16th May 2006 11:59
Slough Estates PLC16 May 2006 Chairman's Statement to the Slough Estates plc Annual General Meeting Speaking at the Annual General Meeting of Slough Estates plc being held inLondon today, Paul Orchard-Lisle, Chairman, will say: "Slough Estates is the leading provider of flexible business space for thosebusinesses that are naturally located on the edge-of-town. That implies we willbuild and invest in a rich mix of offices, research facilities, distributionspace and manufacturing space, and that we will do so in what we consider to bethe best business locations in the countries in which we operate. There are good reasons to be pleased with the results that were achieved in2005. After all, to add 22% to the net value of our assets in a twelve monthperiod and to grow earnings per share by 34% at a time when inflation is runningaround 3% is no mean achievement. However, our view is that there is still moreto be done and that whilst business will be competitive over the next few years,we are well positioned to be one of the top performers in the real estateindustry. In that sense it is worth reflecting that the so-called industrialsector of real estate has proved to be historically, and probably will be in thefuture, the most stable of all the property asset classes. Offices and shopsoften achieve leaps in value, all too often then followed by steep decline. During the last 2 years we have played an active role in the consultationprocess that has taken place with government on the possible introduction ofREITs into the UK. The government responded positively to the views of theindustry and as a result the legislation that is presently in front ofParliament is likely to create a very good environment for the UK propertyindustry. Even so, I hold the strong view that over a period of time it wouldclearly be advantageous if the European Union were to seek to ensurecompatibility of REIT legislation across all member countries and I hope thatthis is something we shall see develop in due course. On the assumption that we elect to convert to a REIT, we would be required topay an entry charge equal to 2% of the value of our UK investment propertyassets at the time of entry. Thereafter we would be exempt from corporation taxon UK investment property income and capital gains. Going forward we would berequired to pay dividends to shareholders which are at least equal to 90% of thetax-exempt income. Those dividends would be subject to a withholding tax at thebasic rate of income tax and shareholders according to their individual taxcircumstances would then be liable to pay a further tax or, in some cases,reclaim withholding tax. The tax treatment of the Group's other activities,including overseas, is unaffected by the REIT legislation. Based on our last valuation, the 2% entry charge would be approximately £70million although that would have to be recalculated at the actual date ofconversion. Thereafter, as I indicated earlier, all future UK rental income andinvestment property gains and disposals would be exempt from taxation and thusdeferred tax provisions in respect of UK investment properties would no longerbe required - a sum of no less than £400 million as at 31st December 2005. The surpluses on our UK investment property developments would also be tax-exempt providing we held the assets for at least three years from the date of completion. The arguments in favour of conversion therefore are strong and, while we cannotmake a final decision until the legislation and regulations are settled, on thebasis of the evidence that we have at the moment the Board believes thatconversion is likely to be in shareholders' best interests. As the full detailsof conversion become available to us, so we will reach our conclusion some timeI suspect later in the summer and of course then provide a review of the effectson the shareholders in the company. I would like to highlight one or two positive developments since the year-endand give you an indication of how I see our immediate future. The most notable achievements in the first quarter of 2006 have been:- * Further progress made in Continental Europe resulting in over 1 million square feet being leased in the first three months of the year. In the last week we also signed a lease to let a further 420,000 square feet in Belgium. * The acquisition of the Treforest Business Park just outside Cardiff. We paid £63 million for 130 acres of land on which there is about 1 million square feet of accommodation but still 9.6 acres of land for early development. The purchase is in keeping with our strategy of owning physically large parks so that we may maximize the returns from the flexibility and their critical mass. With the acquisition of Treforest, we now own 6 of the largest such parks in the UK. * Continued momentum in our leasing programme in the UK with 425,000 square feet already leased in the first quarter of the year. Our proven ability to let the space that we create speaks well for the locationsin which we have chosen to invest your money. Equally independent surveys of ourcustomers reveal high levels of satisfaction with the accommodation that we havecreated and the way in which it is managed. Those factors are supremelyimportant if we are to retain the best businesses and support the image ofSlough Estates as a world-class landlord. Even so, many of our customers areseeking to restrain their physical expansion and to limit their real estaterequirements. However the availability of good accommodation in the rightlocations is not as great as a casual study of the media might suggest.Therefore, whilst I do not expect capital values to accelerate as quickly in thenext nine months as they have done in the last two years, I believe that we willbe able to manage the company's affairs to your good advantage. My thoughts for 2006 and beyond are optimistic. Prime industrial yields havefallen by a further 18 basis points in the first quarter - although we do notbelieve that yield compression will continue throughout the year. Moreimportantly, and in spite of business sentiment being fragile, our enquirylevels remain high in all our areas of operation and we are hopeful of anothergood year of lettings following our record year in 2005. -ends- For further information please contact: Slough Estates plc The Maitland ConsultancyMichael Waring Colin BrowneTel: 0207 491 0177 Tel: 0207 379 5151 Notes to editors Slough Estates is the leading European provider of flexible business space andowns business parks in Europe and North America, with four million square metresof business space and over 1600 customers (as at 31 December 2005). SloughEstates' properties are in suburban locations in close proximity to the mainbusiness centres, where there is long term demand for business accommodation toserve these key economic regions. The company's main activities are currentlybased around London, Brussels, Paris, Dusseldorf, Amsterdam, San Francisco andSan Diego and the company continues to develop new business parks with the longterm objective of building shareholder value and enhancing its reputation forquality buildings offering excellent value to customers. www.sloughestates.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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