2015

First Day of Dealings on AIM

03 July 2015

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

K&C REIT plc, the Central London-focused residential real estate group, is pleased to announce that admission and trading of its Ordinary shares ("Admission") will commence today at 8:00am on the London Stock Exchange's AIM. The Company's shares will trade under TIDM: KCR.L. The Company's AIM Admission Document is available on its website, www.kandc-reit.co.uk.

In addition, on Admission, the Company has agreed to acquire Silcott Properties Limited ("Silcott") for a consideration of £3,630,000 (payable in cash and shares in the Company). Silcott is the owner of 25 Coleherne Road, a 3,976 sq. ft. residential building in Chelsea, London, comprising ten studio apartments. 25 Coleherne Road was valued at £4 million on 22 June 2015. The Group also owns a further three smaller properties.

K&C Highlights:

  • K&C will own and manage Central London residential property within a favourable tax structure;
  • K&C represents a scalable business model with the objective to build a substantial residential property portfolio;
  • K&C will generate income and capital growth through the tax-efficient acquisition of residential property special purpose vehicles ("SPVs") with inherent capital gains and then add value to the portfolio post-acquisition;
  • The Directors have identified a number of SPVs that they believe are suitable acquisition targets and non-binding letters of intent are in place for opportunities of over £40 million in aggregate;
  • The management team has a proven and successful track record with over 140 years' collective industry experience;

Commenting, K&C's CEO, Tim James said:

"We are delighted to complete our IPO and to start trading on AIM. Our plans are advanced, with our first acquisition of Silcott announced alongside our Admission to AIM. Our intention is to provide investors with an opportunity to gain exposure to the Central London residential property market, one of the most resilient sectors of the UK housing market over the past few decades and, to that end, we have identified, and have letters of intent in place, for properties worth in excess of £40 million. We know that the opportunity is there.

"As a REIT, we will have the ability to purchase properties at a discount to market value and will look to increase value through active asset management, aiming to generate growth in capital values and rental yields. Our management team will use their many years of expertise and will exploit our long-term relationships in the Central London residential market to build a portfolio in excess of £500 million. K&C provides an exit strategy for vendors of SPVs and attractive yields to investors." 

Fundraising Highlights:

  • The Company raised £3,566,340 (before expenses) via a placing of new Ordinary Shares
  • Issue price - 10p
  • Number of fundraising shares - 34,528,400
  • Issued Share Capital on Admission - 43,785,623
  • Anticipated market capitalisation of the Company on Admission - £4.4m
  • Allenby Capital is acting as Nominated Adviser and Broker to the Company

 

Contacts:

K&C REIT plc
George Rolls, Chief Executive +44 7768 534641
Timothy James, Property Director
Allenby Capital Limited
Jeremy Porter/James Reeve +44 20 3328 5656
Yellow Jersey PR
Philip Ranger/Dominic Barretto [email protected]

 

Background to K&C REIT plc

K&C REIT's objective is to build a substantial residential property portfolio that generates secure income flow for Shareholders through the acquisition of SPVs with historic capital gains. The Directors intend that the Group will acquire, develop and manage residential property assets in Central London, such as Kensington & Chelsea, Westminster and the surrounding area. The Directors believe that they have assembled a team with the skill, ability and experience to realise this objective.

The Directors believe that the Company offers an attractive opportunity for investors to gain exposure to the Central London residential property market. Central London has been a resilient market for residential property for a number of reasons. These include the UK's economic and political stability, London's position as one of the world's leading financial and cultural centres, constraints on supply, increasing institutional and overseas interest in the sector and rising demand for rental properties.

The Company's management team has a track record of successfully sourcing, financing, improving, letting and managing properties to create sizeable property portfolios with attractive cash-flows. The Group aims to take advantage of opportunities in the London residential real estate market to build its portfolio, enhancing yield and increasing net asset value through active management and development. The Directors believe this strategy will allow the Company to provide Shareholders with an attractive level of dividend income in due course.

The Directors, having taken advice from the Company's tax advisers, Beavis Morgan LLP, expect the Group to qualify as a REIT on Admission. By way of summary, as a REIT Group:

  • companies that are members of the group of which the Company is the principal company will not pay UK corporation tax on income profits and capital gains arising from a Qualifying Property Rental Business carried on by members of that group; and
  • the Company will be required to distribute to Shareholders at least 90 per cent. of the profits arising from its Qualifying Property Rental Business as calculated for tax purposes on or before the filing date of the Company's corporation tax return, which is twelve months after the end of each accounting period.

The Directors believe that admission to AIM and the Group's REIT status will enhance the Company's ability to access opportunities for property acquisitions. In particular, the Company will target SPVs with unrealised capital gains where REIT status can confer an advantage on both the Company and (indirectly) the vendor. The Directors believe that this is demonstrated by the acquisition of Silcott (see below).

The Company has agreed to acquire Silcott for a consideration of £3,630,000, conditional on Admission. Silcott is the owner of 25 Coleherne Road, a 3,976 sq. ft. residential building in Chelsea, London, comprising ten studio apartments. 25 Coleherne Road was valued at £4 million on 22 June 2015. The Group also owns three smaller properties.

The Company has raised £3.57 million (before expenses) at Admission through the Fundraising. The net proceeds of the Fundraising (along with the Group's £1.5m loan facility) will be used by the Group to fund the Acquisition and provide working capital to pursue the acquisition strategy. The Board expects to complete further portfolio acquisitions within three to six months of Admission. The Directors anticipate that future acquisitions will be made by deploying a combination of the Company's cash resources, bank debt and, where appropriate, the issue of Ordinary Shares.

The Company was established on 10 June 2014 and its wholly owned subsidiary, K&C Ltd, was incorporated on 19 August 2013.

Board of Directors

The Board comprises eight Directors, three of whom are non-executive. The Executive Directors are a team of property and finance professionals who between them have over 140 years of collective experience in the UK real estate market. They have a track record of having successfully created value for shareholders in property investments, having set up several property companies over the years and realised exits both publicly and privately. For example, Gander, a London-based property company specialising in the acquisition and development of residential real estate in Kensington & Chelsea, which was quoted on the London Stock Exchange from 1995 to 1999, grew from a £5 million company in 1994 to one with a property portfolio worth over £100 million when it was sold in 1999.

Recently, members of the team have, collectively and individually, continued to carry out significant residential property transactions in Central London, including planning and developing various multi-million pound properties in Kensington & Chelsea, and Wimbledon.

Nigel Terrence Payne, aged 55, Non-Executive Chairman

Nigel has over 25 years of experience at board level, in FTSE, AIM and private businesses covering a wide range of industries: advertising, aviation, manufacturing, distribution, FMCG, retail, finance and e-commerce. His board responsibilities have encompassed chairman (multinational), CEO (multinational), finance (UK and international), I.T. and commercial in some of the UK's leading businesses. His wide-ranging City exposure includes acquisitions, flotations and fund raisings. Nigel is currently chairman of Gateley (Holdings) plc, Stride Gaming plc, an online bingo company, and Perpetuus Advanced Materials, one of the largest graphene- producing companies in the world and a non-executive director of Gama Aviation plc, an AIM-quoted global private-jet management business.

Timothy Michael James, aged 61, Chief Executive

Tim has extensive experience in the London property market of more than 35 years, particularly in Kensington & Chelsea. He founded Gander and helped grow and manage its property portfolio to over 300 residential properties by the time it was sold in 1999, with a property portfolio worth over £100 million. Tim remains actively involved in projects in the London property market, working on a number of refurbishment and redevelopment projects across the capital.

Earlier in his career, Tim was a director of a leading residential estate agency based in west London for over twenty years. Tim has created and managed a number of residential property investment companies specialising in the district of Kensington & Chelsea, including Kensington Limited, Chelsea Limited and Kensington & Chelsea Limited.

James Andrew Cane, aged 63, Finance Director

James has operated a financial and management consultancy business for over thirty years. He has advised a number of national and international private-equity firms on strategy, fundraising, marketing and business development.

James has been a chief executive and finance director in both listed and private equity-backed businesses, including at Ashley House plc, a quoted developer of doctors' surgeries and health centres. He was a non- executive director of the Lambeth Building Society until its sale to the Nationwide in 2006. He was the chief financial officer of 8 Miles LLP, a private equity firm managing a fund to invest in buyouts across Africa. James is currently the chief financial officer of Linton Capital, an investment manager in the oil and gas services sector. He was group chief accountant at Westminster Health Care plc, an operator of over 140 care homes and psychiatric hospitals, during the 1990s.

James has been a trustee of the UK's longest-established drama school, LAMDA (the London Academy of Music and Dramatic Art) since 2008 and chairs its finance committee. He is also an affiliate governor of the Conservatoire for Dance and Drama, an umbrella organisation for eight leading UK dance, circus and drama schools, and sits on its finance committee. James is a member of the finance committee of The Queen's Club, a leading UK racquet sports club and is a fellow of the Institute of Chartered Accountants in England and Wales.

Christopher Douglas James, aged 65, Operations Director

Christopher will be responsible for supervising the management and administration of the Group's assets in his role as Operations Director.

His current property-related activities include the refurbishment, letting and management of properties in Kensington & Chelsea and Wimbledon and investment in portfolios of residential freeholds where long leases have been granted. He is also active in preparing property for redevelopment by obtaining planning and other approvals.

Christopher's recent consulting assignments include membership of the team developing a Published Document on Smart Cities for the British Standards Institute, interim estate management for Direct Line Insurance and the States of Jersey in the Channel Islands, and outsourced estate management for Barclays Bank.

He was operations director of Gander from 1994 to 1999, having responsibility for the management of over 300 apartments.

After receiving a degree in engineering science and economics at the University of Oxford, Christopher trained with Knight Frank, a prominent international estate agent, where he qualified as a chartered surveyor. After leaving Knight Frank, he became a management consultant specialising in property matters with PricewaterhouseCoopers. He subsequently carried out assignments with other major consultancies, including Deloitte, IBM Business Consulting Services and Concerto. Christopher is a Fellow of the Royal Institution of Chartered Surveyors. He also gained an MBA from INSEAD in France.

Timothy John Knight Oakley, aged 65, Construction Director

Tim will be responsible for supervising the redevelopment and refurbishment of the Group's assets in his role as Construction Director.

Tim has over forty years' experience in the construction and property business in Central London. He has owned and managed an independent development and consultancy business for the last twenty years, advising clients on the sale and purchase, and development of residential and commercial property.

He has been a trustee of LAMDA for the last six years, where he chairs its building committee, negotiated the sale of its original theatre and oversaw the planning application for LAMDA's new 60,000 sq. ft. theatre building. He is now overseeing its design and build contract.

Tim was part of the team that started and built up Gander, acting as a director of its main subsidiary company. Using his own construction company, Tim was responsible for supervising the planning and development of acquired buildings. After leaving Gander, Tim was involved in a £23 million redevelopment of a retirement home in Queen's Gate Terrace into 23 flats.

In the early 1970s, Tim founded his own property and construction companies, initially carrying out tightly budgeted projects for the government-sponsored Housing Corporation, later expanding into high-end luxury residential developments in Central London. He also worked as a designer for Sir Terence Conran's Interior Design Group.

Oliver John Vaughan, aged 68, Executive Director

Oliver has significant experience in the capital markets and with AIM companies. He is an entrepreneur with over 35 years of experience in various international businesses, specifically in the property, leisure, financial services, investment and technology sectors.

He has been chairman of a number of public companies. He was the founder in 1997 and a director of what became The Evolution Group Plc until retiring from the board in 2006.

Oliver was chief executive of Gander, one of the first 15 companies to join AIM, from 1994 until its sale in 1999 and was a director of Wembley Plc from 1989 to 1990.

In 1966, Oliver and his brother Thomas co-founded Juliana's Holdings plc, which they built into one of the leading worldwide leisure chains. The company was floated on the London Stock Exchange in 1983 and sold to Wembley Plc in 1989 for over £30 million.

Patricia Mary Preston ("Patricia Farley"), aged 68, Non-Executive Director

Patricia has over forty years' experience in the property industry, specialising in Central London and, particularly, Kensington & Chelsea residential real estate. Currently, Patricia oversees Farleys Estate Agents' sales, lettings and property management operations in South Kensington. In addition, she is responsible for sales at eight further Central London offices, including Mayfair, Knightsbridge, Kensington, Chelsea, Westminster and Fulham. Patricia holds the FNAEA and MARLA industry accreditations.

Patricia sits on the residential board of Chestertons, reporting to the Head of Residential. Patricia was also an executive director of Humberts Group plc, a national group of estate agents and valuers which was quoted on AIM. Locally in the Royal Borough of Kensington & Chelsea, where she lives, Patricia is involved in residents' associations and business working groups as well as sitting on a local planning committee.

George Henry Rolls, aged 55, Non-Executive Director

Over the last thirty years, George Rolls has been a director, non-executive director, manager and adviser to both private and public companies in a variety of sectors such as manufacturing, publishing and print media, technology, consumer products and aviation. Earlier in his career, George spent several years in Australia, primarily working in trading and insurance, before returning to the UK where he founded Beaufort Securities of which he was a director between 1992 and 2006. Since selling Beaufort Securities in 2006, George has acted as a consultant for private high net worth individuals and more recently been involved with the launch of a software technology fund. George is currently a non-executive director of AIM-quoted Gama Aviation plc, a non-executive director of Perpetuus Advanced Materials Limited, and is a trustee of the Geoffrey de Havilland Flying Foundation, a charity of the Air Squadron, which supports aviation and helps young people to fulfil their ambition to be pilots.

Further information on the Silcott Acquisition Agreement

The Company has agreed to acquire the entire issued share capital of Silcott for £3,630,000 (the "Acquisition"). The consideration for the Acquisition shall be satisfied as to £3,330,000 in cash and as to £300,000 by the issue of 3,000,000 Ordinary Shares in the Company at a price of 10p (the "Consideration Shares").

Timothy James, Christopher James and Oliver Vaughan have granted the vendor of Silcott options (each exercisable within a six month period following the first anniversary of the completion of the Acquisition) entitling the vendor to require each of them to purchase 38.636 per cent., 38.636 per cent. and 22.728 per cent. respectively of a maximum number of 2,700,000 of the vendor's Consideration Shares at 10 pence per share.

Definitions

"Acquisition" the acquisition of Silcott from Tuscan Properties Limited ;
"Board" or "Directors" the directors of the Company as at the date of Admission;
"Central London" the City of London; the City of Westminster; and the boroughs of Kensington & Chelsea; Hammersmith & Fulham; Islington; Camden; Hackney; Tower Hamlets; Southwark and Lambeth;
"Fundraising" the fundraising of approximately £3.57 million (before expenses);
"Gander" Gander Holdings plc;
"Greater London" or "London" the administrative area within the London region of England comprising the City of London, the City of Westminster, and the 31 London boroughs;
"Group" the Company and its subsidiaries and subsidiary undertakings from time to time;
"Issue Price" 10 pence per new Ordinary Share;
"K&C Ltd" Kensington & Chelsea REIT Limited, a subsidiary of the Company;
"Ordinary Shares" ordinary shares of 1p each in the capital of the Company, with the rights as set out in the Articles;
"Qualifying Property Rental Business" a Property Rental Business fulfilling the conditions in section 529 of the Corporation Tax Act 2010;
"REIT" Real Estate Investment Trust, being a company or group of companies to which Part 12 of the CTA 2010 applies;
"Shareholders" the holders of Ordinary Shares; and
"SPV" for the purpose of this announcement, a UK-incorporated special purpose vehicle which holds residential property assets as its principal or only asset.