Industrial Multi Property Trust PLC Notice of Members' Requisition of EGM (6169Q)

TIDMIMPT

RNS Number : 6169Q

Industrial Multi Property Trust PLC

01 December 2016

Industrial Multi Property Trust PLC

Notice of Members' Requisition of Extraordinary General Meeting

Further to the announcement on 14 November 2016, Industrial Multi Property Trust PLC (the "Company") announces that it is today posting a circular (the "Circular") to Shareholders convening an Extraordinary General Meeting to be held at the offices of FIM Capital Limited, IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP at 11.00 a.m. on 19 January 2017.

The EGM is to allow Shareholders to vote on:

(i) the Requisitioned Resolutions proposed by Alpha Real Trust seeking the removal of Jonathan Clague and Donald Lake from their positions as independent directors of the Company; and

(ii) the Independent Directors' Resolution to give the Company flexibility to sell the Company's portfolio.

The Independent Directors believe that voting AGAINST the Requisitioned Resolutions is a vote for:

   -      rejecting a highly geared and risky refinancing proposal supported by Alpha Real Trust; 

- maintaining a strong, independent Board who are best placed to take key decisions free from conflicts of interest; and

- ensuring all options for a refinancing or otherwise maximising value for Shareholders as a whole are properly considered.

The Independent Directors believe that voting FOR the Independent Directors' Resolution is a vote for:

- ensuring that a potential sale of the Company's valuable portfolio gets proper consideration; and

- providing the Company with flexibility to execute a sale should the Independent Directors believe it is in the interests of Shareholders as a whole to do so.

The letter from the Chairman, as contained in the Circular, is set out below.

Terms used and not defined in this announcement bear the meaning given to them in the Circular.

"Dear Shareholder

Notice of Extraordinary General Meeting

Unanimous Recommendation of the Independent Directors to

VOTE AGAINST THE REQUISITIONED RESOLUTIONS

VOTE FOR THE INDEPENT DIRECTORS' RESOLUTION

INTRODUCTION

The Company announced on 14 November 2016 that it had received notice from Alpha Real Trust, who holds approximately 18.7 per cent. of the share capital of the Company, requisitioning an extraordinary general meeting of the Company to propose resolutions to remove two of the Independent Directors (the "Requisitioned Resolutions").

The Independent Directors believe that the proposals put forward by Alpha Real Trust are not in the best interests of the Company and Shareholders as a whole and unanimously recommend that you vote AGAINST the Requisitioned Resolutions at the Extraordinary General Meeting.

This letter provides Shareholders with details of the Requisitioned Resolutions which the Company is required to put to Shareholders at the Extraordinary General Meeting to be held at the offices of FIM Capital Limited, IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP on 19 January at 11.00 a.m.

The letter also provides Shareholders with the background to the Independent Directors' assessment of options for a refinancing of the Company and alternative ways to improve Shareholder value. The Independent Directors believe that to provide the Company with additional flexibility the Company's objectives should be amended to permit the sale of the investment portfolio at a value which is not less than a valuation by an independent valuer within three months prior to any sale. An additional resolution (the "Independent Directors' Resolution") is therefore also proposed at the EGM.

The Independent Directors believe that having the flexibility to sell the portfolio is in the best interests of the Company and Shareholders as a whole and unanimously recommend that you vote FOR the Independent Directors' Resolution at the Extraordinary General Meeting.

WHAT ARE THE REQUISITIONED RESOLUTIONS WHICH HAVE BEEN PUT FORWARD BY ALPHA REAL TRUST?

The notice from Alpha Real Trust dated 11 November 2016 requested an Extraordinary General Meeting to consider the following two resolutions (the "Requisitioned Resolutions"):

   -      That Jonathan Clague is removed as a Director of Industrial Multi Property Trust PLC 
   -      That Donald Lake is removed as a Director of Industrial Multi Property Trust PLC 

The Board currently comprises five directors:

Jonathan Clague (Chairman)

Geoffrey Black

Donald Lake

Philip Scales

Mark Rattigan

The first four directors are considered independent and bring a wealth of experience to the Board through being actively involved in other listed and private property holding companies. Mark Rattigan is not considered independent in light of his position as Chief Operating Officer of Alpha Real Capital, the investment adviser and manager to the Company.

Alpha Real Capital is also the investment manager of Alpha Real Trust, the Company's largest Shareholder and the provider of an unsecured subordinated loan facility to the Company. Mark Rattigan has therefore not taken part in the deliberations regarding the Extraordinary General Meeting.

The Independent Directors have been evaluating options for a refinancing of the Company and have recently been in discussions with representatives of Alpha Real Trust regarding refinancing options. The Independent Directors all favoured a refinancing structure which reduced the overall level of debt through an issue of new Shares, providing existing Shareholders with an opportunity to participate, and thereby enabling the Company to pay a material and sustainable dividend. However, during such discussions it became clear that the only option Alpha Real Trust (supported by Alpha Real Capital) was prepared to consider was a risky, highly leveraged debt refinancing of the Company which, if implemented, would have led to the Company:

   -      Ending up with a higher level of debt than the Company has at present 
   -      Having a debt to property valuation ratio of over 75 per cent. 
   -      Incurring arrangement fees and other costs of well over GBP1 million 

- Being liable for expensive penalties in the event of prepayment of certain facilities for the following 18 months

- Accepting new banking covenants at higher levels than at present and, therefore, presenting a higher risk that they could be breached

The Independent Directors unanimously agreed that such a way forward was not in the interests of ALL Shareholders. While they were prepared to enter into discussions regarding other options they are all disappointed that Alpha Real Trust decided instead to requisition an EGM to vote on removing two of the Independent Directors.

WHY SUPPORT THE RECOMMATION TO VOTE AGAINST THE REQUISITIONED RESOLUTIONS?

THESE RESOLUTIONS ARE IMPORTANT AND GO TO THE HEART OF WHO RUNS YOUR COMPANY

- Listed investment funds typically have an independent board for very good reasons. Such a Board appoints all service providers and takes key decisions free from any conflicts of interest.

- Alpha Real Capital is the investment manager of Industrial Multi Property Trust and the investment manager of Alpha Real Trust - the Company's largest Shareholder and provider of mezzanine finance to the Company.

- Alpha Real Trust should not be dictating the removal of half of the Independent Directors in light of such material conflicts of interests.

THE INDEPENT DIRECTORS ARE REQUIRED TO ACT IN THE INTERESTS OF SHAREHOLDERS TAKEN AS A WHOLE - NOT JUST ONE DOMINANT PARTY

- Since the overwhelming majority of Shareholders are private individuals, the Independent Directors are well aware of the importance of dividend income together with the ability of the Company to deliver Shareholder value, not only in net asset value terms but also in price terms.

- The Independent Directors have consistently confirmed their objective of targeting a refinancing of the portfolio and to continue to review alternative ways to improve Shareholder value if a refinancing is not possible or not in the best interest of Shareholders.

- The Independent Directors also recognise the significant discount at which the Company's Shares trade to net asset value and believe that decisions taken in relation to any refinancing or other initiatives should seek to assist in further discount narrowing.

THE COMPANY HAS A VERY IMPORTANT DECISION TO MAKE REGARDING ITS FUTURE STRUCTURE AND STRATEGY

- The current debt facilities were put in place during the difficult refinancing conditions of 2013. Although the facilities run to 2018, there is now an opportunity to refinance as early repayment penalties fall away.

- It is important that any refinancing lowers the Company's finance costs materially, yet is also stable enough to withstand a range of sensitivities which may occur over the medium-term.

- The Independent Directors are conscious that the Company remains highly geared and they all believe that the level of gearing should be reduced from the current high level to enable the Company to pay a material and sustainable dividend.

- The Independent Directors also recognise that there are alternative ways to deliver Shareholder value, including a sale of the portfolio.

ALPHA REAL TRUST HAS STATED IT WISHES ANY REFINANCING TO MAINTAIN VERY HIGH LEVELS OF DEBT

- Alpha Real Capital proposed an all debt refinancing comprising both senior and mezzanine debt.

- This proposed refinancing structure, supported by Alpha Real Trust, would have led to the Company's total debt being higher than it is at present.

- The terms sheets from Alpha Real Trust's proposed providers of finance required more onerous covenant provisions than exist at present and risk being breached as a result of relatively small changes in the portfolio valuation.

- While an all debt refinancing may enable the payment of a modest dividend, the Independent Directors do not agree that a structure is appropriate if it does not appear to be stable enough to withstand a range of sensitivities which may occur over the medium term and thereby putting such a dividend at risk.

- Alpha Real Trust may be happy for its investment to bear similarities to a highly geared warrant, but the Independent Directors do not consider such a structure suitable for Shareholders as a whole, the majority of whom bought their Shares for income.

THE INDEPENDENT DIRECTORS DO NOT WISH TO RULE OUT A PORTFOLIO SALE

- The Company's portfolio has delivered strong growth over the last few years with the most recent valuation as at 30 September 2016 reporting a value of GBP85.3 million.

- The letter from Jones Lang LaSalle on page 11 of this Circular confirms the strength of market demand for a portfolio such as the Company's and the likely appetite for the portfolio, should it be marketed.

- To provide additional flexibility, the Company's objectives are proposed to be amended to permit the sale of the investment portfolio at a value which is not less than a valuation by an independent valuer within three months prior to any such sale.

WHY SUPPORT THE RECOMMENDATION TO VOTE FOR THE INDEPENDENT DIRECTORS' RESOLUTION?

THE COMPANY HAS A VERY VALUABLE PORTFOLIO

- The value of the Company's property portfolio amounted to GBP85.3 million as at 30 September 2016 and, (adjusted for sales), has increased by approximately 12 per cent. over the last two years.

- The letter from Jones Lang LaSalle on page 11 of this Circular confirms that the portfolio is likely to be attractive to a potential acquirer.

THE OPTION TO POTENTIALLY SELL THE PORTFOLIO NEEDS TO GET PROPER CONSIDERATION

- Only a truly independent Board can assess objectively whether a portfolio sale is an option to be pursued and this is put at risk through the attempt to remove half of the Independent Directors.

- Alpha Real Capital and Alpha Real Trust (which is also managed by Alpha Real Capital), both have a conflict of interest in relation to considering a sale.

THE COMPANY SHOULD HAVE FLEXIBILITY TO EXECUTE A SALE SHOULD THE INDEPENDENT DIRECTORS BELIEVE IT IS IN THE INTERESTS OF SHAREHOLDERS TO DO SO

- Although the Company is not required to seek the approval of Shareholders in relation to significant transactions or changes to its objectives, the Independent Directors believe that it is good corporate governance for Shareholders to have a vote on a potential sale.

- Assuming Shareholders approve the Independent Directors' Resolution the Company will have flexibility to sell the portfolio if the Independent Directors believe it is in the interests of Shareholders to do so.

THE INDEPENDENT DIRECTORS' RESOLUTION IS TO CHANGE THE COMPANY OBJECTIVES AS FOLLOWS:

Objectives

Industrial Multi Property Trust plc (the "Company" or together with its subsidiaries the "Group") was incorporated in the Isle of Man on 10 June 2002 as a closed-ended investment company. The Company and its subsidiaries invest in higher yielding UK commercial property. The key objectives of the Company are:

   -      Increase earnings and cash flow - increase occupancy in the portfolio and reduce expenses. 
   -      Protect and enhance asset values - prudent investment in selected portfolio properties. 

- Strengthen the balance sheet - reduce bank borrowings progressively, through rental surplus consistent with the investment programme for the property portfolio.

The Company may sell the investment portfolio if the Board believes it is in the interests of Shareholders to do so, provided that the sale proceeds are higher than a valuation of the investment portfolio by an independent valuer appointed by the Board which is undertaken not more than three months prior to the entry into a sale and purchase agreement.

THE INDEPENDENT DIRECTORS ARE WORKING FOR ALL SHAREHOLDERS

The Independent Directors took the initiative in August 2015 when they announced:

- An objective to return the Company to a position from which it can resume paying a material and sustainable dividend

   -      A refinancing of the current capital structure would be the best way for this to be achieved 

- Such refinancing could, subject to Shareholder approval, include an issue of new equity or other financial instrument which could materially lower the Company's financing charges

- The then Share price of 54p reflected the high gearing and lack of dividend rather than the quality of the property portfolio

- If a refinancing is not possible, they would consider alternative ways to improve Shareholder value, including a sale of the portfolio

Since 9 August 2015 (the day before the "Shareholder update" announcement), the Company's Share price and Net Asset Value have increased significantly:

   -      Adjusted NAV +25 per cent. 
   -      Share price +317 per cent. 

The Independent Directors therefore strongly reject the Requisitioned Resolutions which, if passed, would result in half the Independent Board being removed. The Independent Directors are concerned about the consequences such a move may precipitate since it is likely to result in undue influence being wielded by a dominant Shareholder against the interests of Shareholders as a whole.

ACTION TO BE TAKEN IN RESPECT OF THE EXTRAORDINARY GENERAL MEETING

Set out at the end of this document is a notice convening the Extraordinary General Meeting to be held at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP on 19 January at 11.00 a.m.

Shareholders will find enclosed with this document a Form of Proxy for use in connection with the EGM. Whether or not you intend to be present at the EGM, you are requested to complete and return the Form of Proxy so as to reach Capita Asset Services at PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible and, in any event, not later than 11.00 a.m. on 17 January 2017, being 48 hours before the time appointed for the Extraordinary General Meeting.

Completion and return of a Form of Proxy will not, however, prevent you from attending at the Extraordinary General Meeting and voting in person if you should wish to do so.

If you are in any doubt as to what action you should take, you are recommended to seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 immediately, or, if outside the United Kingdom, another appropriately authorised financial adviser.

If you have any questions regarding the Form of Proxy please contact Boudicca Proxy Consultants, details of which are set out below.

RECOMMENDATION

The Independent Directors unanimously consider that the proposals put forward by Alpha Real Trust are not in the best interests of the Company and its Shareholders as a whole. Accordingly, the Independent Directors unanimously recommend Shareholders to vote AGAINST the Requisitioned Resolutions (Resolutions 1 and 2) as they intend to do in respect of their own beneficial Shareholdings.

Furthermore, the Independent Directors believe that having the flexibility to sell the portfolio is in the best interests of the Company and Shareholders as a whole, and unanimously recommend that you vote FOR the Independent Directors' Resolution (Resolution 3) as they intend to do in respect of their own beneficial Shareholdings.

Yours faithfully

Jonathan Clague

Chairman"

For further information, please contact:

Philip Scales

Director, Industrial Multi Property Trust PLC

[phone]

Alastair Moreton

Financial Adviser and Broker, Stockdale Securities Limited

[phone]

This information is provided by RNS

The company news service from the London Stock Exchange

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December 01, 2016 02:00 ET (07:00 GMT)