22nd Jun 2009 07:06
22 June 2009
BRIXTON PLC AGM STATEMENT 2009
At today's Annual General Meeting Louise Patten, Chairman, will give the following update to shareholders.
Progressing additional financial flexibility and update on possible offer
The Board continues to progress its options to provide the Group with the additional financial flexibility it requires to mitigate the risk of breaching its balance sheet covenants. These options include a refinancing of the Group's debt arrangements, a potential equity raising, discussions with third parties about possible offers for the Company and further asset disposals.
The Company is in negotiation with its banks to refinance its banking facilities and has secured a waiver of any potential breaches of the asset cover ratio covenants under those facilities prior to 31 July 2009. Brixton will update the market on the position regarding its banking and bond covenants by the end of August when it publishes its results for the half year ended 30 June 2009.
On 22 May the Board announced that, following the receipt of preliminary approaches relating to possible offers for the Company, it had entered into discussions with a small number of parties.
Today SEGRO plc ("SEGRO") announced it has reached agreement with the Board of Brixton on the financial terms of a possible recommended offer for the entire issued and to be issued share capital of Brixton on the following basis: 1.75 SEGRO shares for each Brixton share.
The SEGRO announcement does not constitute an announcement of a firm intention to make an offer under Rule 2.5 of the City Code on Takeovers and Mergers (the "Code") and there can be no certainty that any offer will be made even if the pre-conditions referred to below are satisfied.
Any announcement by SEGRO of a firm intention to make an offer for Brixton on the above financial terms and on customary terms and conditions under Rule 2.5 of the Code, which would include a recommendation from the Brixton Board, is subject to the satisfaction of the following non-waivable pre-conditions: (i) completion of final confirmatory due diligence by SEGRO; (ii) finalisation of documentation; and (iii) final approval of the offer by the SEGRO Board.
Property management
Brixton has let 345,000 sq ft of space up to 31 May 2009 generating £3.5m of annualised rental income. This includes the first letting at X2, announced on 13 May. Units 1, 2 and 3, totalling 82,683 sq ft have been let to cargo support services company Airworld Services Limited on a 5-year lease. The transaction equates to a headline rental of £1,125,000pa (£13.61 per sq ft) with the equivalent of 12 months rent-free. To enable the X2 letting, surrenders totaling 106,626 sq ft were agreed at The Heathrow Estate and Fairway Trading Estate at Heathrow.
Total space returned due to expiries, breaks, surrenders and insolvencies up to 31 May 2009 equated to an annualised loss of rent of £6.2m. This included the loss of £2.1m as a consequence of the insolvency of Woolworth subsidiary Entertainment UK Ltd and the surrender of £1.2m to enable the X2 letting.
New tenant insolvencies up to 31 May 2009 represented an annualised loss of rent, net of re-lettings, of £1.2m per annum. This compares to insolvencies in the second half of 2008 representing an annualised loss of rent, net of re-lettings, of £3.0m per annum.
As expected the headline vacancy rate by income rose to 21.1% at 31 May 2009. If the headline vacancy rate is adjusted to take into account those insolvencies where the space had not yet been returned to the Group, the headline adjusted vacancy rate at 31 May 2009 would have been 22.8% compared to 19.9% at 31 December 2008. The difference is largely as a result of new insolvencies in 2009 and the effect of the sales referred to below.
Disposals
Since the beginning of March Brixton has disposed of six properties at a value of £81.9m at an average discount to the December 2008 value of 17.6%.
Brixton today announces that it has exchanged contracts to sell the freehold of Walton Road Industrial Estate, Watford, to Bellway Homes Limited for a consideration of £4.5m. This price reflects a net initial yield of 2.11% assuming normal purchaser's costs of 5.725% and a reduction from the December valuation of 25%. The sale is due to complete on 26 June 2009.
The property comprises 10 industrial / warehouse units and an office block constructed in the 1970s totaling approximately 65,000 sq ft on 2.9 acres. Three units are let at a current rent of £101,000 per annum. Brixton recently obtained full planning permission for the demolition of the existing buildings and the construction of 76 residential units.
As previously announced Brixton sold four industrial units to AEW Europe for their European Property Investors Special Opportunities Fund (EPISO) for a total consideration of £70.25m. Unit 3, Polar Park, Heathrow was sold for £11,212,500, a net initial yield of 6.7%, a single unit at Oldfield Lane, Greenford was sold for £15,502,500, reflecting a net initial yield of 7.8%; and Heathrow Gateway was sold for £43,535,000, reflecting a net initial yield of 8.1%.
A variety of initiatives regarding further asset disposals are being pursued. The proceeds raised will be used to reduce debt. The extent of the disposal programme will be determined by the timing and details of the other measures being taken to strengthen the Group's balance sheet.
Summary
The Board and management team continue to work diligently on the overriding objective of strengthening the Group's financial position. Brixton has a high quality portfolio in excellent locations and management will also maintain its focus on the opportunities to increase income and improve its cash flow.
Enquiries
Brixton
Forward Looking Statements
This document may contain certain 'forward-looking statements'. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes of results expressed or implied by such forward-looking statements.
Any forward-looking statements made by or on behalf of Brixton speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Brixton does not undertake to update forward-looking statements to reflect any changes in Brixton's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
Information contained in this document relating to Brixton should not be relied upon as an indicator of future performance.
Dealing disclosure requirements Under the provisions of Rule 8.3 of the Takeover Code, if any person is, or becomes, "interested" (directly or indirectly) in 1% or more of any class of "relevant securities" of Brixton plc, all "dealings" in any "relevant securities" of Brixton plc (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of Brixton plc, they will be deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the Takeover Code, all "dealings" in "relevant securities" of Brixton plc by any potential offeror or Brixton plc, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.
Related Shares:
Segro