRACTS Other than the Relationship Agreement (details of which are set out in paragraph 21.14 of Part 15 (Additional Information) of this document, Redefine Properties has not entered into any material contracts (not being contracts entered into in the ordinary course of business), within two years prior to the date of this document.
10. FINANCIAL INFORMATION ON REDEFINE PROPERTIES The information set out on pages 191 to 210 relating to Redefine Properties for the two years ended 31 August 2014 and 31 August 2015 has been extracted without material adjustment from the audited accounts of Redefine Properties. Note, all the figures are provided in Rand. In addition, copies of
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Redefine Properties’ Annual Report and Accounts for the two years ended 31 August 2014 and 31 August 2015 are available at http://www.redefine.co.za/financials.asp.
11. SIGNIFICANT ACCOUNTING POLICIES OF REDEFINE PROPERTIES Redefine Properties Limited was incorporated on 26 August 1999 under the laws of the Republic of South Africa. The consolidated financial statements for the year ended 31 August 2015 comprise the company and its subsidiaries (together referred to as the group) and the group’s interest in associates, joint ventures and joint arrangements. The preparation of the financial statements were supervised by LC Kok CA (SA), the group’s financial director.
The financial statements and group financial statements have been prepared in accordance with International Financial Reporting Standards, SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings Requirements, the requirements of the South African Companies Act, 71 of 2008, as amended, and the Companies Regulations 2011, and incorporate the principal accounting policies set out below.
Except for the new standards and interpretations adopted as set out below, all accounting policies applied by the group in the preparation of these consolidated annual financial statements are consistent with those applied by the group in its consolidated annual financial statements as at and for the year ended 31 August 2014. The group has adopted the following new standards and interpretations:
• Investment entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
• Offsetting financial assets and financial liabilities (Amendments to IAS 32)
• Recoverable amount disclosure for non-financial assets (Amendments to IAS 36)
• Novation of derivatives and continuation of hedge accounting (Amendments to IAS 39)
• Annual improvements to IFRS 2010 – 2012
• Annual improvements to IFRS 2011 – 2013
There was no material impact on the financial statements identified based on management’s assessment of these standards.
The financial statements are prepared on the historical cost basis except for investment properties, listed securities, non-current assets held-for-sale and certain financial instruments which are carried at fair value.
Fair value adjustments do not affect the calculation of distributable earnings; however, they do affect the net asset value per share to the extent that the adjustments are made to the carrying value of the assets and liabilities.
The consolidated financial statements are presented in South African Rand, which is the company’s functional currency. All financial information presented in Rand has been presented to the nearest thousand.
11.1 Basis of Consolidation
11.1.1 Subsidiaries Subsidiaries are entities over which the company has control. The group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those through its power over the entity.
In the separate financial statements of the company, investments in subsidiaries are accounted for at cost and adjusted for impairment if applicable.
The consolidated financial statements incorporate the assets, liabilities, income, expenses and cashflows of the group and all entities controlled by the group. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit or loss from the date of acquisition or up to the date of disposal. Inter-company
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transactions, balances and unrealised profits or losses between group companies are eliminated on consolidation.
Business combinations which occurred before 1 September 2009 were accounted for using the purchase method of accounting.
The assets and liabilities acquired were assessed and included in the statement of financial position at their estimated fair values to the group at acquisition date.
All business combinations which occurred on or after 1 September 2009 were accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the group. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another.
The group measures goodwill at the acquisition date as follows:
• The fair value of the consideration transferred; plus
• The recognised amount of the non-controlling interests in the acquiree; plus
• If the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
• The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Where the excess is negative this is immediately recognised in profit or loss as a gain on a bargain purchase.
A “business” is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants.
A “business combination” is defined as a transaction or other event in which an acquirer obtains control of one or more businesses.
If a business combination results in the termination of pre-existing relationships between the group and the acquiree, then the lower of the termination amount, as contained in the agreement, and the value of the off-market element is deducted from the consideration transferred and recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the group incurs in connection with a business combination are expensed as incurred.
Costs associated with the issue of debt or equity securities are recorded directly in the statement of changes in equity.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
Transactions with non-controlling interest holders Transactions with non-controlling interest holders are treated as transactions with equity holders of the group. Disposals to non- controlling interest holders that do not result in the loss of control, result in gains and losses for the group that are recorded directly in the statement of changes in equity. The difference between any consideration paid and the relevant share of the net asset value acquired from non-controlling interests is recorded directly in the statement of changes in equity.
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Common control transactions Acquisitions of businesses which do not result in a change of control of the business are accounted for as common control transactions. The excess of the cost of the acquisition over the group’s interest in the carrying value of the identifiable assets and liabilities of the acquired business is recognised in equity.
11.1.2 Associates and joint ventures Associates are companies over which the group has significant influence but not control.
Joint ventures are arrangements in which the group has joint control, whereby the group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
In the separate financial statements of the company, investments in associates and joint ventures are accounted for at cost and adjusted for impairment if applicable.
In the consolidated financial statements associates and joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. The group’s share of post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post- acquisition movements are adjusted against the carrying amount of the investment.
Where the group acquires an additional shareholding or where it obtains significant influence such that an investment which was previously accounted for as an investment under IAS 39 is now deemed to be an associate undertaking, the group’s previously held interest is remeasured to fair value through profit or loss for the period. The cost of the associate is determined as the fair value of the original investment plus the fair value of any additional consideration given to achieve significant influence.
Goodwill arising on acquisition is included in the carrying amount of the investment and is treated in accordance with the group’s accounting policy for goodwill.
Dividends from associates and joint ventures are deducted from the carrying value of the investment. Where the group’s share of losses of associates and joint ventures exceeds the carrying amount of the group’s net investment in the associate and joint venture the investment is carried at nil.
Additional losses are only recognised to the extent that the group has incurred obligations or made payments on behalf of the associate or joint venture.
Unrealised gains arising from transactions with associates and joint ventures are eliminated to the extent of the group’s interest in these enterprises. Unrealised losses are eliminated in the same way except that they are only eliminated to the extent that there is no evidence of impairment.
11.1.3 Jointly controlled operations A jointly controlled operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations to the liabilities, relating to the arrangement.
In respect of its interest in jointly controlled operations, the group recognises in its financial statements on a line by line basis from the date joint control commences until the date that joint control ceases:
• Its share of the jointly controlled assets, classified according to the nature of the assets
• Any liabilities that it has incurred
• Its share of any liabilities incurred jointly with the other ventures in relation to the jointly controlled asset
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• Any income from the sale or use of its share of the output of the jointly controlled asset, together with its share of any expenses incurred by the jointly controlled asset
• Any expenses that it has incurred in respect of its interest in the jointly controlled asset
11.2 Financial instruments Financial instruments are contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial instruments are recognised in the statement of financial position when the group becomes party to the contractual provisions of the instrument. Any gains or losses on these instruments do not affect distributable earnings.
The group derecognises a financial asset when the contractual rights to the cashflows from the assets expire, or it transfers the rights to receive the contractual cashflows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the group is recognised as a separate asset or liability. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the group commits itself to purchase or sell the asset.
The group derecognises a financial liability when the group’s obligations specified in the contract expire or are discharged or cancelled.
Financial assets and liabilities are initially measured at fair value including transaction costs (other than financial instruments classified as fair value through profit or loss where the transaction costs incurred are immediately expensed in profit or loss). Subsequent to initial recognition, these instruments are measured as follows:
Financial assets • Listed securities are measured at fair value through profit or loss, less the accrual for distributions receivable which is included in current assets
• Listed security income receivables are measured at amortised cost using the effective interest rate method less accumulated impairments
• Loans receivable are measured at amortised cost using the effective interest rate method less any accumulated impairments
• Other financial assets are measured at fair value through profit or loss
• Trade and other receivables are stated at amortised cost using the effective interest rate method less any accumulated impairments
• Cash and cash equivalents are measured at amortised cost using the effective interest rate method
• Guarantee fees receivable are measured at amortised cost using the effective interest rate method less any accumulated impairments
• Interest rate swaps are held-for-trading financial instruments measured at fair value through profit or loss
Financial liabilities • Debenture capital was considered as a financial liability and was recognised at amortised cost using the effective interest rate method (see linked units below)
• Interest-bearing borrowings are recognised at amortised cost using the effective interest rate method
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• Interest rate swaps are held-for-trading financial instruments measured at fair value through profit or loss
• Financial guarantee contracts are measured at the higher of fair value or the amount initially recognised less accumulated amounts recorded as income to date
• Trade and other payables are stated at amortised cost using the effective interest rate method
• Linked unit holders for distribution were measured at amortised cost using the effective interest rate method
For all financial instruments carried at amortised cost using the effective interest rate method, where the effects of discounting are not considered to be material, these instruments are not discounted as their carrying values approximate their amortised cost values.
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when the group has a legally enforceable right to set off the recognised amounts, and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The group assesses all receivables held at amortised cost for impairment at each financial year- end. An impairment loss is calculated as the difference between the asset’s carrying value and the present value of the estimated future cash inflows discounted at the asset’s original effective interest rate. Impairment losses are recognised in profit or loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of the impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Linked units Prior to the conversion to an all equity structure, each and every ordinary share issued was irrevocably linked to a debenture. The debentures were redeemable at the option of the holder and accrued interest half-yearly. As a result of this contractual obligation to deliver cash the group classified the debentures issued as a liability, and the interest that accrued as an interest expense through profit or loss. The debentures issued were initially recognised at fair value. As mentioned above, debenture capital was subsequently carried at amortised cost using the effective interest rate method.
11.3 Investment properties Investment properties, both freehold and leasehold, are properties held for the purpose of earning rental income and for capital appreciation. Investment properties are initially recorded at cost and include transaction costs arising on acquisition. Subsequent expenditure to add to or to replace a part of the property is capitalised at cost. The carrying amount of any replaced part is written off to profit or loss when replaced.
Leasehold properties that are leased out to tenants under operating leases are classified as investment properties as appropriate, and included in the statement of financial position at fair value. Land interests held under an operating lease are classified and accounted for as investment property on a property-by-property basis when they are held to earn rentals or for capital appreciation on both the land and the property. Any such property interest under an operating lease classified as investment property is carried at fair value.
Tenant installations and lease commissions are carried at cost less accumulated amortisation. Amortisation is provided to write down the cost, less residual value, by equal installments over the period of the lease.
Investment properties are valued annually and adjusted to fair value at the reporting date.
The portfolio is valued annually. For the purposes of the independent valuation at 31 August 2015, all properties above R20 million were valued. Independent valuations were also obtained for a portion of the properties under R20 million.
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Properties under R20 million are valued externally on a three-year rotational basis.
Any gain or loss arising from a change in the fair value of the investment property is included in profit or loss for the period to which it relates. Changes in fair value are excluded from the calculation of distributable earnings.
Gains and losses on the disposal of investment properties are recognised in profit or loss, and are calculated as the difference between the sale price and the carrying value of the property.
11.4 Properties under development Properties under development comprise the cost of the land and development, and are stated at fair value. If the fair value cannot be reasonably determined it is stated at cost and is not depreciated. Investment property that requires development is transferred from investment properties to properties under development when development commences. On completion of the development these properties become part of investment property.
11.5 Goodwill Goodwill arises on the acquisition of a business and represents the excess of the cost of the acquisition over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Negative goodwill is recognised immediately in profit or loss.
Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.
11.6 Intangible assets Intangible assets with an indefinite useful life are stated at cost less accumulated impairment losses. These intangible assets are tested for impairment annually by comparing the recoverable amount with its carrying amount. Useful life is reviewed at each year-end to determine whether events and circumstances continue to support an indefinite useful life assessment. If they do not, the change in useful life assessment from indefinite to finite is accounted for as a change in estimate.
Intangible assets with finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of the assets. Assets are amortised to their residual values. The amortisation methods, residual values as well as useful lives are reviewed at each period- end and adjusted if necessary.
The estimated useful lives of the right to manage property assets are 15 years.
11.7 Property, plant and equipment Land and buildings are shown at fair value based on periodic valuations less subsequent depreciation. Any gain or loss arising from a change in fair value is accounted for directly in other comprehensive income.
All other plant and equipment are recorded at cost less depreciation and impairment.
Property, plant and equipment are depreciated on a straight-line basis over the current useful lives of the assets. The estimated useful lives of the assets are:
• Computer hardware – five to six years
• Computer software – three years
• Furniture and fittings and office equipment – three years
• Motor vehicles – five years
• Buildings – 50 years
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• Land is not depreciated as it is deemed to have an indefinite life
The useful lives, depreciation methods and residual values are assessed at each financial period-end and adjusted accordingly. Subsequent expenditure is capitalised when it is probable that future economic benefits will flow to the group and its cost can be reliably measured. All other expenditure is recognised as an expense in the period in which it is incurred.
Gains and losses on the disposal of property, plant and equipment are recognised in profit or loss and are calculated as the difference between the sales price and the carrying value of the item of property, plant and equipment sold.
11.8 Impairment of non-financial assets The carrying value of assets is reviewed for impairment at each reporting date. Assets are impaired when events or changes in circumstances indicate that the carrying values may not be recoverable.
If such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amounts.
Recoverable amount is determined as the higher of fair value less costs to sell or value in use. Where it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing the value in use, the estimated cashflows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, goodwill is allocated to the cash-generating unit expected to benefit from the synergies of the business combination.
Impairment losses and the reversal of impairment losses are recognised in profit or loss other than those relating to revalued assets, in which case the impairment or reversal of impairment is accounted for as a revaluation decrease or increase respectively. In the case of a cash- generating unit, an impairment is first allocated to goodwill and then to the other assets in the cash-generating unit on a pro rata basis. Impairments to goodwill are not subsequently reversed. An impairment loss is only reversed if there is an indication that the impairment loss no longer exists and the recoverable amount increases as a result of a change in estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior years.
11.9 Properties held-for-trading Properties held-for-trading comprise properties acquired as well as properties developed with the intention of disposing for a profit, and are recorded at the lower of cost and net realisable value.
Costs include all costs of purchase, transaction costs, costs of conversion and other costs incurred in bringing the properties to their present condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of selling.
11.10 Non-current assets held-for-sale and disposal groups A non-current asset or a disposal group comprising assets and liabilities is classified as held-for- sale if it is expected that its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and the sale is highly probable to occur within one year. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset or disposal group.
Where the group is committed to a sale plan involving the loss of control of a subsidiary it classifies all the assets and liabilities of that subsidiary as held-for-sale when the criteria set out above and detailed in IFRS 5 non-current assets held-for-sale and discontinued operations are met, regardless of whether the group will retain a non-controlling interest in its former subsidiary after the sale.
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On initial classification as held-for-sale, generally, non-current assets and disposal groups are measured at the lower of the carrying amount and fair value less costs to sell, with any adjustments taken to profit or loss (or other comprehensive income in the case of a revalued asset). The same applies to gains and losses on subsequent remeasurement. However, certain items, such as financial assets within the scope of IAS 39 and investment property within the scope of IAS 40, continue to be measured in accordance with those standards.
Impairment losses subsequent to classification of assets as held-for-sale are recognised in profit or loss. Increases in fair value less costs to sell assets that have been classified as held-for-sale are recognised in profit or loss to the extent that the increase is not in excess of any cumulative impairment loss previously recognised in respect of the asset. Assets classified as held-for-sale are not depreciated.
Gains and losses on remeasurement and impairment losses subsequent to classification as disposal groups and non-current assets held-for-sale are shown within continuing operations in profit or loss, unless they qualify as discontinued operations.
Disposal groups and non-current assets held-for-sale are presented separately from other assets and liabilities on the statement of financial position. Prior periods are not reclassified.
11.11 Stated capital Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction from equity.
11.12 Treasury shares Where a subsidiary company holds shares in the holding company, the consideration paid to acquire these shares is deducted from stated capital as treasury shares, but disclosed separately in the statement of changes in equity. When these shares are sold or reissued, any consideration received is included in stated capital.
11.13 Dividends Dividends and other distributions to the holders of equity instruments, in their capacity as owners, are recognised directly in equity on the date of declaration.
11.14 Provisions Provisions are recognised when there is a present obligation, whether legal or constructive, as a result of a past event for which it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Such provisions are calculated on a discounted basis where the effect is material to the original undiscounted provision. The rate applied is a market-related rate adjusted for the risks associated with the obligation. The carrying amount of the provision increases in each period to reflect the passage of time and the unwinding of the discount and the movement is recognised in profit or loss within interest costs. Provisions are not recognised for future operating losses; however, provisions are recognised for onerous contracts where a contract is expected to be loss-making (and not merely less profitable than expected).
11.15 Revenue recognition
11.15.1 Property portfolio revenue Property portfolio revenue comprises gross rental income and fixed operating cost recoveries from the letting of investment properties. Rental income is recognised in profit and loss on a straight-line basis over the term of the lease.
Recoveries of costs from lessees, where the entity merely acts as an agent and makes payment of these costs on behalf of lessees, are offset against the relevant costs.
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Contingent rents (turnover rentals) are included in revenue when the amounts can be reliably measured. Premiums to terminate leases are recognised in profit or loss as they arise.
11.15.2 Listed security income Dividends from listed securities are recognised in profit and loss when declared. Realised profits and losses on the sale of listed securities are included in profit and loss.
11.15.3 Trading income Trading income represents income from development units sold and is recognised once:
• The risks and rewards of ownership have transferred
• The group no longer has managerial involvement
• The amount of revenue and costs can be measured reliably
• It is probable that the economic benefits from the sale will flow
11.15.4 Interest received Interest earned on cash invested with financial institutions is recognised on an accrual basis using the effective interest rate method. Where the group previously issued linked units at a market price that included accrued interest, the accrued interest portion of the price was included in interest received as an antecedent divestiture of distribution. As confirmed by the guidance letter: Application of IFRS for antecedent interest on linked units, issued by the JSE on 9 October 2014, antecedent interest was no longer recognised as interest received but capitalised to the issue cost of previously issued linked units.
11.15.5 Fee income Fee income is recognised on an accrual basis in accordance with the substance of the relevant agreements and measured at fair value of the consideration receivable.
11.16 Employee benefits
11.16.1 Short-term benefits The cost of the short-term employee benefits is recognised during the period in which the employees render the related service. Short-term employee benefits are measured on an undiscounted basis. The accrual for employee entitlements to salaries, bonuses and annual leave represents the amount which the group has a present legal or constructive obligation to pay as a result of the employees’ services provided up to the reporting date.
11.16.2 Defined contribution plans A defined contribution plan is a post-employment benefit plan under which the group pays fixed contributions to a separate entity and will have no legal or constructive obligation to pay further amounts if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
11.16.3 Share appreciation scheme The group operates a cash-settled share appreciation scheme which is recognised at fair value in the statement of financial position over the vesting period up to and including settlement date with a corresponding charge to profit or loss. The liability is remeasured at each reporting date, using the Black Scholes model to reflect the revised
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fair value adjusted for changes in assumptions. Changes in the fair value are recognised in profit or loss.
11.16.4 Share-based payments
Restricted share scheme In terms of the restricted share scheme, a conditional right to shares is awarded to employees subject to performance and vesting conditions. The scheme is accounted for as an equity-settled share-based payment. The fair value of services received in return for the restricted shares has been determined as follows: the number of shares expected to vest multiplied by the share price at the date of award less discounted future anticipated distributions.
Matching share scheme In terms of the matching share scheme, participants are invited annually to utilise a predetermined percentage of their after tax bonus to acquire Redefine shares. Participants holding shares at the third anniversary of the date of award will be awarded Redefine shares free of consideration based on a multiple of the original shares linked to the group and individuals performance. The scheme is accounted for as an equity- settled share-based payment. The fair value of services received in return for the matching shares has been determined as follows: the number of shares expected to vest multiplied by the share price at the date of award less discounted future anticipated distributions.
The costs of the schemes are recognised over the vesting period and the cost is adjusted for changes in management’s estimate of the number of shares expected to vest. The cost is recognised in profit or loss and a corresponding adjustment in equity.
11.17 Borrowing costs Borrowing costs that are directly attributable to the development or acquisition of qualifying assets are capitalised to the cost of that asset until such time as it is substantially ready for its intended use.
The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes; or with regard to that part of the development cost financed out of general funds, to the average rate.
All other borrowing costs are expensed in the period in which they are incurred.
11.18 Foreign currency
11.18.1 Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at the foreign exchange rates ruling on the dates that the values are determined.
11.18.2 Foreign operations Exchange differences arising from the translation of the net investment in foreign operations are taken to the foreign currency translation reserve (the “FCTR”). They are released into other comprehensive income upon disposal. On consolidation, the statement of financial position of foreign subsidiaries is translated at the closing rate and the statement of comprehensive income is translated at the average rate for the period. Differences arising are taken to the FCTR.
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The movement in the FCTR during the reporting period is accounted for in other comprehensive income.
11.19 Taxation Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income, in which case it is recognised in equity or other comprehensive income respectively.
The charge for current tax is based on the results for the period as adjusted for items which are non-assessable or disallowed and any tax payable in respect of previous years. It is calculated using rates that have been enacted or substantially enacted by the reporting date.
Deferred income tax is provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises:
• From the initial recognition of goodwill in a business combination
• From the initial recognition of other assets and liabilities in a transaction which is not a business combination and affects neither accounting profit nor taxable income
• Differences related to investments in subsidiaries and joint ventures to the extent that it is probable that they will not reverse in the foreseeable future
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled. Deferred tax adjustments are recognised in profit or loss.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and they relate to income tax levied by the same authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.
11.20 Operating segments An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the group’s other components. An operating segment’s operating results are reviewed regularly by the group’s executive committee to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
11.21 Leases
11.21.1 Group as a lessee Where the group leases property and has substantially all the risks and rewards of ownership, the leases are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in interest-bearing liabilities. The interest element of the finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The properties acquired under finance leases are recognised at fair value in terms of IAS 40 and are not depreciated.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any
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incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the period of the lease.
11.21.2 Group as a lessor Properties leased to third parties under operating leases are included in investment property in the statement of financial position. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. This does not affect distributable earnings.
11.22 Earnings, headline earnings and distributable earnings per share Earnings per share is calculated on the weighted average number of shares in issue, net of treasury shares, in respect of the year and is based on profit attributable to shareholders. Headline earnings per share are calculated in terms of the requirements set out in Circular 2/2013 issued by SAICA.
11.23 Key estimates and assumptions The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect amounts reported in the financial statements. Actual results may differ from these estimates. Estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which they were revised and in any future periods affected.
Information on key estimates and assumptions which have the most significant effect on the financial statements are set out in the following notes in the financial statements:
Fair value of financial instruments – All financial instruments, regardless of their IAS 39 categorisation, are initially recorded at fair value (adjusted for transaction costs for all those financial instruments other than those classified as at fair value through profit or loss). The fair value of a financial instrument on initial recognition is normally the transaction price, which is the fair value of the consideration paid or received. Subsequent to initial recognition, the fair values of financial instruments measured at fair value that are quoted in active markets are based on bid prices for the assets. When quoted prices are not available, fair values are determined by using valuation techniques that refer as far as possible to observable market data. These include comparison with similar instruments where market observable prices exist. The carrying values of all financial instruments approximate their fair values. In the case of short-term and trade receivables, the impact of discounting is not material and the carrying amount therefore approximates fair value. The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides evidence of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability requires additional work during the valuation process. The majority of valuation techniques employ only observable market data, and so the reliability of the fair value measurement is high. However, certain financial assets and liabilities are valued on the basis of valuation techniques that feature one or more significant market inputs that are unobservable and, for them, the derivation of fair value is more judgemental. A financial asset or liability in its entirety is classified as valued using significant unobservable inputs if a significant proportion of that asset or liability’s carrying amount is driven by unobservable inputs. In this context, “unobservable” means that there is little or no current market data available for which to determine the price at which an arm’s length transaction is likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair value. Furthermore, in some cases the majority of the fair value derived from a valuation technique with significant unobservable inputs may be attributable to observable inputs.
Goodwill – determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value-in-use calculation requires the group to estimate the future cashflows expected to arise from the cash-generating unit at a suitable discount rate in order to calculate the present value.
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Investment properties – the portfolio is valued annually. For the purposes of the independent valuation at 31 August 2015, all properties above R20 million were valued. Independent valuations were also obtained for a portion of the properties under R20 million. Properties under R20 million are valued externally on a three-year rotational basis. By obtaining external valuations from accredited valuators for the majority of the portfolio, management is of the opinion that the risk relating to estimation uncertainty has been mitigated.
Property, plant and equipment – the determination of the useful life and residual values of property, plant and equipment is subject to management estimation. The group regularly reviews all of its depreciation rates and residual values to take account of any changes in circumstances, and any changes that could affect prospective depreciation charges and asset carrying values.
Trade and other receivables – allowance for doubtful debts – the group assesses its doubtful debt allowance at each reporting date. Key assumptions applied are the estimated recovery rates and future market conditions that could affect recovery.
Deferred taxation – deferred tax assets are raised to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. Assessment of future taxable profit is performed at every reporting date, in the form of future cashflows using a suitable growth rate.
Taxation – the group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which the determination is made.
Business combinations – on the acquisition of a company or a business, a determination of the fair value and useful life of intangible assets acquired is performed, which requires the application of management judgement. Future events could cause the assumptions used by the group to change which would have a significant impact on the results and net position of the group. Refer to note 6 for more detail on intangible assets.
Business combination versus asset acquisition – the directors have assessed the properties acquired and have concluded that in their view these acquisitions are property acquisitions in terms of IAS 40 and are therefore accounted for in terms of that standard.
In the opinion of the directors these properties do not constitute a business as defined in terms of IFRS 3, as there were not adequate processes identified within these properties to warrant classification as businesses.
11.24 Standards and interpretations applicable, not yet effective There are new or revised Accounting Standards and Interpretations in issue that are not yet effective. These include the following Standards and Interpretations that are material to the business of the group and may have an impact on future financial statements, or those for which the impact has not as yet been assessed.
IFRS 9 financial Instruments IFRS 9 will be adopted by the group for the first time for its financial reporting period ending 31 August 2019. The standard will be applied retrospectively, subject to transitional provisions.
IFRS 9 addresses the following and will replace the relevant sections of IAS 39:
• The classification and measurement of financial assets
• The derecognition of financial assets and liabilities
• The classification and measurement of financial liabilities
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Under IFRS 9 there are two options in respect of the classification of financial assets, namely, financial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cashflows and when they give rise to cashflows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value.
Embedded derivatives are no longer separated from hybrid contracts that have a financial asset host.
IFRS 9 has retained in general the requirements of IAS 39 for financial liabilities, except for the following two aspects:
• Fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss, that are attributable to the changes in the credit risk of the liability, will be presented in other comprehensive income. The remaining amount of the fair value change is recognised in profit or loss. However, if this requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed
• Derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value
IFRS 9 incorporates the guidance in IAS 39 dealing with fair value measurement and accounting for derivatives embedded in a host contract that is not a financial asset, as well as the requirements of IFRIC 9 Reassessment of Embedded Derivatives.
The impact on the financial statements for the group has not yet been determined as the standard is not yet finalised.
IFRS 15 revenue from contracts with customers IFRS 15 will be adopted by the group for the first time for its financial reporting period ending 31 August 2019. The amendment will be applied retrospectively.
This standard replaces IAS 11 construction contracts, IAS 18 revenue, IFRIC 13 customer loyalty programmes, IFRIC 15 agreements for the construction of real estate, IFRIC 18 transfer of assets from customers and SIC-31 revenue – barter of transactions involving advertising services.
The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted under IFRS. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.
The impact on the financial statements for the group has not yet been determined.
IFRS 11 joint arrangements (amendments) The objective was to add new guidance to IFRS 11 joint arrangements on the accounting for the acquisition of an interest in a joint operation that constitutes a business. The International Accounting Standards Board decided that acquirers of such interests shall apply all of the principles on business combinations accounting in IFRS 3 Business Combinations, and others, that do not conflict with the guidance in IFRS 11 and disclose the information that is required in IFRS in relation to business combinations. IFRS 11 (amended) will be adopted by the group for the first time for its financial reporting period ending 31 August 2017.
The impact on the financial statements for the group has not yet been determined.
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Sale or contribution of assets between an investor and its associate or joint venture (amendment to IFRS 10 and IAS 28) The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. It will be adopted by the group for the first time for its financial reporting period ending 31 August 2018.
The impact on the financial statements for the group has not yet been determined.
Disclosure initiative (amendments to IAS 1) The IASB has published Disclosure Initiative (amendments to IAS 1). The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports. It will be adopted by the group for the first time for its financial reporting period ending 31 August 2017.
The impact on the financial statements for the group has not yet been determined.
IFRS 5 changes in methods of disposal Assets (or disposal groups) are generally disposed of either through sale or through distribution to owners. The amendment to IFRS 5 clarifies that changing from one of these disposal methods to the other should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is therefore no interruption of the application of the requirements in IFRS 5.
The amendment also clarifies that changing the disposal method does not change the date of classification. For example, on 1 September 2016, Entity A determines that it will distribute shares of its subsidiary to its shareholders. Consequently, it classifies the subsidiary as “held-for- distribution”. However, on 1 December 2016, Entity A decides that, instead of distributing the shares to its shareholders, it will sell the subsidiary. Therefore, it changes the disposal method to “held-for-sale”. The date of classification continues to be 1 September 2016 and the sale must be completed within one year from that date.
The impact on the financial statements for the group has not yet been determined.
IFRS 7 financial instruments: disclosures In December 2011, IFRS 7 was amended to add guidance on offsetting of financial assets and financial liabilities. In the effective date and transition for that amendment, paragraph 44R of IFRS 7 states that “An entity shall apply those amendments for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods.” The interim disclosure standard, IAS 34, does not reflect this requirement, however, and it is not clear whether those disclosures are required in the condensed interim financial report. The amendment removes the phrase “and interim periods within those annual periods” from paragraph 44R, clarifying that these IFRS 7 disclosures are not required in the condensed interim financial report. However, the IASB noted that IAS 34 requires an entity to disclose an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period. Therefore, if the IFRS 7 disclosures provide a significant update to the information reported in the most recent annual report, the IASB would expect the disclosures to be included in the entity’s condensed interim financial report.
The impact on the financial statements for the group has not yet been determined.
IAS 34 Interim financial reporting: disclosure of information “elsewhere in the interim financial report” IAS 34 requires entities to disclose information in the notes to the interim financial statements “if not disclosed elsewhere in the interim financial report”. However, it is unclear what the IASB
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means by “elsewhere in the interim financial report”. The amendment states that the required interim disclosures must either be in the interim financial statements or incorporated by cross- reference between the interim financial statements and wherever they are included within the greater interim financial report (e.g. in the management commentary or risk report). The IASB specified that the other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. If users do not have access to the other information in this manner, then the interim financial report is incomplete.
The impact on the financial statements for the group has not yet been determined.
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REDEFINE PROPERTIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION as at 31 August
Group 2015 2014 R000 R000 ASSETS Non-current assets 67 465 410 55 007 339 –––––––––– –––––––––– Investment property 49 898 869 40 906 077 – Fair value of investment property 46 589 717 37 710 045 – Straight-line rental income accrual 1 436 762 1 213 985 – Properties under development 1 872 390 1 982 047 Listed securities 988 793 2 750 900 Goodwill and intangible assets 5 367 047 5 328 676 Interest in associates and joint ventures 9 823 319 4 173 173 Loans receivable 1 184 924 1 727 212 Other financial assets – 23 510 Interest rate swaps 93 150 – Guarantee fees receivable 73 760 50 000 Property, plant and equipment 35 548 47 791 Interest in subsidiaries – – Current assets 1 422 776 992 697 –––––––––– –––––––––– Properties held for trading 1 080 21 349 Trade and other receivables 617 964 580 021 Loans receivable 587 440 2 050 Listed security income receivable 86 368 38 671 Cash and cash equivalents 129 924 350 606 –––––––––– –––––––––– Non-current assets held for sale 1 289 612 1 490 128 –––––––––– –––––––––– Total assets 70 177 798 57 490 164 –––––––––– –––––––––– EQUITY AND LIABILITIES Shareholders’ interest 45 145 459 32 720 342 Stated capital 33 738 010 22 558 039 Reserves 11 407 449 10 162 303 Non-controlling interests – 3 015 595 Total shareholders interest 45 145 459 35 735 937 Other non-current liabilities 21 894 566 14 997 245 Interest-bearing liabilities 21 602 140 14 355 324 Interest rate swaps – 95 192 Other financial liabilities 17 507 36 731 Deferred taxation 274 919 509 998 Current liabilities 3 137 773 6 756 982 Trade and other payables 1 106 230 1 294 307 Interest-bearing liabilities 1 980 226 5 401 205 Interest rate swaps 10 488 926 Other financial liabilities 18 437 12 872 Taxation payable 22 392 47 672 –––––––––– –––––––––– Total equity and liabilities 70 177 798 57 490 164 –––––––––– –––––––––– Number of shares in issue* *4 448 623 *3 404 603 Net asset value per share (excluding deferred tax and NCI) 1 021.00 976.03 Net tangible asset value per share (excluding deferred tax and NCI) (cents) 900.35 819.52
*Net of 305 876 766 (2014: 5 876 766) treasury shares
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REDEFINE PROPERTIES CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 31 August
Group 2015 2014 R000 R000 Revenue Property portfolio 6 304 742 5 372 149 – Contractual rental income 6 141 437 5 310 428 – Straight-line rental income accrual 163 305 61 721 Listed security income 344 229 185 742 Insurance proceeds received 119 420 – Fee income 44 800 35 204 Dividends received – – Trading (loss)/income (1 946) 1 032 –––––––––– –––––––––– Total revenue 6 811 245 5 594 127 Operating costs (2 084 709) (1 907 524) Administration costs (228 834) (202 031) –––––––––– –––––––––– Net operating profit 4 497 702 3 484 572 Changes in fair values of properties, listed securities and financial instruments 2 242 360 2 051 245 Amortisation of intangibles (62 856) (62 856) Equity accounted profit 453 053 439 766 –––––––––– –––––––––– Profit from operations 7 130 259 5 912 728 Net interest (1 376 835) (1 297 768) – Interest paid (1 683 064) (1 457 159) – Interest received 306 229 159 391 Foreign exchange loss (223 072) (13 638) –––––––––– –––––––––– Profit before debenture interest 5 530 352 4 601 321 Debenture interest – (1 115 697) –––––––––– –––––––––– Profit before taxation 5 530 352 3 485 624 Taxation 170 662 31 303 –––––––––– –––––––––– Profit for the year from continuing operations 5 701 014 3 516 927 Profit from discontinued operations – 369 458 –––––––––– –––––––––– Profit for the year 5 701 014 3 886 385 –––––––––– –––––––––– Equity owners of parent 5 425 097 3 407 818 – Continuing operations 5 425 097 3 042 122 – Discontinued operations – 365 696 Non-controlling interests 275 917 478 567 – Continuing operations 275 917 474 805 – Discontinued operations – 3 762 Other comprehensive loss (90 397) (40 817) Those items that may be reclassified to profit or loss Exchange differences on translation of foreign continuing/discontinued operations – subsidiaries (70 491) 93 230 Exchange differences on translation of foreign continuing operations – associates (19 906) (25 140) Recycling of exchange differences on translation of disposal/deemed disposal of foreign subsidiary and associate – (108 907) –––––––––– –––––––––– Total comprehensive income for the year 5 610 617 3 845 568 –––––––––– ––––––––––
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REDEFINE PROPERTIES CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (continued) for the year ended 31 August
Group 2015 2014 R000 R000 Equity owners of parent 5 334 700 3 363 439 – Continuing operations 5 334 700 3 016 983 – Discontinued operations – 346 456 Non-controlling interests 275 917 482 129 – Continuing operations 275 917 474 805 – Discontinued operations – 7,324 – Actual number of shares in issue (000) 4 448 623 3 404 630 – Weighted number of shares in issue (000) 3 798 575 3 090 599 Basic earnings per share (cents) 142.82 146.36 – Continuing operations per share (cents) 142.82 134.53 – Discontinued operations per share (cents) – 11.83 Diluted earnings per share (cents) 142.82 123.87 – Continuing operations per share (cents) 142.82 113.77 – Discontinued operations per share (cents) – 10.01 Distribution per share (cents) 80.00 74.54
*Net of 305 876 766 (2014: 5 876 766) treasury shares
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REDEFINE PROPERTIES CONSOLIDATED STATEMENTS OF CASHFLOWS for the year ended 31 August
Group 2015 2014 R000 R000 CASHFLOWS FROM OPERATING ACTIVITIES Cash generated from operations 4 299 358 3 622 025 Interest paid (1 683 064) (1 457 159) Interest received 306 229 159 391 Distributions paid (2 859 144) (2 141 093) Distributions paid to non-controlling interests (264 910) (168 460) Taxation paid (97 442) (9 692) Net cash generated in operating activities – discontinued operations – 180 879 –––––––––– –––––––––– Net cash (utilised)/generated in operating activities (298 973) 185 991 –––––––––– –––––––––– CASHFLOWS FROM INVESTING ACTIVITIES Acquisition and development of investment properties (6 702 557) (4 474 744) Acquisition of listed securities (1 599 327) (2 749 391) Acquisition of property, plant and equipment (5 359) (16 208) Acquisition of additional interests in subsidiaries – (1 444 866) Acquisition of subsidiaries in terms of a business combination (564 692) (88 491) Loans advanced to subsidiaries – – Proceeds on disposal of investment properties 3 234 444 206 879 Proceeds on disposal of listed securities 175 699 4 089 471 Loans (advanced)/repaid (42 960) (700 464) Dividends and interest from associates and joint ventures 358 862 155 169 Investment in associates (1 226 087) (1 391 808) Cash balances (disposed of)/acquired on (sale)/acquisition of subsidiary – (327) Other financial assets acquired – – Acquisition of electricity recovery business – (5 091) Net cash utilised in investing activities – discontinued operations – 548 553 –––––––––– –––––––––– Net cash utilised in investing activities (6 371 977) (5 871 318) –––––––––– –––––––––– CASHFLOWS FROM FINANCING ACTIVITIES Shares issued 4 657 717 3 186 068 Increase in interest bearing borrowings 1 926 114 2 373 566 Net cash generated from financing activities – discontinued operations – (856) –––––––––– –––––––––– Net cash generated from financing activities 6 583 831 5 558 778 –––––––––– –––––––––– Net (decrease)/increase in cash and cash equivalents (87 119) (126 549) Cash and cash equivalents at the beginning of the year 350 606 358 908 Effect of foreign exchange fluctuations (133 563) 118 247 –––––––––– –––––––––– Cash and cash equivalents at end of year 129 924 350 606 –––––––––– ––––––––––
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PART 15
ADDITIONAL INFORMATION
1. RESPONSIBILITY The Company and the Directors, whose names are set out on page 38 of this document, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
2. THE COMPANY 2.1 The Company was incorporated and registered in the Isle of Man on 28 June 2004 under the IOM Acts as a public company limited by shares and re-registered under the Companies Act 2006 on 3 December 2013, with registration number 010534V.
2.2 The Company’s main activity is that of property acquisition, disposal, asset management and development.
2.3 The principal legislation under which the Company currently operates is the Companies Act 2006 and the regulations made thereunder.
2.4 The liability of the Shareholders is limited.
2.5 The registered office of the Company is at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE where the telephone number is +44 (0)1624 689 589, and the Company’s principal place of business is at 2nd floor, 30 Charles II Street, London SW1Y 4AE.
2.6 The Company has a primary listing on the London Stock Exchange and a secondary listing on the Main Board of the JSE.
2.7 The Company is the holding company of the Group. The Company owns the entire issued share capital of the Subsidiaries (except where stated), further details of which are set out in paragraph 2.8 below. Between them, the Subsidiaries wholly-own the legal titles to the properties held by the Group.
2.8 The following table contains a list, as at the date of this document, of the subsidiary undertakings of the Company that will be significant in terms of the Company’s assets and liabilities, financial position and profits and losses:
Country of Percentage of Name Business incorporation shareholding 26 The Esplanade No. 1 Limited Property Holding Company Jersey 50.00 Acton Properties Limited Property Holding Company BVI 100 B. Holding II GmbH Limited Partner Germany 46.45 B. Holding III GmbH Limited Partner Germany 46.45 Bastion Verwaitungs GmbH Holding Company Germany 100 Birchwood Warrington Limited Property Holding Company Jersey 100 BNRI Earls Court Limited Property Holding Company BVI 42.63 Byron Place Seaham Limited Property Holding Company UK 100 CEL Portfolio 1 Limited & Co KG Property Holding Company Germany 77.73 CEL Portfolio 2 Ltd. & Co. KG Property Holding Company Luxembourg 47.00 Chelvey Holdings Limited Holding Company Cyprus 66.00 Circuit Limited Property Holding Company Isle of Man 100 Ciref Berlin 1 Limited Property Holding Company Ireland 95.99 Ciref Coventry Limited Holding Company BVI 100 Ciref Europe Limited Holding Company BVI 98.96 Ciref Europe Management Limited Holding Company Ireland 93.91 Ciref Jersey Limited Holding Company BVI 100 Ciref Kwik-Fit Stafford Limited Property Holding Company UK 99.83 Ciref Kwik-Fit Stockport Limited Property Holding Company UK 99.90
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Country of Percentage of Name Business incorporation shareholding Ciref Malthurst Limited Holding Company BVI 100 Ciref Nepi Holdings Limited Holding Company Cyprus 48.00 Ciref Premium Limited General Partner Ireland 49.48 Ciref Premium Holdings Limited Holding Company Cyprus 94.9 CMC Shopping Centre Altona GmbH Property holding company Germany 94.90 Cooperatie Redefine International Real Estate U.A. Holding Company Netherlands 100 EKZ SSC Berlin GmbH & Co.KG Property holding company Germany 94.00 Everton Shopping Centre Sarl Holding company Luxembourg 100 Exchange House Unit Trust Property Holding Unit Trust Jersey 100 Gibson Property Holdings Limited Property Holding Company BVI 100 Grand Arcade Wigan Limited Property Holding Company UK 100 ITB Baumarkt Schwandorf BV Property Holding Company Netherlands 49.50 ITB FMZ Herzogenrath BV Property Holding Company Netherlands 49.50 ITB FMZ Huckelhoven GmbH & Co KG Property Holding Company Germany 51.54 ITB FMZ Reinheim BV Holding Company Netherlands 66.00 ITB FMZ Waldkraiburg BV Property Holding Company Netherlands 52.92 ITB Management Huckelhoven B.V. Holding Company Netherlands 76.00 Kaiserlautern Merkustrasse GmbH & Co KG Property Holding Partnership Germany 48.30 Leopard Holding Germany 1 S.à r.l. Holding Company Luxembourg 50 Leopard Holding UK Ltd Holding Company UK 100 Leopard Holding UK S.à r.l. Holding Company Luxembourg 100 LG Ed2 LP S.à r.l. Holding Company Luxembourg 50 LGP Ed2 Southwest LP S.à r.l. Limited Partner Luxembourg 88 LGP 1 S.à r.l. Property Holding Company Luxembourg 50 LGP 2 S.à r.l. Property Holding Company Luxembourg 50 LGP 3 S.à r.l. Property Holding Company Luxembourg 50 LGP Ed1 S.à r.l. Property Holding Company Luxembourg 50 LGP Ed2 S.à r.l. Property Holding Company Luxembourg 50 LGP Ed3 S.à r.l. Property Holding Company Luxembourg 50 LGP Ed4 S.à r.l. Property Holding Company Luxembourg 50 LGP Ed2 GmbH & Co.KG Property Holding Company Luxembourg 50 LGP ME1 S.à r.l. Property Holding Company Luxembourg 50 LGP ME2 S.à r.l. Property Holding Company Luxembourg 50 Ludwigsburg Real Estate Management GmbH Limited Partner Company Germany 48.87 Mezzanine Capital Limited Management Company Ireland 50 Newington House Limited Property Holding Company BVI 100 Premium Portfolio 2 Limited & Co KG Property Holding Company Germany 48.00 Premium Portfolio Limited & Co KG Property Holding Company Germany 48.00 Princes Street Investments Limited Property Holding Company Scotland 100 Redefine AUK Holdings Limited Holding Company BVI 100 Redefine AUK Limited Holding Company BVI 100 Redefine BDL Hotel Group Limited Management Company BVI 25.28 Redefine Albion Street Derby Limited Property Holding Company BVI 100 Redefine Arches Watford Limited Property Holding Company BVI 100 Redefine Banbury Cross Limited Property Holding Company BVI 100 Redefine Camino Park Crawley Limited Property Holding Company BVI 100 Redefine Dudley Limited Holding Company BVI 100 Redefine Edinburgh Limited Property Holding Company BVI 100 Redefine Enfield Limited Property Holding Company BVI 100 Redefine Express Park Bridgewater Limited Property Holding Company BVI 100 Redefine Hotel Holdings Limited Holding Company BVI 71.05 Redefine Hotels Portfolio 1 Limited Property Holding Company BVI 71.05 Redefine Hotels Portfolio 2 Limited Property Holding Company BVI 71.05 Redefine Hotels Portfolio III Limited Property Holding Company BVI 71.05 Redefine Hotels Portfolio IV Limited Property Holding Company BVI 71.05 Redefine Hotels Portfolio V Limited Property Holding Company BVI 71.05 Redefine Hotels Portfolio VI Limited Holding Company BVI 71.05 Redefine Hotels Reading Limited Property Holding Company BVI 71.05 Redefine International Den Haag B.V. Property Holding Company Netherlands 100
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Country of Percentage of Name Business incorporation shareholding Redefine International Fund Managers Europe Limited Management Company BVI 100 Redefine International Group Services Limited Management Company Ireland 93.91 Redefine International Holdings Limited Holding Company Jersey 100 Redefine International Management Holdings Limited Holding Company BVI 100 Redefine International Property Management Limited Management Company UK 100 Redefine Investment Managers (UK) Limited Management Company UK 100 Redefine Lake View Warrington Limited Property Holding Company BVI 100 Redefine North Street Limited Property Holding Company BVI 100 Redefine Paragon Square Hull Limited Property Holding Company BVI 100 Redefine Queens Drive Kilmarnock Limited Property Holding Company BVI 100 Redefine Retail Management Limited Management Company UK 100 Redefine Severalls Colchester Limited Property Holding Company BVI 100 Redefine St Davids Bangor Limited Property Holding Company BVI 100 Redefine Waterside Leeds Limited Property Holding Company BVI 100 Redefine Wigan Limited Holding Company BVI 100 R.I. Menora German Holdings S.à r.l. Investment Holding Company Luxembourg 49.97 RI Menora Office Management GmbH Management Company Germany 50 R.I. Waldkraiburg Limited Holding Company Cyprus 95.99 RI Management GmbH Management Company Germany 50 RI Menora Bergischgladbach GmbH & Co. KG Property holding company Germany 46.45 RI Menora Berlin GmbH & Co. KG Property holding company Germany 46.45 RI Menora Dresden GmbH & Co. KG Property holding company Germany 48.87 RI Menora German Holdings 2 S.à r.l. Holding Company Luxembourg 50.50 RI Menora Ludwigsburg GmbH Property holding company Germany 48.87 Seaham Limited Property Holding Company UK 100 Seaham Wax Limited Holding Company BVI 100 SMK Erste Investitions GmbH Property holding company Germany 94.90 St Bau Retail 20 UG Holding Company Germany 46.98 St Georges Harrow Limited Property Holding Company BVI 100 Standishgate Wigan Limited Property Holding Company UK 100 Ticino Real Estate Management GmbH Limited Partner Company Germany 48.87 Trito Gibson Limited Holding Company BVI 100 Trito Kwik-Fit Limited Holding Company BVI 100 Twenty Six The Esplanade Limited Holding Company BVI 50.00 West Orchards Coventry Limited Property Holding Company UK 100 Weston Favell Limited Property Holding Company BVI 100 Wichford Alpha Limited Holding Company Isle of Man 100 Wichford Atherton Wigan Limited Property Holding Company Isle of Man 100 Wichford Chatham Limited Property Holding Company Isle of Man 100 Wichford Dalkeith Limited Property Holding Company Isle of Man 100 Wichford DSA Dundee Limited Property Holding Company Isle of Man 100 Wichford DSA Uxbridge Limited Property Holding Company Isle of Man 100 Wichford Edgbaston Limited Property Holding Company Gibraltar 100 Wichford Edgbaston Holdings Limited Holding Company BVI 100 Wichford Europe Limited Holding Company Isle of Man 100 Wichford G3 Limited Unitholder Isle of Man 100 Wichford G4 Limited Unitholder Isle of Man 100 Wichford Gillingham Ltd Property Holding Company Isle of Man 100 Wichford Newcastle Limited Property Holding Company Isle of Man 100 Wichford Newington Causeway Limited Property Holding Company Isle of Man 100 Wichford Park Place Leeds Limited Property Holding Company Isle of Man 100 Wichford Parliament Square Edinburgh Limited Property Holding Company Isle of Man 100 Wichford Property General Partner Limited General Partner UK 100 Wichford Sparkhill Limited Property Holding Company Isle of Man 100
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Country of Percentage of Name Business incorporation shareholding Wichford Swindon Limited Property Holding Company Isle of Man 100 Wichford Tamar Limited Property Holding Company Isle of Man 100 Wichford Temple Back Limited Property Holding Company Isle of Man 100 Wichford VGB Holding Sarl Holding Company Luxembourg 49.00 Wichford Weymouth Limited Property Holding Company Isle of Man 100 Wichford Woodlands Limited Property Holding Company Isle of Man 100 Wichford Zeta Limited Holding Company Isle of Man 100
3. SHARE CAPITAL 3.1 There have been no public takeover bids by third parties for all or any part of the Company’s equity share capital, nor any mandatory takeover bids since incorporation of the Company.
3.2 The Company’s authorised and issued share capital as at the Latest Practicable Date was as follows:
Authorised number Issued number of of ordinary shares ordinary shares of of 8 pence each Nominal value 8 pence each Nominal value 3,000,000,000 £240,000,000 1,495,566,887 £119,645,350.96
3.3 The Company’s authorised and issued share capital following Admission (assuming the Maximum Placing Shares are issued) is expected to be as follows:
Authorised number Issued number of of ordinary shares ordinary shares of of 8 pence each Nominal value 8 pence each Nominal value 3,000,000,000 £240,000,000 1,870,566,887 £149,645,351
3.4 The Company has made the following allotments of Ordinary Shares during the 12-month period prior to the date of this document:
No. of Ordinary Date of issue Reason for issue Shares issued 6 March 2015 Cashbox placing by the Company 131,414,138 5 June 2015 Issue of scrip dividend shares 23,008,358 4 December 2015 Issue of scrip dividend shares 21,235,556 ––––––––––– Total number of Ordinary Shares 175,658,052
3.5 By way of ordinary resolution dated 26 January 2016, the Directors were authorised pursuant to the Articles of Association, in substitution of previous authorities, to allot Ordinary Shares up to a maximum aggregate nominal value of £39,881,783.68 (equivalent to 498,522,296 Ordinary Shares and representing approximately one-third of the Company’s issued share capital as at the Latest Practicable Date) for the period expiring on the date of the Company’s Annual General Meeting to be held in 2017 (unless and to the extent previously revoked, varied or renewed by the Company in a general meeting). In addition, the Directors are authorised to allot a further 498,522,296 Ordinary Shares of the Company in connection with a fully pre-emptive rights issue.
3.6 By way of special resolution dated 26 January 2016, the Directors were authorised, in substitution of previous authorities, to disapply the pre-emption provisions in Article 10 of the Articles of Association in relation to the allotment of Ordinary Shares either (a) in connection with a rights issue or other pre-emptive offer in favour of Shareholders or (b) otherwise up to a maximum aggregate nominal amount of £11,964,535,12 (equivalent to 149,556,689 Ordinary Shares and representing approximately 10 per cent. of the Company’s issued share capital as at the Latest Practicable Date) for the period expiring on the date of the Company’s Annual General Meeting to be held in 2017 (unless and to the extent previously revoked, varied or renewed by the Company in a general meeting).
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3.7 Subject to and conditional on the passing of the Resolutions at the Extraordinary General Meeting:
3.7.1 the Directors will be authorised pursuant to the Articles of Association, in addition to the authority set out in paragraph 3.5 above, to allot Ordinary Shares up to a maximum aggregate nominal value of £30,000,000 (equivalent to 375,000,000 Ordinary Shares and representing approximately 25.1 per cent. of the Company’s issued share capital as at the Latest Practicable Date) pursuant to the potential Placing for the period expiring on the date of the Company’s Annual General Meeting to be held in 2017 (unless and to the extent previously revoked, varied or renewed by the Company in a general meeting); and
3.7.2 the Directors will be authorised, in addition to the authority set out in paragraph 3.6 above, to disapply the pre-emption provisions in Article 10 of the Articles of Association in relation to the allotment of Ordinary Shares up to a maximum aggregate nominal amount of £30,000,000 (equivalent to 375,000,000 Ordinary Shares and representing approximately 25.1 per cent. of the Company’s issued share capital as at the Latest Practicable Date) for the period expiring on the date of the Company’s Annual General Meeting to be held in 2017 (unless and to the extent previously revoked, varied or renewed by the Company in a general meeting).
3.8 The Company has not issued any partly paid shares nor any convertible securities, exchangeable securities or securities with warrants. The Company does not hold any shares in treasury. There are no shares in the issued share capital of the Company that do not represent capital.
3.9 Save for the Redefine Share Schemes, there are no acquisition rights and/or obligations over authorised but unissued share capital or an undertaking to increase the capital of the Company.
3.10 Save for the Redefine Share Schemes, no capital of the Company or any Subsidiary is under option or agreed conditionally or unconditionally to be put under option.
4. DIRECTORS’ INTERESTS 4.1 The interests of each member of the administrative, management or supervisory bodies of the Company and of all such persons connected with the individual, in the issued share capital of the Company as at the Latest Practicable Date, together with such interests as are expected to be held immediately following Admission are set out in the table below:
Immediately following As at 27 January 2016 Admission(1) Number of Percentage Percentage Existing of Existing Number of of Enlarged Ordinary Ordinary Ordinary Share Director Shares Shares Shares(2) Capital Gregory Clarke – – – – Michael Watters(3) 6,162,697 0.41 6,537,697 0.37 Stephen Oakenfull(4) 573,536 0.04 573,536 0.03 Donald Grant – – – – Adrian Horsburgh(5) – – 10,000 0.00 Sue Ford – – – – Bernard Nackan(5) 19,023 0.00 19,023 0.00 Robert Orr(5) – – 25,000 0.00 Gavin Tipper 408,630 0.03 508,630 0.03 Michael Farrow – – – – Marc Wainer(6) 1,481,545 0.10 1,676,545 0.10
Notes: (1) Figures are calculated assuming that (a) the Placing Price is set at the Minimum Placing Price, (b) Redefine Properties subscribes for the RPL Equity Commitment in full, (c) the other Placees subscribe for Placing Shares for an aggregate value of £30.0 million and (d) no further issues of Ordinary Shares occur between publication of this document and Admission.
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(2) Michael Watters and Robert Orr have irrevocably undertaken to subscribe for such number of Placing Shares at the Placing as equals an aggregate amount of £150,000 and £10,000 respectively, if the Placing proceeds. Gavin Tipper and Adrian Horsburgh have irrevocably undertaken to subscribe for 100,000 Placing Shares and 10,000 Placing Shares at the Placing Price respectively, if the Placing proceeds. Marc Wainer has irrevocably undertaken to subscribe for 175,000 Placing Shares at the Placing Price (to be held through his Drawood Trust) and procure that his wife subscribes for 20,000 Placing Shares at the Placing Price, if the Placing proceeds. (3) Michael Watters’ shareholding is held indirectly through two pension fund structures. (4) The beneficial interest of Stephen Oakenfull is held in the name of his wife. (5) The percentage interest in the Ordinary Share capital held by Adrian Horsburgh, Bernard Nackan and Robert Orr rounds down to 0.00 per cent. (6) Marc Wainer’s beneficial interest is held through the 103,774 shareholding in the name of his wife and the 2,755,541 shareholding held by Ellwain Investments (Pty) Limited, of which he is a 50 per cent. shareholder.
4.2 As at the Latest Practicable Date, the following Directors held options over the Company’s shares as follows under the Performance Share Plan:
Number of Director options awarded Date of award Date of vesting(1) Michael Watters 1,698,515 28 October 2015 1 September 2018 Michael Watters 1,773,250 3 February 2015 1 September 2017 Michael Watters 1,730,000 3 December 2013 1 September 2016 Stephen Oakenfull 1,099,617 28 October 2015 1 September 2018 Stephen Oakenfull 1,148,000 3 February 2015 1 September 2017 Stephen Oakenfull 1,120,000 3 December 2013 1 September 2016 Adrian Horsburgh 1,099,617 28 October 2015 1 September 2018 Adrian Horsburgh 478,333 3 February 2015 1 September 2017 Donald Grant 1,072,797 28 October 2015 1 September 2018
Note: (1) Awards are subject to the attainment of certain targets relating to the performance of the Company’s total shareholder return against the total shareholder return of two comparator groups, each weighted at 50 per cent. (see paragraph 13.1 of this Part 15 for further details). 4.3 Save as disclosed in paragraph 4.1 and 4.2 in this Part 15, none of the members of the administrative, management or supervisory bodies of the Company, none of the Directors, and none of all such persons connected with such individuals, has any interest whether beneficial or not beneficial in any share capital of the Company.
4.4 As at the Latest Practicable Date, the Company had been notified of or was otherwise aware of the following persons, other than the Directors themselves, who, directly or indirectly, were interested in three per cent. or more of the issued share capital of the Company:
Immediately following As at 27 January 2016 Admission(1) Number of Percentage Percentage Existing of Existing Number of of Enlarged Ordinary Ordinary Ordinary Share Director Shares Shares Shares Capital Redefine Properties 449,757,285 30.07 624,757,285 35.79 Allan Gray Unit Trust Management (RF) (Pty) Limited 57,348,481 3.83 57,348,481 3.29
Note: (1) Figures are calculated assuming that (a) the Placing Price is set at the Minimum Placing Price, (b) Redefine Properties subscribes for the RPL Equity Commitment in full, (c) the other Placees subscribe for Placing Shares for an aggregate value of £30.0 million, (d) Allan Gray Unit Trust Management (RF) (Pty) Limited does not participate in the Placing and (e) no further issues of Ordinary Shares occur between publication of this document and Admission.
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4.5 Save as set out in paragraph 4.4 above, the Directors are not aware of any person who is or will be, immediately following Admission, directly or indirectly, interested in three per cent. or more of the issued share capital of the Company, or of any other person who can, will or could, directly, or indirectly, jointly or severally, exercise control over the Company. Save in respect of the RPL Equity Commitment, the Directors have no knowledge of any arrangements the operation of which may, at a subsequent date result in a change of control of the Company.
4.6 To the extent known to the Company, no persons have committed to subscribe for more than five per cent. of the Placing Shares under the potential Placing, other than Redefine Properties, which has agreed to irrevocably subscribe for the RPL Equity Commitment in full.
4.7 None of the above persons has voting rights differing from those of any other Shareholder.
5. THE CONCERT PARTY 5.1 The members of the Concert Party and their respective interests in Ordinary Shares as at the Latest Practicable Date, together with such interests as are expected to be held immediately following Admission, on the assumption set out below, are set out in the table below:
Maximum shareholding Shareholding in the Company in the Company as at 27 January 2016 as at Admission(1) Number of Percentage Percentage Existing of Existing Number of of Enlarged Ordinary Ordinary Ordinary Share Director Shares Shares Shares Capital Redefine Properties 449,757,285 30.07 624,757,285 35.79 Michael Watters(2) 6,162,697 0.41 6,537,285(3) 0.37 Bernard Nackan(4) 19,023 0.0 19,023 0.00 Marc Wainer(5) 1,481,545 0.10 1,676,545(6) 0.10 Stephen Carlin 3,186,660 0.21 3,186,660 0.18 ––––––––––– –––––– ––––––––––– –––––– TOTAL ––––––––––– 460,607,210 –––––– 30.80 ––––––––––– 636,177,210 –––––– 36.45 Notes: (1) Figures are calculated assuming that (a) the Placing Price is set at the Minimum Placing Price, (b) Redefine Properties subscribes for the RPL Equity Commitment in full, (c) the other Placees subscribe for Placing Shares for an aggregate value of £30.0 million and (d) no further issues of Ordinary Shares occur between publication of this document and Admission. (2) Michael Watters’ shareholding is held indirectly through two pension fund structures. (3) Michael Watters has irrevocably undertaken to subscribe for such number of Placing Shares as equals an aggregate amount of £150,000, if the Placing proceeds. (4) Bernard Nackan’s percentage interest in the Ordinary Share capital rounds down to 0.00 per cent. (5) Marc Wainer’s beneficial interest is held through the 103,774 shareholding in the name of his wife and the 2,755,541 shareholding held by Ellwain Investments (Pty) Limited, of which he is a 50 per cent. shareholder. (6) Marc Wainer has irrevocably undertaken to subscribe for 175,000 Placing Shares at the Placing Price (to be held through his Drawood Trust) and procure that his wife subscribes for 20,000 Placing Shares at the Placing Price, if the Placing proceeds.
5.2 In addition Michael Watters may be entitled to receive further Ordinary Shares in the future (as approved at the extraordinary general meeting of the Company held on 29 November 2013) subject to any awards granted under and pursuant to the terms of the Performance Share Plan. The maximum number of new Ordinary Shares which may be issued to Michael Watters, (if the maximum possible awards were granted by the Remuneration Committee under the Performance Share Plan and all conditions to the awards were satisfied in full) is 7,000,000 Ordinary Shares.
Therefore assuming the award and subsequent issue of the maximum amount of 7,000,000 Ordinary Shares to Michael Watters and the issue of the Placing Shares (assuming the minimum proceeds of £100 million are raised through the Placing, that Redefine Properties subscribes for the RPL Equity Commitment in full and that the Placing Price is set at the Minimum Placing
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Price), the maximum interest of Michael Watters would be 13,537,697 Ordinary Shares (representing 0.77 per cent. of the issued share capital of the Company) and the maximum interest of the Concert Party would be 643,177,210 Ordinary Shares (representing 36.70 per cent. of the issued share capital of the Company).
5.3 Redefine Properties has entered into the Relationship Agreement which regulates (in part) the degree of control which Redefine Properties may exercise over the management of the Group. Further details of the Relationship Agreement are set out in paragraph 21.14 of this Part 15.
6. INTERESTS AND DEALINGS 6.1 For the purposes of this paragraph 6: “acting in concert” with a party means any such person acting or deemed to be acting in concert with that party for the purposes of the UK Takeover Code; “arrangement” includes indemnity or option arrangements, and any agreement or understanding, formal or informal, of whatever nature relating to relevant securities which may be an inducement to deal or refrain from dealing; “associate” of a company includes: (a) the company’s parent, subsidiaries and fellow subsidiaries and their associated companies and companies of which such companies are associated companies (“relevant companies”); (b) connected advisers of the company and persons controlling, controlled by or under the same control as such connected advisers; and (c) the directors (together in each case with their close relatives and related trusts) of the company and of any relevant company covered in (a) above; “connected advisers” includes an organisation which: (a) is advising the Company in relation to the Proposals; (b) is corporate broker to the Company; or (c) is advising a person acting in concert with the Company in relation to the matter which is the reason for that person being a member of the Concert Party; “dealing” includes: (a) the acquisition or disposal of securities, of the right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to securities, or of general control of securities; (b) the taking, granting, acquisition, disposal, entering into, closing out, termination, exercise (by either party) or variation of an option (including a traded option contract) in respect of any securities; (c) subscribing or agreeing to subscribe for securities; (d) the exercise or conversion, whether in respect of new or existing securities, of any securities carrying conversion or subscription rights; (e) the acquisition of, disposal of, entering into, closing out, exercise (by either party) of any rights under, or variation of, a derivative referenced, directly or indirectly, to securities; (f) entering into, terminating or varying the terms of any agreement to purchase or sell securities; and (g) any other action resulting, or which may result, in an increase or decrease in the number of securities in which a person is interested or in respect of which he has a short position; “derivatives” include any financial product whose value in whole or in part is determined directly or indirectly by reference to the price of an underlying security;
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“disclosure period” means the period commencing on 28 January 2015 (the date 12 months prior to the posting of this document) and ending on the Latest Practicable Date;
a person having an “interest” in relevant securities includes where a person:
(a) owns securities;
(b) has the right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to securities or has general control of them;
(c) by virtue of any agreement to purchase, option or derivative, has the right or option to acquire securities or call for their delivery or is under an obligation to take delivery of them, whether the right, option or obligation is conditional or absolute and whether it is in the money or otherwise; or
(d) is party to any derivative whose value is determined by reference to the prices of securities and which results, or may result, in his having a long position in them;
“relevant securities” means Ordinary Shares, or any securities convertible into, or exchangeable for, rights to subscribe for and options (including traded options) in respect of, and derivatives referenced to, any Ordinary Shares, and includes the Placing Shares; and
“short position” means any short position (whether conditional or absolute and whether in any money or otherwise) including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery.
6.2 Under the UK Takeover Code, a concert party arises where persons, pursuant to an agreement or understanding (whether formal or informal), cooperate to obtain or consolidate control of that company. Under the UK Takeover Code control means an interest or interests in shares carrying in aggregate 30 per cent. or more of the voting rights of a company, irrespective of whether the interest or interests give de facto control.
6.3 During the disclosure period the following dealings for value by members of the Concert Party were made in relevant securities of the Company:
Number of Ordinary Name Date Transaction Shares Price Redefine Properties 4 December 2015 Scrip dividend 6,386,102 52.365 pence Marc Wainer 4 December 2015 Scrip dividend 3,052 52.365 pence Bernard Nackan 4 December 2015 Scrip dividend 559 52.365 pence Stephen Carlin 4 December 2015 Scrip dividend 93,154 52.365 pence Redefine Properties 5 June 2015 Scrip dividend 7,517,709 56.68 pence Marc Wainer 5 June 2015 Scrip dividend 1,297 56.68 pence Bernard Nackan 5 June 2015 Scrip dividend 454 56.68 pence Stephen Carlin 5 June 2015 Scrip dividend 79,604 56.68 pence Redefine Properties 6 March 2015 Placing 39,465,583 54 pence or ZAR9.70 Bernard Nackan 19 May 2015 Acquisition 837 ZAR10.37
6.4 Other than as described elsewhere in this document:
6.4.1 neither the Directors nor the Company nor any person acting in concert with the Company, was interested in or had any rights to subscribe or had any short position in respect of any relevant securities of Redefine Properties on the Latest Practicable Date;
6.4.2 neither the Directors, nor any person acting in concert with the Company, has an arrangement, was interested, had any rights to subscribe or had any short positions in respect of any relevant securities of the Company on the Latest Practicable Date;
6.4.3 neither Redefine Properties nor anyone acting in concert with Redefine Properties nor any directors of Redefine Properties, any members of such directors’ immediate families or any related trust or companies, has an arrangement, was interested, had any rights to
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subscribe or had any short positions in respect of any relevant securities of the Company on the Latest Practicable Date nor has any such person dealt in any relevant securities of the Company during the disclosure period;
6.4.4 neither the Company nor any person acting in concert with the Company has borrowed or lent any relevant securities of the Company;
6.4.5 neither Redefine Properties nor anyone acting in concert with Redefine Properties nor any directors of Redefine Properties has borrowed or lent any relevant securities of the Company;
6.4.6 there were no interests, rights to subscribe or short positions in respect of relevant securities of the Company held by any pension fund or employee benefit trust of the Company or an associate company of the Group as at the Latest Practicable Date;
6.4.7 no connected adviser to the Company or to an associate of the Company or to a person acting in concert with the Company nor any person controlling, controlled by or under the same control as any such connected adviser (except for an exempt principal trader or exempt fund manager) had any interest in or right to subscribe for, or had any short position in relation to any relevant securities of the Company as at the Latest Practicable Date.
6.5 As at the close of business on the Latest Practicable Date, there is no agreement, arrangement or understanding (including any compensation arrangement) between Redefine Properties (or any person acting in concert with Redefine Properties) and any of the directors, recent directors, shareholders or recent shareholders of the Company, or any person interested or recently interested in Ordinary Shares, having any connection with or dependence upon the outcome of the Placing.
6.6 As at the close of business on the Latest Practicable Date, neither Redefine Properties nor any person acting in concert with Redefine Properties has entered into any agreement, arrangement or understanding to transfer any interest acquired in the Company, as a result of the Placing, to any person.
7. MARKET QUOTATIONS AND RATINGS 7.1 The following are the middle market quotations for the Ordinary Shares for the first Business Day in each of the six months immediately before the date of this document and on 27 January 2016, being the Latest Practicable Date.
Date Price per Ordinary Share (pence) 27 January 2016 46.78 4 January 2016 49.81 1 December 2015 51.95 2 November 2015 55.00 1 October 2015 52.55 1 September 2015 52.20 3 August 2015 50.80
7.2 No ratings agency has publicly accorded the Company with any current credit rating outlook.
7.3 The most recent ratings and outlook issued by Moody’s Investors Services, Inc. for Redefine Properties is as follows: rating (Baa3), outlook (stable) and short-term rating (P-3).
8. THE BOARD DIRECTORS 8.1 Brief biographical details of the existing Directors are as follows:
Gregory Clarke (58 years old), Independent Non-executive Chairman Greg Clarke has over 30 years’ experience of working for and running large international public corporations across Europe, Australia and South Africa. Between 2002 and 2009 he was chief executive of Lend Lease Corporation, an ASX 50 international corporation specialising in
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property investment, development and construction. Between 1994 and 2000 he worked for groups owned by Cable and Wireless, ultimately being promoted to CEO of Cable and Wireless Communications plc. He is currently chairman of The Football League, a role he has held since 2010 as well as Chairman of the Meteorological Office.
Michael Watters (56 years old), Chief Executive Officer Michael Watters is a qualified engineer with a BSc Eng (Civil) Degree and an MBA. He has over 27 years’ experience in the investment banking and real estate industries. He has held directorships of some of South Africa’s top rated listed property funds including Sycom Property Fund and Hyprop Investments Limited as well as the Sapphire Retail Fund in the UK and Cromwell in Australia. He is CEO of the Company and a non-executive director of Redefine Properties, the International Hotel Group and is chairman of Redefine BDL.
Stephen Oakenfull (36 years old), Deputy Chief Executive Officer Stephen Oakenfull is a CFA charterholder with a BSc (Hons) Degree in Construction Management. Prior to joining the Group, Stephen worked for DTZ Corporate Finance in London and as a management consultant for Turner & Townsend, an international construction and management consultancy, both in South Africa and London. He was previously the chief operating officer of the former investment adviser to the Company.
Adrian Horsburgh (53 years old), Director of Property Adrian Horsburgh joined the Company following a 30-year career with Jones Lang LaSalle (formerly King Sturge) (“JLL”), where he most recently held the role of retail investment director. Adrian first joined King Sturge as a trainee surveyor in the Investment Department. He qualified as a Chartered Surveyor while at the firm and was appointed an equity partner in 1992. On the merger of King Sturge with JLL in 2011 he was appointed an international director of the merged company. Adrian has worked exclusively in the investment sector with a specialisation in retail and shopping centres.
Donald Grant (42 years old), Chief Financial Officer Donald Grant is a Chartered Accountant having trained at Coopers & Lybrand in New Zealand. Upon moving to the UK, he had 10 years working within various banking and broking institutions prior to moving into the property sector. Donald joined the Group in 2015 from fellow FTSE 250 constituent Capital & Counties Properties PLC where he had spent the last seven years and held the position of financial controller.
Michael Farrow (61 years old), Senior Independent Non-executive Director Michael Farrow is a founder director of Consortia Partnership Limited, a Jersey licensed trust company; this followed seven years as an executive director and trustee of a very substantial family trust whose main activity was property investment and development in the UK, central Europe and California. He currently sits on the boards of both UK listed and private property companies and funds. From 1993 to 1997 he was group company secretary of Cater Allen, Jersey and, prior to that, a regular army officer. He holds an MSc in Corporate Governance and is a Fellow of the Chartered Institute of Secretaries and Administrators.
Gavin Tipper (50 years old), Independent Non-executive Director Gavin Tipper is a Chartered Accountant with BComm and Bacc Degrees and a Masters Degree in Business Administration. He has been involved in the financial services industry for over 20 years. Prior to joining the Coronation Group in 2001, where he spent 10 years as chief operating officer, he was a technical partner at KPMG. Gavin holds directorships in a number of listed South African companies.
Sue Ford (55 years old), Independent Non-executive Director Sue Ford is a Chartered Accountant with over 25 years’ experience working within various leading organisations overseeing finance, strategy and governance matters. Sue was a founder and former finance director for Metric Property Investment plc, prior to its merger with London & Stamford PLC to form LondonMetric Property PLC, an income focused, diversified FTSE 250 REIT.
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Robert Orr (56 years old), Independent Non-executive Director Robert Orr is a Chartered Surveyor with significant experience of the German and European real estate markets. He worked for Jones Lang LaSalle for over 29 years, during which time he was Country Manager for Germany and later the Group’s European CEO. In 2005 Robert founded the International Capital Group for Jones Lang Lasalle, establishing cross-border relationships with international investors seeking real estate investment opportunities. Robert currently serves as a non-executive director for Tishman Speyer Properties UK Limited, an advisor to UK and European Investments and Wainbridge Capital and a Senior Advisor to Canaccord Genuity Limited. Robert is also a Trustee of Dementia UK.
Marc Wainer (67 years old), Non-executive Director Marc Wainer has over 35 years’ experience in all aspects of the property industry. He is the founder and executive chairman of Redefine Properties Limited, a non-executive director of Cromwell Property Group and has served on numerous other listed property boards, including Hyprop Investments Limited and Fountainhead Property Trust.
Bernard Nackan (71 years old), Non-executive Director Bernard Nackan was financial editor of the Rand Daily Mail, from 1969 to 1974. He was an executive director of Sage Group and its investment, life and property subsidiaries until his retirement in 2003. He was a member of the Collective Investment Schemes Advisory Committee for over 10 years. He is currently a non-executive director of two companies listed on the JSE: lead non-executive director of Redefine Properties Limited; and Rezco Asset Management Group.
8.2 Set out below, in the case of each Director, are details of the names of all companies and partnerships of which such Director has been a member of the administrative, management or supervisory bodies or partner at any time in the five years preceding the date of this document, indicating whether or not such Director is still a member of the administrative, management or supervisory bodies or partner:
Current directorships Directorships and partnerships Director and partnerships held in the last five years Gregory Clarke Eteach Group Limited EGHL Limited Nexinto Holdings Limited Stratus (Holdings) Limited The Football League Limited The Meteorological Office Michael Watters 26 the Esplanade no.1 Limited Byron Place Seaham Limited International Hotel Group Limited Ciref Kwik-Fit Stafford Limited Katherine Street Properties (Pty) Ciref Kwik-Fit Stockport Limited Limited Corovest Investment Managers Redefine BDL Hotel Group Limited Limited Corovest Offshore Limited Redefine Hotel Holdings Limited Cromwell Property Group Redefine International Fund Delamere Place Crewe Limited Managers Europe Limited Friars Walk Newport Limited Redefine International Holdings Pearl House Swansea Limited Limited Real Estate Securities Limited Redefine International Regeneration Capital Limited Management Holdings Limited Trinity Walk Wakefield Limited Redefine International Property West Orchards Coventry Limited Management Limited Redefine Investments Managers (UK) Limited Redefine Properties International Limited Redefine Properties Limited Twenty Six The Esplanade Limited
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Current directorships Directorships and partnerships Director and partnerships held in the last five years Stephen Oakenfull Astra Park (Gillingham) Atholl No.1 Limited Management Company Limited Atholl No.2 Limited Ciref Kwik-Fit Stafford Ltd Hedgerows Business Park Ciref Kwik-Fit Stockport Ltd Management Company Limited Leopard Holdings UK Limited Pearl House Residents Pearl House Swansea Ltd Association Limited Redefine International Holdings Wichford Aberdeen No.1 Limited Limited Wichford Aberdeen No.2 Limited Redefine International Property Wichford Ladywell Limited Management Limited Redefine Securities Jersey Limited Wichford Carlisle Limited Wichford Property General Partner Limited Adrian Horsburgh Atherton Estates Limited None Delamere Place Crewe Limited Leopard Holding UK Limited Redefine Retail Management Limited Donald Grant Byron Place Seaham Limited None Ciref Kwik-Fit Stafford Limited Ciref Kwik-Fit Stockport Limited Delamere Place Crewe Limited Grand Arcade Wigan Limited Princes Street Investments Limited Redefine International Holdings Limited Redefine International Property Management Limited Redefine Investment Managers (UK) Limited Redefine Retail Management Limited Redefine Securities Jersey Limited Seaham Limited Standishgate Wigan limited West Orchards Coventry Limited Wichford Property General Partner Limited Michael Farrow 1 Merchant Square (Jersey) Birchwood Warrington Limited Limited Coronation Overseas Limited 3 Merchant Square (Jersey) Corovest Offshore Limited Limited Prime London Holdings 11 Addison Nominees Limited Limited Bellzone Mining PLC Redefine International Holdings Circle Property PLC Limited Consortia Directors Limited Redefine Properties International Consortia Group Limited Limited Consortia Partnership Limited Consortia Secretaries Limited Consortia Trustees Limited ELG Holdings Limited MacDonald Hotels Limited
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Current directorships Directorships and partnerships Director and partnerships held in the last five years Michael Farrow Mad House Limited (continued) Melville Douglas Funds Redt Energy PLC Santa Juana Limited Standard Bank International Funds Limited STANLIB Funds Limited Triton Administration (Jersey) Limited Urban Infrastructure Real Estate (GP) Limited Urban Infrastructure Real Estate Jersey Limited Urban Infrastructure Venture Capital (Jersey) Private Limited Gavin Tipper Accelerate Cape Town Axiom Fund Managers (Pty) AVI Black Staff Empowerment Limited Scheme Trust Corocapital Limited AVI Executive Share Incentive Corohedge Capital (Proprietary) Scheme Trust Limited AVI Limited Coronation Capital Limited AVI Limited Share Incentive Coronation Equities Limited Scheme Trust Coronation Investments & AVI Out-Performance Scheme Trading Limited Trust Corovest Offshore Limited DGA Trust Corovest Property Group Hyprop Investments Limited Holdings (Proprietary) Limited Interwaste Holdings Limited Corovest Property Group Limited Joshua Investments (PTY) ERJF One (Proprietary) Limited Limited Finsource Group Holdings S.A. Airlink (Proprietary) Limited (Proprietary) Limited York Timber Holdings Limited Ikamva Capital Trust Natrust (Proprietary) Limited Off the Shelf Investments Thirty Eight (Proprietary) Limited Redefine International Holdings Limited Redefine Properties International Limited
Sue Ford None Metric LP Income Plus Limited Metric MIPP Asset Management Limited Metric Property Bedford 2 Limited Metric Property Bedford Limited Metric Property Berkhamstead Limited Metric property Bishop Auckland Limited Metric Property Bristol Limited Metric Property Cannock Limited Metric Property Congleton Limited Metric Property Finance (Holdings) Limited Metric Property Finance 1 Limited Metric Property Finance 2 Limited
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Current directorships Directorships and partnerships Director and partnerships held in the last five years Sue Ford (continued) Metric Property Hove Limited Metric Property Inverness Limited Metric Property Investments PLC Metric Property Kings Lynn Limited Metric Property Kirkstall Limited Metric Property Launceston 3 Limited Metric Property Launceston Limited Metric Property Limited Metric Property Loughborough Limited Metric Property Mansfield Limited Metric Property Milford Haven Limited Metric Property Newry Limited Metric Property Rochdale Development Limited Metric Property Rochdale Limited Metric Property Sheffield Limited Metric Property St. Albans Limited Metric Property St. Austell Limited Metric Retail Limited Metric Retail Property Limited Wick Retail Limited
Robert Orr Dementia UK Roskspring Property Investment Tishman Speyer Properties (UK) Managers LLP Limited Marc Wainer ApexHi Properties Limited Fountainhead Property Trust Barringer Investment Holdings Managers Limited (Proprietary) Limited Hyprop Investments Limited Cromwell Property Group Madison Property Fund Ellwain Investments (Proprietary) Managers Holdings Limited Limited Marc Wainer & Ass (Proprietary) Insite Properties (Proprietary) Limited Limited Redefine International Holdings Lason Trading 12 (Proprietary) Limited Limited Madison Property Fund Managers Limited Newark Towers (Pty) Limited Redefine BDL Hotel Group Limited Redefine Properties International Limited Redefine Properties Limited The Drawood Trust The Pivotal Fund Limited
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Current directorships Directorships and partnerships Director and partnerships held in the last five years Bernard Nackan Redefine Properties Limited Fountainhead Property Trust Rezco Asset Management Group Managers Limited Limited Redefine Properties International Limited 8.3 Save as set out in paragraph 8.4 below, no Director has within the five years preceding the date of this document:
8.3.1 had any convictions in relation to fraudulent offences;
8.3.2 been associated with any bankruptcy, receivership or liquidation of any company, partnership or other entity in relation to which he was acting in the capacity of (i) a member of the administrative, management or supervisory bodies of such entity or (ii) a senior manager of such entity;
8.3.3 been the subject of any official public incrimination and/or sanction by statutory or regulatory authorities (including designated professional bodies) or ever been disqualified by a court from or acting as a member of the administrative, management or supervisory bodies of any company, partnership or other entity or from acting in the management or conduct of the affairs of any such entity.
8.4 Stephen Oakenfull is a director of Wichford Carlisle Limited (“WCL”), which was put into receivership on 14 January 2013 following a payment default under a credit facility agreement dated 29 March 2015 (as amended, restated, supplemented and novated from time to time) entered into by, inter alia, (1) Wichford Gamma Limited (as borrower), (2) L.C.P.I. (United Kingdom Branch) (as original lender) and (3) Lehman Brothers International (Europe) (as arranger and security trustee). The property owned by WCL at 5-11 Castle Street, Carlisle was sold by the receiver to cover part of the outstanding debt under the credit facility agreement. WCL ceased to be in receivership on 7 July 2015.
8.5 Save as disclosed in this document, there are no outstanding loans granted by the Company to any of the Directors or granted by any such Director to the Company nor has any guarantee been provided by the Company for their benefit.
8.6 Save as disclosed in this document, no Director has or has had any interest in any transactions which are or were unusual in their nature or conditions, or significant to the business of the Company, and which:
8.6.1 were effected by the Company during the current or immediately preceding financial year; or
8.6.2 were effected by the Company during an earlier financial year and remain in any respect outstanding or unperformed.
9. BOARD PRACTICES
9.1 Board structure The Directors are committed to high standards of corporate governance and compliance with the Corporate Governance Code. The Corporate Governance Code recommends that at least half the members of the board of directors, excluding the chairman, should comprise non-executive directors determined by the board to be independent. Currently, the Board is composed of 11 members, consisting of four independent non-executive directors. The composition of the Board is currently being addressed by its nominations committee and a recruitment agency has been appointed in order to assist with the search for a new independent director.
9.2 Board committees The Board has established three principal committees, the audit and risk committee, the remuneration committee and the nomination committee.
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9.3 Audit and risk committee The audit and risk committee comprises Gavin Tipper (chairman of the audit and risk committee), Sue Ford and Michael Farrow. The Board considers that the members of the committee as a whole have sufficient recent and relevant experience to carry out the functions of the committee. The committee is responsible for ensuring that the financial performance of the Group is properly monitored, controlled and reported. The committee examines and reviews internal controls, together with accounting policies and practices, the form and content of financial reports and statements, terms of appointment and remuneration for the auditor (including overseeing the independence of the auditor particularly as it relates to the provision of non-audit services and general matters raised by the Group’s auditors). The committee meets on a quarterly basis.
9.4 Remuneration committee The remuneration committee comprises Michael Farrow (chairman of the remuneration committee), Sue Ford and Robert Orr. The committee is responsible for all elements of the remuneration of the executive directors.
9.5 Nomination committee The nomination committee comprises Greg Clarke (chairman of the nomination committee), Gavin Tipper and Sue Ford. The principal role of the committee is to consider the composition and strength of the Board, to identify suitable qualified candidates to fill vacancies as they arise, or are required to refresh membership, and to ensure succession planning. The Board considers the committee to have the skills to ascertain the balance of skills, knowledge and experience of the Board and to identify any gaps.
9.6 Model Code The Company complies with the Model Code on dealing in securities in relation to its Ordinary Shares and the Company has also adopted a share dealing code for the Directors in accordance with the Model Code.
9.7 Employees The Company employed 212 employees on average during the financial year ended 31 August 2015; and 175 employees on average during the financial year ended 31 August 2014. The Group employed no employees prior to the Group’s internalisation of management on 3 December 2013.
10. CORPORATE GOVERNANCE 10.1 The Company is an Isle of Man public limited company, with a premium listing on the main market of the London Stock Exchange and a secondary listing on the Main Board of the JSE. The Company will primarily comply with the Corporate Governance Code.
10.2 The Directors are wholly committed to high standards of corporate governance, which they consider critical for business performance and for maintaining investor confidence.
10.3 The Board strives to be effective by maintaining strong leadership and by providing transparency and accountability to Shareholders for the management and control of the Company’s activities.
10.4 Under the Corporate Governance Code the Company has substantially complied with the UK corporate governance requirements for the reporting period ended 31 August 2015 and up to the date of this document. The only areas of non-compliance (as identified and explained in the annual report and accounts for the Group for the year ended 31 August 2015) are as follows:
10.4.1 the Board does not comprise of at least half of its members being independent non- executive directors (as recommended by provision B.1.2 of the UK Corporate Governance Code). The composition of the Board is currently being addressed by its nominations committee and a recruitment agency has been appointed in order to assist with the search for a new independent director. To ensure there is enough independent oversight of related party transactions, a committee comprising solely of independent Directors has been established post year end to review such matters before deciding whether the transaction can progress to the Board for final consideration; and
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10.4.2 Non-executive Directors are not appointed for a specified term (as recommended by provision B.2.3 of the UK Corporate Governance Code). Directors are appointed for a term which expires when either the Director (i) is not reappointed following retirement, (ii) is removed or vacates office, (iii) resigns or does not offer himself for re-election, or (iv) terminates his appointment on three months’ notice. It should be noted that the re-appointment of any independent non-executive Director who has served more than six years will be subject to a rigorous review when being considered for re-election.
11. CONFLICT OF INTEREST None of the Directors have an actual or potential conflict of interest between his duties owed to the Company and his private interests and/or other duties, save for Mike Watters who is a non-executive director of Redefine Properties, Marc Wainer who is an executive director of Redefine Properties and Bernard Nackan who is a non-executive director of Redefine Properties.
12. DIRECTORS’ SERVICE CONTRACTS AND TERMS OF APPOINTMENT 12.1 Executive directors Details of the Executive Directors’ service agreements with the Company are set out below:
Gross annual Bonus salary for the (for the Expiry/ year ending year ended Date of Commence- notice 31 August 31 August Performance Director(1) contract ment date terms 2016 (£) 2016) share plan Michael Watters 02.12.2013 03.12.2013 12 months 372,383 0-100 per cent. Individual limits in Stephen Oakenfull 02.12.2013 17.12.2013 6 months 241,080 of base salary any financial year Adrian Horsburgh 31.03.2014 31.03.2014 6 months 241,080 dependent on shall not exceed Donald Grant 25.02.2015 03.08.2015 6 months 224,000 performance 250 per cent. of against KPIs base salary but in exceptional circumstances an award can be made of up to 400 per cent. of base salary, but such award must not exceed 7,000,000 Ordinary Shares Note: (1) All the Executive Directors are entitled to pension contributions, private medical contributions and a season ticket. All service contracts referred to above are on substantially similar terms and include provisions relating to, inter alia, responsibilities, conflicts of interest and insurance in respect of each of the Executive Directors. The service contracts shall terminate when the first of one of the following occurs:
(a) if the director is not re-appointed as a director by the Shareholders following his retirement in accordance with the Articles; or
(b) if he is removed as a director or vacates his office pursuant to the law or the Articles;
(c) if he resigns or does not offer himself for re-election by Shareholders either for his own reasons or at the request of the Board; or
(d) he gives the Company notice in writing in accordance with the level of notice set out above.
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12.2 Non-executive directors Details of the Non-executive Directors’ letters of appointment with the Company are set out below: Annual fees for the year ending Date of Notice Director 31 August 2016 (£) appointment period Gregory Clarke 88,000 04.10.2011 3 months Sue Ford 40,000 17.12.2013 3 months Bernard Nackan 40,000 01.04.2014 3 months Robert Orr 40,000 23.04.2015 3 months Gavin Tipper 47,500 22.08.2011 3 months Michael Farrow 45,000 22.08.2011 3 months Marc Wainer 40,000 22.08.2011 3 months
All letters of appointment referred to above are on substantially similar terms and include provisions relating to, inter alia, responsibilities, conflicts of interest and insurance in respect of each of the Non-executive Directors. The letters of appointment shall terminate when the first of one of the following occurs: (a) if the director is not re-appointed as a director by the Shareholders following his or her retirement in accordance with the Articles; or (b) if he or she is removed as a director or vacates his or her office pursuant to the law or the Articles; (c) if he or she resigns or does not offer himself or herself for re-election by Shareholders either for his or her own reasons or at the request of the Board; or (d) he or she gives the Company three months’ notice in writing. 12.3 Service contracts Save as disclosed above, there are no service agreements between any Director and any member of the Group. The Company has directors’ and officers’ liability insurance cover in respect of each of the Directors. 12.4 Remuneration paid in the financial year ended 31 August 2015 The amount of remuneration paid (including any contingent or deferred compensation), and benefits in kind granted, by the Group to any of the Directors for the financial year ended 31 August 2015 is set out in the table below:
Name Salary (£) Benefits (£)(1) Bonus (£) Total (£)(2) Michael Watters 354,650 56,939 195,058 606,647 Stephen Oakenfull 229,600 25,838 137,760 393,198 Adrian Horsburgh 229,600 28,483 126,280 384,363 Donald Grant(3) 18,092 2,108 9,950 30,150 Andrew Rowell(4) 172,200 18,294 65,000 255,494 Gregory Clarke 80,000 – – 80,000 Sue Ford 35,000 – – 35,000 Bernard Nackan 37,916(5) – – 37,916 Robert Orr(6) 12,489 – – 12,489 Gavin Tipper 42,500 – – 42,500 Michael Farrow 40,000 – – 40,000 Marc Wainer 35,000 – – 35,000 Richard Melhuish(7) 14,503 – – 14,503 Elisabeth Stheeman(8) 9,876 – – 9,876 Notes (1) The benefits include pension contributions, private medical insurance and a season ticket. (2) The total remuneration paid does not include awards under the Performance Share Plan as these contingent awards will not vest until 2016 or 2017. (3) Donald Grant was appointed as a Director on 3 August 2015.
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(4) Andrew Rowell left the Company on 31 May 2015. (5) An underpayment to Bernard Nackan had occurred the previous financial year. (6) Robert Orr was appointed as a Director on 23 April 2015. (7) Richard Melhuish retired as a director on 29 January 2015. (8) Elisabeth Stheeman was appointed as a director on 24 April 2015 and retired on 3 August 2015.
No remuneration was paid, during the financial year ended 31 August 2015, to any of the Directors other than as set out above.
No amounts have been set aside or accrued by the Company to provide pension, retirement or similar benefits for any of the Directors.
13. REDEFINE SHARE SCHEMES
13.1 Performance Share Plan The operation of the Performance Share Plan will be overseen by the remuneration committee.
The Performance Share Plan will enable selected employees (including executive Directors) to be granted awards in respect of Ordinary Shares. Awards may be granted in the form of:
• nil cost options to acquire Ordinary Shares; or
• contingent rights to receive Ordinary Shares.
Awards will not normally vest until after the end of the period of at least three years beginning with the award date (the “Performance Share Plan Vesting Period”). The remuneration committee may however, at its discretion, determine at the time of making an award that different tranches of an award are to be subject to different Performance Share Plan Vesting Periods, with the first tranche to normally vest no earlier than three years after the award date. In either case awards will only vest if and insofar as targets relating to the performance of the Company over a specified performance period of at least three years have been met. Awards are not transferable (except on death) and are not pensionable benefits.
Awards may be satisfied by newly issued Ordinary Shares, Ordinary Shares purchased in the market by an employees’ trust or by the transfer of Ordinary Shares held in treasury (to the extent that it is lawful for the Company to hold Ordinary Shares in treasury and to use them for this purpose).
Eligibility Employees (including executive Directors) of the Company or of any of its subsidiaries will be eligible to participate in the Performance Share Plan, at the discretion of the remuneration committee.
Individual limits As a result of the Company being dual listed on the main market of the London Stock Exchange and the Main Board of the JSE, the Performance Share Plan will need to operate subject to limits relevant to companies listed on both exchanges. The maximum number of Ordinary Shares that may be awarded to a participant in any financial year of the Company will be limited so that the market value of such Ordinary Shares on the date of the award will not normally exceed 250 per cent. of basic salary. If the remuneration committee considers that exceptional circumstances exist that justify a higher amount, Ordinary Shares with a value of up to 400 per cent. of basic salary may be awarded. In addition, an overarching individual limit on the aggregate number of Ordinary Shares which may be received under the Performance Share Plan by any one individual also applies. That limit has been set at 7,000,000 Ordinary Shares per individual. For the avoidance of doubt, for the purposes of this paragraph “received” means Ordinary Shares which are newly issued or transferred by any means to a participant.
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Grant of share awards Awards may only be granted during the period of six weeks beginning with the dealing day following the announcement of the Company’s results for any period, or within 28 days of a person first joining the Group or, exceptionally, and subject to the Model Code and other relevant restrictions on dealings in Ordinary Shares, on any other day on which the remuneration committee determines that exceptional circumstances exist.
No awards may be made more than 10 years after 6 December 2013. No payment will be required for the grant of an award.
Dilution limit Awards may be granted over unissued or existing Ordinary Shares.
As a result of the Company being dual listed on the main market of the London Stock Exchange and the Main Board of the JSE, the Performance Share Plan will need to operate subject to limits relevant to companies listed on both exchanges.
Subject to the overall limit provided in the final paragraph of this section, in overall terms, the number of new Ordinary Shares issued or remaining capable of being issued in any ten year period under the Performance Share Plan and the Restricted Stock Plan (and any other employee share scheme operated by the Company in future in which participation is also at the discretion of the remuneration committee) will not exceed five per cent. of the ordinary share capital of the Company in issue from time to time.
Subject to the overall limit provided in the final paragraph of this section, in overall terms, the number of new Ordinary Shares issued or remaining capable of being issued in any 10 year period under any employee share scheme operated by the Company will not exceed 10 per cent. of the ordinary share capital of the Company in issue from time to time.
As the Company only currently operates the Performance Share Plan and the Restricted Stock Plan, the Company operates within the five per cent. in 10 years’ limit referred to above. It is only if, for example, an “all-employee” share scheme were to be introduced that the 10 per cent. in 10 years’ limit would become relevant.
If awards are to be satisfied by a transfer of existing Ordinary Shares, those existing Ordinary Shares will not count towards the percentage limits stated above. Insofar as it is necessary to ensure compliance with the guidelines issued from time to time by institutional investors, the percentage limits stated above will apply to awards satisfied by the transfer of Ordinary Shares held in treasury (but Ordinary Shares would only be held in treasury and/or used for this purpose to the extent that it is lawful for the Company to do so).
In addition, an overarching limit on the number of Ordinary Shares which can be received by participants in the Performance Share Plan applies. At the extraordinary general meeting of the Company held on 29 November 2013, the Directors were authorised to allot shares for the purposes of the Performance Share Plan up to a maximum number of 23,000,000 Ordinary Shares.
For the avoidance of doubt, for the purposes of this paragraph “received” means Ordinary Shares which are newly issued or transferred by any means to a participant.
Vesting of awards The awards will vest three years from the date of grant subject to continued employment and the satisfaction of performance targets. The awards are subject to two total shareholder return related performance targets:
• half of any such award will be subject to a performance target which measures the Company’s total shareholder return (“TSR”) relative to that of the members of a bespoke comparator group (“Comparator Group”), comprising:
(The) Local Shopping REIT Highcroft Investments NewRiver Retail British Land Company INTU Properties Primary Health Properties
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Derwent London Land Securities Group Segro Great Portland Estates London Metric Property Shaftesbury Hammerson McKay Securities Town Centre Securities Hansteen Holdings Mucklow (A.&J.) Group Workspace Group
• the other half of the award will be subject to a performance target which measures the Company’s TSR relative to that of each of the members of EPRA/NAREIT Developed Europe Index (“Index”).
Both awards are subject to the following vesting schedule:
Relative TSR performance against Percentage of one half members of the Index: of an award that vests: Upper quartile 100% Between median and upper quartile Between 25% and 100% Median 25% Below median 0%
The formulaic outcome of these performance targets will, however, be subject to an overriding remuneration committee discretion in respect of overall corporate performance and the individual performance of the awardholder as more fully described below.
TSR will in all cases be averaged over the three months prior to the start and end of the performance period.
To determine the level of vesting, the TSR of each company in the Index or Comparator Group (as applicable) will be calculated and the companies will then be ranked by reference to their TSR performance. The TSR of the Company at the median rank will be judged median performance and the TSR of the Company at upper quartile rank will be judged upper quartile performance. The Company’s TSR will then be compared to those levels of performance to determine the extent to which an award vests and, if the Company’s TSR is between the median and upper quartile levels, the level of vesting will be calculated on a straight line basis between those two points.
As noted above, the formulaic outcome of both of the above performance targets is subject to overriding remuneration committee discretion. That is to say that the remuneration committee may, at its discretion, adjust the level of vesting determined by reference to the performance targets (downwards or upwards) if it considers that such level of vesting is not reflective of overall corporate performance. The remuneration committee may also adjust the level of vesting determined by reference to the performance conditions (upwards or downwards) if it considers it appropriate to do so in light of the awardholder’s personal performance.
For the avoidance of doubt, future awards may be granted subject to performance targets other than those described above.
Performance targets may be varied by the remuneration committee, but only if the remuneration committee reasonably considers it to be necessary to ensure that the criteria against which performance will then be measured will be a fairer measure of such performance, the amended performance target will provide a more effective incentive and the amended performance target is not materially less challenging than the original performance target was when first set.
For the avoidance of doubt, for the purposes of this paragraph “received” means Ordinary Shares which are newly issued or transferred by any means to a participant.
Leaving employment If a participant leaves the Group any unvested portion of his award will normally lapse. If the reason for leaving is death, ill-health, injury, disability, redundancy, retirement, the sale of the employing business or company or otherwise at the discretion of the remuneration committee the award will vest at the end of the Performance Share Plan Vesting Period. Alternatively, the remuneration committee may allow the award to vest on cessation. In either case, however, the award will only vest to the extent that the performance target is met at the relevant time. The award will also, unless the remuneration committee determines otherwise, be subject to a time
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pro rata reduction to reflect the proportion of the Performance Share Plan Vesting Period that had elapsed on cessation.
Corporate events In the event of a takeover, scheme of arrangement or winding up of the Company (not being an internal reorganisation), awards shall vest early to the extent that the performance targets have been satisfied at that time. Awards will also, unless the remuneration committee determines otherwise, be subject to a time pro rata reduction to reflect the proportion of the Performance Share Plan Vesting Period that had elapsed at the relevant time.
On an internal reorganisation, replacement awards would normally be offered.
Awards may also vest on the same basis as would apply on a takeover if a demerger is proposed which, in the opinion of the remuneration committee, would or might substantially prejudice the interests of awardholders.
Clawback/Malus The remuneration committee may, in its absolute discretion, determine at any time before the vesting of an award to reduce the number of Ordinary Shares to which an award relates, cancel an award, or impose further conditions on an award, if it forms the view that:
• the Company materially misstated its financial results leading to an error in assessing the extent to which any other award has vested;
• there has been an error in assessing the extent to which any performance conditions imposed upon any other award were met;
• there are circumstances where a participant had by an act or omission contributed to serious reputational damage to the Company’s group; or
• there are circumstances where a participant engaged in serious fraud or misconduct.
Alternatively, the remuneration committee may require the clawback or malus adjustment to be satisfied by way of a reduction in certain other incentive awards, including where relevant the participant’s annual bonus, and/or by requiring the participant to make a cash payment to the Company’s group.
Dividends on award shares An award may be made on terms that, if and when the award vests or is exercised, the participant will be entitled to receive an amount equal to the dividends which would have been paid to the participant on such vested Ordinary Shares during the Performance Share Plan Vesting Period had the participant been the legal owner of such Ordinary Shares during that time. This amount may be delivered in Ordinary Shares or in cash.
Adjustment of share awards If there is a rights or capitalisation issue, sub-division, consolidation, reduction or other variation of the Company’s ordinary share capital, or demerger or payment of a special dividend which would otherwise materially affect the value of an award, the remuneration committee may adjust the number of Ordinary Shares subject to the award in proportion to the original number of Ordinary Shares subject to the award.
Rights attaching to shares Shares allotted or transferred under the Performance Share Plan will rank alongside Ordinary Shares of the same class then in issue. The Company will apply to the FCA for the listing of any newly issued Ordinary Shares.
Amendment The remuneration committee may amend the Performance Share Plan in any respect. However, the provisions governing eligibility requirements, equity dilution, individual participation limits, the
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basis for determining the rights of participants to acquire Ordinary Shares and the adjustments that may be made following a rights issue or any other variation of capital cannot be altered to the advantage of existing or new participants without the prior approval of Shareholders in general meeting. There is an exception for minor amendments to benefit the administration of the Performance Share Plan, to take account of a change in legislation or developments in the law affecting the Performance Share Plan or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants in the Performance Share Plan or for any member of the Group. In addition, no alteration may be made that would materially adversely affect any subsisting rights of any participants without their prior consent.
Overseas plans The Company may at any time (and without further reference to Shareholders) establish schedules to the Performance Share Plan and/or further plans based on the Performance Share Plan but modified to take account of local securities laws, exchange controls or tax laws, provided that any Ordinary Shares made available under such schedules and/or plans are treated as counting against the limits on individual participation and the overall dilution limits applicable under the Performance Share Plan.
13.2 Restricted Stock Plan The operation of the Restricted Stock Plan will be overseen by the remuneration committee.
The Restricted Stock Plan will enable selected employees (excluding executive Directors and participants in the Performance Share Plan) to be granted awards in respect of Ordinary Shares. Awards may be granted in the form of:
• nil cost options to acquire Ordinary Shares; or
• contingent rights to receive Ordinary Shares.
Awards will not normally vest until after the end of the period of three years beginning with the award date (the “Restricted Stock Plan Vesting Period”). The Restricted Stock Plan Vesting Period may, however, be such other period (longer or shorter) as the remuneration committee may determine. The remuneration committee may, at its discretion, determine at the time of making an award that different tranches of an award are to be subject to different Restricted Stock Plan Vesting Periods. Performance targets may or may not be applied to awards granted under the Restricted Stock Plan, at the discretion of the remuneration committee.
Awards are not transferable (except on death) and are not pensionable benefits. Awards may be satisfied by newly issued Ordinary Shares, shares purchased in the market by an employees’ trust or by the transfer of Ordinary Shares held in treasury (to the extent that it is lawful for the Company to hold Ordinary Shares in treasury and to use them for this purpose).
Eligibility Employees (excluding executive Directors and participants in the Performance Share Plan) of the Company or of any of its subsidiaries will be eligible to participate in the Restricted Stock Plan, at the discretion of the remuneration committee.
Individual limits As a result of the Company being dual listed on the main market of the London Stock Exchange and the Main Board of the JSE, the Restricted Stock Plan will need to operate subject to limits relevant to companies listed on both exchanges. The maximum number of Ordinary Shares that may be awarded to a participant in any financial year of the Company will be limited so that the market value of such Ordinary Shares on the date of the award will not normally exceed 100 per cent. of basic salary. If the remuneration committee considers that exceptional circumstances exist that justify a higher amount, Ordinary Shares with a value of up to 400 per cent. of basic salary may be awarded. In addition, an overarching individual limit on the aggregate number of Ordinary Shares which may be received under the Restricted Stock Plan by any one individual also applies. That limit has been set at 7,000,000 Ordinary Shares per participant at any one time.
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For the avoidance of doubt, for the purposes of this paragraph “received” means Ordinary Shares which are newly issued or transferred by any means to a participant.
Grant of share awards Subject to the Model Code and other relevant restrictions on dealings in Ordinary Shares, awards may be granted on any day on which the remuneration committee so determines. No awards may be made more than 10 years after 6 December 2013. No payment will be required for the grant of an award.
Dilution limit Awards may be granted over unissued or existing Ordinary Shares.
As a result of the Company being dual listed on the main market of the London Stock Exchange and the Main Board of the JSE, the Restricted Stock Plan will need to operate subject to limits relevant to companies listed on both exchanges.
Subject to the overall limit provided in the final paragraph in this section, the number of New Ordinary Shares issued or remaining capable of being issued in any 10-year period under the Restricted Stock Plan and the Performance Share Plan (and any other employee share scheme operated by the Company in future in which participation is also at the discretion of the Remuneration Committee) will not exceed five per cent. of the ordinary share capital of the Company in issue from time to time.
Subject to the overall limit provided in the final paragraph in this section, in overall terms, the number of new Ordinary Shares issued or remaining capable of being issued in any 10-year period under any employee share scheme operated by the Company will not exceed 10 per cent. of the ordinary share capital of the Company in issue from time to time.
In practice, as the Company only currently operates the Restricted Stock Plan and the Performance Share Plan, the Company operates within the five per cent. in 10 years’ limit referred to above. It is only if, for example, an “all-employee” share scheme were to be introduced that the 10 per cent. in 10 years’ limit would become relevant.
If awards are to be satisfied by a transfer of existing Ordinary Shares, those existing Ordinary Shares will not count towards the percentage limits stated above. Insofar as it is necessary to ensure compliance with the guidelines issued from time to time by institutional investors, the percentage limits stated above will apply to awards satisfied by the transfer of Ordinary Shares held in treasury (but Ordinary Shares would only be held in treasury and/or used for this purpose to the extent that it is lawful for the Company to do so).
In addition, an overarching limit on the number of Ordinary Shares which can be received by participants under the Restricted Stock Plan applies. At the extraordinary general meeting of the Company held on 29 November 2013, the Directors were authorised to allot shares for the purposes of the Restricted Stock Plan up to a maximum number of 23,000,000 Ordinary Shares.
For the avoidance of doubt, for the purposes of this paragraph “received” means Ordinary Shares which are newly issued or transferred by any means to a participant.
Vesting of awards Awards will normally vest at the end of the Restricted Stock Plan Vesting Period, subject to the attainment of the performance targets (if any) set by the remuneration committee at the time the awards are made. If performance targets are imposed, they may be varied by the remuneration committee if the remuneration committee reasonably considers it to be necessary to ensure that the criteria against which performance will then be measured will be a fairer measure of such performance, the amended performance target will provide a more effective incentive and the amended performance target is not materially less challenging than the original performance target was when first set.
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Leaving employment If a participant leaves the Group any unvested portion of his award will normally lapse. If the reason for leaving is death, ill-health, injury, disability, redundancy, retirement, the sale of the employing business or company, or otherwise at the discretion of the remuneration committee, the award will vest on cessation. Alternatively, the remuneration committee may allow the award to vest at the end of the Restricted Stock Plan Vesting Period. In either case, however, the award will, unless the remuneration committee determines otherwise, be subject to a time pro rata reduction to reflect the proportion of the Restricted Stock Plan Vesting Period that had elapsed on cessation. If any performance targets have been imposed on the award, they must also be satisfied at the relevant time.
Corporate events In the event of a takeover, scheme of arrangement or winding up of the Company (not being an internal reorganisation), awards shall vest early subject, unless the remuneration committee determines otherwise, to a time pro rata reduction to reflect the proportion of the Restricted Stock Plan Vesting Period that had elapsed at the relevant time. If performance targets have been imposed on the awards, they must also be satisfied at the relevant time.
On an internal reorganisation, replacement awards would normally be offered.
Awards may also vest on the same basis as would apply on a takeover if a demerger is proposed which, in the opinion of the remuneration committee, would or might substantially prejudice the interests of awardholders.
Clawback/Malus The remuneration committee may, in its absolute discretion, determine at any time before the vesting of an award to reduce the number of Ordinary Shares to which an award relates, cancel an award, or impose further conditions on an award, if it forms the view that:
• the Company materially misstated its financial results leading to an error in assessing the extent to which any other award has vested;
• there has been an error in assessing the extent to which any performance conditions imposed upon any other award were met;
• there are circumstances where a participant had by an act or omission contributed to serious reputational damage to the Company’s group; or
• there are circumstances where a participant engaged in serious fraud or misconduct.
Alternatively, the remuneration committee may require the clawback or malus adjustment to be satisfied by way of a reduction in certain other incentive awards, including where relevant the participant’s annual bonus, and/or by requiring the participant to make a cash payment to the Company’s group.
Dividends on award shares An award may be made on terms that, if and when the award vests or is exercised, the participant will be entitled to receive an amount equal to the dividends which would have been paid to the participant on such vested Ordinary Shares during the Restricted Stock Plan Vesting Period had the participant been the legal owner of such Ordinary Shares during that time. This amount may be delivered in Ordinary Shares or in cash.
Adjustment of share awards If there is a rights or capitalisation issue, sub-division, consolidation, reduction or other variation of the Company’s ordinary share capital, or demerger or payment of a special dividend which would otherwise materially affect the value of an award, the remuneration committee may adjust the number of Ordinary Shares subject to an award in proportion to the original number of Ordinary Shares subject to the award.
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Rights attaching to shares Shares allotted or transferred under the Restricted Stock Plan will rank alongside Ordinary Shares of the same class then in issue. The Company will apply to the FCA for the listing of any newly issued Ordinary Shares.
Amendment The remuneration committee may amend the Restricted Stock Plan in any respect. However, the provisions governing eligibility requirements, equity dilution, individual participation limits, the basis for determining the rights of participants to acquire Ordinary Shares and the adjustments that may be made following a rights issue or any other variation of capital cannot be altered to the advantage of existing or new participants without the prior approval of Shareholders in general meeting. There is an exception for minor amendments to benefit the administration of the Restricted Stock Plan, to take account of a change in legislation or developments in the law affecting the Restricted Stock Plan or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants in the Restricted Stock Plan or for any member of the Group. In addition, no alteration may be made that would materially adversely affect any subsisting rights of any participants without their prior consent.
Overseas plans The Company may at any time (and without further reference to Shareholders) establish schedules to the Restricted Stock Plan and/or further plans based on the Restricted Stock Plan but modified to take account of local securities laws, exchange controls or tax laws, provided that any Ordinary Shares made available under such schedules and/or plans are treated as counting against the limits on individual participation and the overall dilution limits applicable under the Restricted Stock Plan.
14. PROPERTY PORTFOLIO 14.1 No material changes have occurred to the valuations of the property portfolios of the Group as set out in the Valuation Reports in Part 13 of this document since the effective dates of the valuations contained in the Valuation Reports.
14.2 A summary of the Group’s property portfolio, which has been extracted without material adjustment from the Valuation Reports set out in Part 13 of this document, is set out below:
237 BNP Proportionate Proportionate Paribas Market Market Total Market Savills Savills Real Cushman & Value at Value at Value at Advisory Advisory Estate Cushman & Wakefield 31 August 15 January 15 January Strutt & Services Services (Jersey) Wakefield LLP Schlicht & 2015(1) 2016(1) 2016(2) Parker Limited GmbH Limited LLP Netherland Kollegen Segmental Property Market Values £million £million £million £million £million £million £million £million UK – Combined AUK Portfolio – 462.1 462.1 – 462.1––––– UK Retail Grand Arcade, Wigan 102.2 100.7 100.7 100.7–––––– Weston Favell, Northampton 90.0 87.2 87.2 87.2–––––– St. George’s, Harrow 71.2 72.7 72.7 72.7–––––– Birchwood, Warrington 34.5 35.1 35.1 35.1–––––– West Orchards, Coventry 31.3 30.5 30.5 30.5–––––– Byron Place, Seaham 20.4 19.9 19.9 19.9–––––– UK Commercial Offices 96.6 99.0 99.0 – 99.0––––– Malthurst Portfolio 23.3 12.2 12.2––––12.2 – – Kwik-Fit Portfolio 17.0 17.0 17.0 17.0–––––– Newington House 13.4 17.0 17.0 – 17.0––––– The Esplanade, Jersey(3) 11.911.723.4–––23.4––– 238 UK Hotels London Portfolio 195.4 195.7 195.7 – 195.7––––– DoubleTree by Hilton, Edinburgh 26.4 26.4 26.4 – 26.4––––– Enfield Travelodge 12.9 13.7 13.7 – 13.7––––– 166810 Europe(4) Schloss Centre, Berlin 64.9 68.6 68.6 – – 68.6–––– ro ensa,Jnay2,21 23:13 Wednesday, January27,2016 7 Proof Supermarket Portfolio, Germany(3) 64.8 68.3 136.7––––136.7 – – Bahnhof Altona, Hamburg 55.9 59.4 59.4 – – 59.4–––– VBG Portfolio(3) 33.6 35.4 72.2––––––72.2 Premium Portfolio 26.3 27.6 27.6––––––27.6 OBI Portfolio 16.7 17.6 17.6––––––17.6 City Arkaden, Ingolstadt 14.7 14.7 14.7 – – 14.7–––– Hucklehoven(3) 4.75.09.9––––––9.9 Waldkraiburg(3) 4.14.38.5––––––8.5 Bremen/Lindenhoff 5.3 5.5 5.5––––––5.5 Kaiserslautern(3) 2.52.65.2––––––5.2 Total (excl. non-core assets) 1,040.0 1,509.9 1,638.5 363.1 813.9 142.7 23.4 148.9 146.6 Non-core assets 4.65.05.0–––––5.0– Total 1,044.6 1,514.9 1,643.5 363.1 813.9 142.7 23.4 148.9 5.0 146.6 Notes: (1) Values reflect the Group’s actual percentage ownership of the relevant joint venture entity. (2) Values assume 100 per cent. ownership notwithstanding where the property is held in a joint venture. (3) Property held in a joint venture. (4) The valuations were reported in Euros only and have been converted externally into Sterling for the purposes of this table. 166810 Proof 7 Wednesday, January 27, 2016 23:13
15. VALUATION POLICY The properties in the Group’s portfolio are valued semi-annually on the following basis:
• investment properties are valued on a desk top basis by external professionally qualified valuers at the Company’s interim reporting date (28/29 February);
• investment properties are valued on the basis of open market value by external professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institute of Chartered Surveyors (the Red Book) at the Company’s financial year end (31 August);
• the investment property values disclosed by the Company in its financial results are reviewed and audited by the Company’s auditors, KPMG; and
• properties that are in the course of construction will be reported at cost or directors valuation, and not subject to valuation by external valuers.
The current appointed property valuers of the Group are: BNP Paribas Real Estate (Jersey) Limited, DTZ Debenham Tie Leung Limited (trading as Cushman and Wakefield), Cushman and Wakefield LLP, Savills Advisory Services Limited, Savills Advisory Services GmbH, Schlidt and Strutt and Parker.
The net asset value attributable to the Ordinary Shares will be published at the time of publication of the Company’s interim and annual financial results based on the properties’ most recent valuation and calculated in accordance with IFRS through a regulatory information service provider to the London Stock Exchange and the JSE as soon as practicable after review by the Board.
16. CAPITAL RESOURCES OF THE GROUP The principal sources of the Group’s capital resources are funds which may be raised from time to time from the issue of equity and debt securities and bank or other borrowings as well as proceeds from asset sales.
The Group may from time to time purchase its own shares on the market dependent on, amongst other things, market conditions. Purchase and sale decisions are made on a transaction by transaction basis by the Board. The Group does not have a defined share buy-back plan.
Neither the Company nor any of its subsidiaries is subject to externally imposed regulatory capital requirements. The Group is expected by certain creditors, in the ordinary course of business, to maintain adequate capital levels.
The Group’s acquisitions have been substantially funded with debt finance. In a global environment of volatile interest rates and restricted access to finance, debt management is an important focus. The Group typically looks to secure long term debt finance at fixed interest rates to ensure that fluctuations in interest rates do not impact on the cost of financing during the funding term. The Board targets a minimum of 90 per cent. of aggregate debt to be hedged, notwithstanding the interest rate hedging policy of at least 75 per cent. As at the date of this document the level of aggregate debt hedged stands at 94.7 per cent.
Material loans payable by the Group
The AUK facility agreement Lender: HSBC Bank plc (the ‘Agent’) Barclays Bank PLC Abbey National Treasury Services PLC The Royal Bank of Scotland plc
Borrower: Redefine AUK
Facility: £303,000,000 comprising a £155,000,000 term loan and a £148,000,000 revolving credit facility.
Purpose: To finance and/or refinance the acquisition of the AUK Portfolio.
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Interest rate: The rate of interest is the percentage rate per annum which is the aggregate of the applicable margin (subject to the below loan-to-value ratios) plus LIBOR.
Loan-to-Value Ratio Margin (per annum) <= 40 per cent. 1.60 per cent. >40 per cent. and <= 50 per cent 1.75 per cent. >50 per cent. and <= 60 per cent 1.90 per cent. >60 per cent. and <= 65 per cent 2.10 per cent. >65 per cent 2.50 per cent.
Capital repayments: The Borrower shall repay in full on the termination date.
Maturity date: 5 September 2020
Property: Banbury Cross Retail Park, Oxfordshire, OX16 1LX Express Park, Bridgwater, TA6 4RN Severalls Industrial Estate, Newcomen Way Colchester, Essex, CO4 9TG Lakeview, Lakeside Drive, Centre Park, Warrington, WA1 1RW Camino Park, James Wyatt Way, Gatwick Road, Crawley, RH10 9TZ 7-14 Albion Street, Derby, Derbyshire, DE2 House of Fraser, 1 Paragon Square, Hull, HU1 3JZ Queens Drive Retail Park, Queens Drive, Kilmarnock, KA1 3XB St Davids Retail Park, Bangor The Arches Retail Park, Lower High Street, Watford, WD17 2SD The Omnibus Building, Lesbourne Road, Reigate, Surrey, RH2 7LD The Range, 25 Milton Link, Milton Road, Edinburgh, EH15 3QH Sytner, 575–624 London Road, High Wycombe, Bucks, HP11 1EZ Priory Retail Park, Christchurch Road, Colliers Wood, Merton, London, SW19 2NX 201 Deansgate, Manchester, M3 3NW Kingsthorne Distribution Park, Henson Way, Telford Industrial Estate, Kettering, Northamptonshire, NN16 8PX City Point, 29 King Street, Leeds, LS1 2HL 127-133 Charing Cross Road, London, WC2H 0LA 7 Lochside View, Edinburgh
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: (i) a maximum loan-to-value ratio of 70 per cent., decreasing to 65 per cent. from the fourth anniversary of drawdown; and
(ii) a minimum actual and projected interest cover ratio of 1.75x, increasing to 2.00x from the fourth anniversary of drawdown.
Special conditions: The Borrower will pay a commitment fee of 40 per cent. of the applicable margin on any undrawn amounts. If the loan is repaid early, the following prepayment fees shall apply:
Period Prepayment Fee First 12 months 1.00 per cent. Months 13 – 18 0.50 per cent. Months 19 – 24 0.25 per cent. 24 months onwards 0 per cent.
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The Redefine Hotel Holdings facility agreement Lender: Aareal Bank AG
Borrower: Redefine Hotel Holdings Limited
Facility: £110,534,588
Purpose: To finance and/or refinance the Hotel Propcos.
Interest rate: The rate of interest is the percentage rate per annum which is the aggregate of the applicable margin (2.275 per cent) plus LIBOR.
Capital repayments: The Borrower shall repay each loan in full on the repayment date.
Maturity date: 30 November 2021
Property: Express by Holiday Inn Southwark Hotel, 101 Southwark Street and 2 & 4 Price’s Street, London Express by Holiday Inn Royal Docks Hotel Holiday Inn Brentford Hotel Holiday Inn Limehouse Hotel Holiday Inn Park Royal Hotel Crowne Plaza Hotel, Reading Holiday Inn Earls Court DoubleTree by Hilton, Edinburgh
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: The Borrower must ensure that the loan-to-value does not, at any time, exceed 67.5 per cent. Yield on debt on each test date shall be at least 10 per cent. and interest service cover ratio shall, at all times, be at least 175 per cent.
The Wigan facility agreement Lender: Aviva Commercial Finance Limited
Borrower: Grand Arcade Wigan Limited
Facility: £73,000,000
Purpose: The facility has been employed to finance, in part, the acquisition and development of The Grande Arcade Shopping Centre, 25 and 27 Standishgate, Wigan, 1 and 13 to 25 (odd) Standishgate and land and buildings on the north side of Crompton Street, Wigan.
Interest rate: 5.68 per cent. per annum fixed
Capital repayments: To be repaid in full not later than the termination date.
Maturity date: 3 April 2032
Property: The Grand Arcade Shopping Centre, Wigan 25 and 27 Standishgate, Wigan 1 and 13 to 25 (odd) Standish Gate and land and buildings on the north side of Crompton Street, Wigan.
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
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Material covenants: The Borrower will ensure at all times during the term of the loan that income is equal to or in excess of the ‘Designated Percentage’ of interest and amortised capital repayments (if any) payable in the period under review (the “Income Cover Requirement”).
Designated Percentage is defined as 105 per cent. for the period ending on 12 September 2015 and 110 per cent. from then on to the date of maturity.
The Weston Favell facility agreement Lender: Aviva Commercial Finance Limited
Borrower: Weston Favell Limited
Facility: £50,000,000
Purpose: The facility has been employed to finance the acquisition of Weston Favell Shopping Centre, Northampton.
Interest rate: 5.71 per cent. per annum fixed
Capital repayments: The borrower must repay £15,000,000 of the facility amount before the termination date in such instalments and on such dates as specified in the amortisation schedule.
Maturity date: 30 November 2038
Property: Weston Favell Shopping Centre, Northampton.
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: The Borrower will ensure at all times during the term of the loan that income is equal to or in excess of 120 per cent. of interest and amortised capital repayments (if any) payable in any 12 month period as determined by the Lender at the relevant time (the “Income to Interest Requirement”).
Special conditions: This facility is cross-collateralised with those provided by Aviva Commercial Finance Limited to Birchwood Warrington Limited and Byron Place Seaham Limited.
The St Georges Harrow facility agreement Lender: Berlin-Hannoverische Hypothekenbank AG
Borrower: St Georges Harrow Limited
Facility: £41,745,000
Purpose: To assist with the acquisition of the St Georges Shopping Centre, Harrow, Middlesex, United Kingdom.
Interest rate: The rate of interest is the percentage rate per annum which is the aggregate of the applicable margin (subject to the below loan-to-value ratios) plus LIBOR.
Loan-to-Value Ratio Margin (per annum) < 65 per cent 2.25 per cent. >= 65 per cent 2.50 per cent.
Capital repayment: On 27 January, 27 April, 27 July and 27 October each year falling on or after the second anniversary of 27 April 2011.
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£115,000 if the loan-to-value ratio is equal to or less than 62.5 per cent. and £287,500 if the loan-to-value ratio exceeds 62.5 per cent.
Maturity date: 27 April 2016
Property: St Georges Shopping Centre, Harrow, Middlesex
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: (i) 70 per cent. loan-to-value ratio; and
(ii) projected interest cover ratio of 150 per cent.
The Zeta facility agreement Lender: Lloyds TSB Bank plc
Borrower: Wichford Zeta Limited
Facility: £34,695,000
Purpose: To assist with the funding of the properties secured by the Zeta facility.
Interest rate: The rate of interest is the percentage rate per annum which is the aggregate of the applicable margin (subject to the below loan-to-value ratios) plus LIBOR.
Loan-to-Value Ratio Margin (per annum) < 40 per cent 3.00 per cent. >= 40 per cent 3.25 per cent.
Capital repayments: £250,000 per quarter.
Maturity date: 24 May 2018
Property: Aberdeen – West Tullos Industrial Centre Bedford – Woodlands, Manton Lane Bristol – Temple Back Chatham – The Observatory, Brunel Croydon – St Anne House, Wellesley Road Dalkeith – 7/15 Buccleuch Street Dundee – DSA Edinburgh – Parliament Square Gillingham – Newington Causeway Leeds – Park Place Newcastle – Centrallofts Plymouth – West Point and Centre Court, Ebrington Street Sparkhill – Haynesfield House, Stoney Lane Swindon – Delta 900, Delta Business Park Travelodge – Enfield Uxbridge – DSA Kier Park Watford – Exchange House Weymouth – Westurey House Wigan – Atherton
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Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: (i) 55 per cent. loan-to-value ratio;
(ii) actual interest cover ratio of 175 per cent; and
(iii) projected interest cover ratio of 175 per cent.
The Birchwood facility agreement Lender: Aviva Commercial Finance Limited
Borrower: Birchwood Warrington Limited
Facility: £29,150,000
Purpose: The facility has been employed to re-finance, in part, the existing facility in relation to Birchwood Shopping Centre, Dewhurst Road, Warrington.
Interest rate: 6.10 per cent. per annum fixed
Capital repayments: Birchwood must repay £9,150,000 of the facility amount before the maturity date in such instalments and on such dates specified by Aviva from time to time to Birchwood, in writing, the first instalment being due on the interest payment date following the third anniversary of the date of the facility agreement.
Maturity date: 10 September 2035
Property: Birchwood Shopping Centre, Dewhurst Road, Warrington
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: The Borrower will ensure at all times during the term of the loan that Income is equal to or in excess of 120 per cent. of interest and amortised capital repayments (if any) payable in any 12 month period as determined by the Lender at the relevant time (the “Income to Interest Requirement”).
Special conditions: This facility is cross-collateralised with those provided by Aviva Commercial Finance Limited to Byron Place Seaham Limited and Weston Favell Limited.
The West Orchards Coventry facility agreement Lender: Abbey National Treasury Services PLC
Borrower: West Orchards Coventry Limited
Facility: £18,250,000
Purpose: The Borrower shall apply all amounts borrowed by it under the facility towards:
(i) refinancing existing debt of the Borrower in respect of the property; and
(ii) the payment of any fees, costs and expenses, stamp registration and other taxes (other than VAT) incurred by any transaction obligor in connection with the refinancing of the existing debt of the Borrower in respect of the property and as approved by the Lender.
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Interest rate: The rate of interest is the percentage rate per annum which is the aggregate of the applicable margin (2.75 per cent) plus LIBOR.
Capital repayments: The Borrower shall repay the loans in equal instalments of £45,625 on each interest payment date, starting on the first interest payment date following the date of the Agreement.
Maturity date: 11 December 2018
Property: West Orchards Shopping Centre, Coventry and Units 4, 6, 8 and 10 Smithford Way, Coventry
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: The Borrower must ensure that the loan-to-value does not, at any time, (a) exceed 60 per cent. until the date immediately prior to the third anniversary of the agreement, and (b) thereafter, exceed 55 per cent. The Borrower must also ensure that both historic and projected interest cover are, at all times, at least 200 per cent.
The Byron Place facility agreement Lender: Aviva Commercial Finance Limited
Borrower: Byron Place Seaham Limited
Facility: £17,100,000
Purpose: The facility has been employed to finance in part the acquisition and development of Byron Place Shopping Centre, Seaham, Durham.
Interest rate: 6.44 per cent. per annum fixed
Capital repayments: The Borrower must repay £3,098,817 of the facility amount before the maturity date in such instalments and on such dates specified by Aviva from time to time to the borrower.
Maturity date: 18 September 2031
Property: Byron Place Shopping Centre, Seaham, Durham
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the properties referred to above.
Material covenants: The Borrower will ensure at all times during the term of the loan that Income is equal to or in excess of 120 per cent. of interest and amortised capital repayments (if any) payable in any 12 month period as determined by the Lender at the relevant time (the “Income to Interest Requirement”).
Special conditions: This facility is cross-collateralised with those provided by Aviva Commercial Finance Limited to Birchwood Warrington Limited and Weston Favell Limited.
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The Leopard Portfolio facility agreement (a joint venture with Redefine Properties) Lender: Berlin Hyp AG
Borrower: Leopard Germany Property 1 S.a.r.l Leopard Germany Property 2 S.a.r.l Leopard Germany Property 3 S.a.r.l Leopard Germany Property Ed 1 S.a.r.l Leopard Germany Property Ed 2 S.a.r.l Leopard Germany Property Ed 3 S.a.r.l Leopard Germany Property Ed 4 S.a.r.l Leopard Germany Property Ed 2 Gmbh & Co.KG Leopard Germany Property ME1 S.a.r.l Leopard Germany Property ME2 S.a.r.l CIREF Berlin 1 Limited
Facility: €83,150,000
Purpose: The loan is to be used for the proportional refinancing of existing liabilities of the Borrowers.
Interest rate: The loan bears interest from the date of drawing at the Lender’s cost of funding (EURIBOR) plus a margin.
Maturity date: 30 April and May 2020
Property: Eselskamp 6/Rixener Strabe 8, 59929 Brilon An der Windmuhle, 59469 Ense-Parsit Donnersbergerstrabe 1, 55234 Flomborn Auf den Bernbacher Weg, 63579 Freigericht Kastanienallee 82a, 82b, 16307 Gartz (Oder) Carsdorfer Strabe 8, 04523 Pegau Markstrabe 4-16, 29-45, 26935 Stadland-Rodenkirchen Erfurter Strabe 2, 99958 Grafentonna Unterm neuen Garten/Meerholzer Landweg 6, 63584 Grundau-Lieblos Wernstedter Strabe, 39624 Kalbe Robert-Bosch-Strabe 34, 56743 Mendig Geschwister-Scholl-Strabe 14, 07589 Muchenbernsdorf Kulmbacher Strabe 51/Kreuzstein, 95512 Neudrossenfeld Eilenburger Strabe 3, 04889 Schildau Ledder Dorfstrabe 14, 49545 Tecklenburg-Ledde Grenzweg 1, 21385 Amelinghausen Freiladestrabe 19/17, 59929 Brilon Rumbacher Strabe 1,3,5, 76891 Bundenthal Robert-Koch-Strabe 3, 72359 Dotternhausen Querweg 2/Bahnhofstrabe 17/An der Bahnhofstrabe, 99887 Georgenthal Glauburger Strabe 45a, 45b, 63695 Glauburg Am Worbziger Weg, 06388 Grobzig Die vorderste Schweinebucht, 39606 Osterburg Wartenberger Chaussee 8-9, 39629 Bismark NP-Markt in 10367 Berlin, Bemhard-Bastlein-Str.5 Reichelt Markt in 14199 Berlin, Berkaer Str. 1
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E-Neukauf Markt in 31275 Lehrte-Arpke, Schwublinger Str. 5a E-Neukauf Markt in 06686 Lutzen, Gustav-Adolf-Str. 32 E-Neukauf Markt in 39240 Calbe, Salzer Str. 18c E-Neukauf Markt in 31595 Steyerberg, Kirchstr. E-aktiv Markt in 12277 Berlin, Marienfelder Allee 101 E-Center Markt in 29378 Wittingen, Celler Str. 37 MIOS-Markt in 48432 Rheine, Am Stadwalde 1-3 E-Neukauf Markt in 31535 Neustadt, An der Landwehr 66-68 E-Center Markt in 38302 Wolfenbuttel, Schweigerstr. 5 MIOS-Markt in 31137 Hildesheim, Hafenstr. 24c NP-Markt in 39171 Altenweddingen, Breite Str. 28 E-Neukauf Markt in 12629 Berlin, Gothaer Str. 43-45 E-Neukauf Markt in 31707 Bad Eilsen, Arensburger Str. U.a. E-Neukauf Markt in 29640 Schneverdingen, Bahnhofstr. 39-41 NP-Markt in 06458 Hedersleben, Magdeburger Str. 1 Gewerbestr. 16-18, 63619 Bad orb Heppenheimer Str. 70, 64658 Furth Osterwiesenstr. 47, 73574 Iggingen-Brainkofen In den Gruben 5, 76751 Jockgrim Monchweiler Str. 13, 78126 Konigsfeld Im Gewerbegebiet 47, 77839 Lichtenau Leininger Str. 1 and others, 67067 Ludwigshafen Allerburg 15, 66640 Namborn Sudetenstr. 64, 64385 Reichelsheim Germersheimer Str. 9, 76761 Rulzheim Konrad-Adenauer-Ring 65, 65428 Russelsheim St. Wendeler Str. 11, 66636 Tholey Welzheimer Str. 58, 71554 Weissach i. T. Brockhagener Str., Gutersloher Str. 122, 33649 Bielesfeld Fischerhofstr. 6, 29525 Ulzen Westerstr. 30 25709 Marne Blumenstr. 3, 52457 Aldenhoven Wanderuper Str. 17, 24963 Tarp Kieler Str. 365, 24536 Neumunster Heussstr. 4, 52078 Aachen Lappenbrink 53, 48336 Sassenberg Potsdamer Str. 23, 14776 Brandenburg Gerhart-Hauptmann-Str. 2-6, 51570 Windeck Marienstr. 1b, 45663 Recklinghausen
Security: Each of the properties owned by the Borrowers (including related bank accounts, rental income, insurance proceeds and hedging contracts) are used as collateral for the obligations owing by each of the Borrowers to Berlin Hyp AG under all of the loan agreements.
Material covenants: The interest cover ratio must not fall below 200 per cent. and the loan- to-value shall not exceed 62 per cent. In each case, the covenants are tested by reference to the adjusted net rental income and the value of all the cross-collateralised properties held by all 11 Borrowers, and the interest and other liabilities payable under all the loan agreements with such Borrowers.
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The SSC Berlin facility agreement Lender: HSH Nordbank
Borrower: Grundstucksgesellshaft Einkaufszentrum Schloss-Strassen-Center Berlin Gmbh & Co.KG.
Facility: €72,000,000
Description: Refinancing of the loan from Eurohypo AG secured on the shopping centre.
Interest rate: 6-month EURIBOR plus a margin of 2.00 per cent.
Maturity date: 30 August 2017
Property: Schloss-Strassen Shopping Centre, Berlin
Security: The Borrower has granted security in respect of all their assets and undertakings including (where applicable) a first legal mortgage over each property held by it. The shares in each subsidiary have also been granted as security in favour of the security trustee.
Material covenants: Interest cover ratio at least 115 per cent. and loan-to-value ratio of not more than 80 per cent., reducing to 75 per cent. in year four and five.
The VBG facility agreement (a joint venture with Menora Mivtachim) Lender: DG Hyp
Borrower: RI Menora Ludwigsburg GmbH & Co.KG RI Menora Bergisch Gladbach GmbH & Co.KG RI Menora Berlin GmbH & Co.KG RI Menora Dresden GmbH & Co.KG
Facility: €57,000,000
Purpose: To assist with the funding of the properties secured by the facility.
Interest rate: Margin of 1.72 per cent. plus swap rate of 0.915 per cent.
Maturity date: 28 September 2017
Property: Markgrafenstrasse 17/18, 10969 Berlin, Germany Wiener Platz, 01069 Dresden, Germany Kolner Strasse 20, 51429 Bergisch Gladbach, Germany Martin-Luther-Strasse 79, 71636 Ludwigsburg, Germany
Security: The Borrower has granted security in respect of all their assets and undertakings including (where applicable) a first legal mortgage over each property held by it. The shares in each subsidiary have also been granted as security in favour of the security trustee.
Material covenants: Interest cover ratio at least 130 per cent.
The Altona, Hamburg facility agreement Lender: HSH Nordbank
Borrower: CMC Shopping Centre Altona GmbH
Facility: €56,000,000
Purpose: To refinance the loan from NIBC Bank B.V. secured on the Shopping Centre and other assets.
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Interest rate: 6-month EURIBOR plus a margin of 2.20 per cent.
Maturity date: 28 February 2020
Property: Bahnhof Altona Shopping Centre, Hamburg
Security: The Borrower has granted security in respect of all their assets and undertakings including (where applicable) a first legal mortgage over each property held by it. The shares in each subsidiary have also been granted as security in favour of the security trustee.
Material covenants: Interest cover ratio at least 110 per cent. and loan-to-value ratio of not more than 80 per cent., reducing to 75 per cent. after four years.
26 The Esplanade facility agreement (a joint venture with Rimstone Limited) Lender: Lloyds Bank International Limited
Borrower: 26 The Esplanade No 1 Limited
Facility: £20,300,000
Purpose: For the purchase of the Esplanade building.
Interest rate: The rate of interest payable is the base rate plus an interest margin of 0.70 per cent. per annum, currently 1.20 per cent. per annum in total.
Capital repayments: The loan is repayable in 31 consecutive quarterly instalments of £87,500 commencing on 10 June 2015 with the outstanding balance by way of a single bullet repayment on 31 December 2022.
Maturity date: 31 December 2022
Property: 26 Esplanade, St. Helier, Jersey
Security: The Borrower has given certain warranties and undertakings to the Lender and granted to the Lender a deed of legal charge and deed of assignment with respect to the property referred to above.
Material covenants: Gross rent is not at any time to be less than 125 per cent. of the consolidated interest paid and payable per annum. The total rental income received from all freehold and leasehold properties is not at any time to be less than 100 per cent. of the aggregate principal repayments and the interest paid and payable to the Bank per annum. Loan-to-value shall not, at any time exceed 80 per cent., reducing to 75 per cent. by the end of June 2018.
17. MEMORANDUM AND ARTICLES OF ASSOCIATION The current Memorandum of Association of the Company provides that the objects of the Company are unrestricted and the Company has, by and subject to the IOM Act, the same rights, power and privileges as an individual, unless restricted by special resolution and no such restrictions have been imposed or are resolved to be imposed.
Paragraphs 17.1 to 17.13 below contain a summary of the existing Articles. Capitalised terms used in the following summary are defined in the Articles.
17.1 Voting rights 17.1.1 The Shareholders shall be entitled to receive notice of, to attend and to vote at all general meetings of the Company. Subject to the restrictions in the Articles (as described in paragraph 17.2 below) and subject to any special rights or restrictions for the time being attached to any class of shares, every Shareholder who is present in person (or, being a corporation, by representative) at a general meeting on a show of hands has one vote and, on a poll, every such holder who is present in person (or, being
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a corporation, by representative) or by proxy has one vote in respect of every share held.
17.1.2 Unless the Board otherwise determines, no Shareholder shall be entitled to vote at a general meeting or at any separate general meeting of the holders of any class of shares either in person or by proxy, or to exercise any other right or privilege as a member in respect of a share held by him unless and until all calls or other sums presently due and payable by him in respect of that share, whether alone or jointly with any other person, together with interest and expenses (if any) have been paid to the Company.
17.2 Restrictions on Ordinary Shares 17.2.1 Shares in the capital of the Company must be fully paid up when issued.
17.2.2 No member shall, unless the Board otherwise determines, be entitled to vote at a general meeting or at any separate meeting of the holders of any class of shares, either in person or by proxy, or to exercise any other right or privilege as a member in respect of a share held by him unless and until all calls or other sums presently due and payable by him in respect of that share whether alone or jointly with any other person together with interest and expenses (if any) have been paid to the Company.
17.2.3 If any Shareholder, or any other person appearing to the Directors to be interested in any shares in the capital of the Company held by such Shareholder has been served with a request notice under Article 162 and does not within the 14 day period prescribed therein supply to the Company the information thereby requested, the Company may (at the absolute discretion of the Directors) at any time thereafter by notice (a “Restriction Notice”) to such Shareholder direct that, in respect of the shares in relation to which the default has occurred (the “Default Shares” which expression shall include any further shares which are issued in respect of any Default Shares), the Shareholder shall not be entitled to be present or to vote on any question, either in person or by proxy, at any general meeting of the Company or separate general meeting of the holders of any class of shares of the Company, or to be reckoned in a quorum. Where the Default Shares represent at least 0.25 per cent. (in nominal value) of the issued shares of the same class as the Default Shares, then the Restriction Notice may also direct that:
(a) any dividend or any part thereof or other monies which would otherwise be payable on or in respect of the Default Shares shall be withheld by the Company, shall not bear interest against the Company and shall be payable (when the Restriction Notice ceases to have effect) to the person who would but for the Restriction Notice have been entitled to them; and/or
(b) where an offer of the right to elect to receive shares of the Company instead of cash in respect of any dividend or part thereof is or has been made by the Company, any election made thereunder by such member in respect of such Default Shares shall not be effective; and/or
(c) no transfer of any of the shares held by such member shall be recognised or registered by the Directors unless:
(i) the transfer is a permitted transfer; or
(ii) the member is not himself in default as regards supplying the requisite information required under Article 162 and, when presented for registration, the transfer is accompanied by a certificate by the member in a form satisfactory to the Directors effect that after due and careful enquiry the member is satisfied that none of the shares the subject of the transfer are Default Shares.
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17.3 Variation of class rights and alteration of capital 17.3.1 Subject to the provisions of the IOM Act and to any special rights for the time being attached to any existing shares, any shares may be allotted or issued with or have attached to them such preferred, deferred or other special rights or restrictions, whether in regard to dividend, voting, transfer, return of capital or otherwise, as the Company may from time to time by special resolution determine or, if no such resolution has been passed or so far as the resolution does not make specific provision, as the Board may determine.
17.3.2 If at any time the share capital of the Company is divided into shares of different classes, any of the rights for the time being attached to any share or class of shares in the Company (and notwithstanding that the Company may be or be about to be in liquidation) may be varied or abrogated in such manner (if any) as may be provided by such rights or, in the absence of any such provision, either with the consent in writing of the holders of not less than three-quarters in nominal value of the issued shares of the class or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of shares of the class duly convened and held as hereinafter provided (but not otherwise).
17.3.3 The Company in general meeting may from time to time by special resolution:
(a) increase its authorised share capital by such sum to be divided into shares of such amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;
(c) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled; and
(d) subject to the provisions of the IOM Act, subdivide its shares or any of them into shares of a smaller amount, and may by such resolution determine that, as between the shares resulting from such sub-division, one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights or be subject to any such restrictions as the Company has power to attach to unissued or new shares.
17.3.4 Subject to the provisions of the IOM Act and to any rights for the time being attached to any shares, the Company may by special resolution reduce its share capital or any capital redemption reserve or share premium account in any way if the Directors are satisfied, on reasonable grounds, that the Company will immediately after such reduction satisfy the Solvency Test.
17.3.5 Subject to the provisions of the IOM Act and any resolution of the Company in general meeting relating to pre-emptive rights, unissued shares at the date of adoption of the Articles and any shares hereafter created are at the disposal of the Board who, subject to being authorised to do so by the Company by an ordinary resolution of the shareholders passed in general meeting, may allot (with or without conferring rights of renunciation), grant options over, offer or otherwise deal with or dispose of them or rights to subscribe for or convert any security into shares to such persons (including the Directors themselves), at such times and generally on such terms and conditions as the Board may decide. Such allotments may be made for such consideration in any form (including money, a promissory note or written obligation to contribute money or property, real property, personal property (including goodwill and know-how), services rendered, or a contract for future services) as the Board may decide, provided no share shall be issued at a discount to par value.
17.3.6 Subject to the provisions of the IOM Act and to any special rights for the time being attached to any Existing Ordinary Shares, any share (including any preference share) may be issued which is, or at the option of the Company or of the holder of such share
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is liable, to be redeemed on such terms and in such manner as the Articles and the IOM Act may provide.
17.3.7 Subject to the provisions of the IOM Act and the rules of the London Stock Exchange and the JSE and to any rights for the time being attached to any shares, the Company may purchase or otherwise acquire any of its own shares of any class (including any redeemable shares) for any consideration provided the Directors are satisfied, on reasonable grounds, that the Company will immediately after the purchase or acquisition satisfy the Solvency Test. Subject to compliance with the provisions of section 54 of the IOM Act and Article 42, an offer to one or more holders in accordance with section 53(1)(b)(ii) of the IOM Act is permitted. Subject only as aforesaid, any shares to be so purchased may be selected in any manner whatsoever.
17.4 Transfer of shares 17.4.1 Subject to such of the restrictions of the Articles as may be applicable (as described in paragraph 17.2 above), each Shareholder may transfer all or any of his shares by instrument of transfer in writing in any usual form or in any form approved by the Board or, without a written instrument (subject to the class of shares becoming a participating security for the purposes of the regulations), through an uncertified system in accordance with the regulations.
17.4.2 In respect of shares held in certificated form, every instrument of transfer shall be executed by or on behalf of the transferor and (in the case of a transfer of a share which is not fully paid up) by or on behalf of the transferee. Every instrument of transfer shall be left at the registered office of the Company (or such other place as the Board may from time to time determine) at which it is presented for registration accompanied by the certificate of the shares so transferred, and/or such other evidence as the Company may require, to prove the title of the transferor of his rights to transfer the shares. All authorities to sign instruments of transfer granted by members for the purpose of transferring shares which may be lodged, produced or exhibited with or to the Company at its registered office (or such other place as the Board may from time to time determine) shall, as between the Company and the grantor of such authorities, be taken and deemed to continue and remain in full force and effect and the Company may allow the same to be acted upon until such time as express notice in writing of the revocation of the same shall have been given and lodged at the Company’s registered office (or such other place as the Board may from time to time determine) at which the authority was lodged, produced or exhibited. Even after the giving and lodging of such notice, the Company shall be entitled to give effect to any instrument signed under the authority to sign, and certified by any officer of the Company, as being in order before the giving and lodging of such notices. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the register of members in respect of it.
17.4.3 The Board shall not refuse to register any transfer or renunciation of shares which are traded on the London Stock Exchange or on the JSE in circumstances where such refusal would prevent dealings in such shares from taking place on an open and proper basis.
17.4.4 The Board may refuse to register a transfer if in their opinion (and with the concurrence of the United Kingdom Financial Conduct Authority or the JSE or such other competent authority) exceptional circumstances so warrant.
17.4.5 The Directors are required to register a transfer of an un-certificated share in accordance with the regulations and may refuse to register the transfer of any un- certificated share in accordance with the regulations.
17.4.6 Transfers of shares to a prohibited person under the Articles will not be registered.
17.4.7 Transfers of shares will not be registered in the circumstances referred to in paragraph 17.2 above.
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17.4.8 If the Board refuses to register a transfer of a share it shall, within two months after the date on which the transfer was lodged with the Company, send notice of the refusal to the transferee. Any instrument of transfer which the Board refuses to register shall (except in the case of suspected or actual fraud) be returned to the person depositing it. All instruments of transfer which are registered may be retained by the Company. No fee shall be charged for registration of a transfer or on the registration of any probate, letters of administration, certificate of death or marriage, power of attorney, notice or other instrument relating to or affecting the title to any shares. The registration of transfers of shares or of any class of shares may be suspended (to the extent the same is consistent with the IOM Act) at such times and for such periods (not exceeding 30 days in any year) as the Board may from time to time determine, provided that the prior consent of the London Stock Exchange and the JSE is obtained. Notice of closure of the Register shall be given in accordance with the requirements of the IOM Act.
17.5 Borrowing powers 17.5.1 The Board may exercise all the powers of the Company to borrow money, to give guarantees, to mortgage, hypothecate, pledge or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject to the provisions of the IOM Act and the Articles, to create and issue debentures and other loan stock and debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.
Provided that the Board shall restrict the borrowings of the Company so as to secure that the aggregate principal amount for the time being of all borrowings by the Company and for the time being owing to persons outside the Company shall not at any time, without the previous sanction of an ordinary resolution of the Company exceed ten times the aggregate of:
(a) the amount paid up on the issued share capital for the time being of the Company; and
(b) the total of capital and revenue reserves (including any share premium account, capital redemption reserve, all as shown in the latest balance sheet of the Company).
17.6 Dividends and distributions to Shareholders on liquidation 17.6.1 Subject to the provisions of the IOM Act and of the Articles, the Company may by ordinary resolution declare dividends to be paid to members according to their respective rights and interests in the profits of the Company. However, no dividend may be declared unless the Directors are satisfied, on reasonable grounds, that the Company will, immediately after the payment thereof, satisfy the Solvency Test, and no dividend shall exceed the amount recommended by the Board. The Directors may also withhold the payment of dividends to Substantial Shareholders (as such term is defined in the Articles) pursuant to Article 164. Subject as aforesaid, all dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid, but if any share is issued on terms providing that it shall rank for dividend as from a particular date, it shall rank for dividend accordingly.
17.6.2 Subject to the provisions of the IOM Act, the Board may declare and pay such interim dividends (including any dividend payable at a fixed rate) as appears to the Board to be justified by the profits of the Company available for distribution provided the Directors are satisfied, on reasonable grounds, that the Company will, immediately after the payment thereof, satisfy the Solvency Test.
17.6.3 The Board may, with the authority of an ordinary resolution of the Company, direct that payment of any dividend declared may be satisfied wholly or partly by the distribution of assets, and in particular, of paid up shares or debentures of the Company or any other
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company, or in anyone or more of such ways. Where any difficulty arises in regard to such distribution, the Board may settle it as it thinks fit.
17.6.4 Subject to the Board ensuring that the Company is at all times able to immediately satisfy any claim to such unclaimed dividends, all unclaimed dividends may be invested or otherwise be made use of by the Board for the benefit of the Company until claimed, provided that any dividend remaining unclaimed for a period of not less than 3 (three) years from the date on which it became payable may be forfeited by resolution of the Board for the benefit of the Company.
17.6.5 If the Company is wound up the liquidator may, with the sanction of a special resolution of the Company and any other sanction required by law, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the Shareholders or different classes of Shareholders. Any such division may be otherwise than in accordance with the existing rights of the Shareholders, but if any division is resolved otherwise than in accordance with such rights, the Shareholders shall have the same right of dissent and consequential rights as if such resolution were a special resolution passed pursuant to section 222 of the Companies Act 1931 (as applied by, but ignoring the words “and as if references therein to a ‘special resolution’ were references to a resolution” in, section 182 of the IOM Act). The liquidator may, with the like sanction, vest the whole or any part of the assets in trustees on such trusts for the benefit of the Shareholders as he with the like sanction shall determine, but no Shareholder shall be compelled to accept any assets on which there is a liability.
17.7 Real Estate Investment Trust
17.7.1 Identification of Substantial Shareholders (a) Each Substantial Shareholder, or any registered Shareholder holding Ordinary Shares on behalf of a Substantial Shareholder, must notify the Company if its Ordinary Shares form part of a Substantial Shareholding. Such a notice must be given within two business days.
(b) The Board may require any person to provide information in relation to any Ordinary Shares in order to determine whether the Ordinary Shares form part of a Substantial Shareholding. If the required information is not provided within the time specified (which would be seven days after a request is made or such other period as the Board may decide), the Board would be entitled to impose sanctions, including withholding dividends (as described in paragraph 17.7.2 below) and/or requiring the transfer of the Ordinary Shares to another person who is not, and does not thereby become, a Substantial Shareholder (as described below).
17.7.2 Preventing payment of a dividend to a Substantial Shareholder A dividend will not be paid on any Ordinary Shares that the Board believes may form part of a Substantial Shareholding unless the Board is satisfied that the Substantial Shareholder is not beneficially entitled to the dividend.
If, in these circumstances, payment of a dividend is withheld, the dividend will be paid subsequently if the Board is satisfied that:
(a) the Substantial Shareholder concerned is not beneficially entitled to the dividends (see also paragraph 17.7.3 below);
(b) the shareholding is not part of a Substantial Shareholding;
(c) all or some of the Ordinary Shares and the right to the dividend have been transferred to a person who is not, and does not thereby become, a Substantial Shareholder (in which case the dividends would be paid to the transferee); or
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(d) sufficient Ordinary Shares have been transferred (together with the right to the dividends) such that the Ordinary Shares retained are no longer part of a Substantial Shareholding (in which case the dividends would be paid on the retained Ordinary Shares).
For this purpose, references to the “transfer” of an Ordinary Share include the disposal (by any means) of beneficial ownership of, control of voting rights in respect of and beneficial entitlement to dividends in respect of, that Ordinary Share.
17.7.3 Payment of a dividend where rights to it have been transferred Dividends may be paid on Ordinary Shares that form part of a Substantial Shareholding if the Board is satisfied that the right to the dividend has been transferred to a person who is not, and does not thereby become, a Substantial Shareholder and the Board may be satisfied that the right to the dividend has been transferred if it receives a certificate containing appropriate confirmations and assurances from the Substantial Shareholder. Such a certificate may apply to a particular dividend or to all future dividends in respect of Ordinary Shares forming part of a specified Substantial Shareholding, until notice rescinding the certificate is received by the Company. A certificate that deals with future dividends will include undertakings by the person providing the certificate:
(a) to ensure that the entitlement to future dividends will be disposed of; and
(b) to inform the Company immediately of any circumstances which would render the certificate no longer accurate.
The Directors may require that any such certificate is copied or provided to such persons as they may determine, including HMRC.
If the Board believes a certificate given in these circumstances is or has become inaccurate, then it will be able to withhold payment of future dividends (as described in paragraph 17.7.2 above).
In addition, the Board may require a Substantial Shareholder to pay to the Company the amount of any tax payable (and other costs incurred) as a result of a dividend having been paid to a Substantial Shareholder in reliance on the inaccurate certificate. The Board may (as described in paragraph 17.7.5 below) arrange for the sale of the relevant Ordinary Shares and retain any such amount from the proceeds. Any such amount may also be recovered out of dividends to which the Substantial Shareholder concerned may become entitled in the future.
Certificates provided in the circumstances described above will be of considerable importance to the Company in determining whether dividends can be paid. If the Company suffers loss as a result of any misrepresentation or breach of undertaking given in such a certificate, it may seek to recover damages directly from the person who has provided it.
The effect of these provisions is that there is no restriction on a person becoming or remaining a Substantial Shareholder provided that the person who does so makes appropriate arrangements to divest itself of the entitlement to dividends.
17.7.4 Trust arrangements where rights to dividends have not been disposed of by a Substantial Shareholder If a dividend is, in fact, paid on Ordinary Shares forming part of a Substantial Shareholding (which might occur, for example, if a Substantial Shareholding is split among a number of nominees and is not notified to the Company prior to a dividend payment date) the dividends so paid are to be held on trust by the recipient for any person (who is not a Substantial Shareholder) nominated by the Substantial Shareholder concerned. The person nominated as the beneficiary could be the purchaser of the Ordinary Shares if the Substantial Shareholder is in the process of selling down their holding so as not to cause the Company to breach the Substantial Shareholder rule. If the Substantial Shareholder does not nominate anyone within 12
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years, the dividend concerned will be held on trust for the Company or any other person nominated by the Board.
If the recipient of the dividend passes it on to another without being aware that the Ordinary Shares in respect of which the dividend was paid were part of a Substantial Shareholding, the recipient will have no liability as a result. However, the Substantial Shareholder who receives the dividend should do so subject to the terms of the trust and as a result may not claim to be beneficially entitled to those dividends.
17.7.5 Mandatory sale of Substantial Shareholdings The Board may require the disposal of Ordinary Shares forming part of a Substantial Shareholding if:
(a) a Substantial Shareholder has been identified and a dividend has been announced or declared and the Board has not been satisfied that the Substantial Shareholder has transferred the right to the dividend (or otherwise is not beneficially entitled to it);
(b) there has been a failure to provide information requested by the Board; or
(c) any information provided by any person proves materially inaccurate or misleading.
If a disposal of shares required by the Board is not completed within the timeframe specified by the Board or if the Company incurs a charge to tax as a result of a dividend having been paid on a Substantial Shareholding, the Board may arrange for the sale of the relevant Ordinary Shares and for the Company to retain from the sales proceeds an amount equal to any tax so payable.
17.8 Directors 17.8.1 Subject to the provisions of the IOM Act, and the Memorandum of Association and the Articles of the Company and to any Directions given by special resolution of the Company the business of the Company shall be managed by the Board, which may exercise all the powers of the Company, whether relating to the management of the business or not.
17.8.2 Unless and until otherwise determined by the Company by ordinary resolution, the number of the Directors (other than any alternate directors) shall be not less than four but there shall be no maximum.
17.8.3 Subject to the provisions of the IOM Act and provided that Article 120 is complied with, a Director, notwithstanding his office:
(a) may enter into or otherwise be interested in any contract, arrangement, transaction or proposal with the Company or in which the Company is otherwise interested, either in regard to his tenure of any office or place of profit or as vendor, purchaser or otherwise;
(b) may hold any other office or place of profit under the Company (except that of auditor or of auditor of a subsidiary of the Company) in conjunction with the office of the Director and may act by himself or through his firm in a professional capacity for the Company, and in any such case on such terms as to remuneration and otherwise as the Board may arrange, either in addition to or in lieu of any remuneration provided for by any other Article;
(c) may be a director or other officer of, or employed by, or a party to any transaction or arrangement with or otherwise interested in, any company promoted by the Company or in which the Company is otherwise interested or as regards which the Company has any powers of appointment;
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(d) shall not be liable to account to the Company for any profit, remuneration or other benefit realised by any such office, employment, contract, arrangement, transaction or proposal; and
and no such contract, arrangement, transaction or proposal shall be avoided on the grounds of any such interest or benefit.
17.8.4 Save as provided in the Articles, and provided that notice has been given, a Director may vote and be counted in the quorum in relation to, any resolution of the Board or of a committee of the Board concerning any contract, arrangement, transaction or any other proposal whatsoever to which the Company is or is to be a party and in which he has directly or indirectly any interest which is material or otherwise than by virtue of his interests in shares or debentures or other securities of or otherwise.
17.8.5 If any question arises at any meeting as to the entitlement of any Director (other than the chairman) to vote or be counted in a quorum, and such question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum, such question shall be referred to the chairman of the meeting. The chairman’s ruling in relation to the Director concerned shall be final and conclusive.
17.8.6 The Directors (other than alternate directors) shall be entitled to receive by way of fees for their services as Directors such sum as the Board may from time to time determine provided that such sum shall not exceed in the aggregate £420,000 (or such other sum as the Company in general meeting shall from time to time determine).
17.8.7 Such sum (unless otherwise directed by the resolution of the Company by which it is voted) shall be divided among the Directors in such proportions and in such manner as the Board may determine or, in default of such determination, equally (except that in such event of any Director holding office for less than the whole of the relevant period in respect of which the fees are paid shall only rank in such division in proportion to the time during such period for which he holds office). Any fees payable pursuant to the Articles shall be distinct from any salary, remuneration or other amounts payable to a Director pursuant to any other provisions in the Articles and shall accrue from day to day.
17.8.8 Subject to the IOM Act and the Articles, during any period where the Company has a Controlling Shareholder, the Company may appoint or re-appoint a person who is willing to be an Independent Director, either to fill a vacancy or as an addition to the Board, provided such appointment or re-appointment has been approved by an ordinary resolution of each of the Company’s members and the Independent Shareholders.
17.8.9 The Board may from time to time appoint one or more of its body to hold any employment or executive office (including that of chief executive or managing director) for such term and subject to such other conditions as the Board thinks fit in accordance with Article 101. The Board may revoke or terminate any such appointment without prejudice to any claim for damages for breach of contract between the Director and the Company. The salary or remuneration of any Director appointed to hold any employment or executive office in accordance with the provisions of the Articles may be either a fixed sum of money, or may altogether or in part be governed by business done or profits made or otherwise determined by the Board, and may be in addition to or in lieu of any fee payable to him for his services as a Director pursuant to the Articles.
17.8.10 A resolution for the appointment of two or more persons as Directors by a single resolution shall be void unless an ordinary resolution that it shall be so proposed has first been agreed to by the meeting without any vote being given against it.
17.8.11 The Board may from time to time: (a) delegate or entrust to and confer on any Director holding executive office (including a chief executive or managing director) such of its powers, authorities and discretions (with power to sub-delegate) for such time, on such terms and subject to such conditions as it thinks fit; and (b) revoke, withdraw, alter or vary all or any of such powers.
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17.8.12 Each Director (other than an alternate director) may, by notice in writing delivered to the Company Secretary at the registered office of the Company, or in any other manner approved by the Board, appoint any other Director or any person approved for that purpose by the Board and willing to act, to be his alternate.
17.8.13 At each Annual General Meeting one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not greater than one-third) shall retire from office by rotation. The Directors to retire by rotation shall include (so far as necessary to obtain the number required) any Director who is due to retire at the meeting by reason of age or who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election or appointment and so that as between persons who became or were last re-elected directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring Director shall be eligible for re-election (subject always to Article 80, where relevant). In addition, any Director who would not otherwise be required to retire shall retire by rotation at the third annual general meeting after his last appointment or re-appointment. Life directorships are not permissible.
17.9 Investigate interests in Shares 17.9.1 The Company may by notice in writing request any person whom the Company knows or has reasonable cause to believe to be or, at any time during the three years immediately preceding the day on which the notice is issued, to have been interested in shares in the Company:
(a) to confirm that fact or (as the case may be) to indicate whether or not it is the case; and
(b) where he holds or has during that time held an interest in shares so comprised, to give such further information as may be requested in accordance with Article 162.2.
17.10 Annual General Meetings and Extraordinary General Meetings 17.10.1 An annual general meeting (the “Annual General Meeting”) shall be convened by the Board once at the least in every calendar year. Annual general meetings shall be held in the United Kingdom at such time and place as the Board may determine.
17.10.2 The Board may convene an extraordinary general meeting whenever it thinks fit. An extraordinary general meeting shall also be convened on such requisition, or in default may be convened by such requisitionists, as provided by section 67(2) of the IOM Act.
17.10.3 An Annual General Meeting shall be convened by not less than 21 clear days’ notice in writing. All extraordinary general meetings shall be convened by not less than 14 clear days’ notice in writing.
17.10.4 No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business. Two persons entitled to attend and to vote on the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation which is a member, shall be a quorum.
17.10.5 The Board may convene a meeting of the holders of any class of shares whenever it thinks fit and whether or not the business to be transacted involves a variation or abrogation of class rights. The quorum for every such meeting shall be not less than two persons holding or representing by proxy at least one third of the nominal amount paid up on the issued shares of the class.
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17.11 Notification of interests in shares 17.11.1 Notification of interests in shares is only dealt with in the Articles. The Articles provide that where a member either:
(a) to his knowledge acquires a notifiable interest in shares in the Company or ceases to be so interested in shares (whether or not retaining an interest in other shares); or
(b) becomes aware that he has so acquired a notifiable interest in shares in the Company or that he has ceased to be so interested in shares in the Company in which he was previously interested;
then the Shareholder is obliged to notify the Company of the interests which he has or had in shares.
17.11.2 A Shareholder has a “Notifiable Interest” at any time when he is interested in shares and is resident for tax purposes in the Isle of Man or the legal holder of shares of an aggregate nominal value equal to or more than 5 per cent. of the Company’s issued share capital.
17.12 Provisions relating to changes in the capital that are more stringent than required by law 17.12.1 Subject to the provisions of the IOM Act and to any rights for the time being attached to any shares, the Company may by special resolution reduce its share capital in any way, provided that the Directors are satisfied, on reasonable grounds, that the Company will immediately after such reduction satisfy the Solvency Test.
17.12.2 Subject to the provisions of the IOM Act and the rules of the London Stock Exchange and the JSE and to any rights for the time being attached to any shares, the Company may purchase or otherwise acquire any of its own shares of any class (including any redeemable shares) for any consideration provided the Directors are satisfied, on reasonable grounds, that the Company will immediately after the purchase or acquisition satisfy the Solvency Test. Subject to compliance with the provisions of section 54 of the IOM Act and this Article 42, an offer to one or more holders in accordance with section 53(1)(b)(ii) of the IOM Act is permitted. Subject only as aforesaid, any shares to be so purchased may be selected in any manner whatsoever.
17.12.3 If at any time the share capital of the Company is divided into shares of different classes, any of the rights for the time being attached to any share or class of shares in the Company (and notwithstanding that the Company may be or be about to be in liquidation) may be varied or abrogated in such manner (if any) as may be provided by such rights or, in the absence of any such provision, either with the consent in writing of the holders of not less than three-quarters in nominal value of the issued shares of the class or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of shares of the class duly convened and held as hereinafter provided (but not otherwise).
17.13 Other The Board may not make, amend or repeal any necessary or incidental rules relating to the governance of the Company which are contrary to the JSE Listings Requirements. The members may not ratify any action by the Company or the Directors that is inconsistent with any limit, restriction or qualification contained in the Articles and/or any provision contained in the JSE Listings Requirements.
18. TAXATION
18.1 UK Taxation The statements set out below are intended only as a general guide to certain aspects of current UK tax law and HMRC practice as at the date of this document and apply only to certain Shareholders resident or ordinarily resident for tax purposes in the UK (save where express
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reference is made to non-UK resident persons). The summary does not purport to be a complete analysis or listing of all the potential tax consequences of holding Ordinary Shares and Placing Shares. Prospective purchasers of Ordinary Shares and Placing Shares are advised to consult their own independent tax advisers concerning the consequences under UK tax law of the acquisition, ownership and disposition of Ordinary Shares and Placing Shares. The statements below do not constitute tax advice.
The statements are not applicable to all categories of Shareholders, and in particular are not addressed to (i) Shareholders who do not hold their Ordinary Shares and Placing Shares as capital assets or investments and who are not the absolute beneficial owners of those shares, (ii) Shareholders who own (or are deemed to own) 10 per cent. or more of the voting power of the Company, (iii) special classes of Shareholders such as dealers in securities, broker-dealers, insurance companies, trustees of certain trusts and investment companies, (iv) Shareholders who hold Ordinary Shares and Placing Shares as part of hedging or commercial transactions, (v) Shareholders who hold Ordinary Shares and Placing Shares in connection with a trade, profession or vocation carried on in the UK (whether through a branch or agency or otherwise), (vi) Shareholders who hold Ordinary Shares and Placing Shares in a personal equity plan or an individual savings account or (vii) Shareholders who are not resident or ordinarily resident in the UK for tax purposes (save where express reference is made to non-UK resident Shareholders).
18.1.1UK Taxation of PIDs (a) UK taxation of Shareholders who are individuals
Subject to certain exceptions, a PID will generally be treated in the hands of Shareholders who are individuals as the profit of a single UK property business (as defined in Part 3 of the Income Tax (Trading and Other Income) Act 2005). A PID is, together with any property income distribution from any other company to which Part 12 of the CTA 2010 applies, treated as a separate UK property business. Income from any other UK property business (a “different UK property business”) carried on by the relevant Shareholder must be accounted for separately. This means that any surplus expenses from a Shareholder’s different UK property business cannot be offset against a PID as part of a single calculation of the profits of the Shareholder’s UK property business. No dividend tax credit will be available in respect of PIDs. However, credit will be available in respect of the basic rate tax withheld by the Company (where required) on the PID.
(b) UK taxation of corporate Shareholders
Subject to certain exceptions, a PID will generally be treated in the hands of Shareholders who are within the charge to corporation tax as profit of a property business (as defined in Part 4 of CTA) (“Part 4 property business”). A PID is, together with any property income distribution from any other company to which Part 12 of the CTA 2010 applies, treated as a separate Part 4 property business. Income from any other Part 4 property business (a “different Part 4 property business”) carried on by the relevant Shareholder must be accounted for separately. This means that any surplus expenses from a Shareholder’s different Part 4 property business cannot be offset against a PID as part of a single calculation of the Shareholder’s Part 4 property business profits.
(c) UK taxation of Shareholders who are not resident for tax purposes in the UK
Where a Shareholder who is resident for tax purposes outside the UK receives a PID, the PID will generally be chargeable to UK income tax as profit of a UK property business and this tax will generally be collected by way of a withholding. Under section 548(7) of the CTA 2010, this income is expressly not non-resident landlord income for the purposes of regulations under section 971 of the Income Tax Act, 2007.
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18.1.2 Withholding tax (a) General
Subject to certain exceptions summarised below, the Company is required to withhold income tax at source at the basic rate (currently 20 per cent) from its PIDs (whether paid in cash or in the form of a stock dividend). The Company will provide Shareholders with a certificate setting out the gross amount of the PID, the amount of tax withheld, and the net amount of the PID.
(b) Shareholders solely resident and ordinarily resident in the UK
Where tax has been withheld at source, Shareholders who are individuals may, depending on their particular circumstances, be liable to further tax on their PID at their applicable marginal rate, incur no further liability on their PID, or be entitled to claim repayment of some or all of the tax withheld on their PID. Shareholders who are corporate entities will generally be liable to pay corporation tax on their PID and if (exceptionally) income tax is withheld at source, the tax withheld can be set against their liability to corporation tax or income tax which they are required to withhold in the accounting period in which the PID is received.
(c) Shareholders who are not resident for tax purposes in the UK
It is not possible for a Shareholder to make a claim under a double taxation convention for a PID to be paid by the Company gross or at a reduced rate. The right of a Shareholder to claim repayment of any part of the tax withheld from a PID will depend on the existence and terms of any double taxation convention between the UK and the country in which the Shareholder is resident.
(d) Exceptions to requirement to withhold income tax
Shareholders should note that in certain circumstances the Company is not required to withhold income tax at source from a PID. These include where the Company reasonably believes that the person beneficially entitled to the PID is a company resident for tax purposes in the UK, or a charity or a company resident for tax purposes outside the UK with a permanent establishment in the UK which is required to bring the PID into account in computing its chargeable profits. They also include where the Company reasonably believes that the PID is paid to the scheme administrator of a registered pension scheme, the sub-scheme administrator of certain pension sub-schemes, the account manager of an Individual Savings Account (“ISA”), the plan manager of a Personal Equity Plan (“PEP”), or the account provider for a Child Trust Fund, in each case, provided the Company reasonably believes that the PID will be applied for the purposes of the relevant fund, scheme, account or plan.
In order to pay a PID without withholding tax, the Company will need to be satisfied that the Shareholder concerned is entitled to that treatment. For that purpose the Company will require such Shareholders to submit a valid claim form (copies of which may be obtained on request from the Registrars). Shareholders should note that the Company may seek recovery from Shareholders if the statements made in their claim form are incorrect and the Company suffers tax as a result. The Company will, in some circumstances, suffer tax if its reasonable belief as to the status of the Shareholder turns out to have been mistaken.
(e) UK taxation of Non-PID Dividends
Non-PID Dividends paid by the Company will be taxed in the same way as dividends paid by a Company which does not have REIT status, whether in the hands of individual or corporate Shareholders and regardless of whether the Shareholder is resident for tax purposes in the UK.
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The Company will not be required to withhold tax at source when paying a Non- PID Dividend (whether in cash or in the form of a stock dividend).
18.1.3 UK taxation of chargeable gains, stamp duty and stamp duty reserve tax in respect of Ordinary Shares in the Company (a) UK taxation of chargeable gains
For the purpose of UK tax on chargeable gains, the amount paid by a Shareholder for Ordinary Shares will constitute the base cost of his holding. If a Shareholder disposes of all or some of his Ordinary Shares, a liability to tax on chargeable gains may arise. This will depend on the base cost which can be allocated against the proceeds, the Shareholder’s circumstances and any reliefs to which they are entitled. In the case of corporate Shareholders, indexation allowance will apply to the amount paid for the Ordinary Shares.
The current rate of tax on chargeable gains is up to 28 per cent. for individuals, trustees and personal representatives; and 20 per cent. from 1 April 2015 for corporate Shareholders.
Shareholders who are not resident in the UK for tax purposes may not, depending on their personal circumstances, be liable to UK taxation on chargeable gains arising from the sale or other disposal of their Ordinary Shares (unless they carry on a trade, professional or vocation in the UK through a branch or agency with which their Ordinary Shares are connected or through a permanent establishment).
Individual Shareholders who are temporarily neither UK resident nor ordinarily resident may be liable to UK capital gains tax on chargeable gains realised on their return to the UK.
Shareholders who are resident for tax purposes outside the UK may be subject to foreign taxation on capital gains depending on their circumstances.
(b) UK stamp duty and UK SDRT On the basis that the Company keeps its share register outside the United Kingdom, which is its current intention, paperless transfers of Ordinary Shares within CREST will not be liable to SDRT. If a transfer of shares takes place outside CREST, such a transfer may attract UK stamp duty, broadly at a rate of 0.5 per cent. of the consideration, if it could be said to relate to something done or to be done in the United Kingdom.
No stamp duty or SDRT should be payable on the issue of Ordinary Shares.
18.2 Isle of Man Taxation
18.2.1 Tax Residence in the Isle of Man Historically a company incorporated in the Isle of Man was considered to be tax resident in the Isle of Man as a result of the domestic laws of the Isle of Man, regardless of its place of central management and control. However, section 2N of the Isle of Man Income Tax Act 1970 provides that a company that is incorporated in the Isle of Man is treated as not tax resident in the Isle of Man if: (a) the company is managed and controlled in another country; (b) it is resident for tax purposes under the other country’s law; (c) there is a bona fide commercial reason for its residence status in the other country, which status is not motivated by a wish to avoid or reduce Isle of Man income tax for any person; and (d) either (i) the company is resident for tax purposes under a double taxation agreement between the Isle of Man and the other country in which a tie-breaker
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clause applies; or (ii) the highest rate at which any company may be charged to tax on any part of its profits in the other country is 20 per cent. or higher.
As a UK-REIT the Company’s management and control is in the UK. The Company is therefore not tax resident in the Isle of Man and meets the residence requirement of the UK-REIT regime.
18.2.2 Capital Taxes in the Isle of Man The Isle of Man has a regime for the taxation of income, but there are no capital gains taxes, stamp taxes or inheritance taxes in the Isle of Man. No Isle of Man stamp duty or stamp duty reserve tax will be payable on the issue or transfer of, or any other dealing in the Ordinary Shares.
18.2.3 Corporate Income Tax in the Isle of Man The standard rate of corporate income tax in the Isle of Man is 0 per cent. (zero per cent).
However, 10 per cent. rate of tax applies to income received by a company from banking business carried on in the Isle of Man.
With effect from 6 April 2015, the rate of tax applying to income from land and property in the Isle of Man was increased to 20 per cent.
A 10 per cent. rate of tax also applies to companies which carry on retail business in the Isle of Man and have taxable income of more than £500,000 from such business.
As it does not receive income from these sources, the Company is liable to income tax at a rate of “zero” per cent. on its profits. The Company is not required to withhold tax from the payment of dividends to Shareholders, wherever resident.
18.2.4 Management and Control of the Company The management and control of the Company and its subsidiaries are exercised in the UK.
18.2.5 Isle of Man Probate In the event of the death of a sole holder of Ordinary Shares an Isle of Man grant of probate or administration may be required, in respect of which certain fees will be payable to the Isle of Man Government.
18.3 South African Taxation The statements set out below are intended only as a general guide to certain aspects of current South African and UK law as at the date of this document and apply only to certain Shareholders resident for tax purposes in South Africa. The summary does not purport to be a complete analysis or listing of all the potential tax consequences of holding Ordinary Shares and Placing Shares. Prospective purchasers of Ordinary Shares and Placing Shares are advised to consult their own independent tax advisers concerning the consequences under UK tax law of the acquisition, ownership and disposition of Ordinary Shares and Placing Shares. The statements below do not constitute tax advice.
The statements are not applicable to all categories of Shareholders, and in particular are not addressed to (i) Shareholders who do not hold their Ordinary Shares and Placing Shares as capital assets or investments and who are not the absolute beneficial owners of those shares, (ii) special classes of Shareholders such as dealers in securities, broker-dealers, insurance companies, trustees of certain trusts, retirement funds and investment companies, (iii) Shareholders who hold Ordinary Shares and Placing Shares as part of hedging or commercial transactions, (iv) Shareholders who hold Ordinary Shares and Placing Shares in connection with a trade, profession or vocation carried on in South Africa (whether through a branch or agency or otherwise), (v) Shareholders who hold Ordinary Shares and Placing Shares in a personal
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equity plan or an individual savings account or (vi) Shareholders who are not resident in South Africa for tax purposes.
The analysis set out below assumes that the Company is not treated as a Controlled Foreign Company (“CFC”) for South African tax purposes as not more than 50 per cent. of the Company’s shares are held by South African residents.
18.3.1 UK Withholding tax Under UK law the Company is required to withhold UK income tax at source at the basic rate (currently 20 per cent) from its PIDs (whether paid in cash or in stock dividends). The Company will provide Shareholders with a certificate setting out the gross amount of the PID, the amount of UK income tax withheld, and the net amount of the PID.
It is not possible for a Shareholder to make a claim under a double taxation convention for a PID to be paid by the Company gross or at a reduced rate. The right of a Shareholder to claim repayment of any part of the tax withheld from a PID will depend on the existence and terms of any double taxation convention between the UK and the country in which the Shareholder is resident. Under the current UK-South African double tax treaty and subject to a successful claim being made, a South African tax resident shareholder is able to reclaim 5 per cent. in relation to the 20 per cent. UK income tax withheld such that the UK withholding tax on the PID is reduced to 15 per cent. for South African tax residents.
The analysis set out below assumes that the Shareholder is able to make a valid claim under the UK-South African tax treaty in order to reclaim 5 per cent. in relation to the 20 per cent. UK income tax withheld.
No UK withholding tax is charged on non-PID distributions.
18.3.2 South African Taxation of PIDs The taxation of a PID for South African tax purposes will depend on whether the PID is a “foreign dividend” as defined by section 1 of the Income Taxes Act, No. 59 of 1962 (the “Act”). For this purpose, a foreign dividend means any amount that is paid or payable by a foreign company in respect of a share in that company where that amount is treated, by that foreign company, as a dividend or similar payment for the purposes of the company taxation laws of the jurisdiction in which the paying entity’s place of effective management exists. A PID is treated as a distribution by the paying entity for UK tax purposes (i.e. it is not deductible as a charge against profits) and is reflected in the financial statements in the same way as any other dividend.
For UK corporation tax purposes, the UK-REIT provisions at section 530(6A)(a), (b) CTA 2010 refer to PIDs as including both a dividend in cash and a dividend in shares issued in lieu of a cash dividend.
This conclusion is further supported by the fact that a PID meets the definition of a dividend for the purposes of Article 10 of the OECD model treaty.
Given that a PID is treated as a dividend by the ‘payer’ under UK taxation laws then any payment of PIDs should be treated as “foreign dividends” for the purposes of section 1 of the Act.
South African taxation of Shareholders who are individuals A PID which is settled in cash should be treated in the hands of individual shareholders who are tax resident in South Africa as a foreign dividend. No South African income tax will be payable on the PID, although individual shareholders will be subject to South African dividend withholding tax at a rate of 15 per cent. A rebate equal to the amount of UK withholding tax may be deducted from the South African dividends tax suffered, subject to certain administrative requirements being met. A credit of the UK withholding tax may therefore be available, such that no additional South African dividends tax should arise in respect of UK PIDs.
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South African taxation of corporate shareholders Corporate South African shareholders in the Company will be exempt from South African income tax on PID income and South African dividend withholding tax provided that:
(a) The South African companies are the beneficial owners of the dividends, and
(b) The Company is (by the date determined by the Company or its regulated intermediary, or where no such date is determined the date of payment of the dividend) in possession of declaration and undertaking forms relating to the beneficial ownership of the dividends.
On the basis of the above, no additional South African income tax or dividends tax should arise on the PID. The only incidence of tax will be the 15 per cent. net withholding tax once a claim has been made to and processed by the UK authorities under the UK- South African double tax treaty – see above.
South African taxation of exempt shareholders No South African income tax is payable by income tax exempt entities such as retirement funds and public benefit organisations on receipts from PID distributions. In addition, such bodies are exempt from South African dividend withholding tax provided the Company or its regulated intermediary is, by the required dates (see above), in possession of declaration of undertaking forms relating to the beneficial ownership of the dividends.
There is generally no provision to enable the PID to be paid gross to such bodies and therefore the UK withholding tax will be withheld on distributions to such bodies, currently at a rate of 20 per cent. Assuming the shareholder is able to make a claim to the UK tax authorities for 5% in relation to the 20% of tax withheld by the Company on the PID under the UK-South African double tax treaty the net tax effect will be 15 per cent.
Article 10 of the UK/South Africa double tax agreement provides that the tax charged on dividends paid by a UK company to a South African resident shall not exceed 15% of the gross amount of the dividend.
18.3.3 South African taxation of a Non PID distribution
South African taxation of Shareholders who are individuals Non PID distributions will not be subject to UK withholding taxes. Such distributions should be treated as foreign dividends in South Africa and such foreign dividends will not be chargeable to South African income tax but will be subject to South African withholding tax at a rate of 15 per cent. However, no credit will be available to South African resident shareholder on the underlying UK or overseas corporate income taxes charged on the income and gains.
South African taxation of corporate shareholders Corporate South African shareholders in the Company will be exempt from South African income tax on non-PID income and South African dividend withholding tax provided that:
(a) The South African companies are the beneficial owners of the dividends, and
(b) The Company is (by the date determined by the Company or its regulated intermediary, or where no such date is determined the date of payment of the dividend) in possession of declaration and undertaking forms relating to the beneficial ownership of the dividends.
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On the basis of the above, no income tax or dividends tax charge should arise in South Africa and the only incidence of tax will be the underlying UK or overseas corporate income tax.
South African taxation of exempt shareholders No South African income tax is payable by income tax exempt entities or entities such as retirement funds and public benefit organisations on receipts from non-PID distributions. In addition, such entities are exempt from South African dividend withholding tax provided the Company paying the distribution is in possession of declaration of undertaking forms relating to the beneficial ownership of the dividends.
18.3.4 South African taxation of chargeable gains
Disposal of property by UK tax resident companies No South African taxation should be payable in relation to gains made by UK tax resident companies on UK properties.
Such gains will be payable by the Company to shareholders as PIDs and withholding tax at a rate of 15 per cent. will be due (after a valid reclaim of 5 per cent. in relation to the 20 per cent. of the UK tax withheld is made).
No additional South African income tax or dividends tax should arise on the distribution. The only incidence of tax will be the 15 per cent. net withholding tax once a claim has been made to and processed by the UK authorities under the UK-South African double tax treaty.
Disposal of property by non-UK tax resident companies The analysis which follows only considers UK and South African taxation matters and, in particular, disregards any local tax that may be payable in relation to gains arising on non-UK assets.
South African tax resident individual South African dividend withholding tax will be due on the distribution, currently at a rate of 15 per cent.
South African tax resident company and South African pension funds and other exempt entities No South African dividend withholding tax will be due in relation to the distribution on distributions of gains payable to companies and pension funds and other exempt entities which are tax resident in South African provided that:
(a) The South African companies/pension funds/other exempt entities are the beneficial owners of the dividends, and
(b) The Company is (by the date determined by the Company or its regulated intermediary or where no such date is determined the date of payment of the dividend) in possession of declaration and undertaking forms relating to the beneficial ownership of the dividends.
18.3.5 South African Taxation of Capital Gains
South African taxation of capital gains For the purpose of South African tax on capital gains, the amount paid by a Shareholder for Ordinary Shares will constitute the base cost of his holding. If a Shareholder disposes of all or some of his Ordinary Shares, a liability for capital gains tax may arise. This will depend on the base cost which can be allocated against the proceeds, the Shareholder’s circumstances and any reliefs to which they are entitled. The current percentage of the
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capital gain which must be included in taxable income is up to 33.3 per cent. for individuals and 66.6 per cent. for trusts and corporate shareholders.
Securities transfer tax Securities transfer tax at rate of 0.25 per cent. is levied on the transfer on sale or other disposal of Ordinary shares. No securities transfer tax will be payable on the issue of Ordinary shares.
19. LEGAL AND ARBITRATION PROCEEDINGS There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the 12 months period prior to the publication of this document which may have or have had in the recent past significant effects on the Company or the Group’s financial position or profitability.
20. RELATED PARTY TRANSACTIONS 20.1 Details of the Related Party Transaction are set out in paragraph 8 of Part 7 (Letter from the Chairman of Redefine International P.L.C.) of this document.
20.2 As announced on 7 September 2015, the Company exchanged contracts to acquire the AUK Portfolio from Aegon UK Property Fund. As part of that acquisition, the Company entered into a number of related party transactions with Redefine Properties, each of which was approved by Related Party Independent Shareholders at the September EGM, as follows:
(a) the RPL Equity Commitment whereby Redefine Properties irrevocably undertook to subscribe up to £70.0 million in any future equity raise undertaken by the Company to part finance the consideration of Tranche 2. Further details of the RPL Equity Commitment are set out in paragraph 21.4 of this Part 15;
(b) the RPL Loan whereby Redefine Properties made available to the Company a conditional loan facility for £135 million which can be drawn down by the Company at least three Business Days prior to completion of the acquisition of the Tranche 2 Properties and such funds being provided to the Company, in order to allow Redefine AUK to finance the relevant Acquisition SPVs to acquire the Tranche 2 Properties;
(c) in consideration for Redefine Properties providing the RPL Equity Commitment and the RPL Loan described above, the Company agreed to pay Redefine Properties a fee of £2.5 million; and
(d) the RPL JV being the potential joint venture between Redefine AUK and Redefine Properties that would form if Conversion occurs and therefore the Disposal. The RPL JV would be governed by the terms of the RPL JV Agreement.
20.3 Other than as set out above, and save as disclosed in the historical financial information relating to related party transactions as set out in:
• note 36 (related party transactions) to the Group’s consolidated financial statements for the financial year ended 31 August 2015;
• note 37 (related party transactions) to the Group’s consolidated financial statements for the financial year ended 31 August 2014;
• note 33 (related party transactions) to the Group’s consolidated financial statements for the financial year ended 31 August 2013;
each of which is incorporated by reference into this document, during the period between 1 September 2015 to 27 January 2016 (being the Latest Practicable Date), the Group did not enter into any transactions with related parties.
20.4 Please refer to Part 16 (Documents incorporated by reference) of this document for further details about information incorporated by reference.
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21. MATERIAL CONTRACTS Set out below is a summary of each contract (not being a contract entered into in the ordinary course of business) entered into by any member of the Group: (a) within the two years immediately preceding the date of this document and which are or may be material to the Group; or (b) which contain any provision under which any member of the Group has any obligation or entitlement which is material to the Group as at the date of this document:
21.1 Placing Agreement On 28 January 2016, the Company and the Joint Bookrunners entered into the Placing Agreement pursuant to which the Company appointed JPMC and Peel Hunt to act as joint bookrunners in connection with the proposed UK Placing. Under the Placing Agreement, the Joint Bookrunners have severally agreed to use reasonable endeavours to procure, as agents for the Company, placees for the UK Placing Shares at the Placing Price. To the extent that, following the release of the closing announcement relating to the Placing, a Placee (other than Redefine Properties) procured by a Joint Bookrunner fails to subscribe for and pay the Placing Price for any of the UK Placing Shares which they have been allocated in the UK Placing, the relevant Joint Bookrunner has agreed to acquire such UK Placing Shares. If the Company and the Joint Bookrunners agree that the UK Placing will proceed, the Placing Agreement is conditional upon, amongst other things, admission of the UK Placing Shares occurring on or before 8.00 a.m. on 23 February 2016 (or such later date as the Company and the Joint Bookrunners may agree, being not later than 8.00 a.m. (London time) on 31 May 2016). Under the Placing Agreement, the Company gave certain customary undertakings, representations and warranties to the Joint Bookrunners in relation to the UK Placing and the Group and its business. In addition, the Company gave customary indemnities to the Joint Bookrunners and certain indemnified persons connected with each of them. The Joint Bookrunners have the right to terminate the Placing Agreement in certain circumstances prior to admission of the UK Placing Shares, including in the event of a breach of the warranties. In consideration of the services provided by the Joint Bookrunners, the Company has agreed to pay an aggregate commission to the Joint Bookrunners based on (a) the aggregate number of UK Placing Shares at the Placing Price, other than those placees who the parties agree shall be treated as South African investors; and (b) the aggregate number of UK Placing Shares at the Placing Price placed with placees who the parties agree shall be treated as South African investors. In addition, Peel Hunt and JPMC will also receive a corporate finance fee of £300,000 and £200,000 respectively.
21.2 South African Placing Agreement On 28 January 2016, the Company and Java Capital entered into the South African Placing Agreement pursuant to which the Company appointed Java to act as its sole agent in connection with the proposed South African Placing. Under the South African Placing Agreement, Java Capital has agreed to use reasonable endeavours to procure, as agent for the Company, placees for the South African Placing Shares at the Placing Price. If the Company and Java Capital agree that the South African Placing will proceed, the South African Placing Agreement is conditional upon, amongst other things, admission of the South African Placing Shares occurring on or before 9.00 a.m. (South African time) on 23 February 2016 (or such later date as Java Capital may determine in agreement with the Company and the Joint Bookrunners, being not later than 9.00 a.m. (South African time) on 31 May 2016). Under the Placing Agreement, the Company gave certain customary undertakings, representations and warranties to Java Capital in relation to the South African Placing and the Group and its business. In addition, the Company gave customary indemnities to Java Capital and certain indemnified persons connected with it. Java Capital has the right to terminate the South African Placing Agreement in certain circumstances prior to admission of the South African Placing Shares, including in the event of a breach of the warranties. In consideration of the services provided by Java Capital, the Company has agreed to pay a commission to Java Capital based on (a) the aggregate number of South African Placing Shares
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at the Placing Price; and (b) the aggregate number of UK Placing Shares at the Placing Price placed with placees introduced by Java Capital.
21.3 Acquisition Agreements On 5 September 2015, the Company entered into the Acquisition Agreements to acquire the AUK Portfolio. The acquisition of the AUK Portfolio was split into Tranche 1 and Tranche 2. Tranche 1 completed on 2 October 2015 at a purchase price of £203.5 million (£212.1 million including costs), and Tranche 2 is expected to complete on or around 1 March 2016. Following the disposal of 16 Grosvenor Street, London (as announced by the Company on 21 December 2015), the consideration payable to complete Tranche 2 has been reduced by £32.0 million to £201.7 million (£210.2 million including costs).
Tranche 1 comprised of the following nine properties, with apportioned values as follows:
1. Express Park, Bridgwater, TA6 4RN £41,100,000
2. Severalls Industrial Estate, Newcomen Way Colchester, Essex, CO4 9TG £3,400,000
3. Lakeview, Lakeside Drive, Centre Park, Warrington, WA1 1RW £5,500,000
4. Camino Park, James Wyatt Way, Gatwick Road, Crawley, RH10 9TZ £41,600,000
5. 7-14 Albion Street, Derby, Derbyshire, DE2 £3,900,000
6. House of Fraser, 1 Paragon Square, Hull, HU1 3JZ £17,100,000
7. Queens Drive Retail Park, Queens Drive, Kilmarnock, KA1 3XB £26,100,000
8. St Davids Retail Park, Bangor £15,400,000
9. The Arches Retail Park, Lower High Street, Watford, WD17 2SD £49,400,000
Tranche 2 will comprise the following nine properties (following the disposal of 16 Grosvenor Street, London, announced by the Company on 21 December 2015), with apportioned values as follows:
1. The Omnibus Building, Lesbourne Road, Reigate, Surrey, RH2 7LD £19,500,000
2. The Range, 25 Milton Link, Milton Road, Edinburgh, EH15 3QH £11,200,000
3. Synter, 575–624 London Road, High Wycombe, Bucks, HP11 1EZ £24,900,000
4. Priory Retail Park, Christchurch Road, Colliers Wood, Merton, London, SW19 2NX £37,519,375
5. 201 Deansgate, Manchester, M3 3NW £25,800,000
6. Kingsthorne Distribution Park, Henson Way, Telford Industrial Estate, Kettering, Northamptonshire, NN16 8PX £10,700,000
7. City Point, 29 King Street, Leeds, LS1 2HL £21,600,000
8. 127-133 Charing Cross Road, London, WC2H 0LA £42,600,000
9. 7 Lochside View, Edinburgh £10,900,000
The Acquisition Agreements contained warranties, indemnities and covenants common for a transaction of this nature. The Company also agreed to provide a guarantee to Aegon UK Property Fund in respect of the completion obligations of each relevant Acquisition SPV for Tranche 2 in the event any relevant Acquisition SPV fails to complete in respect of the relevant asset.
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21.4 RPL Equity Commitment On 5 September 2015, the Company and Redefine Properties entered into the RPL Equity Commitment whereby Redefine Properties irrevocably undertook to subscribe up to £70.0 million in any equity raise undertaken by the Company to finance the completion of the acquisition of the Tranche 2 Properties. To the extent that such equity raise requires further shareholder approval, Redefine Properties also irrevocably agreed to vote in favour of all resolutions on which it is entitled to vote in connection therewith, save that Redefine Properties irrevocably undertook not to vote on any resolutions required to approve its participation in such capital raise.
The RPL Equity Commitment terminates upon the earlier of (i) the completion of any equity raise that is used to fund Tranche 2 or (ii) the Conversion.
Redefine Properties’ commitment to subscribe for up to £70.0 million in any such equity raise is subject to a subscription price per Ordinary Share being at the Minimum RPL Price.
To the extent that any equity raise to finance Tranche 2 or repay the RPL Loan is oversubscribed, the Company agreed that Redefine Properties shall be allocated such number of new Ordinary Shares as enables Redefine Properties to maintain its percentage shareholding in the Company as at the date immediately preceding the completion of such equity raise.
21.5 RPL Loan On 5 September 2015, the Company entered into the RPL Loan being a conditional loan facility for £135.0 million, made between (1) Redefine Properties, (2) Redefine Global (Pty) Limited and (3) Redefine AUK. Under the terms of the RPL Loan, the Company has the option at least three Business Days prior to completion of Tranche 2 of drawing down the full amount of £135.0 million from Redefine Properties, such funds being provided to the Company, in order to allow Redefine AUK to finance the relevant Acquisition SPVs to acquire the Tranche 2 Properties. In circumstances where the Company exercises its option to drawdown the RPL Loan, the Company has the right to repay the RPL Loan within three months from the date of drawdown. Alternatively, the Company has the option to drawdown the RPL Loan in order to complete Tranche 2 and either (1) upon drawdown or (2) at any time within the three months following drawdown, elect to convert the loan into a 50 per cent. equity interest in Redefine AUK held by Redefine Properties thereby creating the RPL JV.
If the Company does not elect to convert the loan following drawdown, and the loan is not repaid through a subsequent fundraising by the Company within three months from the date of drawdown, then the RPL Loan automatically converts into a 50 per cent. equity interest in Redefine AUK held by Redefine Properties thereby creating the RPL JV.
In such circumstances where the RPL JV is formed as a result of the Conversion, the RPL JV Agreement (further details of which are provided below) would govern the parties’ relationship in respect of Redefine AUK.
In consideration for Redefine Properties providing the RPL Equity Commitment and the RPL Loan described above, the Company agreed to pay Redefine Properties a fee of £2.5 million.
21.6 RPL JV Agreement On 5 September 2015, the Company entered into the RPL JV Agreement made between (1) the Company (2) Redefine Properties and (3) Redefine AUK in connection with the possible RPL JV. The RPL JV Agreement is conditional upon the formation of the RPL JV, following the Conversion and such RPL Loan not having been refinanced by the Company on the basis described above.
Under the RPL JV Agreement both the Company and Redefine Properties (the “JV Shareholders”) agreed to operate Redefine AUK in accordance with the terms of the RPL JV Agreement.
The overall management and supervision of Redefine AUK will be vested in the board of directors of Redefine AUK. The JV Shareholders will be entitled to appoint two directors each. The RPL JV would represent a deadlock 50:50 joint venture company for the JV Shareholders. Certain specified reserved matters require the approval of the JV Shareholders. If the JV Shareholders
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are unable to reach a decision on any such reserved matter, the RPL JV will be deadlocked and the status quo will prevail. Under the terms of the RPL JV Agreement, neither of the JV Shareholders are capable of forcing the other to sell its shareholding in Redefine AUK and there are no provisions allowing either party to refer the matter to expert determination. Reserved matters include:
• the issue of new share or loan capital in Redefine AUK or any Redefine AUK Group Company, except as expressly required by the RPL JV Agreement;
• the approval of any budget and any alteration which reflects a deviation of 10 per cent. or more in any line item;
• the sale of one or more properties held by a Redefine AUK Group Company (including by way of a sale of a Redefine AUK Group Company);
• the taking of any steps to wind up or dissolve Redefine AUK, Redefine Banbury Cross Limited or any of the Acquisition SPVs; and
• the commencement of any new business not being ancillary to the business of acquiring and holding the Combined AUK Portfolio.
If Redefine UK or any other Redefine AUK Group Company requires funding to repair any damage incurred to any of the properties within the Combined AUK Portfolio, the JV Shareholders will be able to make preferred loans to Redefine AUK or the relevant Redefine AUK Group Company in proportion to their 50:50 shareholding. Such loans will bear an annual interest rate of 7 per cent. above EURIBOR during the initial 70 days following advance of the loan and an annual interest rate of 10 per cent. above LIBOR thereafter.
The JV Shareholders have pre-emption rights on transfers of shares in Redefine AUK, save that the Company is permitted to transfer shares representing up to 25 per cent. of the issued share capital of Redefine AUK to any third party without restriction.
The RPL JV Agreement will terminate when the JV Shareholders both approve a resolution to dissolve Redefine AUK.
21.7 Management agreement with Kames Capital plc On 4 September 2015, Redefine AUK entered into a management agreement between (1) Redefine AUK (2) Kames Capital plc (“Kames Capital”) and (3) the Company pursuant to which Redefine AUK agreed to employ Kames Capital to manage the Combined AUK Portfolio and the key terms of the management agreement are summarised as follows:
• Kames Capital are employed on a term of three years for an annual fee equating to 0.5 per cent. of the market value of the assets under management as at the previous six monthly valuation date.
• The fee payable to Kames Capital includes the cost of property management services provided by Savills (UK) Limited (“SUK”) where these costs are not recoverable through provisions in tenant’s lease agreements or as a direct result of vacant space where such cost is deemed to be a landlord’s cost. SUK have contracted directly with Redefine AUK with any fees (as described above) being offset against Kames Capital’s fee.
• Redefine AUK has the option to break the contract after 12 months, subject to a six-month notice period and payment of 33 per cent. of the foregone fee that would have been paid for the balance of the three year contract as compensation.
• Kames Capital provide a comprehensive asset management service including:
(a) assistance with establishing business plans for each asset;
(b) management, advice and supervision of all lease events;
(c) negotiations with contractors and suppliers to ensure competitive rates for goods and services;
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(d) oversight and management of SUK’s property management function;
(e) advice and support in the acquisition and disposal of assets;
(f) procurement of refurbishment and development works; and
(g) regular reporting requirements.
• All material decisions with regards to the management of the portfolio including the establishment of business plans and strategy for each asset, the approval of expenditure and the appointment of consultants requires the prior approval of Redefine AUK.
• The Company has guaranteed the payment of fees due to Kames Capital from Redefine AUK, together with the costs of any insurance premiums paid by Kames Capital on behalf of Redefine AUK.
21.8 AUK Facility On 5 September 2015, Redefine AUK entered into a facility agreement with Barclays Bank PLC, HSBC Bank plc, The Royal Bank of Scotland plc and Abbey National Treasury Services PLC. The facility was used to part finance the acquisition of the AUK Portfolio, pay associated transaction costs and for general corporate purposes of the Group. Further information on this facility can be found in paragraph 16 of this Part 15.
21.9 Acquisition agreement in respect of Banbury Cross Retail Park On 4 September 2015, the Company, Redefine AUK and Redefine Banbury Cross Limited, entered into an acquisition agreement with Aegon UK Property Fund pursuant to which Redefine Banbury Cross Limited agreed to acquire Banbury Cross Retail Park for a consideration of £52.5 million. Completion of the acquisition occurred on 7 September 2015.
21.10 Amendment agreements and loan agreements Certain amendment agreements (the “Amendment Agreements”) were entered into on or around 30 April 2015 between Berlin Hyp AG as lender and Leopard Germany Property 1 S.à r.l., Leopard Germany Property 2 S.à r.l., Leopard Germany Property 3 S.à r.l., Leopard Germany Property Ed 1 S.à r.l., Leopard Germany Property 2 S.à r.l., Leopard Germany Property Ed 3 S.à r.l., Leopard Germany Property 4 S.à r.l. and Leopard Germany Property Ed 2 GmbH & Co. KG, as borrowers. In addition, three new loan agreements (“New Loan Agreements”) were entered into in June 2015 between Berlin Hyp AG as lender and, respectively, Ciref Berlin 1 Limited, Leopard Germany Property ME 1 S.à r.l and Leopard Germany Property ME 2 S.à r.l as borrower. Pursuant to the New Loan Agreements and the Amendment Agreements (together the “New German Facility Agreements”), the aggregate principal amount of all the loans outstanding by the 11 borrowers to Berlin Hyp AG was €83,150,000. Under the New German Facility Agreements:
• the final repayment date for each of the loans is 30 April 2020 or, as the case may be, 30 May 2020;
• the initial interest rate in respect of each loan is based upon a three-month Euribor plus a margin of 1.2 per cent. p.a. and a liquidity supplement;
• a prepayment fee may be payable on an early repayment or prepayment of the loan, ranging from 2 per cent. of the relevant amount if paid within the first year following drawdown, 1 per cent. within the second year and 0.5 per cent. within the third year;
• each of the 11 borrowers has given certain warranties and undertakings to Berlin Hyp AG and granted to Berlin Hyp AG security in respect of its assets, including, but not limited to, land charges over each property held by it, together with pledges over bank accounts and assignments of rental income. The land charges and certain other security granted by each borrower secures the obligations of it and of each other borrower to Berlin Hyp AG from time to time; and
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• an interest rate cap was entered into by or on behalf of the 11 borrowers with Berlin Hyp AG in order to provide protection against the fluctuation in interest rates pursuant to the New German Facility Agreements.
21.11 Placing agreement in respect of the February 2015 Placing The Company entered into a placing agreement dated 27 February 2015 with Peel Hunt and JPMC in connection with the placing of up to 131,414,138 Ordinary Shares (“2015 UK Placing Shares”). Peel Hunt and JPMC agreed to use their respective reasonable endeavours to procure placees to subscribe for the 2015 UK Placing Shares. The Company gave certain warranties and an indemnity to each of Peel Hunt and JPMC which were customary for a transaction of this nature. Peel Hunt and JPMC each received a commission of the gross proceeds of the 2015 UK Placing Shares procured by it at the placing price of 54 pence.
21.12 Placing agreement with Java Capital in respect of the February 2015 Placing As part of the same transaction in connection with the February 2015 Placing (including the arrangements described in paragraph 21.11 above), the Company entered into a placing agreement dated 27 February 2015 with Java Capital in connection with the placing of up to 131,414,138 Ordinary Shares as above (“2015 SA Placing Shares”). Java Capital agreed to use its reasonable endeavours to procure placees to subscribe for the 2015 SA Placing Shares. The Company gave certain warranties and an indemnity to Java Capital which were customary for a transaction of this nature. Java Capital received a commission of the gross proceeds of the 2015 SA Placing Shares procured by it at the placing price of R9.70.
21.13 Acquisition agreement in respect of portfolio of German retail properties Leopard Holdings S.A. and Leopard Holdings UK S.à r.l. representing a 50:50 joint venture between the Company and Redefine Properties, entered into an acquisition agreement with Leopard Germany NE LP1 GmbH & Co. KG, Leopard Germany NE LP2 GmbH & Co. KG and Leopard Germany Holding 3 S.a.r.l. on 29 January 2015 pursuant to which they acquired a portfolio of 56 German retail properties for a consideration of €156.9 million, reflecting a net initial yield of 7.5 per cent. The portfolio was acquired together with existing bank debt of €100 million which was refinanced on the basis described in paragraph 21.10 above.
21.14 Relationship Agreement The Company entered into a relationship agreement with (1) Redefine Properties, (2) Madison Property Fund Managers Holdings Ltd, (3) Madison Property Fund Managers Ltd and (4) Redefine Retail (Pty) Ltd (parties (2), (3) and (4), together, the “Associated Parties”) on 14 November 2014, pursuant to which Redefine Properties and each Associated Party will exercise its rights to procure, insofar as it is able, that, among other things:
• the Company and its subsidiaries are capable at all times of carrying on its business independently of Redefine Properties or any of its Associates (as defined in the agreement);
• all transactions entered into between (i) Redefine Properties or any of its Associates and (ii) the Company or any of its subsidiaries, will be made on an arm’s length basis and on normal commercial terms; and
• neither Redefine Properties nor any of its Associates will propose any shareholder resolution which is intended to circumvent the proper application of the UK Listing Rules.
The above obligations cease to apply in the event that either (i) the Ordinary Shares cease to be admitted to trading on the premium listing segment of the London Stock Exchange’s main market for listed securities or (ii) Redefine Properties and its Associates (including any of the Associated Parties) ceases to have, in aggregate, an interest in 30 per cent. or more of the issued ordinary share capital of the Company.
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22. WORKING CAPITAL The Company is of the opinion that the Group’s and the Enlarged Group’s working capital is sufficient for its present requirements, that is, for at least the next 12 months from the date of publication of this document.
23. SIGNIFICANT CHANGE Save for entering into the AUK Facility (as described in paragraph 21.8 of this Part 15), the drawdown of approximately £155.0 million from the AUK Facility, the acquisition of Banbury Cross Retail Park and the acquisition of the Tranche 1 Properties (each as described in paragraph 1 of Part 7 of this document) there has been no significant change in the financial or trading position of the Group from 31 August 2015 (being the date of the audited consolidated financial statements of the Group) to the date of this document.
24. DIVIDENDS In respect of the financial periods reported on by the Company’s reporting accountants, as incorporated by reference in Part 11 of this document, being the periods set out below, the Company paid the following dividends:
Financial period Dividend per Ordinary Share 12 months ended 31 August 2015 3.25 pence 12 months ended 31 August 2014 3.20 pence 12 months ended 31 August 2013 3.11 pence
25. INFORMATION SOURCED FROM THIRD PARTIES Where third party information has been used in this document the source of such information has been identified. The Company confirms that information provided by third parties has been accurately reproduced and, so far as the Company is aware and is able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading.
26. CONSENTS 26.1 Peel Hunt has given and has not withdrawn its written consent to the inclusion of its name and the references to its name in the form and context in which they appear in this document.
26.2 BNP Paribas Real Estate (Jersey) Limited has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
26.3 DTZ Debenham Tie Leung Limited (trading as Cushman and Wakefield), Birmingham office, has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
26.4 DTZ Debenham Tie Leung Limited (trading as Cushman and Wakefield), London office, has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
26.5 Cushman and Wakefield LLP has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
26.6 Savills Advisory Services Limited has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
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26.7 Savills Advisory Services Germany GmbH & Co. KG has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
26.8 Schlidt has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
26.9 Strutt and Parker has given and has not withdrawn its written consent to the inclusion of its Valuation Report in Part 13 (Property valuation reports) of this document and the references to its name in the form and context in which they appear.
26.10 KPMG has given and has not withdrawn its written consent to the inclusion of its report on the pro forma financial information in Part 12 (Unaudited pro forma financial information of the Group) of this document and the references to its name in the form and context in which they appear.
27. GENERAL 27.1 The financial information concerning the Company contained or incorporated by reference in this document does not constitute financial statements within the meaning of the Companies Act 2006. The consolidated financial statements of the Company in respect of the years ended 31 August 2015, 31 August 2014 and 31 August 2013 were reported on by KPMG, the auditors of the Company for those periods forming the period of the historical financial information set out in this document. The auditors of the Company made reports in respect of each of the three years ended 31 August 2015 and such reports were unqualified reports.
27.2 The total costs, charges and expenses payable by the Company are estimated to be £6.1 million (exclusive of VAT) in connection with the Proposals (assuming the potential Placing raises the maximum gross proceeds of £150.0 million).
27.3 The Company remains subject to the continuing obligations of the UK Listing Rules with regard to the issue of securities for cash and the pre-emption provisions set out in the Articles (which confer on Shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash) apply to the balance of the authorised but unissued ordinary share capital of the Company which is not the subject of the disapplication approved by the Shareholders in a general meeting of the Company.
27.4 The Existing Ordinary Shares are in registered form, are capable of being held in uncertificated form and are admitted to the premium listing segment of the Official List and are traded on the main market for listed securities of the London Stock Exchange and the JSE’s Main Board.
27.5 The potential Placing Shares will be in registered form and will, from Admission, be capable of being held in uncertificated form and title to such shares may be transferred by means of a relevant system (as defined in the CREST Regulations). Where Placing Shares are held in certificated form, share certificates will be sent to the registered members by first-class post. Where Placing Shares are held in CREST, the relevant CREST stock account of the registered members will be credited. The potential Placing Shares will be admitted, fully paid, with the ISIN IM00B8BV8G91 and SEDOL B8BV8G9.
27.6 The holders of the Ordinary Shares shall participate proportionately to such shareholdings in all distributions of capital or income by the Company or any surplus arising on liquidation of the Company. There are no fixed dates for dividend payment on the Ordinary Shares. Each Ordinary Share will afford the holder of such share the right to one vote. A fuller description of the rights attaching to the Ordinary Shares by virtue of the Articles is set out at paragraph 17 of this Part 15.
27.7 Save as discussed in this document, specifically with reference to the fair valuation adjustments to investment properties and derivatives, as far as the Directors are aware, there are no known trends, uncertainties, demands, commitments or events which are reasonably expected to have a material effect on the Group’s prospects for at least the current financial year.
27.8 As far as the Directors are aware, there are no environmental issues that may affect the Group’s utilisation of its tangible fixed assets.
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27.9 Save as disclosed in this document, as regards the Company’s three previous financial years, the Company has had no principal investments and there are no principal investments in progress and there are no principal future investments on which the Directors have made a firm commitment.
27.10 Save as described in this document there are no patents, intellectual property rights, licences or any industrial, commercial or financial contracts which are or may be material to the business or profitability of the Group.
27.11 The Directors expect typical investors in the Group to be primarily fund manager or sophisticated private investors or those acting on the advice of their stockbroker or financial adviser, who are looking to allocate part of their investment portfolio to the UK and German commercial property market.
28. DOCUMENTS ON DISPLAY Copies of the following documents will be published on www.redefineinternational.com and made available for inspection at the office of Nabarro LLP, 125 London Wall, London EC2Y 5AL and at the registered office of the Company during usual business hours on any weekday (excluding Saturdays, Sundays and public holidays), from the date of this document until the conclusion of the Extraordinary General Meeting:
28.1 the Memorandum and Articles of Association of the Company;
28.2 the audited consolidated financial statements of the Group for the financial years ended 31 August 2015, 31 August 2014 and 31 August 2013;
28.3 the Valuation Reports contained in Part 13 (Property valuation reports) of this document;
28.4 KPMG’s report on the pro forma information contained in Part 12 (Unaudited pro forma financial information of the Group) of this document;
28.5 the letters of consent referred to in paragraph 26 above;
28.6 the irrevocable undertakings as set out in paragraph 10 of Part 7 (Letter from the Chairman of Redefine International P.L.C.) of this document; and
28.7 this document.
Dated 28 January 2016
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PART 16
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are available for inspection in accordance with Part 15 of this document and contain information which is relevant to the Proposals. These documents are available on the Company’s website at www.redefineinternational.com/investors/reports-presentations-and- circulars/yr-2015.aspx:
• consolidated financial statements of the Group for the year ended 31 August 2015;
• consolidated financial statements of the Group for the year ended 31 August 2014;
• consolidated financial statements of the Group for the year ended 31 August 2013; and
• the Circular.
The tables below sets out the various sections and page numbers of these documents that are incorporated by reference into this document so as to provide information required under the UK Prospectus Rules and the UK Takeover Code and to ensure that Shareholders and others are aware of all information that, according to the particular nature of the Company and the Placing Shares, is necessary to enable the Shareholders and others to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Company.
No part of the consolidated financial statements of the Group for the years ended 31 August 2015, 2014 or 2013 or the Circular is incorporated in this document except as expressly stated below. It should be noted that the other sections of such documents that are not incorporated by reference are either not relevant to Shareholders and others or are covered elsewhere in this document.
Information that is itself incorporated by reference or referred or cross-referred to in these documents is not incorporated by reference into this document.
The Company will provide, without charge, to each person to whom a copy of this document has been delivered, upon the oral or written request of such person, a hard copy of the aforementioned documents incorporated by reference herein. Written or telephone requests for such documents should be directed to the Company at its head office at 2nd Floor, 30 Charles II Street, London SW1Y 4AE or by telephone on +44(0) 7811 0100. A hard copy of any document incorporated into this document by reference will not be sent to such persons unless requested.
Results Results Results for the for the for the Group for the Group for the Group for the year ended year ended year ended 31 August 31 August 31 August 2015 2014 2013 Accounting policies 77-81, 108 78-87, 131 60-69, 109-110 Auditor’s independent review report 70-71 67-70 52 Consolidated income statement 72 71 53 Consolidated statement of comprehensive income 73 72 54 Consolidated statement of changes in equity 75 74-75 56-57 Consolidated balance sheet/statement of financial position 74 73 55 Consolidated cash flow statement 76 76 58 Corporate governance 44-68 38-65 36-51 Dividend payments 4 3 3 Notes to the financial statements 77-105, 78-129, 60-106 108-112 131-140 Related party transactions 101 120-121 97-99
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Circular Letter from the Chairman of the Company 7-17 Principal terms and conditions of the Acquisition, the RPL Loan and the RPL Equity Commitment 36-39
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PART 17
DEFINITIONS
In this document the following expressions have the following meanings, unless the context requires otherwise:
“Acquisition” means the acquisition by the Group of the AUK Portfolio from the Aegon UK Property Fund;
“Acquisition Agreements” means the two acquisition agreements each dated 5 September 2015 between the Seller, the Company and (in the case of those relevant properties located in England and Wales) 16 Acquisition SPVs and (in respect of those properties located in Scotland) three Acquisition SPVs, in each case setting out the terms and conditions upon which the Acquisition SPVs acquired, or will acquire, the AUK Portfolio, as more particularly described in paragraph 21.3 of Part 15 (Additional information) of this document;
“Acquisition SPVs” means the 19 special purpose vehicles, each of which are incorporated in the British Virgin Islands and are a wholly-owned subsidiary of Redefine AUK, which together acquired, or will acquire, the AUK Portfolio;
“Admission” means admission of the Placing Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities becoming effective in accordance with the Admission and Disclosure Standards of the London Stock Exchange and the listing and trading of the Placing Shares on the Main Board of the JSE in accordance with the JSE Listings Requirements;
“Aegon UK Property Fund” means Aegon UK Property Fund Limited;
“Articles” or means the existing articles of association of the Company; “Articles of Association”
“AUK Facility” means the facility agreement entered into by Redefine AUK on 5 September 2015 with Barclays Bank PLC, HSBC Bank plc, The Royal Bank of Scotland plc and Abbey National Treasury Services plc, as more particularly described in paragraph 21.8 of Part 15 (Additional information) of this document;
“AUK Portfolio” means the 18 properties (following the disposal of 16 Grosvenor Street, London, as announced by the Company on 21 December 2015) acquired, or to be acquired, by the Acquisition SPVs from the Aegon UK Property Fund, comprising the Tranche 1 Properties and the Tranche 2 Properties, as more particularly described in paragraph 21.3 of Part 15 (Additional information) of this document;
“Banbury Cross Retail Park” means Banbury Cross Retail park, Oxfordshire, OX16 1LX;
“Board” or “Directors” means the current directors of the Company, whose names are set out in Part 6 (Directors, company secretary and advisers) of this document;
“Bookbuild” means the bookbuilding exercise proposed to be undertaken jointly by the Joint UK Bookrunners in respect of the proposed
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UK Placing, and by Java Capital in respect of the proposed South African Placing;
“Bookrunners” means the Joint UK Bookrunners, acting as joint bookrunners in connection with the proposed UK Placing and Java Capital, acting as bookrunner in connection with the proposed South African Placing;
“Business Day” means any day (other than a Saturday, Sunday or public holiday in England or SA) on which clearing banks in the City are open for business;
“Capita” means Capita Asset Services, a trading name of Capita Registrars Limited;
“certificated” or ” means an Ordinary Share which is not in uncertificated form; in certificated form”
“Circular” means the circular posted to Shareholders on 7 September 2015, setting out details of the Acquisition;
“Combined AUK Portfolio” means Banbury Cross Retail Park and the AUK Portfolio, as more particularly described in paragraph 14 of Part 15 (Additional information) of this document;
“Companies Act 2006” means the Isle of Man Companies Act 2006, as amended;
“Company” or means Redefine International P.L.C., a company registered in “Redefine International” the Isle of Man with registered number 010534V and having its registered office at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE;
“Concert Party” means Redefine Properties, Michael Watters, Marc Wainer, Bernard Nackan and Stephen Carlin;
“Conversion” means the conversion of the RPL Loan resulting in the Disposal;
“Corporate Governance Code” means the UK Corporate Governance Code in the latest form issued by the Financial Reporting Council from time to time;
“CREST” means the paperless settlement system operated by Euroclear UK & Ireland under the CREST Regulations to facilitate the transfer of title to, and the holding of, shares in uncertificated form;
“CREST Manual” means the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure and CREST Glossary of Terms (all as defined in the CREST Glossary of Terms promulgated by Euroclear on 15 July 1996, as amended);
“CREST member” means a person who has been admitted by Euroclear as a system-member (as defined in the Uncertificated Securities Regulations);
“CREST Proxy Instruction” has the meaning ascribed to it in paragraph 13 of the notes to the Notice of Extraordinary General Meeting;
“CREST Regulations” means the Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended;
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“CREST sponsored members” means a CREST member admitted to CREST as a sponsored member;
“CREST sponsors” means a CREST participant admitted to CREST as a CREST sponsor;
“Cromwell Group” means Cromwell Property Group, Australia, an Australian property trust which has stapled securities consisting of units in an Australian real estate investment fund (Cromwell Diversified Property Trust);
“CSDP” means a Central Securities Depository Participant accepted as a participant under the South African Financial Markets Act, 2012, appointed by a Shareholder in South Africa for the purposes of, and in regard to, dematerialisation and to hold and administer securities or an interest in securities on behalf of such Shareholder;
“Dematerialised Shareholders” means Shareholders on the SA share register who hold Dematerialised Shares;
“Dematerialised Shares” means Ordinary Shares which have been incorporated into the Strate system, title to which is no longer represented by physical documents of title;
“Disposal” means the effective disposal on Conversion of a 50 per cent. interest in Redefine AUK to form the RPL JV;
“EEA” the European Economic Area;
“Enlarged Group” the Group as enlarged by the acquisition of the Tranche 2 Properties;
“Enlarged Share Capital” means the expected issued ordinary share capital of the Company immediately following the issue of the Placing Shares pursuant to the potential Placing (assuming the Maximum Placing Shares are issued);
“Executive Directors” means the executive Directors, being Michael Watters, Stephen Oakenfull, Donald Grant and Adrian Horsburgh;
“Existing Ordinary Shares” the 1,495,566,887 existing ordinary shares of 8.0 pence each in the capital of the Company in issue at the date of this document;
“Extraordinary General means the extraordinary general meeting of the Company to be Meeting” or “EGM” held at 2nd Floor, 30 Charles II Street, London SW1Y 4AE at 9.30 a.m.(London time) on 15 February 2016, notice of which is set out at the end of this document;
“FCA” means the Financial Conduct Authority;
“February 2015 Placing” means the placing of new Ordinary Shares by the Company, as more particularly described in paragraphs 21.11 and 21.12 of Part 15 (Additional information) of this document;
“First Resolution” means the first resolution to be proposed at the Extraordinary General Meeting as set out in the Notice of EGM;
“Form of Proxy” means the form of proxy for use at the EGM which accompanies this document;
“FSMA” means the Financial Services and Markets Act 2000, as amended;
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“Group” means the Company and its subsidiaries at the date of this document;
“IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Board and, for the purposes of this document, as adopted by the European Union;
“Independent Directors” means the Directors, other than Michael Watters, Marc Wainer, Bernard Nackan, Gavin Tipper, Robert Orr and Adrian Horsburgh;
“IOM Acts” or “1931 Act” means the Companies Acts 1931-2004 (as amended) of the Isle of Man and every statutory modification or re-enactment thereof for the time being in force and, where the context requires, every other statute from time to time in force concerning companies and affecting the Company;
“Java Capital” means Java Capital Proprietary Limited;
“Joint UK Bookrunners” means Peel Hunt and JPMC;
“JPMC” means J.P. Morgan Securities plc (which conducts its UK investment banking business as J.P. Morgan Cazenove);
“JSE” means Johannesburg Stock Exchange, being the exchange operated by the JSE Limited (registration number 2005/022939/06), licensed as an exchange under the South African Financial Markets Act, 2012, as amended, and a public company incorporated in terms of the laws of South Africa;
“JSE Listings Requirements” means the Listings Requirements issued by the JSE from time to time;
“Latest Practicable Date” means close of business on 27 January 2016, being the latest practicable date prior to the date of this document for ascertaining certain information contained herein;
“Maximum Placing Shares” means the maximum number of Placing Shares proposed to be issued by the Company, being 375,000,000 (assuming the Company raises gross proceeds of £150.0 million and the Placing Price is set at the Minimum Placing Price);
“Maximum RPL Price” has the meaning given to it in paragraph 1 of Part 7 (Letter from the Chairman of Redefine International P.L.C.) of this document;
“Minimum Placing Price” means 40 pence per share;
“Non-executive Directors” means the non-executive Directors, being Gregory Clarke, Sue Ford, Bernard Nackan, Robert Orr, Gavin Tipper, Michael Farrow and Marc Wainer;
“Non-PID Dividend” means any dividend of the Company other than a PID received by a Shareholder;
“Notice of Extraordinary General means the notice of Extraordinary General Meeting that is found Meeting” or “Notice of EGM” at the end of this document at page 288;
“Official List” means the Official List of the FCA;
“Ordinary Shares” means ordinary shares of 8.0 pence each in the capital of the Company;
“Overseas Shareholders” means Shareholders who are resident in, ordinarily resident in, or citizens of, jurisdictions outside the United Kingdom;
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“Performance Share Plan” means the Redefine International P.L.C. Long-Term Performance Share Plan;
“PID” means a property income distribution;
“Placees” means persons procured by (i) any of the Joint Bookrunners in accordance with the Placing Agreement to subscribe for UK Placing Shares pursuant to the UK Placing; and/or (as the context requires) (ii) Java Capital in accordance with the South African Placing Agreement to subscribe for South African Placing Shares pursuant to the South African Placing;
“Placing” means the proposed UK Placing and/or the proposed South African Placing, as the context requires;
“Placing Agreement” means the placing agreement dated 28 January 2016 between the Company and the Joint UK Bookrunners in connection with the UK Placing, as more particularly described in paragraph 21.1 of Part 15 (Additional information) of this document;
“Placing Announcement” means the launch announcement of the Placing to be released by the Company on or about 16 February 2016, should the Placing proceed, and which sets out the terms and conditions of the Placing;
“Placing Price” means the price at which the Placing Shares will be issued pursuant to the Placing, as established by the Bookbuild, being:
(a) not more than a 10 per cent. discount to the middle market price of the Existing Ordinary Shares at the time of agreeing the Placing; and
(b) in the case of a South African Placing Share, the equivalent price of a UK Placing Share in Rand (subject only to adjustment in terms of the prevailing exchange rate agreed between the Bookrunners and the Company at the time of the Bookbuild);
“Placing Shares” means the UK Placing Shares and/or the South African Placing Shares, as the context requires;
“Pricing Statement” means the pricing statement expected to be published on 16 February 2016 by the Company detailing, among other things, the Placing Price and the number of Ordinary Shares that have been issued under the Placing;
“Property Rental Business” means business within the meaning of section 205 of the Corporation Tax Act 2009 or an overseas property business within the meaning of section 206 Corporation Tax Act 2009, but, in each case, excluding certain specified types of business (as per section 519(3) of the Corporation Tax Act 2010;
“Proposals” means the potential Placing, the Waiver and the Related Party Transaction;
“Prospectus Directive” means European Union Directive 2003/71/EC, including any applicable implementing measures in any Relevant Member State;
“Redefine AUK” means Redefine AUK Holdings Limited, a company registered in the British Virgin Islands with registered number 1884800 and having its registered office at Coastal Buildings, Wickham Cay II,
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PO Box 2221, Waterfront Drive, Road Town, Tortola, British Virgin Islands VG1110;
“Redefine AUK Group” means Redefine AUK and its subsidiaries from time to time, which includes as at the date of this document, the Acquisition SPVs and Redefine Banbury Cross Limited, and “Redefine AUK Group Company” means any one of them;
“Redefine BDL” means Redefine BDL Hotel Group Limited, a company incorporated in the British Virgin Islands, with registered number 1522323;
“Redefine Properties” means Redefine Properties Limited (Registration number 1999/018591/06), a public company duly incorporated and registered in terms of the laws of South Africa and listed on the JSE, with its registered address at 3rd Floor, Redefine Place, 2 Arnold Road, Rosebank, 2196, South Africa;
“Redefine Properties International” means Redefine Properties International Limited (registration number 02010/009284/06), a company incorporated and registered in terms of the laws of South Africa and previously listed on the JSE but subsequently delisted from the JSE on 4 November 2013;
“Redefine Share Schemes” means the Performance Share Plan and the Restricted Stock Plan;
“Regulatory Information Service” means one of the regulatory information services authorised by the FCA to receive, process and disseminate regulatory information in respect of listed companies;
“Related Party Independent means the Shareholders, save for Redefine Properties and its Shareholders” associates;
“Related Party Resolution” means the fourth resolution to be proposed at the EGM as set out in the Notice of EGM, approving the Related Party Transaction;
“Related Party Transaction” means the potential Placing of Placing Shares with Redefine Properties, as more particularly described in Part 7 (Letter from the Chairman of Redefine International P.L.C.) of this document;
“Relationship Agreement” means the relationship agreement dated 14 November 2014 between (1) the Company, (2) Madison Property Fund Managers Holdings Ltd, (3) Madison Property Fund Managers Ltd and (4) Redefine Retail (Pty) Ltd, as more particularly described in paragraph 21.14 of Part 15 (Additional information) of this document;
“Relevant Member State” means each member state of the EEA which has implemented the Prospectus Directive;
“Resolutions” means the First Resolution, the Second Resolution, the Rule 9 Waiver Resolution and the Related Party Resolution;
“Restricted Jurisdiction” means any jurisdiction, including but not limited to Australia, Canada, Japan and the United States, where the extension or availability of the Placing (and any other transaction contemplated thereby) would (i) result in a requirement to comply with any governmental or other consent or any registration filing or other formality which the Company regards as unduly onerous, or (ii) otherwise breach any applicable law or regulation;
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“Restricted Stock Plan” means the Redefine International P.L.C. Restricted Stock Plan;
“RPL Equity Commitment” means the irrevocable commitment from Redefine Properties to subscribe for such number of Placing Shares at the Placing Price as equals an aggregate subscription amount of up to £70.0 million, as more particularly described in paragraph 21.4 of Part 15 (Additional information) of this document;
“RPL JV” means the potential 50:50 joint venture which would be created in respect of Redefine AUK in circumstances where the RPL Loan is drawn down and the Company exercises its rights to convert such loan into equity in the capital of Redefine AUK to be held by Redefine Properties or otherwise such loan automatically converts three months following the date of completion of Tranche 2;
“RPL JV Agreement” means the conditional joint venture agreement dated 5 September 2015 between (1) the Company (2) Redefine Global (Pty) Limited (a subsidiary of Redefine Properties) and (3) Redefine AUK in connection with the RPL JV, if it were ever to come into existence, as more particularly described in paragraph 21.6 of Part 15 (Additional information) of this document;
“RPL Loan” means the loan facility to be provided by Redefine Global (Pty) Limited (a subsidiary of Redefine Properties) to the Company in connection with the Acquisition as more particularly described in paragraph 21.5 of Part 15 (Additional information) of this document;
“Rule 9” means Rule 9 of the UK Takeover Code;
“Rule 9 Independent Shareholders” means the Shareholders, save for any Shareholders who shall not be permitted to vote on the Rule 9 Waiver Resolution (being the Concert Party and the other Directors who have irrevocably undertaken to participate in the Placing (being Gavin Tipper, Robert Orr and Adrian Horsburgh));
“Rule 9 Waiver Resolution” means the third resolution to be proposed at the EGM, in relation to approval by the Rule 9 Independent Shareholders of the Waiver, as described in paragraph 7 of Part 7 (Letter from the Chairman of Redefine International P.L.C.) of this document;
“Second Resolution” means the second resolution to be proposed at the EGM as set out in the Notice of EGM;
“SA” or “South Africa” means the Republic of South Africa;
“SA share register” means the share register maintained on behalf of the Company in South Africa by the South African transfer secretaries;
“SEC” means the US Securities and Exchange Commission;
“Seller” means Aegon UK Property Fund Limited;
“September EGM” means the extraordinary general meeting of the Company held on 25 September 2015 in connection with the Acquisition;
“Share Authority Resolutions” means the First Resolution and the Second Resolution;
“Shareholder” means a holder of Ordinary Shares from time to time;
“Solvency Test” means the solvency test referred to in section 49 of the IOM Act;
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“South African Companies Act” means the South African Companies Act, 2008 (as amended);
“South African Placing” means the potential Placing of the South African Placing Shares by Java Capital on behalf of the Company on the terms of this document and the Placing Announcement;
“South African Placing Agreement” means the placing agreement dated 28 January 2016 between the Company and Java Capital in connection with the proposed South African Placing, as more particularly described in paragraph 21.2 of Part 15 (Additional information) of this document;
“South African Placing Shares” means up to 375,000,000 new Ordinary Shares proposed to be issued by the Company pursuant to the proposed South African Placing;
“Stock Exchange means the Stock Exchange News Service of the JSE; News Services” or “SENS”
“Strate” means Strate Proprietary Limited (Registration number 1998/022242/07), a private company incorporated with the laws of South Africa and the electronic clearing and settlement system used by the JSE to settle trades;
“Substantial Shareholder” means a company or body corporate that is beneficially entitled, directly or indirectly, to 10 per cent. or more of the distributions paid by the Company and/or the share capital of the Company, or which controls, directly or indirectly, 10 per cent. or more of the voting rights of the Company (referred to in section 553 of the Corporation Tax Act 2010 as a “holder of excessive rights”);
“Takeover Panel” or “Panel” means the UK Panel on Takeovers and Mergers;
“Tranche 1” means pursuant to the Acquisition Agreements, completion of the acquisition of the Tranche 1 Properties;
“Tranche 1 Properties” means the nine properties acquired by the Group on completion of Tranche 1, as set out in paragraph 21.3 of Part 15 (Additional information) of this document;
“Tranche 2” means pursuant to the Acquisition Agreements, completion of the acquisition of the Tranche 2 Properties;
“Tranche 2 Properties” means the nine properties (following the disposal of 16 Grosvenor Street, London as announced by the Company on 21 December 2015) that are proposed to be acquired on completion of Tranche 2, as set out in paragraph 21.3 of Part 15 (Additional information) of this document;
“UK Disclosure and means the disclosure rules and transparency rules made by the Transparency Rules” UK Listing Authority acting under Part VI of FSMA (as set out in the FCA Handbook), as amended from time to time;
“UK Listing Rules” means the rules and regulations made by the FCA in its capacity as the UK Listing Authority under FSMA and contained in the UK Listing Authority’s publication of the same name;
“UK Placing” means the potential Placing of the UK Placing Shares by the Joint Bookrunners on the terms of this document and the Placing Announcement;
“UK Placing Shares” means up to 375,000,000 new Ordinary Shares proposed to be issued by the Company pursuant to the potential Placing less the
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number of Ordinary Shares which are actually issued to satisfy entitlements under the proposed South African Placing;
“UK Prospectus Rules” means the prospectus rules of the Financial Conduct Authority made pursuant to Part VI FSMA;
“UK-REIT” means a UK Real Estate Investment Trust under Part 12 of the Corporation Tax Act 2010;
“UK-REIT Regime” means Part 12 of the Corporation Tax Act 2010;
“UK share register” means the share register maintained on behalf of the Company by Capita;
“United Kingdom” or “UK” means the United Kingdom of Great Britain and Northern Ireland;
“United States” or “US” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;
“US Securities Act” means the US Securities Act of 1933, as amended;
“Valuation Reports” means the valuation reports dated 28 January 2016 and prepared by each of BNP Paribas Real Estate (Jersey) Limited, Debenham Tie Leung Limited (trading as Cushman and Wakefield), Cushman and Wakefield LLP, Savills Advisory Services Limited, Savills Advisory Services GmbH & Co. KG, Schlidt, and Strutt and Parker, details of which are set out in Part 13 of this document;
“VAT” means value added tax; and
“Waiver” means the proposed waiver by the Panel of the obligation which would otherwise arise under Rule 9 of the UK Takeover Code requiring the Concert Party to make an offer for the entire issued share capital of the Company as a result of the issue of the potential Placing Shares to Redefine Properties.
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PART 18
NOTICE OF EXTRAORDINARY GENERAL MEETING
REDEFINE INTERNATIONAL P.L.C. (Incorporated in the Isle of Man with registered number 10534V)
NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of Redefine International P.L.C. (the “Company”) will be held at 2nd Floor, 30 Charles II Street, London SW1Y 4AE at 9.30 a.m. (London time) on 15 February 2016 for the purpose of considering and, if thought fit, passing the resolutions 1, 3 and 4 as ordinary resolutions and resolution 2 as a special resolution.
ORDINARY RESOLUTION 1. THAT, conditional upon the passing of Resolutions 2, 3 and 4 set out in this Notice, the Directors be and they are hereby generally and unconditionally authorised pursuant to the Articles of Association of the Company to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security into such shares (all of which transactions are hereafter referred to as an allotment of “relevant securities”) up to an aggregate nominal amount of £30,000,000 pursuant to the Placing (as defined in the prospectus (the “Prospectus”) to which this Notice is attached), which authority shall be additional to the existing authority conferred on the Directors at the annual general meeting of the Company on 26 January 2016 (the “AGM”), which shall continue in full force and effect. The authority conferred by this resolution shall expire on the earlier of the Company’s next annual general meeting to be held in 2017 or completion of the Placing in accordance with its terms (unless previously revoked or varied by the Company in general meeting), save that the Company may, before such expiry, revocation or variation make an offer or agreement which would or might require relevant securities to be allotted after such expiry, revocation or variation and the Directors may allot relevant securities in pursuance of such offer or agreement as if the authority hereby conferred had not expired or been revoked or varied.
SPECIAL RESOLUTION 2. THAT, subject to the passing of Resolutions 1, 3 and 4 set out in this Notice and in addition to the authority conferred on the Directors at the AGM which shall continue in full force and effect, the Directors be and they are hereby generally authorised and empowered to allot new ordinary shares in the capital of the Company (“New Ordinary Shares”) pursuant to the authority granted by Resolution 1 as if the pre-emption provisions in Article 10 of the Articles of Association of the Company did not apply to any such allotment, such additional power (unless and to the extent previously revoked, varied or renewed by the Company in general meeting) to expire on the date of the Company’s annual general meeting to be held in 2017 and be limited to the allotment of New Ordinary Shares up to a maximum aggregate nominal value of £30,000,000 (equivalent to 375,000,000 New Ordinary Shares), provided that the authority shall allow the Company before its expiry to make offers or agreements which would or might require New Ordinary Shares to be allotted after such expiry and, notwithstanding such expiry, the Directors may allot New Ordinary Shares in pursuance of such offers or agreements.
ORDINARY RESOLUTIONS 3. THAT subject to the passing of Resolutions 1, 2 and 4 set out in this Notice, the waiver, on the terms described in paragraph 7 of Part 7 of the Prospectus, by the UK Panel on Takeovers and Mergers of any requirement under Rule 9 of the UK City Code on Takeovers and Mergers for Redefine Properties Limited and the other members of its Concert Party (as such term is defined in the Prospectus) to make a general offer to shareholders of the Company as a result of the issue of Placing Shares (as defined in the Prospectus) pursuant to the Placing, be approved by the Rule 9 Independent Shareholders (as defined in the Prospectus) on a poll.
4. THAT, subject to the passing of Resolutions 1, 2 and 3 set out in this Notice, the Related Party Transaction (as defined in, and as described in paragraph 8 of Part 7 of, the Prospectus) between
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the Company and Redefine Properties Limited be and is hereby approved as a related party transaction for the purposes of Chapter 11 of the UK Listing Rules (as defined in the Prospectus) by the Related Party Independent Shareholders (as defined in the Prospectus) and the Directors be and are hereby authorised to take all steps as may be necessary or as desirable in relation thereto and to implement the same with such non-material modifications, variations, revisions, waivers or amendments as the Directors or any such committee thereof may deem necessary.
By order of the Board
Lisa Hibberd Company Secretary
Dated 28 January 2016
Registered office: Merchants House 24 North Quay Douglas Isle of Man IM1 4LE
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Notes: 1. All the resolutions in this Notice of Extraordinary General Meeting will be taken on a poll. Only Rule 9 Independent Shareholders shall be entitled to vote on Resolution 3 and only Related Party Independent Shareholders shall be entitled to vote on Resolution 4. 2. A member entitled to attend and vote at the above meeting is entitled to appoint a proxy or proxies to attend and vote, on a poll instead of him/her. If a member appoints more than one proxy, each proxy must be entitled to exercise the rights attached to different shares. A proxy need not be a member of the Company. The appointment of a proxy will not preclude a member from attending and voting at the meeting in person should he/she subsequently decide to do so. 3. A Form of Proxy is enclosed for your use if desired. If you are a UK Shareholder, to be valid, the instrument appointing a proxy must be completed and reach the Company’s Registrars, Capita Asset Services PXS 1, 34 Beckenham Road, Beckenham BR3 4ZF by 10.00 a.m. (London time) on 12 February 2016. Shareholders wishing to vote online should visit www.capitashareportal.com and follow the instructions. 4. In the case of joint holders of Ordinary Shares, the vote of the senior shareholder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the other joint holder(s) and for this purpose seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding. 5. In respect of Ordinary Shares on the SA share register, forms of proxy must only be filled in by certificated shareholders or “own-name” Dematerialised Shareholders. Dematerialised Shareholders in South Africa who are not “own-name” Dematerialised Shareholders must follow the instructions set out in note 14 below. 6. To direct your proxy how to vote on the resolutions mark the appropriate box on your proxy form with an ‘X’. To abstain from voting on a resolution, select the relevant ‘Vote withheld’ box. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting. 7. Any power of attorney or any other authority under which your proxy form is signed (or a duly certified copy of such power or authority) must be included with your proxy form. 8. In the case of a member which is a company, your proxy form must be executed under its common seal or signed on its behalf by a duly authorised officer of the company or an attorney or other person duly authorised for the company. 9. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. 10. An explanation of the resolutions is set out in the Prospectus enclosed with this document. 11. Pursuant to Regulation 22 of the Uncertificated Securities Regulations 2006 of the Isle of Man, the Company specifies that only those shareholders of the Company on the register at 6.00 p.m. on 12 February 2016 shall be entitled to attend or vote at the Extraordinary General Meeting in respect of the number of shares registered in their name at the time. Changes to the register of members after that time will be disregarded in determining the rights of any person to attend or vote at the meeting. 12. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take appropriate action on their behalf. 13. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be transmitted so as to be received by the Company’s agent, Capita Asset Services (whose CREST ID is RA10) by the specified latest time(s) for receipt of proxy appointments. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the Company agent is able to retrieve the message by enquiry to CREST in the manner prescribed. 14. Dematerialised Shareholders on the SA share register who are not “own-name” Dematerialised Shareholders and who wish to attend this meeting should instruct their CSDP or broker to issue them with the necessary authority to attend this meeting in person, in the manner stipulated in the custody agreement governing the relationship between such shareholders and their CSDP or broker. These instructions must be provided to the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature. 15. Dematerialised Shareholders on the SA share register who are not “own-name” Dematerialised Shareholders and who cannot attend but who wish to vote at the meeting should provide their CSDP or broker with their voting instructions, in the manner stipulated in the custody agreement governing the relationship between such shareholders and their CSDP or broker. These instructions must be provided to the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature. 16. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares. 17. As at 27 January 2016 (being the last practicable day prior to the date of this Notice of Extraordinary General Meeting), the Company’s issued share capital consisted of 1,495,566,887 Ordinary Shares, carrying one vote each. Therefore, the total voting rights in the Company as at 27 January 2016 were 1,495,566,887. 18. Any member attending the meeting has the right to ask questions. The Company has to answer any questions raised by members at the meeting which relate to the business being dealt with at the meeting unless: (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information; (b) the answer has already been given on a website in the form of an answer to a question; (c) it is undesirable in the interests of the Company or the good order of the meeting to answer the question.
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