Notice of EGM

26th January 2010
RNS Number : 1016G
Real Estate Investors PLC
26 January 2010
 

26 January 2010

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, SOUTH AFRICA OR SWITZERLAND OR ANY OTHER JURISDICTION IN WHICH THE RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

Real Estate Investors PLC

(“REI” or the “Company”)

Conditional Placing of £10.1 Million

and

Notice of Extraordinary General Meeting

Real Estate Investors PLC (AIM : RLE), the West Midlands based property company, today announces that it has conditionally placed 155,309,834 new Ordinary Shares at a price of 6.5 pence per Ordinary Share, raising gross proceeds of £10.1 million (£9.7 million net), from institutional and other investors.

 

Summary of the Placing

* Placing of 155,309,834 new Ordinary Shares at a Placing Price of 6.5 pence per Ordinary Share, to raise gross proceeds of £10.1 million (£9.7 million, net)

* Net proceeds of the Placing to be used to provide additional resources to take advantage of depressed values in the West Midlands property market. REI will continue to invest in acquisition opportunities in line with its established investing policies. It will acquire assets at attractive valuations, which would be expected to deliver accretive internal rates of return and future net asset value growth 

* Paul Bassi, Chief Executive of REI will invest £0.4 million to acquire 6,600,507 new Ordinary Shares pursuant to the PlacingFollowing completion of the Placing, Paul Bassi will own 18.1 per cent. of the Company’s enlarged issued share capital following the Placing

* The Placing Price represents a premium of 6.1 per cent. to the closing middle market price of 6.125 pence per Ordinary Share on 22 January 2010, being the latest practicable date prior to this announcement

* The Placing Shares will represent approximately 45.6 per cent. of the Company’s issued share capital

   

Paul Bassi, Chief Executive of REI, commented: “We are delighted to have had such a positive response to our fundraising from both our existing and new investors. These new funds will enable us to take advantage of the available opportunities to buy assets from which we can create real shareholder value and establish a strong platform for the future of REI.”  

The Placing is conditional, inter alia, on the approval by Shareholders in an extraordinary general meeting. A circular setting out the details of the Placing and other proposals (“the Circular”), incorporating a notice convening the Extraordinary General Meeting (“the Notice of EGM”), will be posted to shareholders today.  The Circular, Form of Proxy and a copy of the presentation made to prospective investors will also be available on the Company’s website later this morning.

The Circular also sets out the Company‘s proposals to adopt new Articles of Association in a form which is in line with the changes to company law brought about by the Companies Act 2006 and to implement a more comprehensive investing policy in line with the guidelines set out in the AIM Rules.

Information extracted from the Circular is set out below.

– End –

Enquiries:

Real Estate Investors PLC

Paul Bassi

 

+44 (0)121 524 1174

Smith & Williamson Corporate Finance Limited

Azhic Basirov / Siobhan Sergeant

 

+44 (0)20 7131 4000

Singer Capital Markets     Limited

Roger Clarke

 

+44 (0)20 3205 7500

Tavistock Communications

Jeremy Carey/Gemma Bradley

 

+44 (0)20 7920 3150

Notes to Editors

  • REI is an AIM listed property investment company specialising in commercial property principally in the West Midlands and central England

  • REI is focused on delivering shareholder value through returns generated from strong yields and capital enhancements. This is achieved by targeting investments in orphaned, distressed, part-let and underperforming commercial property assets

  • REI is led by respected property investor Paul Bassi CBE, who has over 25 years of property experience in the West Midlands. Mr Bassi is also founder and chairman of Bond Wolfe and chairman of Bigwood Chartered Surveyors 

  • REI was admitted to trading on AIM in June 2004. In December 2006, REI successfully raised £25 million to grow its property portfolio. In January 2008, it raised a further £20 million through refinancing its portfolio. As at 30 June 2009, its portfolio and inventories were valued at £49 million

  • Further information on REI can be found at www.reiplc.com 

  The following information has been extracted without material adjustment from the Circular.

Background to and reasons for the Placing

The UK commercial real estate market has become increasingly stressed since mid 2007, with acquisition opportunities emerging from a range of sources including:

    banks and building societies seeking to asset manage and reduce their distressed loan book;

 

    local government, regional development agencies and other government bodies, eg the NHS, seeking to release capital;

 

    distressed vendors looking to sell to cash buyers on discounted terms; and

 

    vendors who have waited for, and expect, the investment markets to stabilise in early 2010 and who may prefer cash buyers.

In addition, the Company expects acquisition opportunities to arise from property companies seeking equity partners to fund acquisitions. 

Throughout the recent financial crisis, the Company has pursued an active strategy of repositioning properties and recycling and conserving capital, whilst generating cash flow, maximising occupancy rates and crystallising reversions. The Board believes that this strategy has been effective in placing the Company in a strong competitive position.  The Directors also believe that their proven track record, with the Company’s established market reputation and profile, together with available cash resources, should facilitate significant growth opportunities for REI.

The Board believes that the market is now at, or close to, the bottom of the current economic cycle, and that accordingly the present conditions in the UK commercial property market offer REI an attractive opportunity to expand its property asset base through opportunistic acquisitions and active asset management. In addition, the Board believes that the Executive Directors’ considerable regional experience and extensive market contacts in the West Midlands, including acquiring and managing real estate through the last significant property downturn of the early 1990s, position the Company well to source, finance and structure transactions that should be resilient to any further weakness during this cycle.  

The Board anticipates an increase, in early 2010, in the availability of attractive acquisition opportunities at valuations that should place REI in a position to generate above average returns for Shareholders. The Company’s focus remains firmly on value.

In order to maximise REI’s ability to respond quickly to opportunities and to benefit from price advantages available to cash buyers, the Directors are seeking to raise approximately £10.1 million (before expenses) by way of a Placing of new Ordinary Shares.  

Use of Proceeds

The Company will seek to acquire assets at attractive valuations, which would be expected to deliver accretive internal rates of return and future net asset value growth. The Board is proposing to raise approximately £10.1 million of additional equity (before expenses) by means of the Placing, in order to provide additional resources to take advantage of depressed values in the West Midlands property market. REI will continue to invest in acquisition opportunities in line with its established investing policies, focusing on assets which have:

    high running yields or short to medium term asset management opportunities; and

 

    opportunities to generate rental value growth from active asset management, refurbishment, redevelopment, change of use and planning gains.

Based on some of the attractive valuations the Directors are now starting to see for acquiring certain commercial properties and their broader view of the opportunities that they expect to be forthcoming, it is the expectation of the Board that REI should be able to deploy the proceeds of the Placing before the end of 2010. It is the Board’s aim, within the next 18 months, to create a portfolio worth approximately £100 million which can benefit from direct asset management and will not be reliant on yield compression, although the Directors believe that the continuing yield compression currently being experienced in the market should benefit the portfolio.

Current Trading and Prospects

On 5 September 2009, the Company announced its interim results for the six months to 30 June 2009, confirming a profit before tax of £1.3 million (including a gain on its interest rate swaps of £1.2 million), with rental income up 55 per cent. to £1.7 million compared to £1.1 million for the same period in 2008 and contracted annual rental income of £3.5 million. The level of contracted annual rental income represents yields of between 8.5 per cent. and just over 10 per cent. per annum. The Directors believe that there is still a significant differential between ERV and current contracted rental income, presenting prospects for organic growth with ERVs starting to be achieved on new lettings.

The total property portfolio valuation, as at 30 June 2009, was £49 million, based on Directors’ estimates, with a net asset value per Ordinary Share of 7.33 pence.  

Since the publication of the interim results for the six months to 30 June 2009, the Directors believe that there has been further stabilisation in the property markets. It is expected that REI’s results for the year ended 31 December 2009 will be announced in the first week of March 2010. Having conducted an informal review of its real estate portfolio, where appropriate in consultation with external valuers, the Board is confident that the net asset value per Ordinary Share that will be announced will be ahead of current market expectations.  

REI remains conservatively financed with debt of approximately £40 million and available cash of approximately £13.8 million, with a net debt loan to value ratio across the portfolio of 55 per cent. as at 30 June 2009. It is the Board’s intention that the loan to value ratio across the Company’s portfolio will not exceed a level of 65 per cent. at any time.  

In addition, the Board intends taking a more proactive approach to ensuring the share price adequately reflects the value created in the Company.  They hope to achieve this through a combination of increased market profile and the ability to manage the discount of share price to net asset value through, inter alia, the buy back of Ordinary Shares, when appropriate.

Portfolio and pipeline

The property portfolio, based principally in the West Midlands and central England, comprises a diverse range of properties and is not reliant on or over-exposed to specific sub-sectors or tenants. The Directors believe that they can build on this portfolio through their network of agents and established relationships which provide introductions to prospective investments where the Company’s cash resources facilitate quick execution on competitive terms. Further, the Directors believe that REI’s wellestablished banking relationships, with institutions such as the Lloyds Banking Group, Santander and Handelsbanken, will provide access to new credit facilities, allowing it to recycle its equity investments, as well as participate in distressed asset work-outs in the region where the Company has been selected as a potential partner to one of the major UK banks.

REI has been in discussions in relation to an identified pipeline of opportunities with an aggregate value of almost £100 million including: 

 

– a retail and office investment worth an estimated £9 million; 

– a real estate investment in partnership with a major bank worth up to £50 million; 

the acquisition of early build units from a national housebuilder with a view to letting and subsequent sale, valued at approximately £10 million; 

– a completed development being sold on a distressed basis, with the potential for immediate cash profits on resale, valued at approximately £9 million; 

the acquisition of sites from breweries providing the opportunity for obtaining new planning permission and sale at auction; and 

a town centre retail development potentially being sold on a distressed basis, worth up to £10 million.

Overall, it is the Directors’ intention to achieve capital growth through asset management coupled with revenue growth through the capture of reversionary income from the current portfolio and immediate revenue enhancement from pipeline acquisitions.

Details of the Placing

The Company is proposing to issue 155,309,834 Placing Shares at a price of 6.5 pence per Placing Share pursuant to the Placing, raising £9.7 million (net of expenses). The Placing Price represents a premium of 0.375 pence (6.1 per cent.) to the closing middle market price of an Ordinary Share on 22 January 2010, the latest practicable date prior to the publication of the Circular.

The Placing has been undertaken pursuant to the Placing Agreement. Under the terms of the Placing Agreement Singer, as agent for the Company, has agreed to use its reasonable endeavours to seek to procure subscribers for the Placing Shares.  

The Placing Agreement is conditional on, amongst other things:

(i)    the passing of the Resolutions (without amendment) at the EGM;

 

(ii)    the delivery by the Company to Smith & Williamson and Singer of certain documents and letters;

 

(iii)    there having arisen no circumstances which would require notification to the London Stock Exchange of any change to information previously disclosed to it in accordance with the AIM Rules and/or would require publication of a supplement to certain documents issued by the Company in connection with the Placing on or prior to Admission in relation to any matter which is material in the context of Admission and/or the Placing; and

 

(iv)    Admission becoming effective by not later than 8.00 a.m. on 25 February 2010 (or such later time and/or date as the Company, Smith & Williamson and Singer may agree (being not later than 8.00 a.m. on 11 March 2010)). 

The Placing Agreement contains certain warranties given by the Company in favour of Smith & Williamson and Singer as to, amongst other things, certain matters relating to the Company and its business. In addition, the Company has given certain undertakings to Smith & Williamson and Singer relating to, amongst other things, the despatch of public communications concerning the Company following Admission and the issue and allotment of Ordinary Shares following Admission. The Placing Agreement also contains indemnities given by the Company in favour of Smith & Williamson and Singer in relation to certain liabilities they may respectively incur in respect of the Placing and/or Admission. Each of Smith & Williamson and Singer has the right to terminate the Placing Agreement prior to Admission in certain circumstances, including: (i) in the event of a material breach of the warranties or undertakings in the Placing Agreement by the Company; (ii) in the event of certain force majeure events or other events involving certain material adverse changes relating to the Company; and (iii) in the event of Smith & Williamson or Singer becoming aware of any material inaccuracies in certain documents (or any of them) issued by the Company in connection with the Placing. 

In consideration for the services to be provided to the Company by Smith & Williamson and Singer in connection with Admission and the Placing, the Company has agreed to pay Smith & Williamson and Singer certain fees and commissions and certain other costs and expenses incidental to Admission and/or the Placing.

The expenses of and incidental to the Placing, including the fees and commissions payable to Smith & Williamson and Singer, are estimated to amount to approximately £357,000 (including VAT), and will be payable by the Company. 

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. Subject to, amongst other things, the Resolutions being duly passed by the requisite majority at the EGM, it is expected that Admission will become effective and dealings in the Placing Shares on AIM will commence on 25 February 2010.

If Admission does not take place on or before 8.00 a.m. on 25 February 2010 (or such later time and/or date as the Company, Smith & Williamson and Singer may agree (being not later than 8.00 a.m. on 11 March 2010)), the Placing will not proceed.

The Placing Shares will rank pari passu in all respects with the existing issued Ordinary Shares, including the right to receive all dividends and other distributions declared, paid or made after Admission.

The Placing is not being underwritten.

The Directors are seeking authority from Shareholders to allot Ordinary Shares pursuant to the Placing and to disapply statutory pre-emption rights in respect of such Ordinary Shares.

Director’s intention

Paul Bassi, the Company’s Chief Executive, has subscribed for 6,600,507 new Ordinary Shares pursuant to the Placing. As a result, his total beneficial interest in the Company, following completion of the Placing, will be in respect of 90,000,000 Ordinary Shares, representing 18.1 per cent. of the Company’s enlarged issued share capital following the Placing.  

Paul Bassi’s investment is held personally and through Bond Wolfe Assets Limited, of which he is chairman and sole shareholder.

At the time of their appointment as Directors, the Panel on Takeovers and Mergers deemed Paul Bassi, Marcus Daly and certain other individuals who invested in REI at the same time to be members of a concert party. Following completion of the Placing, this concert party will have an aggregate interest of 21.0 per cent. in the enlarged issued share capital of the Company.

Related party transaction

As at 22 January 2010 (being the latest practicable date prior to the publication of the Circular) Caledonia holds 29.62 per cent. of the existing issued Ordinary Shares.  38,827,459 Placing Shares will be issued to Caledonia pursuant to the Placing and, because Caledonia‘s holding is in excess of 10 per cent. of the existing issued Ordinary Shares, this will constitute a related party transaction under Rule 13 of the AIM Rules.  

The Board, having consulted with Smith & Williamson, considers that the terms of this related party transaction are fair and reasonable insofar as the Shareholders are concerned. In providing its advice to the Board, Smith & Williamson has taken into account the Directors’ commercial assessment of this related party transaction.

Dividend policy

It is the Board’s present intention that the Company’s funds will principally be applied towards its investment strategy and that, accordingly, dividends will not be paid in respect of the year ending 31 December 2009. Thereafter, the Board intends to begin paying dividends commencing in respect of the year ending 31 December 2010 as existing portfolio and accretive acquisitions begin to produce surplus cashflow for the Company, subject always to the Directors’ judgment of market conditions and the Company’s cash and financial position at the relevant time.

Board composition

Given the expansion of the Company, the Board believes that the Company would benefit from the appointment of a prominent, regionally focused non-executive director to boost the profile of REI in the West Midlands region. In addition, Caledonia will propose a nominee director as its representative on the Board. The Company anticipates announcing the appointment of suitable candidates in due course.  

Management incentives

Following completion of the Placing, the Board intends to consult Shareholders regarding the introduction of an appropriate incentivisation scheme for the Executive Directors, designed to reward strong, long term growth in net asset value. Such a scheme will be subject to Shareholder approval and details will be provided at the appropriate time.

Adoption of new Articles of Association

The Company’s Articles of Association were adopted on 4 June 2004. Since then, there has been a number of changes in company law and practice, including the implementation of the Companies Act 2006, which have resulted in certain provisions of the Company’s Articles of Association being out of date or inappropriate. The Company is therefore proposing to adopt new Articles of Association. A summary of the principal differences between the existing and proposed new Articles of Association is set out in Part III of the Circular.

Implementation of a comprehensive investing policy

The Company’s investing policy has developed in line with its growth and transformation since REI was first established in 2004. Following the implementation of the new AIM Rules for investing companies, the Directors believe it is prudent to implement a more comprehensive investing policy. As the proposed investing policy contains additional parameters on, inter alia, gearing, the Company is seeking the approval of Shareholders in accordance with Rule 8 of the AIM Rules. The proposed investing policy is set out in Part IV of the Circular.

Extraordinary General Meeting

As noted above, the Directors are seeking authorities to allot authorised but unissued Ordinary Shares to implement the Placing. Notice of the EGM is set out at the end of the Circular. The EGM will be held at the Company’s registered office, 8th Floor, West Plaza144 High Street, West Bromwich, West Midlands, B70 6JJ, on 22 February 2010 at 12.00 noon

Explanation of the Resolutions to be proposed at the Extraordinary General Meeting

The notice convening the EGM sets out the Resolutions to be proposed at the EGM. An explanation of these Resolutions is set out below:

Authority to allot shares (Resolution 1)

The Directors need the authority of Shareholders to allot new Ordinary Shares and Resolution 1 provides such authority by granting the Directors the authority to allot unissued shares in the capital of the Company for the purpose of the Placing up to a maximum nominal amount of £1,553,098.34 (representing, as at 22 January 2010 (being the latest practicable date before the publication of the Circular), 45.6 per cent. of the Company’s issued share capital). This authority, if granted, would last until 11 March 2010. If, however, the Company makes an offer or enters into an agreement requiring the issue of Ordinary Shares prior to that date, the allotment will be valid even if the allotment occurs after the expiry of this authority. The passing of Resolution 1 will require more than 50 per cent. of the votes cast voting in favour. This authority, if granted, will be in addition to any existing authorities to allot Ordinary Shares granted to the Directors prior to the date of the Circular which will continue in full force and effect whether or not the Placing is effected.

Disapplication of pre-emption rights (Resolution 2)

Section 561 of the Act requires that on an allotment of “equity securities” for cash, such equity securities must first be offered to existing Shareholders in proportion to the number of Ordinary Shares they each hold at that time. This is known as a shareholder’s pre-emption right. The Ordinary Shares are “equity securities” for the purposes of Section 561 of the Act. Accordingly, the Ordinary Shares cannot be allotted for cash on a non pre-emptive basis unless the Shareholders have first waived their pre-emption rights and Resolution 2 requests Shareholders to do so for the purpose of the Placing. If the authority is granted, the Directors will be able to allot Ordinary Shares for cash on a non pre-emptive basis, to the extent authorised, without further authority from the Shareholders. As with Resolution 1, the authority is sought for the purpose of the Placing and is intended to last until 11 March 2010. The passing of Resolution 2 will require not less than 75 per cent. of the votes cast voting in favour. This authority, if granted, will be in addition to any existing authorities to disapply pre-emption rights granted to the Directors prior to the date of the Circular which will continue in full force and effect whether or not the Placing is effected.

Adoption of new Articles of Association (Resolution 3)

The adoption of the proposed new Articles of Association requires a special resolution, the passing of which will require not less than 75 per cent. of the votes cast voting in favour.

Approval of Investing Policy (Resolution 4)

The approval of the Investing Policy requires an ordinary resolution, the passing of which will require more than 50 per cent. of the votes cast voting in favour.

Authority to buy back shares (Resolution 5)

In line with many listed and AIM companies the Directors are seeking general authority to make market purchases of Ordinary Shares. The passing of Resolution 5 will require not less than 75 per cent. of the votes cast voting in favour. The authority will be limited to 10 per cent. of the issued share capital of the Company (after the Placing) and the minimum price at which an Ordinary Share may be purchased is 1 pence (exclusive of expenses) and the maximum price (exclusive of expenses) is 105 per cent. of the average of the market price of an Ordinary Share on the five business days prior to the date of such purchase. The authority will expire at the next Annual General Meeting of the Company.

Recommendation

The Board believes the Placing and the other proposals set out in the Circular to be in the best interests of the Company and the Shareholders taken as a whole. Accordingly, the Directors unanimously recommend Shareholders to vote in favour of the Resolutions to be proposed at the EGM as they have irrevocably undertaken to do in respect of their beneficial holdings, amounting, in aggregate, to 98,099,493 Ordinary Shares, representing 28.8 per cent. of the existing issued share capital of the Company.

  Summary of Principal Changes to Articles of Association

The notes below give an explanation of the proposed Resolution to adopt new Articles of Association. 

It is proposed to adopt new Articles of Association (“New Articles”) in order to update the Company’s current Articles of Association (the Current Articles), primarily to take account of changes in English company law brought about by the Act, the Companies (Shareholders’ Rights) Regulations 2009 (the “Shareholders’ Rights Regulations”) and certain amendments to the Uncertificated Securities Regulations 2001.  

The principal changes introduced in the New Articles are summarised below. Other changes, which are of a minor, technical or clarifying nature, and also some more minor changes which merely reflect changes made by the Act, the Shareholders’ Rights Regulations or the Uncertificated Securities Regulations 2001, or conform the language of the New Articles with that used in the model articles for public companies produced by the Department for Business, Innovation and Skills, have not been noted. The New Articles are available for inspection at the registered office of the Company from the date of the Notice of EGM until the date of the EGM and for at least 15 minutes prior to the EGM and during the EGM, as noted on page 20 of the Circular.

 

Principal changes introduced in the New Articles

Articles which duplicate statutory provisions

Provisions in the Current Articles which replicate provisions contained in the Act are in the main to be removed in the New Articles. This is in line with the approach advocated by the Government that statutory provisions should not be duplicated in a company’s constitution. Certain examples of such provisions include articles as to the form of resolutions and the variation of class rights. 

The Company’s objects

The provisions regulating the operations of the Company are currently set out in the Company’s memorandum and Current Articles. The Company’s memorandum contains, amongst other things, the objects clause which sets out the scope of the activities the Company is authorised to undertake. This is drafted to give a wide scope. 

The Act significantly reduces the constitutional significance of a company’s memorandum. The Act provides that a memorandum will record only the names of subscribers and the number of shares each subscriber has agreed to take in the company. Under the Act the objects clause and all other provisions which are currently contained in a company’s memorandum, for existing companies at 1 October 2009, will be deemed to be contained in a company’s articles of association, but the company can remove these provisions by special resolution. 

Further, the Act states that, unless a company’s articles of association provide otherwise, a company’s objects are unrestricted. This abolishes the need for companies to have objects clauses. For this reason the Company is proposing to remove its objects clause together with all other provisions of its memorandum which, by virtue of the Act, are to be treated as forming part of the Company’s articles of association as of 1 October 2009. As the effect of this resolution will be to remove the statement currently in the Company’s memorandum of association regarding limited liability, the New Articles also contain an express statement regarding the limited liability of the shareholders. 

Change of the Company’s name

Under the Companies Act 1985 (“CA 1985“), a company could only change its name by special resolution. Under the Act a company will be able to change its name by other means provided for by its articles of association. To take advantage of this provision, the New Articles enable the Directors to pass a resolution to change the Company’s name.

Authorised share capital and unissued shares 

The Act abolishes the requirement for a company to have an authorised share capital and the New Articles reflect this. The Directors will still be limited as to the number of shares they can at any time allot because allotment authority continues to be required under the Act, save in respect of employee share schemes. 

Redeemable shares 

Under the CA 1985, if a company wished to issue redeemable shares, it had to include in its articles of association the terms and manner of redemption. The Act enables directors to determine such matters instead provided they are so authorised by the articles of association. The New Articles contain such an authorisation. The Company has no plans to issue redeemable shares but if it did so the Directors would need shareholders’ authority to issue new shares in the usual way.

Suspension of registration of share transfers 

The Current Articles permit the Directors to suspend the registration of transfers. Under the Act share transfers must be registered as soon as practicable. The power in the Current Articles to suspend the registration of transfers is inconsistent with this requirement. Accordingly, this power has been removed in the New Articles. 

Authority to purchase own shares, consolidate and sub-divide shares and reduce share capital 

Under the CA 1985 a company required specific enabling provisions in its articles of association to purchase its own shares, to consolidate or sub-divide its shares and to reduce its share capital or other undistributable reserves as well as shareholder authority to undertake the relevant action. The Current Articles include these enabling provisions. Under the Act a company will only require shareholder authority to do any of these things and it will no longer be necessary for articles of association to contain enabling provisions. Accordingly the relevant enabling provisions have been removed in the New Articles. 

Convening general and annual general meetings

The provisions in the Current Articles dealing with the convening of general meetings and the length of notice required to convene general meetings are to be removed in the New Articles on the basis that this is dealt with in the Act.

Votes of members

Under the Act proxies are entitled to attend, speak and vote on a show of hands whereas under the Current Articles proxies are only entitled to vote on a poll. The time limits for the appointment of a proxy have been altered by the Act so that the articles cannot provide that they should be received more than 48 hours before the meeting or in the case of a poll taken more than 48 hours after the meeting, more than 24 hours before the time for the taking of a poll, with weekends and bank holidays being permitted to be excluded for this purpose. The New Articles reflect all of these new provisions.

Proxy appointments

Detailed provisions have been included in the New Articles, which set out what will happen if shareholders deliver multiple forms of proxy to the Company. The Shareholders’ Rights Regulations have amended the Act so that it now provides that each proxy appointed by a shareholder has one vote on a show of hands unless the proxy is appointed by more than one shareholder in which case the proxy has one vote for and one vote against if the proxy has been instructed by one or more shareholders to vote for the resolution and by one or more shareholders to vote against the resolution. The New Articles remove provisions in the Current Articles dealing with proxy voting on the basis that these are dealt with in the Act and contain a provision clarifying how the provision of the Act giving a proxy a second vote on a show of hands should apply to discretionary authorities. The New Articles also make provision that at a general meeting, two proxies appointed to exercise the rights attached to different shares held by one shareholder will be a quorum.

Voting by corporate representatives

The Shareholders’ Rights Regulations have amended the Act in order to enable multiple representatives appointed by the same corporate member to vote in different ways on a show of hands and a poll. The New Articles remove provisions in the Current Articles dealing with voting by corporate representatives on the basis that these are dealt with in the Act.

Electronic conduct of meetings

Amendments made to the Act by the Shareholders’ Rights Regulations specifically provide for the holding and conducting of electronic meetings. The Current Articles have been amended to reflect more closely the relevant provisions.  

Vacation of office by Directors 

The Current Articles specify the circumstances in which a Director must vacate office. The New Articles update these provisions to reflect the approach taken on mental and physical incapacity in the model articles for public companies produced by the Department for Business, Innovation and Skills.

Provision for employees on cessation of business

The Act provides that the powers of the directors of a company to make provision for a person employed or formerly employed by the company or any of its subsidiaries in connection with the cessation or transfer to any person of the whole or part of the undertaking of the company or that subsidiary, may only be exercised by the directors if they are authorised by the company’s articles of association or by the company in general meeting. The New Articles provide that the Directors may exercise this power.

Conflicts of interest

The Act sets out directors’ general duties which largely codify the existing law but with some changes. Under the Act, since 1 October 2008 a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the company’s interests. The requirement is very broad and could apply, for example, if a director becomes a director of another company or a trustee of another organisation. The Act allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association contain a provision to this effect. The Act also allows the articles of association to contain other provisions for dealing with directors’ conflicts of interest to avoid a breach of duty. The New Articles give the Directors authority to approve such situations and to include other provisions to allow conflicts of interest to be dealt with in a similar way to the position under the previous legislation. There are safeguards which will apply when Directors decide whether to authorise a conflict or potential conflict. Firstly, only Directors who have no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success. The Directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate. The New Articles contain provisions relating to confidential information, attendance at board meetings and availability of board papers to protect a Director being in breach of duty if a conflict of interest or potential conflict of interest arises. These provisions will only apply where the position giving rise to the potential conflict has previously been authorised by the Directors.

Execution of Documents

The New Articles provide an alternative option for execution of documents (other than share certificates), so that when the seal is affixed to a document it can also be signed by one Director in the presence of a witness, whereas previously the requirement was for signature by either a Director and the secretary or two Directors.

Use of seals 

Under the CA 1985, a company required authority in its articles of association to have an official seal for use abroad. Under the Act such authority will no longer be required. Accordingly the relevant authorisation has been removed in the New Articles. 

Directors’ indemnities and funding

The Current Articles enable the Company to indemnify the Directors against liability in certain limited circumstances. The Companies (Audit, Investigations and Community Enterprise) Act 2004 (“CAICE”) amended the CA 1985 to broaden the scope of permitted indemnities which a company may grant to a director. In broad terms, the changes introduced by CAICE enable a company to indemnify its directors against any liability incurred by a director to any person (other than the Company or any associated company) in connection with any negligence, default, breach of duty or breach of trust in relation to the company (which was previously prohibited under section 310 of the CA 1985), and to provide its directors with funds to cover the costs incurred by a director in defending legal proceedings against him or her. Previously, a company was only able to fund a director’s defence costs once final judgment in their favour had been reached. The Act has in some areas widened further the scope of the powers of a company to indemnify its directors and to fund expenditure incurred in connection with certain actions against directors. The exemption afforded by CAICE allowing a company to provide money for the purpose of funding a director’s defence costs now expressly covers regulatory proceedings and applies to associated companies. As directors are increasingly being added as defendants in legal actions against companies, and litigation is often very lengthy and expensive, the board believes that the risk of Directors being placed under significant personal financial strain is increasing. Further, the board believes that the ability to provide appropriate indemnities and to fund Directors’ defence costs as they are incurred, as permitted by the Act, afford the Directors reasonable protection, and are important to ensure that the Company continues to attract and retain the highest calibre of directors. The New Articles reflect this. Individual Directors of the Company would still be liable to pay damages awarded to the Company in an action against them by the Company, and to repay their defence costs (to the extent funded by the Company) if their defence is unsuccessful.

Language

Generally the opportunity has been taken to bring clearer language into the New Articles and in some areas to conform the language of the New Articles.

  Proposed Investing Policy

The Company seeks to provide investors with capital growth through asset management, coupled with revenue growth through the capture of reversionary income from its current portfolio of properties and future investments, providing a competitive income yield.

Investment Focus

The Company invests in retail, commercial and residential property principally in the West Midlands and Central England, targeting vacant or part vacant, short leased, single, multi-let and distressed property assets that:

    have high running yields or short to medium term asset management opportunities;

    may be priced below replacement cost;

 

    have opportunities to generate rental value growth from active asset management, refurbishment, redevelopment, change of use and planning gains;

 

    provide attractive value attributes arising from the nature of the vendors who may be motivated sellers; and

    are likely to have individual building values of between £1m and £10m per lot.

The Company’s niche areas of activity include:

    non-core “orphan” disposals by institutions;

    assets not easily acquired by private or smaller investors; and

    distressed and deadline purchases.

Investment Strategy

The Directors will endeavour to build the Company’s portfolio through leveraging their network of agents and established relationships which provide introductions to prospective investments where the Company’s strong banking relationships and cash resources facilitate quick execution on competitive terms.  

The Directors will look to “create” investments rather than “buy” investments, through an active strategy of repositioning properties and recycling and conserving capital, whilst generating cash flow, maximising occupancy rates and crystallising reversions.

The Company will maintain a portfolio comprising a diverse range of properties which is not reliant on or over-exposed to specific sub-sectors or tenants.  

Gearing

The Directors intend to use the Company’s cash resources to make ungeared acquisitions but, thereafter, once asset management initiatives have been carried through, the Company will introduce leverage on secured assets in order to recycle the equity. The Directors’ intention is that loan to value gearing will not exceed 65 per cent. at any time. This ratio, however, is subject to review by the Board in light of prevailing market conditions.

  This announcement is for information purposes only and does not constitute an offer or invitation to acquire or dispose of any securities or investment advice in any jurisdiction.

Smith & Williamson Corporate Finance Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser for the purposes of the AIM Rules exclusively for the Company in connection with Admission and the Placing. Smith & Williamson Corporate Finance Limited is not acting for any other person and will not be responsible to any other person for providing the protections afforded to clients of Smith & Williamson Corporate Finance Limited or for advising any other person in connection with Admission and the Placing.

Singer Capital Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as lead manager and broker exclusively for the Company in connection with the Placing. Singer Capital Markets Limited is not acting for any other person and will not be responsible to any other person for providing the protections afforded to clients of Singer Capital Markets Limited, or for advising any other person in connection with the Placing.

No representation or warranty, express or implied, is made by Smith & Williamson Corporate Finance Limited or Singer Capital Markets Limited or any of their respective directors, officers, employees, advisers or agents as to any of the contents of this announcement and, without limiting the statutory rights (if any) of any person to whom this announcement is issued, no liability whatsoever is accepted by Smith & Williamson Corporate Finance Limited or Singer Capital Markets Limited or any of their respective directors, officers, employees, advisers or agents for the accuracy of any information or opinions contained in this announcement or for the omission of any material information.

The information contained in this announcement is not for release, publication or distribution, directly or indirectly, to persons in the United States, Australia, Canada, Japan, New Zealand, South Africa or Switzerland or any other jurisdiction in which such publication or distribution is unlawful and should not be distributed, forwarded to or transmitted in or into any jurisdiction where to do so might constitute a violation of local securities laws or regulations. The new Ordinary Shares to be issued in relation to the Placing have not been and will not be registered under the United States Securities Act of 1933, as amended (“the Securities Act“), or under the laws of any state of the United States, and may not be offered, sold or transferred in the United States except pursuant to an exemption from, or in a transaction not subject to, the requirements of the Securities Act. The new Ordinary Shares to be issued in relation to the Placing may not be offered, sold or transferred, directly or indirectly, in or into Australia, Canada, Japan, New Zealand, South Africa or Switzerland, or any province or territory thereof, or any other jurisdiction in which it would be unlawful to do so. There will be no public offer of Ordinary Shares to be issued in relation to the Placing in the United Kingdom or elsewhere.

  Definitions

The following definitions apply throughout this announcement unless the context otherwise requires:

“Act”

the Companies Act 2006

 

“Admission”

the admission of the Placing Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules

 

“AIM Rules”

the rules for companies whose shares are traded on AIM, and their nominated advisers, and issued by the London Stock Exchange from time to time

 

“AIM”

a market operated by the London Stock Exchange

 

“Board” or “Directors”

the directors of the Company, whose names appear on page 3 of the Circular

 

Caledonia

Caledonia Investments PLC

 

“Company” or “REI”

Real Estate Investors PLC

 

“EGM”

the extraordinary general meeting of the Company convened for 22 February 2010 (and any adjournment thereof), notice of which is set out in the Circular

 

“ERV”

Estimated Rental Value, being the estimate of the rental which a property is likely to command in the open market at a given time

 

“Executive Directors”

 

Paul Bassi and Marcus Daly

“Form of Proxy”

the form of proxy accompanying this document for use at the EGM

 

“Investing Policy”

the proposed investing policy for the Company as set out in Part IV of this document to be approved at the EGM

 

London Stock Exchange”

London Stock Exchange plc

 

“Ordinary Shares”

ordinary shares of 1p each in the capital of the Company

 

“Placing”

the proposed placing of the Placing Shares

 

“Placing Agreement”

the placing agreement dated 26 January 2010 between (1) the Company, (2) Singer and (3) Smith & Williamson

 

“Placing Price”

6.5 pence per Placing Share 

 

“Placing Shares”

the 155,309,834 new Ordinary Shares to be issued pursuant to the Placing

 

“Register”

 

the register of members of the Company

“Resolutions”

the resolutions set out in the notice of EGM at the end of this document

 

“Shareholders”

holders of Ordinary Shares

 

“Singer”

Singer Capital Markets Limited, 1 Hanover StreetLondon W1S 1YZ

 

“Smith & Williamson”

Smith & Williamson Corporate Finance Limited, 25 Moorgate, London EC2R 6AY

 

“Voting Record Time”

in relation to the EGM, 6.00 p.m. on 20 February 2010 or if the EGM is adjourned, 6.00 p.m. on the day which is two days before the date of the adjourned meeting

 

This information is provided by RNS
The company news service from the London Stock Exchange
 

END

 
 

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