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THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE
YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should take, you arerecommended to seek your own financial advice immediately from an independent financial adviserwho specialises in advising on shares or other securities and who is authorised under the FinancialServices and Markets Act 2000 (“FSMA”) if you are resident in the United Kingdom or, if not, fromanother appropriately independent financial adviser.
This document, which comprises (i) a circular prepared in accordance with Chapter 13 of the UK ListingRules for the purposes of the Extraordinary General Meeting convened pursuant to the Notice of EGMset out at the end of this document and (ii) a prospectus relating to Redefine International P.L.C.(“Redefine International”) for, to the extent the Placing proceeds, the purposes of section 85(2) ofFSMA, has been prepared in accordance with the UK Prospectus Rules of the UK Listing Authoritypursuant to Part VI of FSMA and has been approved as a prospectus by the Financial Conduct Authority(“FCA”) in accordance with section 87A of FSMA. This prospectus has been filed with the FCA andmade available to the public in accordance with Rule 3.2.1 of the Prospectus Rules by the same beingavailable at www.redefineinternational.com.
If you sell or have sold or otherwise transferred all of your Existing Ordinary Shares, you should sendthis document (but not any personalised Form of Proxy) at once to the purchaser or transferee or to thebank, stockbroker or other agent through whom the sale or transfer was effected for delivery to thepurchaser or the transferee. However, the distribution of this document and the Form of Proxy intojurisdictions other than the United Kingdom may be restricted by law. Therefore, persons outside theUnited Kingdom into whose possession this document and any accompanying documents come shouldinform themselves about, and observe, any such restrictions. Any failure to comply with theserestrictions may constitute a violation of the securities laws of the relevant jurisdiction.
The Company and the Directors, whose names are set out on page 38 of this document, acceptresponsibility for the information contained in this document. To the best of the knowledge and belief ofthe Company and the Directors (who have taken all reasonable care to ensure that such is the case),the information contained in this document is in accordance with the facts and does not omit anythinglikely to affect the import of such information.
This document should be read in its entirety by Shareholders. Your attention is drawn to the
letter from the Chairman of Redefine International which is set out in Part 7 (Letter fromChairman of Redefine International P.L.C.) of this document and which contains arecommendation from (i) the Directors that you vote in favour of the Share Authority
Resolutions and the Related Party Resolution and (ii) the Independent Directors that you vote in
favour of the Rule 9 Waiver Resolution, in each case to be proposed at the Extraordinary
General Meeting referred to below. Part 2 of this document entitled “Risk Factors” includes adescription of certain important factors, risks and uncertainties that may affect the Enlarged
Group’s business and the Ordinary Shares, and which should be taken into account when
considering the matters referred to in this document.
REDEFINE INTERNATIONAL P.L.C.
(Incorporated in the Isle of Man under the Companies Acts, 1931 – 2004 (as amended) andre-registered under the Companies Act 2006 of the Isle of Man with registered number 010534V)
Potential Placing of up to 375,000,000 Placing Shares
Approval of waiver of Rule 9 of the UK Takeover Code
Approval of the Related Party Transaction
and
Notice of Extraordinary General Meeting
Peel Hunt J.P. Morgan Cazenove Java Capital
UK Sponsor and Joint UK Bookrunner JSE Sponsor, South African Joint UK Bookrunner Corporate Adviser
and SA Bookrunner
AIII/6.1
LR 13.3.1 (1)
LR 13.3.1 (6)
AI/1.1, 1.2
AIII/1.1, 1.2
AI/5.1.1/
5.1.2
LR 13.6.1(1)(a)
AIII/4.1
LR 13.1.1 (a)
AIII/ 5.4.1
LR 13.3.1
(9) (a)
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The Existing Ordinary Shares are admitted to (a) the premium listing segment of the Official List and totrading on the London Stock Exchange’s main market for listed securities and (b) listing and trading onthe Main Board of the JSE. It is proposed that, subject to Shareholder approval of the Resolutions andthe Board (in consultation with the Bookrunners) electing to proceed with the Placing, application willbe made to (a) the UK Listing Authority for the Placing Shares to be admitted to the premium listingsegment of the Official List and to the London Stock Exchange for the Placing Shares to be admittedto trading on the London Stock Exchange’s main market for listed securities and (b) the JohannesburgStock Exchange (the “JSE”) for the Placing Shares to be listed and traded on the Main Board of theJSE (together “Admission”). If the Placing proceeds, it is expected that Admission would becomeeffective and that dealings would commence by 8.00 a.m. (London time) on 23 February 2016 inrespect of the UK Placing Shares and 9.00 a.m. (South African time) on 23 February 2016 in respectof the South African Placing Shares.
A Notice of Extraordinary General Meeting, which is to be held at 2nd Floor, 30 Charles II Street,London SW1Y 4AE, on 15 February 2016, at 9.30 a.m. (London time) is set out at the end of thisdocument. A Form of Proxy for use in relation to the Extraordinary General Meeting is enclosed. To bevalid, the Form of Proxy should be completed, signed and returned in accordance with the instructionsprinted on it and the notes in the Notice of Extraordinary General Meeting. Completion and return of aForm of Proxy will not preclude Shareholders from attending and voting in person at the ExtraordinaryGeneral Meeting, should they so wish.
This document does not constitute or form part of any offer to buy or any invitation to sell orissue, or any solicitation of any offer to buy or subscribe for, Placing Shares in any jurisdiction.This document has been produced for the purposes of, inter alia, Admission, should the Placingproceed. Accordingly, no Placing Price is included in this document, which will only bedetermined by the Board and the Bookrunners following the Bookbuild, should the Placingproceed.
The release, publication or distribution of this document and the Form of Proxy in jurisdictions otherthan the United Kingdom may be restricted by law and, therefore, any persons who are subject to thelaws of any jurisdiction other than the United Kingdom should inform themselves about, and observe,any applicable requirements. Failure to comply with any such restrictions may constitute a violation ofthe securities laws of any jurisdiction. This document has been prepared to comply with requirementsof English law, the UK Listing Rules, the UK Prospectus Rules and the Rules of the London StockExchange and information disclosed may not be the same as that which would have been disclosed ifthis document had been prepared in accordance with the laws of jurisdictions outside England.
Peel Hunt LLP, which is authorised and regulated in the United Kingdom by the Financial ConductAuthority, is acting as UK sponsor and joint UK bookrunner to the Company in connection with thepotential Placing and will not be responsible to anyone other than the Company for providing theprotections afforded to clients of Peel Hunt LLP, nor for providing advice in relation to the potentialPlacing.
J.P. Morgan Securities plc (which conducts its UK investment banking business as J.P. MorganCazenove), which is authorised in the United Kingdom by the Prudential Regulation Authority (“PRA”)and regulated by the FCA and the PRA, is acting as joint UK bookrunner to the Company in connectionwith the potential Placing and will not be responsible to anyone other than the Company for providingthe protections afforded to clients of J.P. Morgan Securities plc, nor for providing advice in relation tothe potential Placing.
Java Capital Proprietary Limited is acting as JSE sponsor, SA corporate adviser and SA bookrunnersolely for the Company in relation to matters referred to in the document and will not be responsible toanyone other than the Company for providing the protections afforded to clients of Java CapitalProprietary Limited, nor for providing advice in relation to the potential Placing.
Aside from the responsibilities and liabilities, if any, which may be imposed under FSMA or theregulatory regime established thereunder, or any other applicable regulatory regime, none of Peel HuntLLP, J.P. Morgan Securities plc, Java Capital Proprietary Limited or any of their respective affiliatesaccept any responsibility or liability whatsoever for, nor make any representation or warranty, expressor implied, as to the contents of this document, including its accuracy, fairness, completeness orverification, or for any other statement made or purported to be made by it, or on its behalf, inconnection with the Company or the potential Placing and nothing in this document is, or shall be reliedupon as a promise or representation in this respect, whether as to the past or future. Each of Peel HuntLLP, J.P. Morgan Securities plc and Java Capital Proprietary Limited and their respective affiliatesaccordingly disclaims to the fullest extent permitted by law all and any responsibility or liability whether
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arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respectof this document or any such statement.
NOTICE TO US INVESTORS
This document does not constitute an offer of Placing Shares to any person, including those with aregistered address in, or who is resident in, the United States or any other Restricted Jurisdiction. Anypotential Placing Shares have not been and will not be registered under the US Securities Act, or withany regulatory authority or under the applicable securities laws of any state or other jurisdiction of theUnited States, or the relevant laws of any state, province or territory of any other Restricted Jurisdiction,or any other Restricted Jurisdiction, and may not be offered, sold, taken up, exercised, resold,renounced, transferred or delivered, directly or indirectly, within any Restricted Jurisdiction or within theUnited States (as defined in Regulation S under the US Securities Act (“Regulation S”)) unless anyoffer and sale of Placing Shares has been registered under the US Securities Act or pursuant to anexemption from, or in a transaction not subject to, the registration requirements of the US SecuritiesAct. Any potential Placing Shares would be offered or sold outside the United States in reliance onRegulation S. This document does not constitute an offer to sell or a solicitation of an offer to buyPlacing Shares in any jurisdiction in which such offer or solicitation is unlawful. Neither this documentnor any other document connected with the potential Placing will be distributed in or into the UnitedStates or any of the other Restricted Jurisdictions.
Neither the potential Placing Shares, the Form of Proxy, this document nor any other documentconnected with the potential Placing have been or will be approved or disapproved by the SEC, anystate securities commission in the United States or any other US regulatory authority, nor have any ofthe foregoing authorities passed upon or endorsed the merits of the offering of any Placing Shares orthe accuracy or adequacy of this document connected with any potential Placing. Any representation tothe contrary is a criminal offence in the United States. There will be no public offer of the Placing Sharesin the United States.
NOTICE TO OVERSEAS SHAREHOLDERS
EXCEPT AS OTHERWISE SET OUT HEREIN, THE POTENTIAL PLACING DESCRIBED IN THISDOCUMENT IS NOT BEING MADE TO SHAREHOLDERS OR INVESTORS IN ANY RESTRICTEDJURISDICTIONS. NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BESOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OFAPPLICABLE LAW.
Capitalised terms have the meanings ascribed to them in Part 17 (Definitions) of this document.
Any reproduction or distribution of this document, in whole or in part, and any disclosure of its contentsis prohibited, except to the extent such information is otherwise publicly available.
No person has been authorised to give any information or make any representations other thanthose contained in this document and, if given or made, such information or representationsmust not be relied upon as having been authorised by Redefine International, Peel Hunt, JPMCor Java Capital. None of Redefine International, Peel Hunt, JPMC or Java Capital takes anyresponsibility for, or can provide assurance as to the reliability of, other information that youmight be given. Redefine International will comply with its obligation to publish a supplementaryprospectus containing further updated information required by law or by any regulatoryauthority but assumes no further obligation to publish further information. Subject to FSMA, theUK Listing Rules, the UK Disclosure and Transparency Rules and the UK Prospectus Rules, thedelivery of this document shall not, under any circumstances, create any implication that therehas been any change in the affairs of Redefine International since the date of this document orthat the information in this document is correct as at any time after this date. Without limitation,the contents of the Group’s website do not form part of this document. Investors should onlyrely on the information contained in this document and contained in any documentsincorporated into this document by reference.
THE CONTENTS OF THIS DOCUMENT OR ANY SUBSEQUENT COMMUNICATION FROMREDEFINE INTERNATIONAL, PEEL HUNT, JPMC OR JAVA CAPITAL OR ANY OF THEIRRESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS ARE NOT TO BECONSTRUED AS LEGAL, FINANCIAL OR TAX ADVICE. INVESTORS SHOULD CONSULT THEIROWN SOLICITORS, INDEPENDENT FINANCIAL ADVISERS OR TAX ADVISERS FOR LEGAL,FINANCIAL OR TAX ADVICE.
The date of this document is 28 January 2016.
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CONTENTS
Page
PART 1 SUMMARY 5
PART 2 RISK FACTORS 18
PART 3 IMPORTANT INFORMATION 30
PART 4 EXPECTED TIMETABLE OF PRINCIPAL EVENTS 36
PART 5 PLACING STATISTICS 37
PART 6 DIRECTORS, COMPANY SECRETARY AND ADVISERS 38
PART 7 LETTER FROM THE CHAIRMAN OF REDEFINE INTERNATIONAL P.L.C. 41
PART 8 INFORMATION ON THE POTENTIAL PLACING SHARES 60
PART 9 INFORMATION ON REDEFINE INTERNATIONAL 63
PART 10 OPERATING AND FINANCIAL REVIEW OF THE GROUP 71
PART 11 HISTORICAL FINANCIAL INFORMATION RELATING TO THE GROUP 80
PART 12 UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP 81
PART 13 PROPERTY VALUATION REPORTS 86
PART 14 WAIVER OF RULE 9 OF THE UK TAKEOVER CODE AND INFORMATION
ON THE CONCERT PARTY 188
PART 15 ADDITIONAL INFORMATION 211
PART 16 DOCUMENTS INCORPORATED BY REFERENCE 277
PART 17 DEFINITIONS 279
PART 18 NOTICE OF EXTRAORDINARY GENERAL MEETING 288
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PART 1
SUMMARY
Summaries are made up of disclosure requirements known as “Elements”. These elements arenumbered in Sections A–E (A.1–E.7).
This summary contains all the Elements required to be included in a summary for this type of securityand company. Because some Elements are not required to be addressed there may be gaps in thenumbering sequence of the Elements.
Even though an Element may be required to be inserted into the summary because of the type ofsecurity and company, it is possible that no relevant information can be given regarding the Element.In this case a short description of the Element is included in the summary with the mention of “notapplicable”.
Section A – Introduction and warnings
DisclosureElement requirement Disclosure
A.1 Warning This summary should be read as an introduction to this
document. Any decision to invest in the securities should be
based on consideration of this document as a whole by the
investor. Where a claim relating to the information contained in
this document is brought before a court, the plaintiff investor
might, under the national legislation of the member states of the
European Union, have to bear the costs of translating this
document before the legal proceedings are initiated. Civil liability
attaches only to those persons who have tabled the summary
including any translation thereof, but only if the summary is
misleading, inaccurate or inconsistent when read together with
the other parts of this document or it does not provide, when read
together with the other parts of this document, key information in
order to aid investors when considering whether to invest in such
securities.
A.2 Not applicable. Redefine International P.L.C. is not engaging any
financial intermediaries for any resale of securities or final
placement of securities after publication of this document.
Section B – Company and any guarantor
DisclosureElement requirement Disclosure
B.1 The Company’s legal and commercial name is Redefine
International P.L.C. (the “Company”) and it trades under the
name Redefine International.
B.2 The Company was initially incorporated with limited liability under
the laws of the Isle of Man under the Companies Acts 1931 –
2004 (as amended), and is domiciled in the Isle of Man. The
Company is subject to the provisions of the Companies Act 2006
of the Isle of Man.
Resale or final
placement of
securities through
financial
intermediaries
Legal and
Commercial Name
Domicile/Legal
Form/Legislation/
Country of
Incorporation
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B.3 The Company is an income focused property investment
company with exposure to a broad range of properties and
geographical areas. The Company has direct and indirect
property investments geographically diversified across the UK
and Germany, providing exposure to the retail, office, industrial
and hotel sectors.
B.4a Significant trends The investment market, both in the UK and Germany, continues
to benefit from strong demand, albeit that levels of investment
have normalised following record investment volumes in the
second quarter of 2015. International investors continue to
dominate the UK investment market with a similar trend now
evident in Germany. Rental values in the UK have continued on
an upward trend although this has been driven to a large extent
by the office and distribution sectors, principally in London and
the South East. Growth in retail rents has been more muted
although there has been some encouraging data in the second
half of 2015. Demand from retailers in Germany continued to
strengthen during the year, with interest improving from both local
and international brands. Demand continues to outweigh supply
in prime locations which is having a positive knock-on effect on
secondary locations.
With performance in the next phase of the property cycle likely to
be more heavily weighted to income returns and rental growth,
the Group’s approach toward recycling capital into assets with
strong fundamentals and occupier demand is as important as
ever.
B.5 Group structure The Company is the parent company of the Group and has a
number of subsidiaries. The Company’s interests in these
subsidiary companies are comprised as follows:
• 74 of the companies are wholly-owned subsidiary companies;
• 14 of the companies are interests held amounting to 75 per
cent. or more but less than 100 per cent. of the ownership of
the relevant company;
• 30 of the companies are interests held in companies of 50 per
cent. or more but less than 75 per cent. of the ownership of
the relevant company; and
• 21 of the companies are minority interests held in companies
amounting to less than 50 per cent. of the ownership of the
relevant company.
The Company holds each of its properties through its
subsidiaries and Group companies.
B.6 Notifiable interests As at the Latest Practicable Date, no person (other than the
Shareholders listed below) had a notifiable interest in the issued
share capital of the Company:
• Redefine Properties held 449,757,285 Ordinary Shares (equal
to 30.07 per cent. of the Company’s issued share capital); and
• Allan Gray Unit Trust Management (RF) (Pty) Limited held
57,348,481 Ordinary Shares (equal to 3.83 per cent. of the
Company’s issued share capital).
Key factors of
Company’s
current operations
and principal
activities
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DisclosureElement requirement Disclosure
-
Redefine Properties and Allan Gray Unit Trust Management (RF)
(Pty) Limited have the same voting rights in connection with their
Ordinary Shares as are enjoyed by all other Shareholders.
B.7 Selected historical financial information relating to the Company
which summarises the financial condition of the Company for the
three financial years ended 31 August 2015, 31 August 2014 and
31 August 2013 is set out in the following table.
Year ended Year ended Year ended
31 August 31 August 31 August
2015 2014 2013
Financial Information £m £m £m
Gross rental income 68.3 66.2 51.4
Investment and other income 11.4 11.1 4.6
Net operating income 63.3 61.2 36.9
Profit from operations 109.0 135.6 89.5 ———— ———— ————Profit for the Year 77.9 102.8 61.1 ———— ———— ————Total assets 1,226.8 1,183.3 1,062.7
Total liabilities 590.0 673.6 752.3 ———— ———— ————Net Assets 636.8 509.7 310.4 ———— ———— ————Net asset value per share –
Basic (pence) 40.6p 37.1p 31.0p ———— ———— ————Net asset value per share –
Diluted (pence) 40.5p 37.1p 29.1p ———— ———— ————
The Company completed the acquisition of Banbury Cross Retail
Park on 7 September 2015 and the Tranche 1 Properties on
2 October 2015. Save for entering into the AUK Facility, the
drawdown of £155.0 million from the AUK Facility, the acquisition
of Banbury Cross Retail Park and the Tranche 1 Properties, there
has been no significant change to the Company’s financial
condition and operating results during or subsequent to the
period covered by the historical key financial information on the
Company set out in this section.
B.8 The unaudited pro forma financial effect of:
• the potential Placing (assuming the Company raises the
minimum gross proceeds of £100.0 million);
• the acquisition of the Combined AUK Portfolio (being the
acquisition of Banbury Cross Retail Park and the AUK
Portfolio (assuming the completion of the acquisition of both
Tranche 1 and Tranche 2 of the AUK Portfolio);
• entering into the AUK Facility; and
• receipt of proceeds from the sale of the Cromwell Group, the
Swiss Coop portfolio and certain petrol filling stations (the
cash receipts from these transactions will be used to part fund
the acquisition of the Combined AUK Portfolio),
on the Group’s assets and liabilities as if they had occurred on
31 August 2015 would be to increase total assets from
£1,226.8 million to £1,513.6 million, and total liabilities from
£590 million to £799.9 million.
Historical financial
information
Pro forma
financial
information
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DisclosureElement requirement Disclosure
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B.9 Profit forecast Not applicable as the Company has not published any profit
forecasts or estimates.
No profit forecast or estimate is included in this document.
B.10 Not applicable; the audit reports on the historical financial
information contained in, or incorporated by reference into, this
document are not qualified.
B.11 Not applicable; the Company is of the opinion that the Group’s
and the Enlarged Group’s working capital is sufficient for its
present requirements, that is, for at least the next 12 months from
the date of publication of this document.
Section C – Securities
DisclosureElement requirement Disclosure
C.1 The Company would propose to issue up to 375,000,000 Placing
Shares pursuant to the Placing. The ISIN which the Placing
Shares would trade under is IM00B8BV8G91.
C.2 The Ordinary Shares are denominated in Pounds Sterling.
The Existing Ordinary Shares held on the UK share register are
quoted and traded in Pounds Sterling and the Existing Ordinary
Shares held on the SA share register are quoted and traded in
Rand.
The potential Placing Shares to be held on the UK share register
would be quoted and traded in Pounds Sterling and the potential
Placing Shares to be held on the SA share register would be
quoted and traded in Rand.
C.3 As at the Latest Practicable Date, the Company had in issue
1,495,566,887 fully paid Ordinary Shares of 8.0 pence each,
none of which are held in treasury.
C.4 Any Placing Shares would be issued credited as fully paid and
would rank pari passu in all respects with the Existing OrdinaryShares, including the right to receive all dividends and other
distributions declared in respect of the ordinary share capital of
the Company after the date of the allotment and issue of any
such Placing Shares.
Subject to any special rights, restrictions or prohibitions as
regards voting for the time being attached to any Ordinary Shares
(for example, in the case of joint holders of a share, the only vote
which will count is the vote of the person whose name is listed
before the other voters on the register for the share),
Shareholders shall have the right to receive notice of and to
attend and vote at general meetings of the Company. Subject to
the provisions of the Companies Act 2006, the Company may
from time to time declare dividends and make other distributions
on the Ordinary Shares. Shareholders are entitled to participate
in the assets of the Company attributable to their shares in a
winding-up of the Company or other return of capital, but they
have no rights of redemption.
Qualifications in
the audit report
Working capital
explanation
Type and class of
securities being
admitted to trading
Currency of the
securities issue
Number of shares
issued
Description of the
rights attaching to
the securities
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DisclosureElement requirement Disclosure
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C.5 The following restrictions apply to the free transferability of the
Ordinary Shares:
• If any Shareholder has been served with a request notice
under Article 162 of the Articles of Association and does not
within the 14 day period prescribed therein supply to the
Company the information thereby requested, the Company
may (at the absolute discretion of the Directors) at any time
thereafter by a restriction notice to such Shareholder direct
that no transfer of any of the shares held by such member (the
“Default Shares”) shall be recognised or registered by the
Directors unless:
(i) the transfer is a permitted transfer; or
(ii) the member is not himself in default as regards supplying
the requisite information required under Article 162 and,
when presented for registration, the transfer is
accompanied by a certificate by the member in a form
satisfactory to the Directors to the effect that after due
and careful enquiry the member is satisfied that none of
the shares the subject of the transfer are Default Shares
under the Articles,
provided the Default Shares represent at least 0.25 per cent.
(in nominal value) of the issued shares of the same class as
the Default Shares.
• The Board may refuse to register a transfer if in its opinion
(and with the concurrence of the FCA or the JSE or such other
competent authority) exceptional circumstances so warrant.
• Transfers of shares to a prohibited person under the Articles
will not be registered.
C.6 Admission Subject to Shareholder approval of the Resolutions, and the
Board (in consultation with the Bookrunners) electing to proceed
with the potential Placing, application would be made to (a) the
UK Listing Authority and to the London Stock Exchange for the
Placing Shares to be admitted to the premium listing segment of
the Official List and to trading on the London Stock Exchange’s
main market for listed securities; and (b) the JSE for the Placing
Shares to be listed and traded on the Main Board of the JSE. In
that case, Admission of the Placing Shares could be expected to
become effective, and dealings to commence at 8.00 a.m.
(London time) on 23 February 2016 in respect of the UK Placing
Shares and 9.00 a.m. (South African time) on 23 February 2016
in respect of the South African Placing Shares.
C.7 Dividend policy The Company’s dividend policy is consistent with the UK-REIT
Regime, at the date of this document. Currently, as a UK-REIT
the Company is required to distribute at least 90 per cent. of its
UK property rental profits to Shareholders.
Restrictions on the
free transferability
of the securities
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DisclosureElement requirement Disclosure
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Section D – Risks
DisclosureElement requirement Disclosure
D.1 The Company believes that the following are key risks affecting
the Enlarged Group and its business:
• The Enlarged Group’s operations are capital intensive and are
financed on an asset specific basis. The Group has a number
of asset-specific financings and also has general corporate
borrowings in place to finance its property acquisitions and
development activities. There can be no assurance that the
Enlarged Group will be able to find lenders in the longer term
who are willing to lend on similar terms to those which apply
to existing financing arrangements, or at all, upon maturity. An
increase in loan-to-value ratio, for example, as a result of
declines in property values associated with the Combined
AUK Portfolio or generally, would be one factor which could
restrict the Enlarged Group’s ability to arrange such financing
or refinancing in the longer term. If, in the longer term, the
Enlarged Group is not able to refinance borrowings as they
mature in the longer term and/or the terms of such refinancing
are less favourable than the existing terms of borrowing, this
may have a material adverse effect on the business, financial
condition, results of operations and future prospects of the
Enlarged Group.
• The Enlarged Group operates in a highly competitive market
for investment opportunities. Heightened competition in the
real estate market in the countries in which the Enlarged
Group invests may reduce investment opportunities, increase
prices of real estate and affect occupancy and rental rates of
the Enlarged Group’s properties. Some competitors and
potential competitors may have advantages over the
Company, including greater name recognition, greater
financial, marketing and other resources and better access to
capital, which would allow them to respond more quickly to
new or changing opportunities.
• The Enlarged Group competes for tenants for its properties
with real estate investment funds, developers, owners and
operators of commercial real estate businesses in the regions
where the Enlarged Group’s properties are located. If, as a
result of competition or lack of demand, the Enlarged Group is
required to reduce rental rates or to offer more substantial rent
abatements, tenant improvements, early termination rights or
below-market renewal options to retain existing or to attract
new tenants, the Enlarged Group’s cash flow and operating
results could be adversely affected.
• The Enlarged Group’s net asset value may be reduced by
downward property valuations, which may occur, for example,
as a result of prevailing economic conditions allowing for a
tapering of global government asset purchase programmes,
decreased demand for commercial and/or government
occupied office space, adverse change in retail economic
conditions and/or decline in the hotel industry. This may affect
the Enlarged Group’s ability in the longer term to refinance
debt when required or to pay dividends.
Key information
on the key risks
specific to the
issuer or its
industry
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• The valuation of the Enlarged Group’s properties is inherently
subjective due to the individual nature of each property, its
location and the expected future rental revenues from that
particular property. As a result, valuations are subject to
uncertainty and, in determining market value, valuers are
required to make certain assumptions and such assumptions
may prove to be inaccurate. Incorrect assumptions or flawed
assessments underlying a valuation report could negatively
affect the Enlarged Group’s financial condition and potentially
inhibit the Enlarged Group’s ability to realise a sale price that
reflects the stated valuation. This is particularly so in periods
of volatility or when there has been limited real estate
transactional evidence against which property valuations can
be benchmarked. In addition, incorrect assumptions or flawed
assessments underlying a valuation could potentially inhibit
the Enlarged Group’s ability to raise finance in the future.
Further, if the Enlarged Group acquires properties based on
inaccurate valuations, the Enlarged Group’s net assets and
results of operations may be materially adversely affected.
There can also be no assurance that the valuations of the
Enlarged Group’s current and prospective properties will be
reflected in the actual transaction prices, even where any
such transactions occur shortly after the relevant valuation
date, or that the estimated yield and estimated annual rental
income will prove to be attainable. In addition, property
valuations are dependent on the level of rental income
receivable and anticipated to be receivable on that property in
the future and, as such, declines in rental income could have
an adverse impact on revenue and the value of the Enlarged
Group’s properties.
• The Company is internally managed and therefore relies on its
management and their experience, skill and judgement, in
identifying, selecting and negotiating the acquisition of
suitable investment opportunities. The Company also relies
on the Directors, and in particular, the Executive Directors, to
manage the day-to-day affairs of the Company. There can be
no assurance as to the continued service of these individuals
as directors and employees of the Company. The departure of
any of these individuals from the Company without adequate
replacement may have a material adverse effect on the
Company’s business prospects and results of operations. The
Company is also reliant on its senior asset managers and
senior finance staff. The departure of key personnel may
require an extended period in which to find suitable
replacements and may have a temporary adverse effect on
the business.
• Under the Companies Act 2006, subject to the provisions of its
memorandum and articles of association, a company may
make distributions (including cash dividends) provided that it
satisfies the statutory solvency test prescribed by section 49
of the Companies Act 2006. The solvency test is satisfied if a
company is able to pay its debts as they become due in the
normal course of the company’s business and the value of the
company’s assets exceeds the value of its liabilities. The
Company’s ability to pay dividends is affected by its
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profitability and there can be no assurance that the Company
will be able to pay a dividend in the future or as to the amount
of any such dividend, if paid.
• If the Resolutions are not passed by Shareholders at the
Extraordinary General Meeting or prevailing market conditions
mean that the Board (in consultation with the Bookrunners)
elects not to proceed with the Placing or if, inter alia, thePlacing fails to raise gross proceeds of at least £100.0 million,
the Board will not proceed with the Placing and will utilise the
RPL Loan instead to complete the acquisition of the Tranche
2 Properties. In such circumstances, if the Board elects not to
raise funds through a debt or equity fundraising prior to the
repayment date of the RPL Loan, the Company may elect to
implement the Conversion resulting in the Disposal (or, in the
absence of election by the date being three months following
drawdown, it will automatically convert). This would result in
the Company being in a 50:50 joint venture with Redefine
Properties in respect of the Combined AUK Portfolio.
Consequently, the Directors would not be able to exclusively
direct the strategy and operating decisions of Redefine AUK in
the same manner as it would with full control. In particular,
material decisions relating to the Combined AUK Portfolio,
such as a planned operational change, acquisition, disposal
or development, or the refinancing or repayment of debt,
would require the consent of Redefine Properties, which may
restrict the Enlarged Group’s ability to proceed with such a
decision. This lack of control may decrease the value of the
assets held by Redefine AUK. Conflict with Redefine
Properties may lead to deadlock and result in the Enlarged
Group being unable to pursue its desired strategy or exit the
joint venture other than on disadvantageous terms. However,
under the terms of the RPL JV Agreement, neither the
Company nor Redefine Properties is capable of forcing the
other to sell its shareholding in Redefine AUK in the event of
a deadlock.
• The Company cannot guarantee that it will maintain UK-REIT
status nor can it guarantee that it will maintain continued
compliance with all of the UK-REIT conditions. If the Company
was to leave the UK-REIT Regime within 10 years of joining,
HMRC has wide powers to direct how it would be taxed which
could have a material impact on the financial condition of the
Company.
D.3 The Company believes that the following are key risks affecting
the Ordinary Shares:
• Redefine Properties is currently interested in 30.07 per cent.
of the issued share capital of the Company (or 30.80 per cent.
when aggregated with the interests of the other members of
the Concert Party in the issued share capital of the Company)
and following completion of the Placing, its percentage
shareholding may increase to up to 35.79 per cent. (or
36.45 per cent. when aggregated with the other members of
the Concert Party) if, for illustrative purposes, (a) the Placing
Price is set at the Minimum Placing Price, (b) Redefine
Properties subscribes for the RPL Equity Commitment in full,
Key information
on the risks
specific to the
securities
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(c) the other Placees subscribe for Placing Shares for an
aggregate value of £30.0 million and (d) no further issues of
Ordinary Shares occur between publication of this document
and Admission. The concentration of ownership may affect the
market price and liquidity of the Ordinary Shares. In addition,
Redefine Properties may have the ability to control the
outcome of matters requiring Shareholder approval, including
appointments to the Board and significant corporate
transactions, such as an acquisition or other change of control
of the Enlarged Group. On 14 November 2014, the Company
entered into the Relationship Agreement with, inter alia,Redefine Properties to regulate aspects of the ongoing
relationship between the Company and Redefine Properties.
The Directors believe that the terms of the Relationship
Agreement enable the Enlarged Group to carry on an
independent business as its main activity. However, the
interests of Redefine Properties may not be the same as the
interest of minority shareholders in the Company and
Redefine Properties may make decisions that may have a
material adverse impact on an investment in the Ordinary
Shares and on the business operations of the Group.
• Prospective investors should be aware that the value of an
investment in Redefine International may go down as well as
up. The market price of Ordinary Shares could be volatile and
subject to significant fluctuations due to a variety of factors
including changes in sentiment in the market regarding the
Ordinary Shares (or securities similar to them), any regulatory
changes affecting the Enlarged Group’s operations, variations
in its operating results, business developments or its
competitors, the operating and share price performance of
other companies in the industries and markets in which it
operates, or speculation about the Enlarged Group’s business
in the press, media or investment community.
• The potential Placing would be made on a non pre-emptive
basis, primarily to institutional investors only. If Shareholders
do not or are unable to participate in the Placing, their
proportionate ownership and voting interests in Redefine
International will be reduced and the percentage that their
Ordinary Shares will represent of the total issued share capital
of Redefine International will be reduced accordingly.
Section E – Placing
DisclosureElement requirement Disclosure
E.1 If the Placing were to proceed, the net proceeds of the potential
Placing would be dependent on the number of Placing Shares
issued and the actual Placing Price, however, the Placing would
be conditional, inter alia, on the Company raising minimum grossproceeds of at least £100.0 million.
By way of illustration, assuming (a) the Placing Shares were
issued at 44.4 pence per share (being a five per cent. discount to
the mid-market price per Ordinary Share at the Latest Practicable
Net proceeds and
costs of the
Placing
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Date) (b) Redefine Properties participated in the Placing and
subscribed for Placing Shares representing £70.0 million and (c)
other Placees subscribed for Placing Shares representing
£30.0 million, the Company would expect to raise net proceeds
of approximately £94.5 million through the Placing after
deduction of estimated expenses of approximately £5.5 million.
No expenses would be charged by the Company to Shareholders
who acquire Placing Shares.
E.2a If the Placing were to proceed, the Company would seek to raise
a minimum of £100.0 million (gross) for the Company which will
allow the Company to complete the acquisition of the Tranche 2
Properties, with the balance of the consideration being funded
from existing cash resources and the AUK Facility.
Any additional equity raised would be used to provide capital for
further disciplined asset management opportunities within the
Group’s existing portfolio as well as new investment
opportunities. Additionally any excess equity raised would
support refinancing and restructuring of the Group’s existing
facilities at lower leverage levels.
For example, should the Company raise up to £150.0 million
(gross) through the potential Placing, following the scale back of
the RPL Equity Commitment, the excess of £50.0 million may be
utilised to reduce the Company’s leverage on the Acquisition. The
AUK Facility provides the required flexibility (through the
£148.0 million revolving credit facility) with the margin charged
subject to the amount of debt drawn and the resultant loan-to-
value ratio. Utilising the maximum drawdown of £98.0 million
would result in a loan-to-value ratio on the Combined AUK
Portfolio of 55 per cent. and a margin of 1.9 per cent. Limiting the
drawdown to £75.0 million would result in a reduced margin of
1.75 per cent. Should the overall facility be reduced to £263.0
million following the sale of 16 Grosvenor Street, London and to
maintain headroom of £33.0 million, the marginal return on the
additional £23.0 million of equity would be 4.6 per cent.
E.3 If the Resolutions are passed, and if the Board then considers it
in the best interests of the Company to pursue an equity raising
and the Placing proceeds, the Bookrunners, as agents of the
Company, have agreed to use their respective reasonable
endeavours to procure placees for the Placing Shares.
The Placing, if it were to proceed, would be on a non pre-emptive
basis, primarily to institutional investors only, and conditional on
the Company raising minimum gross proceeds of £100.0 million.
RPL Equity CommitmentIn connection with the potential Placing, if it were to proceed,
Redefine Properties has irrevocably agreed to subscribe for such
number of Placing Shares at the Placing Price as equals an
aggregate subscription amount of up to £70.0 million (the “RPL
Equity Commitment”). The RPL Equity Commitment is subject
to the Placing Price representing a minimum discount of five per
cent. to the volume weighted average price of an Existing
Ordinary Share over the 30 days prior to the date of
announcement of any such Placing (the “Maximum RPL Price”).
Terms and
conditions of the
potential Placing
Reason for the
Placing and use of
proceeds
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If the Placing proceeds, the Company would seek to raise a
minimum additional aggregate of £30.0 million from Placees
(other than Redefine Properties) in order to raise a minimum of
£100.0 million (gross) through the Placing. If there is a successful
procurement of Placees (other than Redefine Properties)
representing in excess of £30.0 million of gross proceeds, the
Board expects to scale back Redefine Properties’ maximum
participation of up to £70.0 million on a pound for pound basis, for
every pound raised from other Placees in excess of the additional
aggregate £30.0 million, subject to Redefine Properties’
entitlement to participate in the Placing at the level which would
maintain its current percentage shareholding in the Company,
being 30.07 per cent.
Size of potential Placing and Placing PriceIf the Placing proceeds and there is sufficient demand from
Placees (including from Redefine Properties, to the extent that it
seeks to participate in excess of its pro-rata entitlement in the
Placing, subject to its terms and conditions), the Board may then
decide to increase the size of the Placing up to a maximum
amount of £150.0 million.
The potential Placing would comprise two separate but
simultaneous and co-ordinated placings. Placees would be able
to participate outside of South Africa and subscribe for UK
Placing Shares in Pounds Sterling pursuant to the UK Placing or
within South Africa and subscribe for Placing Shares in Rand
pursuant to the South African Placing. Investors who participate
in the UK Placing would be required to make bids for Placing
Shares in Pounds Sterling. Investors who participated in the
South African Placing would be required to make bids for Placing
Shares in Rand. The South African Placing would be subject to a
minimum application of R1 million per investor, acting as
principal, except for those categories of exempted persons
contemplated in section 96(1)(a) of the South African Companies
Act. The South African Placing would be undertaken with certain
existing shareholders and new institutional investors. Members of
the public (other than any member of the South African public
who acts as principal and offers to subscribe for a minimum of
R1 million worth of Placing Shares and those categories of
exempted persons contemplated in section 96(1)(a) of the South
African Companies Act) would not be entitled to participate in the
South African Placing. Similarly, the UK Placing would be
undertaken with certain existing and new institutional investors.
The potential Placing would be conducted, subject to the
satisfaction of certain conditions, through an accelerated
bookbuild process (the “Bookbuild”) to be carried out by the
Joint UK Bookrunners (in respect of the UK Placing) and Java
Capital (in respect of the South African Placing). If the
Resolutions are passed at the Extraordinary General Meeting,
and assuming the Company decides to proceed with the potential
Placing, it is expected that the book would open on 16 February
2016 and close at any time thereafter. The timing of the closing
of the book, the Placing Price and the number of Placing Shares
would be agreed between the Bookrunners and the Board
following completion of the Bookbuild and announced as soon as
practicable on a Regulatory Information Service in the UK and
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the Stock Exchange News Service of the JSE. It is expected that
a Pricing Statement containing the Placing Price and the number
of Placing Shares issued, would (subject to certain restrictions)
be published at the same time and would be available on the
Company’s website at www.redefineinternational.com.
If the Placing proceeds, the Placing Price per UK Placing Share
would be set by the Directors and the Bookrunners, following
their assessment of market conditions and discussions with a
number of institutional investors in the course of the Bookbuild. In
addition, in accordance with Listing Rule 9.5.10R, the Placing
Price would not represent a discount of more than 10 per cent. to
the middle market price at the time of agreeing the Placing. The
Placing Price per South African Placing Share will be the
equivalent price of a UK Placing Share in Rand (subject only to
adjustment in terms of the prevailing exchange rate agreed
between the Bookrunners and the Board at the time of the
Bookbuild).
As this document does not constitute or form part of any offer to
buy or any invitation to sell or issue, or any solicitation of any offer
to buy or subscribe for, Placing Shares in any jurisdiction, no
maximum price has been included in this document.
If the Company and the Joint Bookrunners agree that the UK
Placing will proceed, the UK Placing is conditional upon, interalia, the following:
• the Resolutions being passed by the relevant Shareholders
at the Extraordinary General Meeting (without material
amendment);
• the Company raising gross proceeds of at least
£100.0 million through the Placing;
• the Placing Agreement becoming unconditional; and
• Admission becoming effective by not later than 8.00 a.m.
(London time) on 23 February 2016 or such later time and/or
date as the Company and the Joint UK Bookrunners may
agree (being not later than 8.00 a.m. (London time) on
31 May 2016).
Accordingly, if any of such conditions were not satisfied, or, if
applicable, waived, the proposed UK Placing would not proceed,
and the Company would utilise the RPL Loan in order to
complete the acquisition of the Tranche 2 Properties, to the
extent the South African Placing has not otherwise taken place
and raised sufficient funds.
If the Company and Java Capital agree that the South African
Placing will proceed, the South African Placing would be
conditional upon, inter alia, the following:
• the Resolutions being passed by the relevant Shareholders
at the Extraordinary General Meeting (without material
amendment);
• the Company raising gross proceeds of at least
£100.0 million through the Placing;
• the South African Placing Agreement becoming
unconditional; and
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• Admission becoming effective by not later than 9.00 a.m.
(South African time) on 23 February 2016 or such later time
and/or date as the Company and the Bookrunners may agree
(being not later than 9.00 a.m. (South African time) on 31 May
2016).
Accordingly, if any of such conditions are not satisfied, or, if
applicable, waived, the proposed South African Placing would not
proceed, and the Company would utilise the RPL Loan in order
to complete the acquisition of the Tranche 2 Properties, to the
extent the UK Placing has not otherwise taken place and raised
sufficient funds.
E.4 Material interests Redefine Properties holds 30.07 per cent. and the Concert Party
holds 30.80 per cent. of the existing issued share capital of the
Company as at the Latest Practicable Date. If the Placing
proceeds, these percentages may increase depending on the
number of Placing Shares allocated to Redefine Properties
which, in turn, will depend on the actual Placing Price. In addition,
Michael Watters and Marc Wainer (who are members of the
Concert Party) have irrevocably undertaken to participate in the
Placing: (a) Michael Watters has irrevocably agreed to subscribe
for such number of Placing Shares at the Placing Price as equals
an aggregate amount of £150,000 and (b) Marc Wainer has
irrevocably agreed to subscribe for 175,000 Placing Shares at
the Placing Price (to be held through his Drawood Trust) and
procure that his wife subscribes for 20,000 Placing Shares at the
Placing Price. Accordingly, the Company is proposing the Rule 9
Waiver Resolution at the Extraordinary General Meeting to waive
the need for the Concert Party to make a mandatory takeover
offer for the Company under Rule 9 of the UK Takeover Code in
the event the Placing proceeds and the Concert Party’s
percentage shareholding increases.
E.5 Not applicable.
E.6 Dilution The potential Placing would be made on a non pre-emptive
basis, primarily to institutional investors only. As the potential
Placing does not involve a pre-emptive offer of shares to Existing
Shareholders, Existing Shareholders who do not, or are not
permitted to, participate in the potential Placing would suffer a
dilution of up to 20 per cent. to their interests in the Company
(assuming the Maximum Placing Shares are issued under the
Placing).
E.7 Not applicable; no expenses would be directly charged to the
investor by the Company.
Name of person
selling
Securities/lock up
agreements
Expenses charged
to the Investor
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PART 2
RISK FACTORS
Any investment in the Ordinary Shares is subject to a number of risks. Before making any investment
decision, prospective investors should carefully consider the factors and risks attaching to an
investment in the Ordinary Shares, together with all other information contained in this document
including, in particular, the risk factors described below. Some of these risk factors apply to carrying on
the Enlarged Group’s business generally, while others are specific to the Group. They are not set out
in any order of priority. Additional risks and uncertainties currently unknown to the Company, or that it
currently believes to be immaterial for taking investment decisions, may also have an adverse (or
materially adverse) effect on the Enlarged Group’s business. If any of or a combination of the following
risk factors materialise, the Enlarged Group’s business, financial condition and/or operational
performance could be materially adversely affected. In such case, the trading price of the Ordinary
Shares may decline and potential investors may lose all or part of their value. An investment in Ordinary
Shares is only suitable for investors capable of evaluating the risks and merits of such investment and
who have sufficient resources to bear any loss which may result from the investment. Accordingly,
prospective investors are recommended to obtain independent financial advice from an adviser
authorised under FSMA (or another appropriately authorised independent professional adviser) who
specialises in advising upon investments. Investors should consider carefully whether an investment in
the Ordinary Shares is suitable for them in light of the information in this document and their personal
circumstances.
1. RISKS RELATING TO THE ENLARGED GROUP AND ITS BUSINESS
1.1 The valuation of the Enlarged Group’s properties is inherently subjective and uncertainand is based on assumptions which may prove inaccurateThe valuation of the Enlarged Group’s properties is inherently subjective due to the individual
nature of each property, its location and the expected future rental revenues from that particular
property. As a result, valuations are subject to uncertainty and, in determining market value,
valuers are required to make certain assumptions and such assumptions may prove to be
inaccurate. Incorrect assumptions or flawed assessments underlying a valuation report could
negatively affect the Enlarged Group’s financial condition and potentially inhibit the Enlarged
Group’s ability to realise a sale price that reflects the stated valuation. This is particularly so in
periods of volatility or when there has been limited real estate transactional evidence against
which property valuations can be benchmarked. In addition, incorrect assumptions or flawed
assessments underlying a valuation could potentially inhibit the Enlarged Group’s ability to raise
finance in the future. Further, if the Enlarged Group acquires properties based on inaccurate
valuations, the Enlarged Group’s net assets and results of operations may be materially
adversely affected. There can also be no assurance that the valuations of the Enlarged Group’s
current and prospective properties will be reflected in the actual transaction prices, even where
any such transactions occur shortly after the relevant valuation date, or that the estimated yield
and estimated annual rental income will prove to be attainable. In addition, property valuations
are dependent on the level of rental income receivable and anticipated to be receivable on that
property in the future and, as such, declines in rental income could have an adverse impact on
revenue and the value of the Enlarged Group’s properties.
Any of the foregoing factors could have an adverse impact on the Enlarged Group’s business,
financial condition and/or results of operations.
1.2 The Enlarged Group may not be able to refinance its borrowings in the longer termThe Enlarged Group’s operations are capital intensive and are financed on an asset-specific
basis. The Group has a number of asset-specific financings, including the AUK Facility, and also
has general corporate borrowings in place to finance its property acquisitions and development
activities. There can be no assurance that the Enlarged Group will be able to find lenders in the
longer term who are willing to lend on similar terms to those which apply to existing financing
arrangements, or at all, upon maturity. An increase in loan to value ratio, for example, as a result
of declines in property values associated with the Combined AUK Portfolio or generally, would be
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one factor which could restrict the Enlarged Group’s ability to arrange such financing or
refinancing in the longer term. Declines in property values may occur, for example, as a result of
prevailing economic conditions stemming from the global economic downturn, decreased
demand for commercial and/or government occupied office space, adverse change in retail
demand or economic conditions and/or decline in the hotel industry. If, in the longer term, the
Enlarged Group is not able to refinance borrowings as they mature and/or the terms of such
refinancing are less favourable than the existing terms of borrowing, this may have a material
adverse effect on the business, financial condition, results of operations, future prospects of the
Enlarged Group, the price of the Ordinary Shares and the Enlarged Group’s ability to pay
dividends.
1.3 The Enlarged Group’s cost of finance could increaseAn increase in the cost, or lack of availability of finance (whether for macroeconomic reasons,
such as a lack of liquidity in debt markets (in particular in the relevant UK, German or South
African markets) or reasons specific to the Enlarged Group, such as the extent to which it is
leveraged and decline in property values, as outlined above), could impact both the ability to
progress capital investment opportunities necessary to deliver required rates of return to meet
shareholder expectations and the day-to-day financing (or refinancing) requirements of the
Enlarged Group in the longer term. Adverse interest rate movements could lead to an increase
in the cost of borrowing. Although the Enlarged Group has historically been able to obtain
financing on reasonable terms, there is no guarantee that future financing will be available on
terms that the Enlarged Group considers acceptable. It is possible in the current lending
environment that the terms of any new facilities entered into by the Enlarged Group in the future
could be more onerous than the terms of the Enlarged Group’s existing financing facilities.
Any of the foregoing factors may have an adverse impact on the Enlarged Group’s business,
financial condition and/or results of operations.
1.4 The Enlarged Group may be subject to increases in operating expensesThe Enlarged Group’s operating and other expenses could increase without a corresponding
increase in turnover or tenant reimbursements of operating and other costs. Factors which could
increase operating and other expenses include:
• increases in the cost of financing;
• increases in the rate of inflation and currency fluctuation;
• increases in the costs of services provided by third party providers;
• increases in taxes, tax laws and other statutory charges;
• changes in laws, regulations or government or local authority policies (including those
relating to health and safety and environmental compliance) which increase the costs of
compliance with such laws, regulations or policies;
• increases in insurance premiums;
• increases in the costs of maintaining properties; and
• capital expenditure which may arise as a result of defects affecting the properties which
need to be rectified, failure to perform by sub-contractors or increases in maintenance
costs.
Such increases could have a material adverse effect on the Enlarged Group’s financial position,
capital resources and ability to make distributions at historic levels or any distributions to
Shareholders.
1.5 The market for the Enlarged Group’s properties is relatively illiquidThe Enlarged Group’s properties, and those in which the Enlarged Group may invest in the
future, are relatively illiquid and investors may be reluctant to purchase or sell property in the
current or future market. Investor appetite for the Enlarged Group’s property assets may be
dampened by a dislocation in the global financial markets and a limited availability of financing,
any resulting decrease in the value of the Enlarged Group’s property assets, including on account
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of decreased demand for relevant types of properties (e.g. government occupied office space,
which represents approximately seven per cent. of the Enlarged Group’s properties). Investor
appetites may also be decreased if demand for commercial properties decreased and/or there
was an adverse change in retail economic conditions and/or a decline in the hotel industry. The
resulting lack of liquidity in commercial real estate may inhibit the Enlarged Group’s ability to
strategically adjust the identity and mix of its property portfolio and may affect the Enlarged
Group’s ability to dispose of, or liquidate part of, its portfolio in a timely fashion and at satisfactory
prices in response to changes in economic, real estate market or other conditions or to finance
its development activity. In the case of an accelerated sale or a sale required for compliance with
covenants contained in the Enlarged Group’s financing, or in the event of enforcement of security
by a lender under one of the Enlarged Group’s non-recourse financings, there may be a
significant shortfall between the carrying value of the property on the Enlarged Group’s
consolidated balance sheet and the price achieved on the disposal of such property, and there
can be no assurance that the price obtained from such a sale would cover the book value of the
property sold.
Periods of reduced liquidity in the capital markets may also mean that it may be difficult to
achieve the sale of property assets at prices reflecting the Enlarged Group’s property valuations.
Failure to achieve successful sales of properties in the future at acceptable prices could have an
adverse impact on the Enlarged Group’s business, financial condition and/or results of
operations.
1.6 The Enlarged Group is reliant on the performance and retention of key personnel and maynot be able to retain key members of the management teamThe Company is internally managed and therefore relies on its management and their
experience, skill and judgement, in identifying, selecting and negotiating the acquisition of
suitable investment opportunities. The Company also relies on the Directors, and in particular,
the Executive Directors, to manage the day-to-day affairs of the Company. There can be no
assurance as to the continued service of these individuals as directors and employees of the
Company. The departure of any of these individuals from the Company without adequate
replacement may have a material adverse effect on the Company’s business prospects and
results of operations. The Company is also reliant on its senior asset managers and senior
finance staff. The departure of key personnel may require an extended period in which to find
suitable replacements and may have a temporary adverse effect on the business.
1.7 The Company may incur losses as a result of fluctuations in the foreign currencyexchange rates between the Pound and other foreign currencies for which it has not, ornot effectively, hedged its riskRevenues in Euros are earned from the Enlarged Group’s European business. The Enlarged
Group is, therefore subject to currency fluctuations on translating revenues and costs from those
foreign currencies to Sterling. This exposure is hedged by matching the value of the foreign
assets with borrowings in foreign currencies where practicable. To the extent that the Enlarged
Group does not hedge its exposure to foreign currency exchange rate fluctuations, or to the
extent that such hedging is inaccurate or otherwise ineffective, such exposure could have a
material adverse effect on the Enlarged Group’s business, financial condition, results of
operations, future prospects or the price of the Ordinary Shares.
1.8 If the Enlarged Group suffers uninsured losses, it may lose the value of the damagedasset altogetherThe Company believes it maintains insurance against all risks commonly insured against by
persons carrying on similar businesses to its business and believes it insures against all risks
against which it might reasonably be expected to insure its assets and property in the particular
circumstances of the business carried on by it. Inability to obtain such insurance on comparable
terms in the future may result in a material adverse effect on the business of the Enlarged Group.
For example, the availability or cost of such insurance may be affected by an act or acts of
terrorism. In addition, there can be no guarantee that current insurance coverage will not be
cancelled or become unavailable to the Enlarged Group on economically reasonable terms. If the
Enlarged Group were to suffer damage to an asset for which it was uninsured, it may lose the
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value of the damaged asset altogether, which could have a material adverse effect on the
Enlarged Group’s business, financial condition, results of operations, future prospects or the
price of the Ordinary Shares.
There is a risk of accidents involving the public at hotels, shopping centres and other premises
owned by the Enlarged Group. Should an accident attract publicity or be of a size and/or nature
that is not adequately covered by insurance, the resulting publicity and costs could have an
adverse impact on the Enlarged Group’s reputation, business, financial condition and results of
operation. In such instance, the Enlarged Group’s ability to put in place public liability insurance
cover in the future may also be adversely affected.
1.9 The Enlarged Group’s debt facilities contain restrictions on the business of the EnlargedGroupAt 31 August 2015, the Enlarged Group had £540.9 million of net external debt outstanding.
Covenants contained in the Enlarged Group’s debt facilities may restrict its ability to engage in
certain businesses or to implement certain business strategies. For example, the Enlarged Group
may be required to seek the relevant lenders’ consent before incurring additional indebtedness
or creating further security interests over, or disposing of all or a substantial part of, its property
assets. If such consent is withheld, this may hinder the Enlarged Group’s ability to plan for or
react to market conditions or otherwise restrict the Enlarged Group’s business plans and
adversely affect the Enlarged Group’s ability to finance future strategic acquisitions, investments
and development projects.
1.10 A non-renewal by a major tenant could result in a significant loss of letting income, voidcosts, a reduction in asset value, increased capital expenditure, unoccupied propertyliabilities and increased bad debtsNon-renewal, in particular by one of the Enlarged Group’s principal tenants (such as Redefine
BDL, The First Secretary of State (UK Government), Tesco, VBG or Edeka), could result in a loss
of rental income, void costs, an increase in bad debts, and decrease the value of the relevant
properties. In the event of non-renewal by tenants, the Enlarged Group may be unable to find
new tenants quickly or at all or at rents equal to those under the expiring leases or on equally or
more favourable terms. Existing and potential tenants may seek to reduce their rental payments,
and/or reduce the length of time before they can break, and/or increase their rent-free periods
and/or demand a higher grade of fit-out. While properties remain vacant they may incur empty
rates liabilities. In the event that any of the above occurs, there could be a material adverse effect
on the Enlarged Group’s business, results of operations, financial condition, future prospects
and/or the price of the Ordinary Shares.
1.11 Reputational riskThe Company may also be subject to reputational risk from adverse publicity associated with
particular properties or tenants. The Enlarged Group relies on its reputation for attracting new
business partners, investors and maintaining credibility with key stakeholders. For example,
relationships with joint venture partners such as Redefine Properties and other professional
organisations such as Savills (UK) Limited are important to the delivery of the Enlarged Group’s
business strategy. Any reputational damage suffered by the Enlarged Group could have an
adverse effect on the Enlarged Group’s business prospects and results of operations.
1.12 The Enlarged Group may not be able to maintain or increase the rental rates for itsproperties, which may, in the longer term, have a material adverse impact on the value ofthe Enlarged Group’s properties, as well as the Enlarged Group’s turnoverThe value of the Enlarged Group’s property portfolio, and its turnover, will be dependent on the
rental rates that can be achieved from the properties. The ability of the Enlarged Group to
maintain or increase the rental rates for those properties generally may be adversely affected by
general economic conditions in the UK and Germany. In addition, there may be other factors that
depress rents or restrict the Enlarged Group’s ability to increase rental rates, including local
factors relating to particular properties or locations, such as increased competition. Any failure to
maintain or increase the rental rates for the properties in the Enlarged Group’s portfolio generally
may have a material adverse effect on the Company’s profitability, net asset value, the price of
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the Ordinary Shares and the Enlarged Group’s ability to meet interest and capital repayments on
any debt facilities.
1.13 The difficult macroeconomic and property market conditions in many of the markets inwhich the Enlarged Group operates may have a negative impact on its businessThe Enlarged Group operates in a highly competitive market for investment opportunities.
Heightened competition in the real estate investment market in the countries in which the
Enlarged Group invests may reduce investment opportunities and increase prices of real estate.
Some competitors and potential competitors may have advantages over the Company, including
greater name recognition, longer operating histories, pre-existing relationships with current or
potential tenants, greater flexibility as to movement of clients between properties, greater
financial, marketing and other resources and better access to capital, which would allow them to
respond more quickly to new or changing opportunities.
The Enlarged Group competes for tenants for its properties with real estate investment funds,
developers, owners and operators of commercial real estate businesses in the regions where the
Enlarged Group’s properties are located. If competitors offer property at rental rates below the
rates charged to the Enlarged Group’s tenants or below market rates, the Enlarged Group may
lose existing tenants and be unable to attract new tenants. If, as a result of competition or lack
of demand, the Enlarged Group is required to reduce rental rates or to offer more substantial rent
abatements, tenant improvements, early termination rights or below-market renewal options to
retain existing or to attract new tenants, the Enlarged Group’s cash flow and operating results
could be adversely affected.
The Enlarged Group’s net asset value may be reduced by downward property valuations, which
may occur, for example, as a result of prevailing economic conditions allowing for a tapering of
global government asset purchase programmes, decreased demand for commercial and/or
government occupied office space, adverse change in retail economic conditions and/or decline
in the hotel industry. This may affect the Enlarged Group’s ability in the longer term to refinance
debt when required or to pay dividends.
1.14 The Company has increased its exposure to the UK as a result of the Acquisition. As such,any future property market recession or significant increase in interest rates in the UK ina short period of time could materially adversely affect the value of the Enlarged Group’sreal estate assets.If the Placing proceeds and if the Company is not required to implement the Disposal, following
completion of the acquisition of the Tranche 2 Properties, UK real estate is expected to account
for approximately 80 per cent. of the market value of the Enlarged Group’s property portfolio as
at 1 March 2016.
The market value of the Enlarged Group’s UK real estate assets may be adversely affected by a
number of the following factors:
• the overall economic conditions in the UK such as growth or contraction in gross domestic
product, employment trends, consumer sentiment and the level of inflation and interest
rates;
• local real estate conditions, such as the level of demand for and supply of commercial and
retail space; and
• external factors including major world events such as war or acts of nature such as floods.
Significant reductions in the value of the Enlarged Group’s UK real estate assets could have a
material adverse effect on the business prospects and results of operations of the Enlarged
Group.
1.15 Benefits in relation to the Acquisition set out in this document may not be achieved or theAUK Portfolio may not perform as expectedThere is a risk that the benefits of the Acquisition, such as (i) exposure to a high quality diversified
UK portfolio where the Company expects to capture rental growth as the UK economy continues
to improve, (ii) enhancing the Company’s ability to sell assets and re-invest sale proceeds in
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other properties and (iii) further enhancing the overall yield on the Enlarged Group’s portfolio, fail
to materialise, that they are materially less than have been estimated, take longer or cost more
to achieve, or that the AUK Portfolio will fail to perform as expected. If the Enlarged Group is
unable to realise the expected benefits or these expected benefits take longer to achieve or the
AUK Portfolio fails to perform as expected, this could have a significant impact on the business
prospects and results of operations of the Enlarged Group.
1.16 Construction of the Enlarged Group’s developments may be subject to delays ordisruptions that are outside of the Enlarged Group’s controlThe Enlarged Group will depend on skilled third party contractors for the timely construction of
its developments in accordance with applicable standards of quality and safety. The process of
construction may be delayed or disrupted by a number of factors, such as inclement weather or
acts of nature, industrial accidents and defective building methods or materials. Any of these
factors, alone or in combination, could delay or disrupt the construction process by halting the
construction process or damaging materials or the development itself. In addition, the costs of
construction depend primarily on the costs of materials and labour, which may be subject to
significant unforeseen increases. In the event that a contractor fails to deliver and/or ceases to
be financially viable, the timetable of the relevant development or scheme may be delayed, the
Enlarged Group may need to provide additional resources to the development (financial or
otherwise) and/or may incur financial liabilities. Any of these factors could have a material
adverse effect on the Enlarged Group’s business prospects and results of operations.
1.17 The Enlarged Group’s development projects will be subject to the hazards and risksnormally associated with the construction and development of commercial real estateThe Enlarged Group’s development projects will be subject to the hazards and risks normally
associated with the construction and development of commercial real estate, including
unforeseen capital expenditure, personal injury and property damage. The Enlarged Group has
approved health and safety policies and procedures applicable to all its locations. In addition, the
Enlarged Group has public liability insurance in place, which the Directors consider provides an
adequate level of protection against third party claims. Should an accident attract publicity or be
of a size or nature that is not adequately covered by insurance, the Enlarged Group could face
significant costs, and the Enlarged Group’s ability to put in place public liability insurance cover
in the future may also be adversely affected.
The occurrence of any of these events could result in significantly increased operating costs,
reputational damage, fines, legal fees, or criminal prosecution of the companies within the
Enlarged Group, and their directors or management, all of which could have a material adverse
effect on the Enlarged Group’s business prospects and results of operations.
1.18 External events beyond the control of the Group may have a negative impact on demandat the Group’s hotels and/or shopping centres and therefore demand for, and the value of,the Group’s propertiesDemand at the Group’s hotels is dependent on the travel industry and demand at the Group’s
shopping centres is affected by customer footfall. Any declines in, or disruptions to, the travel
industry or declines in customer footfall at the Group’s shopping centres may therefore adversely
affect demand for, and the value of, the Group’s properties. For example, the occurrence of
events such as adverse weather, an outbreak of an infectious disease, such as avian or swine
flu, or any other serious public health concern, could result in a reduction of demand at the
Group’s hotels and/or customer footfall at the Group’s shopping centres. In addition, accidents,
system failures or other similar external events could raise questions as to the safety and security
of the Group’s hotels and/or shopping centres and result in reputational damage and/or impact
the Group’s business, financial condition and/or results of operations.
Furthermore, terrorist attacks or war could damage infrastructure or associated transport
infrastructure or otherwise inhibit or prevent access to the Group’s hotels and/or shopping
centres or harm the demand for, and the value of, the Group’s properties. Terrorist attacks could
also discourage consumers from travelling to, and staying in, places where the Group’s hotels
are located or shopping in public places including the Group’s shopping centres. While the Group
does have insurance in place in respect of certain ris
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