Oct. 13, 2022
BWP REIT PLC ("BWP REIT" or the "Company"), a newly formed single asset company established to acquire Bridgewater Place ("Bridgewater Place" or the "Property"), an office-led mixed use property situated in a prime location in central Leeds which has been independently valued at £63 million (as at 30 August 2022), announces its intention to raise £35 million (before expenses) through the issue of 35 million new ordinary shares (the "Ordinary Shares") in the Company at an issue price of 100 pence per share (the "Issue Price") (the "Issue").
The Company will apply for all of its issued and to be issued Ordinary Shares to be admitted to trading ("Admission") on the Wholesale segment of the International Property Securities Exchange (the "IPSX"), the world's first regulated exchange dedicated to single asset real estate companies and those owning multiple assets with commonality.
The Company has exchanged contracts for the acquisition of Bridgewater Place (subject to Admission, completion of the acquisition and the novation and reinstatement of the vendor's debt facility of £38.6 million). The acquisition will initially be undertaken by way of the grant of a 999-year lease of the internal commercial areas of the Property to M7 BWP Propco Limited (" Propco "), a wholly owned subsidiary of the Company. Propco will also be granted a call option to acquire the freehold titles in the future for £1. The Issue, debt facility and issue of £23 million of Loan Notes will enable the Company to acquire the Property and undertake a comprehensive asset management plan to fully reposition the Property by undertaking essential fire safety and cladding works, creating up-to-date amenity spaces, upgrading M&E and cosmetic modernisation whilst improving sustainability towards "net zero".
M7 Real Estate Financial Services Ltd (the " AIFM "), will serve as alternative investment fund manager to the Company and M7 Real Estate Ltd (the " M7 " or the " Asset Manager " and together with its subsidiaries, the " M7 Group ") will act as asset manager to Propco in respect of the Property. M7, either directly or through its affiliates, will own c.8.57% of the Company's share capital after Admission.
WH Ireland Limited ("WH Ireland") is acting as IPSX Lead Adviser and Settlement Agent.
The Company will apply to become a real estate investment trust to which Part 12 of the UK Corporation Tax Act 2010 applies (a "REIT") and in summary means that the Company will not pay UK corporation tax on income and capital gains from its property rental business in the UK and elsewhere provided that certain conditions are satisfied.
HIGHLIGHTS AND INVESTMENT CASE
BWP REIT offers professional investors the potential for capital growth from its asset management strategy and thereafter a steady income from a high quality and energy efficient building, providing tenants with flexible and affordable office space and a strong amenity offer.
The asset management strategy aims to create a clear path to capital growth through sustainability improvements (including a pathway to net zero), increasing space utilisation, capturing rent reversion and re-letting vacant space.
The comprehensive upgrade programme will be carried out over the next two to three years from Admission to significantly improve how the Property is positioned within the Leeds office market to both occupiers and ultimately future buyers or long-term investors.
The programme will comprise:
A key element of the asset management strategy will be to lease c.18,000 sq. ft. of currently vacant space on floor 9 (following completion of certain works by mid-2023), resulting in an expected c.£0.6 million per annum increase in rental income and reducing service charge leakage.
There are also a number of opportunities to improve the net operating income through upcoming rent reviews, potential lease re-gearing and lease extension negotiations and/or the removal of break options. A small number of leases are due to expire in the next 12 to 18 months. As a proactive Asset Manager willing to invest in building improvements, M7 will schedule cosmetic works to coincide with key lease events where possible so as to maximise the prospect of retaining key tenants.
The Asset Manager believes that with careful branding, marketing and proactive management, the physical qualities of the Property, its energy performance credentials, new amenities, inherent affordability relative to newly constructed buildings together with regional connectivity, will all serve to position the Property for the next generation of tenants.
Upon completion of the remedial works and repositioning of the Property, the Board intends to look at options to optimise investor returns either through an outright sale of the Company or by listing the Company on the IPSX Prime market (allowing existing shareholders the choice to exit or retain their investment).
Strong occupier demand for high quality, green office space in Leeds expected to contribute to high rental growth supported by the growth prospects of the local economy.
Dividend outlook during Asset Management Programme
Highly experienced Asset Manager with strong track record of value add performance that is aligned through significant anticipated investment in the Company.
Strong independent non-executive Board with significant real estate and financial experience.
Edmund Craston , Chairman of BWP REIT, commented: "BWP REIT presents a compelling opportunity to create value in an asset that has historically suffered from a lack of investment by undertaking a number of essential and cosmetic asset management initiatives. Our aim is to execute a programme of works to create a high quality, fully repositioned and energy efficient office space with a strong amenity offer which generates long term secure income from a range of high-quality tenants. Leeds is one of the UK's main regional cities and suffers from an acute shortage of high quality modern and sustainable office stock, presenting strong fundamentals to underpin the investment opportunity BWP REIT presents."
Richard Croft, Executive Chairman of M7, added: "The transaction and the proposed Admission of BWP REIT to IPSX Wholesale serves to demonstrate how, in addition to being a market for investors seeking long term real estate backed income, IPSX has the potential to solve complex situations for existing property owners while presenting new investors with a strong opportunity to benefit from value creation through the ownership of shares traded on a regulated and liquid exchange. In this case there has been insufficient capital to invest in Bridgewater Place for a number of years, meaning that the essential works and cosmetic improvements required to make the Property both attractive to office occupiers and investable for yield hungry institutions have not been undertaken. This proposed capital raise and Admission, will allow us to fully reposition this high-profile property to create a grade A office asset which meets the needs of the modern and future occupier."
The Company expects to announce the results of the Issue and publish its admission document on or around 25 October 2022 and Admission and commencement of dealings to commence on or around 27 October 2022.
IPSX Wholesale is a market exclusively for institutional and professional investors.