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SIR Secure Income Reit Plc

461.00
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Secure Income Reit Plc LSE:SIR London Ordinary Share GB00BLMQ9L68 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 461.00 461.00 461.50 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Secure Income REIT PLC Proposed £196m acquisition & £140m share placing (2500J)

08/09/2016 7:01am

UK Regulatory


Secure Income Reit (LSE:SIR)
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TIDMSIR

RNS Number : 2500J

Secure Income REIT PLC

08 September 2016

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN, SOUTH AFRICA OR AUSTRALIA OR ANY JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR IMMEDIATE RELEASE.

8 September 2016

Secure Income REIT Plc

("SIR" or the "Company" and together with its subsidiaries the "Group")

Proposed GBP196 million acquisition of 55 Travelodge hotel investments and GBP140 million placing of ordinary shares

The board of directors of Secure Income REIT Plc, the specialist long term income REIT, is pleased to announce that it has agreed to acquire 55 hotels with a weighted average unexpired lease term of 27 years with upwards only RPI linked rent reviews throughout the term, let to Travelodge Hotels Limited, the UK's second largest budget hotel brand (the "Travelodge Portfolio"), at a total cost of GBP196.2 million including purchase costs reflecting a yield of 7% (the "Acquisition").

To finance the Acquisition, the Company is proposing a placing to institutional investors of up to 46.9 million new ordinary shares in the Company (the "Placing Shares") targeting gross proceeds of up to approximately GBP140 million (the "Placing" and, together with the Acquisition, the "Transaction"). The placing price will be 298.6 pence per share (the "Placing Price"), equal to the 30 June 2016 EPRA NAV per share adjusted for the completion of the Transaction. The balance of the consideration for the Acquisition will be financed via a new GBP60 million seven year non-recourse secured debt facility in respect of which the Company has the lender's credit approval and is in advanced negotiations on documentation.

The Acquisition will be earnings accretive to the Company with the Travelodge Portfolio expected to produce GBP13.7 million of rental income per annum initially, rising in line with the upwards only RPI linked uplifts throughout the term. In addition, assuming completion of the Transaction, the Company's Net LTV ratio will reduce from 59.5% to 56.0%.

Following completion of the Acquisition, the Company's dividend yield is expected to increase by 14%, growing from a current level of 3.9% on 30 June 2016 EPRA NAV to 4.5% on the Placing Price. In addition, the Company's long term contracted rental income with fixed and RPI linked rent reviews should continue to result in increased net rent every year and hence provides attractive dividend growth prospects which the board of directors (the "Board" or "Directors") estimates should equate to 6.5% per annum over the first six years following the Transaction.

The Company has separately announced today its interim results for the six months ended 30 June 2016. The Company's EPRA NAV at 30 June 2016 (prior to any adjustments for completion of the Transaction) is GBP541.5 million or 300.2 pence per share, up 6.2% since 31 December 2015 and its Adjusted EPRA EPS is 5.4 pence, near double the reported 2.9 pence for the 6 month period to 31 December 2015.

Transaction highlights

The Board considers that the Travelodge Portfolio is highly complementary to the Company's existing portfolio (the "Existing Portfolio") and that the Transaction is consistent with the Company's investment strategy. The Transaction highlights include:

-- Agreement to acquire a portfolio of 55 hotel assets mainly throughout England comprising 3,096 rooms for a total cost of GBP196.2 million including acquisition costs. The agreement is conditional only on completion of the Placing.

-- Initial contracted rental income is expected to be GBP13.7 million per annum offering further potential to grow earnings through the Travelodge Portfolio's uncapped, upward only RPI linked rent reviews. The purchase price represents an initial yield of 7% which is expected to increase to 7.3% by October 2017 on completion of the next scheduled rent reviews on 35% of the Travelodge Portfolio rents.

-- Long leases on full repairing and insuring terms with a weighted average unexpired lease term of 27 years without break. No individual lease has an unexpired term of less than 22 years.

-- Each hotel is let to Travelodge Hotels Limited ("Travelodge"), the UK's second largest budget hotel brand which reported revenues of GBP560 million and EBITDA of GBP105 million for the year ended 31 December 2015.

-- Enhanced diversification through the Travelodge Portfolio representing 15% by rent and 12% by gross asset value of the Company's enlarged portfolio following the Acquisition.

-- Prestbury Investments LLP (the "Investment Adviser") and its associates' (together "Prestbury") historic knowledge and experience of the portfolio has been a key feature in sourcing and structuring this off-market transaction.

-- Financed by way of an equity placing of up to approximately GBP140 million (GBP137.5 million net of expenses) and a new GBP60 million seven year fixed rate non-recourse secured loan facility. The initial loan to cost ratio for the new debt facility is c. 31% which should reduce SIR's Net LTV ratio from 59.5% to 56.0% immediately following the Acquisition, whilst retaining the attractive geared return profile of the Company. The weighted average term to maturity of all of the Company's debt facilities following completion of the Transaction will be approximately 7.5 years.

-- Prestbury and the Board intend to invest a further GBP5.4 million in the Placing which would result in a total post Transaction shareholding in the Company of over GBP104 million at the Placing Price. With one of the largest management shareholdings in the quoted UK real estate sector, Prestbury remains very strongly aligned with shareholders' interests.

-- Based on the assumptions which are contained in Appendix V of this Announcement (and referred to in this Announcement as the "Assumptions"), the Transaction delivers anticipated shareholder return accretion:

o dividend yield increasing by 14% from 3.9% to 4.5% (based on 30 June 2016 EPRA NAV and the Placing Price respectively);

o geared returns on the Travelodge Portfolio estimated at 13.5% per annum, driving an expected total shareholder return (calculated as the return on investment at the Placing Price and the estimated future EPRA NAV plus dividend payments) over the next six years of approximately 11%; and

o Company distributions growing at a compounded annual rate of 6.5% over the next six years.

The Transaction has been recently discussed in principle with a number of the Company's larger shareholders and the Board has been encouraged by the positive feedback received.

The Company's strategy to continue to deliver growth remains unchanged, with a firm intention to further expand SIR's multi-sector portfolio of long term income streams. Further equity issues or vendor placings may be undertaken in the future where transactions are accretive to total shareholder return.

SIR is unique among UK REITs in its focus on long term income streams without any restriction as to property subsector. When assessing potential acquisitions, the Board ensures that each opportunity is reviewed against the following criteria:

   --      its potential to enhance shareholder returns; 
   --      its potential to further the Company's diversification of assets and tenants; and 
   --      its potential to further reduce the Company's gearing. 

The Board considers that there remain opportunities for further growth from its current portfolio and from the Travelodge Portfolio (together with the Existing Portfolio, the "Enlarged Portfolio"), and from future acquisitions of conventional long lease property or of ground rents.

Details of the Placing

The Company is proposing to issue up to 46,885,466 Placing Shares, representing 26.0% of the Company's current issued share capital, at the Placing Price of 298.6 pence per share, to raise gross proceeds of up to approximately GBP140.0 million and net proceeds of approximately GBP137.5 million. The Placing Price reflects the 30 June 2016 EPRA NAV per share adjusted for the completion of the Transaction, as shown in Appendix 1.

The Board and Prestbury intend to invest GBP5.4 million at the Placing Price. Of that total, Prestbury intend to subscribe for GBP5.3 million of new ordinary shares resulting in a post-acquisition shareholding of over GBP104 million at the Placing Price, maintaining its position as having one of the largest management shareholdings in the quoted UK real estate sector.

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM ("Admission"). It is expected that Admission will become effective and that unconditional dealings in the Placing Shares will commence at 8.00 a.m. (London time) on, or around, 6 October 2016.

The Placing will be subject to the terms and conditions set out in Appendix VI of this Announcement.

The Placing is conditional on the Placing Agreement becoming wholly unconditional (save as to Admission) and not having been terminated in accordance with its terms prior to Admission.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue, including the next dividend which the Company expects to declare with a record date in the fourth quarter of 2016.

The Placing Shares will be issued in registered form and may be held in uncertificated form. The Placing Shares allocated will be issued to Placees through the CREST system unless otherwise stated. The Placing Shares will be eligible for settlement through CREST with effect from Admission.

The number of Placing Shares to be issued will be agreed between Stifel Nicolaus Europe Limited ("Stifel") and the Company, following completion of the bookbuild. In the event that the number of Placing Shares applied for under the Placing exceeds 46.9 million, it may be necessary to scale back applications under the Placing. In such event, the Placing Shares will be allocated at the discretion of the Company in consultation with Stifel. In the event that the number of Placing Shares subscribed for is less than 46.9 million but more than 39.2 million, then the Company believes it would be able to complete the Acquisition with its existing resources although the return profile of the Group, as based on the Assumptions, would change from that illustrated in this Announcement (such changes are illustrated in Appendix V). The Placing Agreement is conditional on applications being received in respect of at least 39,216,343 Placing Shares.

Appendix VI to this Announcement (which forms part of this Announcement) sets out the terms and conditions of the Placing (the "Terms and Conditions"). Investors will be deemed to have read and understood this Announcement in its entirety (including all appendices) and to be making an offer on the Terms and Conditions and providing the representations, warranties, acknowledgements and undertakings contained in the Appendix VI.

Stifel is acting as sole bookrunner in respect of the Placing. Qualified Investors (as defined in the Terms and Conditions) should communicate their firm interest to their usual sales contact at Stifel, providing a clear indication of the number of Placing Shares which such Qualified Investor wishes to subscribe for under the Placing.

Expected timetable of principal events

 
 Placing opens                                          8 September 2016 
 Latest time and date for receipt of Placing      1.00 p.m. on 3 October 
  commitments                                                       2016 
 Results of the Placing announced                         4 October 2016 
 Admission and commencement of dealings                   6 October 2016 
  in the Placing Shares 
 Placing Shares issued in uncertificated                  6 October 2016 
  form expected to be credited to accounts 
  in CREST 
 Despatch of definitive share certificates           As soon as possible 
  for the Placing Shares issued in certificated                    after 
  form                                                    6 October 2016 
 

Times and dates set out in the timetable above and mentioned throughout this Announcement that fall after the date of publication of this Announcement are indicative only and may be subject to change without further notice. If any of the above times and/or dates change, the revised times and/or dates will be notified by an announcement through a Regulatory Information Service.

Martin Moore, Independent Non-Executive Chairman of the Company, commented:

"Today's proposed acquisition and placing are exciting for the Company and indicative of the strong ambitions we have to grow the business. This transaction delivers further upwards only RPI linked income, which will be significantly accretive to earnings, enabling us to continue to increase dividend payments and improve total shareholder returns. Furthermore, the acquisition expands and diversifies Secure Income REIT's asset base through the purchase, at an attractive yield, of a portfolio of long lease assets in a highly robust sector, let to the UK's second largest budget hotel chain."

FOR FURTHER INFORMATION, PLEASE CONTACT:

 
 Secure Income REIT Plc 
  Nick Leslau 
  Mike Brown                                                  +44 20 7647 
  Sandy Gumm                                                         7647 
 Stifel Nicolaus Europe Limited 
  Mark Young 
  David Arch                                                  +44 20 7710 
  Tom Yeadon                                                         7600 
 FTI Consulting 
  Richard Sunderland                                          +44 20 3727 
  Claire Turvey                                                      1000 
 
   This Announcement, the interim results announcement and the related 
   shareholder presentation are available on the Company's website, 
   www.SecureIncomeREIT.co.uk. 
 

Appendix I

Further INFORMATION ON THE TRANSACTION

Background to the Acquisition

The Board has in past announcements and reports stated its belief that there are opportunities to deliver growth through transactions that should increase total shareholder returns and diversify the Company's exposure to various property subsectors, assets and tenant credits. The Board considers that the Travelodge Portfolio meets all these criteria. Furthermore, the Investment Adviser has in depth knowledge of the Travelodge Portfolio and the dynamics of the value branded hotel industry through prior ownership of the properties (within a larger portfolio of Travelodge hotels) from 2004 to 2014 in a private joint venture partly owned by a business associated with Prestbury. The Travelodge Portfolio is considered by the Board to be highly complementary to the Existing Portfolio.

The Transaction has the following key features:

Long, inflation linked income

The assets within the Travelodge Portfolio are individually leased on full repairing and insuring terms for a weighted average unexpired term of 27 years. Upwards only, uncapped RPI linked rent reviews are carried out every five years (on a staggered profile so that not all reviews fall in the same year) throughout the respective lease terms.

Following completion of the Acquisition, the weighted average unexpired lease term across the Enlarged Portfolio would increase from 23.1 years to 23.6 years from 30 June 2016.

Shareholder return enhancing

The annualised contracted rental income of the Travelodge Portfolio on completion of the Acquisition is expected to be GBP13.7 million, representing an initial yield of 7%. Based on the Assumptions, the yield on cost is expected to increase to 7.3% by October 2017 following completion of rent reviews on 35% of the Travelodge Portfolio rents. The Company has credit approved terms for a GBP60 million, seven year non-recourse fixed rate secured loan facility to part finance the Acquisition. The interest rate will be fixed at the time of completion of the Acquisition but is expected to be approximately 2.75% per annum.

As a result of the incremental net returns from the Transaction, the geared returns from the Enlarged Portfolio will enhance shareholder returns such that, over an illustrative six year period and on the basis of the Assumptions:

-- the dividend yield will increase by 14% from 3.9% to 4.5% on 30 June EPRA NAV and the Placing Price respectively;

   --      dividends are anticipated to grow at a compounded annual growth rate of 6.5%; and 

-- geared returns on the Travelodge Portfolio estimated at 13.5% per annum should drive an expected total shareholder return over the next six years of approximately 11% per annum.

Illustrative returns on the basis of the Assumptions over a six year period from completion of the Transaction are as follows:

 
             Illustrative Total Shareholder Returns (September 2016 - September 
                                2022): Base Case TSR of 10.9% 
-------------------------------------------------------------------------------------------- 
                       Pro Forma   30 Sept   30 Sept   30 Sept   30 Sept   30 Sept   30 Sept 
                                      2017      2018      2019      2020      2021      2022 
--------------------  ----------  --------  --------  --------  --------  --------  -------- 
 EPRA NAV per 
  share (pence)            298.6     320.3     338.3     357.2     379.0     405.4     431.1 
--------------------  ----------  --------  --------  --------  --------  --------  -------- 
 Accumulated 
  Dividends (pence)            -      12.3      27.2      42.9      59.5      77.3      96.8 
--------------------  ----------  --------  --------  --------  --------  --------  -------- 
 Net LTV                     56%       54%       53%       51%       49%       48%       46% 
--------------------  ----------  --------  --------  --------  --------  --------  -------- 
 

Note: There is no certainty that these illustrative returns will be achieved.

The Travelodge Portfolio has predictable income characteristics, consistent with the Existing Portfolio, meaning that it provides good visibility of net income and therefore of growth prospects. Consequently, it is possible to illustrate Total Shareholder Returns over a range of valuation yield and inflation assumptions. Illustrative returns on the basis of the Assumptions over a six year period from completion of the Transaction are as follows:

 
        Total Shareholder Return (September 2016 - September 2022) 
------------------------------------------------------------------------- 
 Property Valuation    RPI Curve   Base case:   RPI curve   Zero or lower 
  Yield (net)                +1%    RPI curve         -1%             RPI 
--------------------  ----------  -----------  ----------  -------------- 
 -50 bps                   14.3%        13.7%       13.0%           11.4% 
--------------------  ----------  -----------  ----------  -------------- 
 -25 bps                   12.9%        12.3%       11.5%            9.9% 
--------------------  ----------  -----------  ----------  -------------- 
 Base case 5.4%            11.5%        10.9%       10.1%            8.4% 
--------------------  ----------  -----------  ----------  -------------- 
 +25bps                    10.2%         9.5%        8.7%            7.0% 
--------------------  ----------  -----------  ----------  -------------- 
 +50 bps                    8.9%         8.2%        7.4%            5.6% 
--------------------  ----------  -----------  ----------  -------------- 
 

Note: The base case 10.9% Total Shareholder Return from 30 September 2016 to 30 September 2022 assumes investment at the Placing Price and final valuation at EPRA NAV. It assumes a constant valuation yield on the Enlarged Portfolio of 5.4% and no changes in the Enlarged Portfolio composition or lease terms. There is no certainty that these illustrative returns will be achieved.

Key operating assets secured by a well capitalised business

Travelodge is the UK's second largest budget hotel brand and the UK's biggest independent brand with 525 hotels and over 39,000 rooms under management as at 31 December 2015. It reported approximately 18 million customers serviced during 2015. Travelodge's geographic spread across the UK and long-standing presence in the UK market has established it as one of the UK's most recognised consumer brands.

Focused predominantly in the UK, Travelodge benefits from operating in one of the world's largest hotel markets. The UK hotel market has a long term track record of growth with a compound annual growth rate in revenue per available room ("RevPAR") of 2.7% over the past decade, notwithstanding the 2007-09 recession. The value branded sector in the UK made up approximately 19% of UK hotel supply in 2014 compared to 24% in France and 33% in the US, implying scope for further growth.

Travelodge is owned by a consortium of investors comprising GoldenTree Asset Management, Avenue Capital Group and Goldman Sachs Group with certain members of the Travelodge management team holding 10.4% of the company via its equity incentive program. GoldenTree Asset Management, Avenue Capital Group and Goldman Sachs Group, through a structure separate to the ownership of the Travelodge business, are the ultimate vendors of the Travelodge Portfolio which will be acquired by the Company through the acquisition of unit trusts which hold the underlying properties.

The Travelodge shareholder consortium invested heavily in the business from 2012. Since that time, Travelodge has shown significant operational and financial improvements including:

-- revenue up 12.6% from GBP497.2 million in the 12 months to 31 December 2014 to GBP559.6 million in the 12 months to 31 December 2015;

   --      EBITDA up 58.8% from GBP66.2 million in 2014 to GBP105.1 million in 2015; 

-- RevPAR up 11.7% like for like over the 12 month period to 31 December 2015, compared to the overall UK hotel market showing an increase of 4.2%;

-- refinancing of the group's debt with a GBP390 million bond issue in April 2016, lowering the cost and extending the term of Travelodge's debt and achieving ratings from Moody's of B3 and S&P of B-;

-- completion in 2015 of a GBP100 million modernisation programme, refurbishing some 35,000 rooms including all hotels in the Travelodge Portfolio, together with substantial investment in the yield management system, online platform and marketing; and

-- significantly improved customer satisfaction ratings with TripAdvisor cumulative average satisfaction scores increasing from 3.3 out of five stars as of 31 December 2013 to an average of four stars as at 31 December 2015.

The Enlarged Portfolio

SIR's existing portfolio of 26 healthcare and leisure assets was externally valued as at 30 June 2016 at GBP1.38 billion. Including the Travelodge Portfolio at its contract price of GBP192.6 million would result in an Enlarged Portfolio of 81 assets and a pro forma value of GBP1.57 billion.

Key statistics for the Enlarged Portfolio

   --      Contracted rental income of GBP92.4 million per annum at a combined initial yield of 5.4%. 
   --      58% of rents subject to fixed annual uplifts and 42% subject to uplifts linked to RPI. 
   --      Weighted average unexpired lease term of 23.6 years from 30 June 2016 
   --      Rental income analysed by tenant/guarantor: 

o 49% Ramsay Health Care Limited

o 34% Merlin Entertainments Plc

o 15% Travelodge Hotels Limited

o 2% Orpea SA

   --      Portfolio analysis by value: 

o 52% Ramsay hospitals

o 28% Merlin UK assets

o 12% Travelodge hotels

o 5% Merlin German assets

o 3% London psychiatric hospital

Strong covenants underpinning rents

-- Ramsay Health Care Limited is ranked in the top five private healthcare operators in the world by revenue, and has a market capitalisation as at 7 September 2016 of GBP9.3 billion. With operations throughout Australia, France, South East Asia and the UK the business has global spread, with UK operations accounting for 10% of group revenues and 10% of group EBITDA as reported in Ramsay's 30 June 2016 financial statements.

-- Merlin Entertainments Plc, Europe's largest and the world's second largest visitor attractions business by visitor numbers, which has a market capitalisation as at 7 September 2016 of GBP4.9 billion. Also with extensive global reach, Merlin operates in North America, Europe, Asia and Australia, with UK revenues accounting for 36.5% of group revenues as reported in Merlin's 31 December 2015 financial statements.

-- Travelodge Hotels Limited being one of the UK's top two budget hotel brands with 2015 revenues of GBP560 million and EBITDA of GBP105.1 million and with a very significant competitive advantage in the market by way of its strong brand recognition and national network of hotels.

-- Orpea SA, a European leader in integrated long term and post-acute care, listed on Euronext with a market capitalisation as at 7 September 2016 of GBP4.0 billion.

Financial impact of the Transaction

Increase in expected shareholder returns

The incremental net income from the Travelodge Portfolio will enhance both the Company's dividend yield and potential for capital growth, and therefore total shareholder return. The Company's dividend policy is to make quarterly cash distributions to shareholders equal to the higher of the minimum REIT distribution or one times Adjusted EPRA EPS (which is EPRA EPS adjusted to exclude the distorting effect of the smoothing of fixed rental uplifts over the entire term of the relevant leases, and excluding material non-recurring items). Consistent with this policy, following completion of the Transaction, the Board expects to increase distributions by 13% from an annualised 11.75 pence per share to 13.3 pence per share, with the record date for the first increased dividend expected to be in the first quarter of 2017. This equates to a dividend yield of 4.5% on the Placing Price. On the basis of the Assumptions the illustrative six year compounded dividend growth rate is expected to be 6.5%.

The expected rate of growth in the Company's dividend can be sensitised across a range of RPI scenarios. On the basis of the Assumptions, the Company would deliver a minimum compound annual dividend growth rate of 4.3% if there is zero or negative RPI throughout the period, and this would increase to 7.0% if the RPI outcome is 100 basis points higher than suggested by the base case RPI swap curve.

New secured credit facility

The Company has credit approved terms from M&G, a lender that is new to the Group, and is in advanced stages of documentation of a new GBP60 million secured fixed rate seven year non-recourse credit facility. Following completion of the Transaction, the Group's overall net debt position would be as follows on a pro forma basis:

 
                                 Unaudited 30   Travelodge facility   Pro forma 
                                    June 2016 
-----------------------------  --------------  --------------------  ---------- 
 Net Debt                          GBP819.7m*              GBP60.0m   GBP879.7m 
-----------------------------  --------------  --------------------  ---------- 
 Net LTV (LTC for Travelodge 
  facility)                             59.5%                 30.5%       56.0% 
-----------------------------  --------------  --------------------  ---------- 
 Weighted average term              8.0 years             7.0 years   7.7 years 
  to maturity from 30 
  June 
-----------------------------  --------------  --------------------  ---------- 
 Weighted average fixed 
  interest rate                          5.2%              2.75** %        5.1% 
-----------------------------  --------------  --------------------  ---------- 
 

Notes:

* Net Debt includes Euro denominated debt of GBP59.4m translated at EUR1:GBP0.8278;

** Travelodge debt at a fixed rate assumed to be 2.75% per annum. The interest rate will be fixed at drawdown just prior to completion of the Acquisition. The assumed fixed rate is based on an estimate of the relevant seven year swap rate of 0.75%.

Each of the Group's three existing debt facilities is within a separate ring fenced structure with no cross collateralisation and no recourse to the Company itself. The new facility will be structured in the same way. There will be no financial covenant default tests on 61% of the total debt, including the new facility, until September 2019 and no financial covenant default tests on 39% of the SIR group's debt through to October 2022.

The agreed terms of the new facility include financial covenant headroom consistent with the existing facilities. The valuation of the Travelodge Portfolio would have to fall relative to the contract price by:

   --      22% to trigger retention of 50% of cash surpluses within the secured structure 
   --      31% to trigger retention of 100% of cash surpluses within the secured structure 
   --      38% to trigger a default on the loan to value covenant 

Terms agreed include an unlimited right to cure a potential loan to value default by way of a cash cure. The agreed interest cover covenants also have significant headroom, with a fall in rental income of over 50% being able to be tolerated before triggering a covenant default.

Immediate reduction in group net LTV

The Transaction, once completed, would have the effect of creating an immediate reduction in the Group's net LTV from 59.5% to 56.0%. Furthermore, based on the Assumptions, the Transaction would have the effect of accelerating the reduction in net LTV to c. 50% by approximately two years with net LTV reducing to below 50% in less than four years.

Pro forma financial profile

Assuming completion of the Transaction and on the basis of the Assumptions, the Group's pro forma EPRA NAV would be as follows:

 
                    GBPm   30 June     Equity   Debt Financing   Portfolio   Pro Forma 
                              2016    Placing                     Purchase 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 Investment property*      1,378.5          -                -       192.6     1,571.1 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 Travelodge transaction 
  costs****                  (1.4)          -                -         1.4           - 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 Gross debt**              (909.3)          -           (60.0)           -     (969.3) 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 Prepaid finance 
  fees                        13.2          -              1.3           -        14.5 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 Cash                         89.6      137.5             58.7     (196.2)        89.6 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 Rent deposits                   -          -                -         1.7         1.7 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 Other                      (29.1)          -                -           -      (29.1) 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 EPRA NAV                    541.5      137.5                -       (0.5)       678.5 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 EPRA NAV per Share 
  (pence)***               300.2 p                                             298.6 p 
------------------------  --------  ---------  ---------------  ----------  ---------- 
 

Notes:

*External valuation of existing portfolio at GBP1,378.5m at 30 June 2016 (GBP/EUR exchange rate of EUR1:GBP0.8278 on GBP85.6m of German investment property) plus GBP192.6m Travelodge acquisition at cost excluding purchase costs;

**Includes Euro denominated debt of GBP59.4m translated at EUR1:GBP0.8278;

***Based on 180,344,240 shares currently in issue and 227,229,706 shares in issue following the Placing;

**** GBP1.4 million of costs relating to the Acquisition, principally legal due diligence and documentation costs, had been incurred by 30 June 2016 and have been charged to the income statement in that period. Should the transaction not proceed, GBP3.0 million of payments will be due to the vendors and further due diligence and documentation costs of approximately a further GBP1.0 million would be payable.

Appendix II

Further information

SIR is the only UK REIT which specialises in investing in long term, secure income derived from real estate investments and offering inflation protection without the restriction of a specific sector specialisation. The Board believes that the Company's investment strategy, which is designed to satisfy investors' growing demand for high quality, safe, inflation protected income returns, combined with the Company's tax efficient REIT status and carefully managed capital structure, will allow it to produce attractive, growing and sustainable total returns to shareholders.

The Existing Portfolio

The Existing Portfolio is a freehold investment portfolio of 26 key operating assets including Alton Towers and Thorpe Park, which are two of the three most visited theme parks in the UK, 19 private hospitals in England and central London's only private psychiatric hospital.

The external valuation of the Existing Portfolio was GBP1.38 billion as at 30 June 2016, reflecting a blended net initial valuation yield of 5.3%. The annual passing rental income on the Existing Portfolio was GBP78.5 million as at 30 June 2016 and has since increased to GBP78.7 million following completion of the 2016 rent review cycle. The weighted average unexpired lease term of the Existing Portfolio as at 30 June 2016 was over 23 years. There are no break options in any lease, the shortest of which has an unexpired term of 21 years.

All properties in the Existing Portfolio are fully let and 100% of the current rental income is guaranteed by substantial international businesses that the Board considers financially strong. The guarantors are:

   --      Ramsay Health Care Limited, guaranteeing 58% of annual passing rent as at 30 June 2016; 
   --      Merlin Entertainments plc, guaranteeing 39% of annual passing rent as at 30 June 2016; and 
   --      Orpea SA, guaranteeing 3% of annual passing rent as at 30 June 2016. 

Prestbury and the Board

The Investment Adviser to the Company is Prestbury Investments LLP. The Prestbury team comprises Nick Leslau, Mike Brown, Sandy Gumm, Ben Walford and Tim Evans, a group of property and finance professionals who between them have extensive experience in the UK real estate market as one of the most successful management teams in the quoted UK real estate sector over the last 30 years.

Prestbury has a close alignment to the interests of all shareholders through its very significant shareholding in the Company and it intends to invest a further GBP5.3 million in the Placing. Its shareholding holding is therefore expected to amount to over GBP104 million at the Placing Price, which is over 15% of the Company's enlarged share capital and maintains its position as one of the largest management shareholdings in the quoted UK real estate sector.

The Company has an experienced non-executive Board chaired by Martin Moore (CEO of M&G Real Estate Limited (previously Prudential Property Investment Managers Limited) from 1996 to 2012 and past President of the British Property Federation), with three further Directors independent of Prestbury (the "Independent Directors") comprising Leslie Ferrar (non-executive Chairman of The Risk Advisory Group; a non-executive member of the HMRC Risk and Audit Committee; and a member of the Audit Committee for the Sovereign Grant), Jonathan Lane (Senior Adviser to Morgan Stanley and Chairman of EMEA Real Estate Investment Banking) and Ian Marcus (Chairman of the Prince's Regeneration Trust and former Managing Director and Chairman of Credit Suisse's European Real Estate Investment Banking division). The Board also includes three Directors from the Prestbury team: Nick Leslau, Mike Brown and Sandy Gumm.

Investment strategy

The Company invests in long term, secure income streams from real estate investments. A long term income stream is considered by the Board to be one with, or a portfolio with, a weighted average term to maturity in excess of 15 years at the time of acquisition. Security of income is assessed with reference to both the extent of rent cover from underlying earnings, the credit strength of tenants and (where relevant) guarantors and the reversionary potential of the assets.

The Existing Portfolio and the Travelodge Portfolio are considered by the Board to offer attractive geared returns from high quality real estate, with financially strong tenants with well established brands in industry sectors with strong defensive characteristics. The Board intends to build on the Group's substantial Existing Portfolio through the Acquisition and through accretive investment opportunities to deliver an attractive proposition for investors, offering:

-- long term income streams secured on high quality real estate, including the Existing Portfolio income which the Directors believe is derived from large, financially secure, international, mature businesses;

   --      gearing appropriate to the underlying assets and the stage of the economic cycle; 
   --      the tax efficiency of a UK REIT; 
   --      a strategy overseen by a strong Board with extensive relevant experience; 

-- exclusive access to all long lease transactions sourced by Prestbury which fit the Group's investment policy; and

-- day to day management undertaken by the Prestbury team, one of the best performing management teams in the quoted UK real estate sector over the last 30 years, subject always to the oversight of the Independent Directors.

Distribution policy

The UK REIT rules require that the Company distributes at least 90% of the Group's qualifying net income from its tax exempt property business within 12 months of each financial year end, or otherwise suffer a tax penalty. The Company's dividend policy is to make quarterly cash distributions to shareholders equal to the higher of the minimum REIT distribution or one times Adjusted EPRA EPS cover. The Board expects the upwards only rental uplifts on the Enlarged Portfolio, in combination with predictable administrative expenses and a fixed cost of debt, will enable the Company to increase its distributions annually in line with geared net earnings.

Appendix III

The Travelodge Portfolio

The Travelodge Portfolio comprises 55 hotels. 26% of the portfolio value is in three properties: Oxford Peartree, Edinburgh Central and Manchester Central.

A further 25% is in the next eight largest properties:

   --      Glasgow Central 
   --      Exeter M5 
   --      Milton Keynes Central 
   --      Southampton 
   --      Northampton Upton Way 
   --      Nottingham Riverside 
   --      Ely 
   --      Bristol 

49% of value is in the remaining 44 properties in smaller lot sizes which tend to be attractive to the private investor market.

Tenure by value:

 
 Freehold                        60% 
------------------------------  ---- 
 999 years (virtual freehold)     9% 
------------------------------  ---- 
 100 - 165 years                  7% 
------------------------------  ---- 
 80 - 95 years                   17% 
------------------------------  ---- 
 40 - 80 years                    7% 
------------------------------  ---- 
 

Lot size by value:

 
                             No of properties 
--------------------  ----  ----------------- 
 GBP14 - 20 million    26%                  3 
--------------------  ----  ----------------- 
 GBP5 - 8 million      25%                  8 
--------------------  ----  ----------------- 
 GBP3 - 5 million      27%                 14 
--------------------  ----  ----------------- 
 Up to 3 million       22%                 30 
--------------------  ----  ----------------- 
 

Location by value:

 
 South East       35% 
---------------  ---- 
 South West       16% 
---------------  ---- 
 North West       15% 
---------------  ---- 
 Scotland         16% 
---------------  ---- 
 North             5% 
---------------  ---- 
 East Midlands     9% 
---------------  ---- 
 West Midlands     4% 
---------------  ---- 
 

Property type by value:

 
 City Centre      30% 
---------------  ---- 
 Edge of Town     18% 
---------------  ---- 
 City Roadside    24% 
---------------  ---- 
 Roadside         28% 
---------------  ---- 
 

Recent comparable transactions

 
                                            Sale Type          Rooms      Reported   Yield 
                                                                        sale price     (%) 
                                                                            (GBPm) 
--------  -------------------------------  -----------------  ------  ------------  ------ 
           Travelodge London Liverpool 
 Jul-16     Street                          Investment           142          42.3     4.6 
--------  -------------------------------  -----------------  ------  ------------  ------ 
           Travelodge Royal Scot 
 Jun-16     - Kings Cross                   Investment           408          70.0     4.2 
--------  -------------------------------  -----------------  ------  ------------  ------ 
           Travelodge Sites Portfolio 
            (Weston-super-Mare, Andover, 
 Apr-16     Stirling, Kings Lynn)           Forward Funding      302          19.8     6.0 
--------  -------------------------------  -----------------  ------  ------------  ------ 
 Mar-16    Travelodge Hackney Site          Investment            80          13.5     5.9 
--------  -------------------------------  -----------------  ------  ------------  ------ 
 Jan-16    Travelodge Crawley               Investment           110          42.5     5.8 
--------  -------------------------------  -----------------  ------  ------------  ------ 
           Travelodge Sunbury M3 
 Dec-15     Hotel                           Investment           131          13.0     4.7 
--------  -------------------------------  -----------------  ------  ------------  ------ 
 Dec-15    Travelodge Teddington            Investment           113          13.7     4.6 
--------  -------------------------------  -----------------  ------  ------------  ------ 
 Proposed Acquisition                                          3,096         192.6     7.0 
-----------------------------------------  -----------------  ------  ------------  ------ 
 

Notes: The table includes a sample of illustrative Travelodge transactions that the Company is aware of. It does not purport to show all the transactions involving Travelodge properties.

Appendix iV

Illustrative returns of the Travelodge portfolio

The Travelodge Portfolio returns can be illustrated as follows on a range of valuation yields and RPI outcomes. These are net rental returns before the Company's central and administrative costs.

 
              Six year portfolio IRR estimate 
---------------------------------------------------------- 
                         RPI Assumptions 
-----  --------------------------------------------------- 
        RPI Curve   Base Case    RPI Curve   Zero or lower 
           +1%       RPI Curve      -1%           RPI 
-----  ----------  -----------  ----------  -------------- 
 6.0%     16.3%       15.1%        13.9%         11.3% 
-----  ----------  -----------  ----------  -------------- 
 6.5%     14.8%       13.5%        12.3%         9.7% 
-----  ----------  -----------  ----------  -------------- 
 7.0%     13.3%       12.1%        10.8%         8.2% 
-----  ----------  -----------  ----------  -------------- 
 7.5%     12.0%       10.7%        9.5%          6.8% 
-----  ----------  -----------  ----------  -------------- 
 

Note: There is no certainty that these estimated returns will be achieved.

These illustrations assume that:

   1          The Transaction completes on 30 September 2016; 

2 The RPI swap curve as at 30 August 2016 has been employed, showing average increases of 3.1% per annum over the period; and

3 The interest rate on the new debt facility is assumed to be 2.75% per annum. The actual rate will be fixed at drawdown on the basis of the seven year swap rate, assumed for these purposes to be 0.75%.

Appendix V

Assumptions

The illustrative returns in this Announcement are based on the following assumptions:

-- The RPI swap curve at 30 August 2016 has been adopted to estimate future RPI movements with average increases of 3.1% per annum over the period.

-- Constant valuation yield at the 30 June 2016 external valuation for the Existing Portfolio and valuation yield at purchase for the Travelodge Portfolio.

-- Only fixed uplifts on Ramsay leases are included. The potential for open market uplifts has been ignored.

-- Completion of the Acquisition on 30 September 2016 otherwise no purchases or sales of properties and no lease variations.

   --          Constant Euro exchange rate of EUR1:GBP0.8278. 

-- Fixed rate of Acquisition debt assumed at 2.75% per annum. This will be fixed at drawdown on the basis of the 7 year swap rate assumed for these purposes to be 0.75%.

-- Incentive fee arrangements currently in place are not amended at the Independent Directors' 2017 review.

-- The Investment Adviser contract continues on current terms for four months from expiry in June 2022.

-- Earnings cover based on the adjusted earnings per share to exclude increase in rental income from rental smoothing IFRS adjustment.

-- Completion of Placing with gross proceeds of approximately GBP140 million on 30 September 2016 and revaluation of the EPRA NAV on 30 September 2022.

If the gross proceeds of the Placing total less than GBP140 million, but exceed GBP117.1 million then the Company may still consider completing the Transaction using existing cash reserves. In these circumstances the illustrative returns in this Announcement would change. On the basis of a Placing size of 39,216,343 shares and using the existing assumptions in this Appendix V, the illustrative pro forma EPRA NAV on completion of the Transaction would be 298.8 pence per share, the LTV 57.4%, the base case annual Total Shareholder Return over six years would be 11.2% whilst the expected dividend yield on the Placing Price would increase to 4.6% and the dividend would be expected to grow at a compound rate of 6.3% over the six years following completion of the Transaction.

Appendix VI

Terms and conditions of the Placing

THE ANNOUNCEMENT, INCLUDING THESE APPICES (TOGETHER, THE "ANNOUNCEMENT") AND THE INFORMATION CONTAINED HEREIN ARE RESTRICTED AND ARE NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

IMPORTANT INFORMATION ON THE PLACING FOR INVITED PLACEES ONLY

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THE ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT IN THIS APPIX VI ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE (WHICH MEANS DIRECTIVE 2003/71/EC (AND AMMENTS THERETO, INCLUDING DIRECTIVE 2010/73/EU) AND INCLUDES ANY RELEVANT IMPLEMENTING DIRECTIVE MEASURE IN ANY MEMBER STATE) (THE "PROSPECTUS DIRECTIVE") ("QUALIFIED INVESTORS"); AND (B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER"); (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS IN (A) AND (B) TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS APPIX AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THE ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS APPIX AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THE ANNOUNCEMENT DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY.

NEITHER STIFEL NOR THE COMPANY MAKES ANY REPRESENTATION TO ANY PLACEES REGARDING AN INVESTMENT IN THE SECURITIES REFERRED TO IN THE ANNOUNCEMENT.

EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, TAX, FINANCIAL, BUSINESS AND RELATED ASPECTS OF A PURCHASE OF PLACING SHARES.

Persons who are invited to and who choose to participate in the Placing by making an oral or written offer to subscribe for Placing Shares, including any individuals, funds or others on whose behalf a commitment to acquire Placing Shares is given (the "Placees"), will be deemed to have read and understood the Announcement in its entirety and to be making such offer on the terms and conditions, and to be providing the representations, warranties, acknowledgements, undertakings and agreements, contained in this Appendix. In particular, each such Placee represents, warrants and acknowledges to Stifel and the Company that:

1. it is a Relevant Person and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;

2. in the case of a Relevant Person in a relevant member state of the EEA who acquires any Placing Shares pursuant to the Placing:

   (a)        it is a Qualified Investor; and 

(b) if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, any Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of securities to the public other than an offer or resale in a member state of the EEA which has implemented the Prospectus Directive to Qualified Investors, or in circumstances in which the prior consent of Stifel has been given to each such proposed offer or resale;

   3.         it (and any account referred to in paragraph 4 below) is either: 

(a) not a US person within the meaning of Rule 902 of Regulation S ("Regulation S") under the US Securities Act of 1933, as amended (the "Securities Act") and is located outside the United States; or

(b) a "qualified institutional buyer" ("QIB") (within the meaning of Rule 144A ("Rule 144A") under the Securities Act) and, in each case under this sub clause (b), it has duly executed an investor letter in a form provided to it and delivered the same to Stifel or one of its affiliates and to the Company;

4. it is acquiring the Placing Shares for its own account or is acquiring the Placing Shares for an account with respect to which it exercises sole investment discretion and has the authority to make and does make the representations, warranties, indemnities, acknowledgements and agreements contained in the Announcement; and

5. it understands (or, if acting for the account of another person, such person understands) the resale and transfer restrictions set out in this Appendix.

The Announcement does not constitute an offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of any securities or investment advice in any jurisdiction, including, without limitation, the United Kingdom, the United States, Australia, Canada, Japan or South Africa. No public offer of securities of the Company is being made in the United Kingdom, the United States or elsewhere.

In particular, the Placing Shares referred to in the Announcement have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States, and the Company has not been registered as an investment company under the US Investment Company Act of 1940, as amended. None of this Announcement, the Placing Shares, nor any document related to this Announcement or the Placing Shares, have been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of the Announcement. Any representation to the contrary is unlawful. The Placing Shares are being offered and sold (i) outside the United States in accordance with Regulation S and (ii) within the United States only to QIBs pursuant to Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

The relevant clearances have not been, and nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with and/or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and the Placing Shares have not been, nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of Australia, Canada, Japan or South Africa. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered or otherwise transferred, directly or indirectly, in or into the United States, Australia, Canada, Japan, South Africa or any other jurisdiction outside the United Kingdom.

The information set out in the Announcement is not intended, and should not considered, as "advice" as defined in the Financial Advisory and Intermediary Services Act 2002, nor does it purport to describe all of the considerations that may be relevant to a prospective investor.

The Announcement constitutes objective information about the Company and the Placing Shares and nothing contained in it should be construed as constituting any form of investment advice or recommendation, guidance or proposal of a financial nature in respect of any investment issued by the Company or any transaction in relation to the Company or the Placing Shares. Any investor contemplating making an investment in the Placing Shares should determine its own investment objectives and experience, and any other factors which may be relevant to it in connection with such investment, and should consult its professional advisers in this regard.

Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this Appendix or the Announcement of which it forms part should seek appropriate advice before taking any action.

Each Placee, by applying to participate in the Placing, agrees that the content of the Announcement is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Company, the Investment Adviser or Stifel or any other person and neither Stifel, the Company, the Investment Adviser nor any other person will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement that the Placees may have obtained or received. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

These terms and conditions are being provided by Stifel which is acting as agent for and on behalf of its affiliate Stifel Nicolaus & Company, Inc., a U.S. SEC registered broker-dealer pursuant to a Rule 15a-6 intra-group company agreement.

Details of the Placing Agreement and the Placing Shares

Stifel has entered into a placing agreement with the Company and the Investment Adviser under which Stifel, as agent of the Company, on the terms and subject to the conditions set out therein, has agreed to use reasonable endeavours to procure Placees to subscribe for the Placing Shares.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 10 pence each in the capital of the Company including the right to receive all future dividends and distributions declared, made or paid after the date of sale. The Placing Shares are expected to be issued on 6 October 2016. The Placing will be made on a non pre-emptive basis.

Application for listing and admission to trading

Application will be made for the Placing Shares to be admitted to trading on AIM. It is expected that dealings in the Placing Shares will commence no later than 8.00 a.m. on 6 October 2016 (the "Closing Date").

Bookbuild

Stifel will today commence the bookbuilding process in respect of the Placing (the "Bookbuild") to determine demand for participation in the Placing by Placees. This Appendix gives details of the terms and conditions of, and the mechanics of participation in, the Placing. No commissions will be paid to Placees or by Placees in respect of any Placing Shares.

Stifel and the Company shall be entitled to effect the Placing by such alternative method to the Bookbuild as they may, in their sole discretion, determine.

Participation in, and principal terms of, the Placing

1. Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by Stifel. Stifel and its affiliates are entitled to enter bids in the Bookbuild as principal.

   2.         The Placing Price will be 298.6 pence per Placing Share. 

3. The number of Placing Shares to be issued will be agreed between Stifel and the Company, following completion of the Bookbuild. The number of Placing Shares to be issued will be announced through a Regulatory Information Service following the completion of the Bookbuild (the "Placing Results Announcement").

4. To bid in the Bookbuild, prospective Placees should communicate their bid by telephone to their usual sales contact at Stifel. Each bid should state the number of Placing Shares which the prospective Placee wishes to acquire at the Placing Price. Bids may be scaled down by Stifel on the basis referred to in paragraph 7.

5. The Bookbuild is expected to close no later than 1pm (London time) on 3 October 2016 but may be closed earlier or later at the discretion of Stifel and the Company. Stifel may, in agreement with the Company, accept bids that are received after the Bookbuild has closed.

6. Each prospective Placee's allocation will be confirmed to the Placee orally by Stifel following the close of the Placing, and a trade confirmation will be dispatched as soon as possible thereafter. Stifel's oral confirmation to such Placee will constitute an irrevocable legally binding commitment upon such person (who will at that point become a Placee) in favour of Stifel and the Company, under which the Placee agrees to acquire the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Appendix and in accordance with the Company's constitutional documents.

7. Subject to paragraphs 4 and 5, Stifel may choose to accept bids, either in whole or in part, on the basis of allocations determined by the Company at its discretion (in consultation with Stifel) and may scale down any bids for this purpose on such basis as they may determine. The acceptance of bids shall be at Stifel's absolute discretion. Stifel may also, notwithstanding paragraphs 4 and 5, subject to the prior consent of the Company, (i) allocate Placing Shares after the time of any initial allocation to any person submitting a bid after that time and (ii) allocate Placing Shares after the Bookbuild has closed to any person submitting a bid after that time. The Company reserves the right to reduce or seek to increase the amount to be raised pursuant to the Placing.

8. A bid in the Bookbuild will be made on the terms and subject to the conditions in the Announcement and will be legally binding on the Placee on behalf of which it is made and, except with Stifel's consent, will not be capable of variation or revocation after the time at which it is submitted. Each Placee will also have an immediate, separate, irrevocable and binding obligation, owed to Stifel and the Company, to pay to Stifel (or as it may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to acquire. Each Placee's obligations under this paragraph will be owed to the Company and to Stifel.

9. Except as required by law or regulation, no press release or other announcement will be made by Stifel or the Company using the name of any Placee (or its agent) in its capacity as Placee (or agent), other than with such Placee's prior written consent.

10. Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

11. All obligations under the Bookbuild and Placing will be subject to fulfilment or (where applicable) waiver of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Right to terminate under the Placing Agreement".

12. By participating in the Bookbuild, each Placee agrees that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

13. To the fullest extent permissible by law, neither Stifel nor any of its affiliates shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, neither Stifel nor any of its affiliates nor the Company shall have any liability (including, to the extent permissible by law, any fiduciary duties) in respect of Stifel's conduct of the Bookbuild or of such alternative method of effecting the Placing as Stifel, its affiliates and the Company may agree.

Conditions of the Placing

Stifel's obligations under the Placing Agreement are conditional on, inter alia:

1. Admission of the Placing Shares occurring not later than 8.00 a.m. (London time) on 6 October 2016 or such other date as may be agreed between the Company and Stifel, not being later than 31 October 2016;

2. the publication by the Company of the Placing Results Announcement through a Regulatory Information Service as soon as reasonably practicable following execution of a terms of sale between the Company, the Investment Adviser and Stifel;

3. the Company allotting and issuing, subject only to Admission, the Placing Shares to the Placees procured by Stifel;

4. the Company and the Investment Adviser having complied with all their respective obligations and undertakings and having satisfied all conditions to be satisfied by any of them under the Placing Agreement on or prior to Admission;

5. the representations, warranties and undertakings on the part of the Company and the Investment Adviser contained or referred to in the Placing Agreement being true, accurate and not misleading on and as of the date hereof, the allocation date and Admission, as though they had been given and made on the relevant date by reference to the facts and circumstances then subsisting, and no matter having arisen prior to the Closing Date which might reasonably be expected to give rise to a claim under the indemnity set out in the Placing Agreement;

6. the Unit Purchase Agreement (being the unit purchase sale agreement between the Company and the current owners of the Travelodge Portfolio in relation to the acquisition) remaining in full force and effect and not having lapsed or been terminated prior to Admission, none of the representations, warranties and agreements of the parties thereto ceasing to be true, accurate and not misleading on and as of the date hereof, the allocation date and Admission, each of the parties having complied with all their respective obligations and undertakings thereunder and all conditions to be satisfied by any of them (other than Admission) thereunder having been satisfied or waived and (subject to certain limited exceptions) no event having arisen at any time prior to Admission which gives any party to the Unit Purchase Agreement a right to terminate it;

7. in the opinion of Stifel there being or there having been no material adverse change in, or any development involving a prospective material adverse change in or affecting, the condition (financial, operational, legal or otherwise), earnings, management, business affairs or prospects of the Company or the Group taken as a whole, whether or not arising in the ordinary course of business since the execution of the Placing Agreement; and

8. valid applications being received under the Placing in respect of at least 39,216,343 shares.

If: (i) any of the conditions contained in the Placing Agreement in relation to the Placing Shares, including those described above, are not fulfilled or (where applicable) waived by Stifel by the respective time or date where specified (or such later time or date as the Company and Stifel may agree); or (ii) the Placing Agreement is terminated in the circumstances specified below, the Placing will lapse and the Placee's rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee against either the Company or Stifel in respect thereof.

The Placing is not conditional upon completion of the Acquisition. Therefore, subject to the conditions of the Placing being satisfied or, where applicable, waived and the Placing Agreement not being terminated, Admission will become effective and the net proceeds of the Placing will be received by the Company before completion of the Acquisition.

Stifel may, at its discretion and upon such terms as it thinks fit, waive compliance with the whole or any part of any of the obligations in relation to the conditions in the Placing Agreement, save that the above conditions relating to Admission of the Placing Shares taking place, the publication of the Placing Results Announcement and the Company's allotment and issue of the Placing Shares may not be waived. Any such extension or waiver will not affect Placees' commitments as set out in the Announcement.

Neither Stifel nor the Company shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision it may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of Stifel and the Company.

Right to terminate under the Placing Agreement

Stifel may, at any time on or before the Closing Date, terminate the Placing Agreement by giving notice to the Company in certain circumstances, including, inter alia:

1. any matter or circumstance arises as a result of which it is reasonable to expect that any of the conditions will not be satisfied or (to the extent capable of being waived) waived by Stifel by the required time(s) (if any) and continue to be satisfied at the Closing Date or have become incapable of satisfaction; or

2. there has been a breach by the Company or the Investment Adviser of any of the representations, warranties, undertakings or covenants respectively contained in or given pursuant the Placing Agreement or any of the representations, warranties or undertakings is not or has ceased to be, true, accurate and not misleading; or

3. the Company or the Investment Adviser has not complied with all its obligations and undertakings under the Placing Agreement which fall to be performed or satisfied on or prior to the Closing Date; or

4. it shall come to the notice of Stifel that any statement contained in any of the placing documents (or any amendment or supplement thereto) is or has become untrue or inaccurate in any material respects or incomplete or misleading or any matter has arisen, which would, if the Placing were made at that time, constitute, in the opinion of Stifel, a material omission from the placing documents, or any of them (or any amendment or supplement to any of them) or there is, in the opinion of Stifel, a material omission from any of the placing documents or a material omission from or misleading inaccuracy in the Company's publicly available information; or

5. in the opinion of Stifel there shall have been a material adverse change in, or any development involving a prospective material adverse change in or affecting, the condition (financial, operational, legal or otherwise), earnings, management, business affairs or prospects of the Company or the Group taken as a whole, whether or not arising in the ordinary course of business since the execution of the Placing Agreement; or

6. there has occurred any material adverse change in the financial markets in the United States, the United Kingdom, any other member state of the EEA or the international financial markets, any outbreak of hostilities or escalation thereof, any act of terrorism or war or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, exchange rates or exchange controls, in each case the effect of which is such as to make it, in the judgement of Stifel, impracticable or inadvisable to market the Placing Shares or to enforce contracts for the subscription of the Placing Shares; or

7. trading in any securities of the Company has been suspended or limited by the London Stock Exchange on any exchange or over-the-counter market, or if trading generally on the NYSE Amex Equities, the New York Stock Exchange, the NASDAQ System or the London Stock Exchange has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of such exchanges or by such system or by order of the SEC, the Financial Industry Regulatory Authority, the FCA or any governmental or self-regulatory authority, or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, the United Kingdom or any other member state of the EEA; or

8. a banking moratorium has been declared by the authorities of any of the United States, the United Kingdom, any other member state of the EEA or the State of New York; or

9. there has occurred an adverse change or a prospective adverse change since the date the Placing Agreement in the United States or United Kingdom taxation affecting the Placing Shares or the issue thereof or exchange controls have been imposed by the United States, the United Kingdom or any other member state of the EEA.

Following Admission of the Placing Shares, the Placing Agreement shall not be capable of rescission or termination to the extent that it relates to the Placing or the issue of the Placing Shares.

If any of the obligations of Stifel with respect to the Placing are terminated in the manner contemplated above, the rights and obligations of each Placee shall cease and terminate at such time and no claim can be made by any Placee in respect thereof. The rights and obligations of the Placees shall terminate only in the circumstances described in these terms and conditions and will not be subject to termination by the Placee or any prospective Placee at any time or in any circumstances.

By participating in the Placing, Placees agree that the exercise by Stifel of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of Stifel and that they need not make any reference to Placees and that they shall have no liability to Placees whatsoever in connection with any such exercise.

Lock-up

The Company has undertaken to Stifel that from the date of the Placing Agreement until the date falling 90 days after Admission, it will not, without the prior written consent of Stifel, directly or indirectly, offer, issue, allot, lend, mortgage, assign, charge, pledge, sell or contract to sell or issue, issue options in respect of, or otherwise dispose of, directly or indirectly, or announce an offering or issue of, any Shares (or any interest therein or in respect thereof) or any other securities exchangeable for or convertible into, or substantially similar to, Shares or enter into any transaction with the same economic effect as, or agree to do, any of the foregoing provided that the Company may issue Shares pursuant to the terms of the Investment Advisory Agreement without the prior written consent of Stifel.

No Prospectus

No offering document or prospectus has been or will be published or submitted to be approved by the FCA or submitted to the London Stock Exchange in relation to the Placing and no such prospectus is required (in accordance with the Prospectus Directive) to be published.

Placees' commitments will be made solely on the basis of the information contained in the Announcement. Each Placee, by accepting a participation in the Placing, agrees that the content of the Announcement is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Company, the Investment Adviser or Stifel or any other person and none of Stifel, the Company nor the Investment Adviser nor any other person will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. The Company is not making any undertaking or warranty to any Placee regarding the legality of an investment in the Placing Shares by such Placee under any legal, investment or similar laws or regulations. Each Placee should not consider any information in the Announcement to be legal, tax, financial or business advice. Each Placee should consult its own lawyer, tax adviser, financial adviser and business adviser for legal, tax, financial and business advice regarding an investment in the Placing Shares. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Registration and Settlement

Settlement of transactions in the Placing Shares (ISIN: GB00BLMQ9L68) following Admission will take place on a delivery versus payment basis within the system administered by Euroclear UK & Ireland Limited ("CREST").

Stifel and the Company reserve the right to require settlement for and delivery of the Placing Shares to Placees by such other means that they deem necessary if delivery or settlement is not possible or practicable (including within the CREST system) or would not be consistent with the regulatory requirements in the Placee's jurisdiction.

Each Placee allocated Placing Shares in the Placing will be sent a trade confirmation in accordance with the standing arrangements in place with Stifel stating the number of Placing Shares allocated to it at the Placing Price, the aggregate amount owed by such Placee to Stifel and settlement instructions. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with either the standing CREST or certificated settlement instructions that it has in place with Stifel.

It is expected that settlement of Placing Shares will be on 6 October 2016 on a T+2 basis with the trade date being 4 October 2016 in accordance with the instructions set out in the trade confirmation.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above LIBOR as determined by Stifel and the Company.

Each Placee is deemed to agree that, if it does not comply with these obligations, the Stifel may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for the Company's account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee's behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation.

Representations, Warranties and Further Terms

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) for the benefit of the Company and Stifel:

1. represents and warrants that it has read and understood the Announcement, including this Appendix, in its entirety and that its subscription of the Placing Shares is subject to and based upon only the terms, conditions, representations, warranties, acknowledgments, agreements and undertakings and other information contained herein;

2. acknowledges that no offering or admission document or prospectus has been prepared or published in connection with the placing of the Placing Shares and represents and warrants that it has not received a prospectus or other offering or admission document in connection therewith;

3. acknowledges that the content of the Announcement is exclusively the responsibility of the Company and that none of Stifel, its affiliates or any person acting on behalf of them has or shall have any liability for any information, representation or statement contained in the Announcement or any information previously published by or on behalf of the Company and will not be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in the Announcement or otherwise;

4. acknowledges that the ordinary shares in the capital of the Company are admitted to trading on AIM and that the Company is therefore required to publish certain business and financial information in accordance with law and that it is able to obtain or access such information, or comparable information concerning any other publicly traded company, in each case without undue difficulty;

5. acknowledges that none of Stifel, its affiliates nor any person acting on behalf of any of them has or shall have any liability for any publicly available or filed information or any information, representation, warranty or statement relating to the Company or its business contained therein or otherwise, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;

6. represents and warrants that it is not, and at the time the Placing Shares are acquired will not be, a resident of Australia, Canada, Japan or South Africa;

7. acknowledges that the Placing Shares have not been and will not be registered or qualified for offer and sale and, subject to certain exceptions, may not be offered, sold, or delivered or transferred, directly or indirectly, within United States, Australia, Canada, Japan or South Africa and agrees not to reoffer, resell, pledge or otherwise transfer the Placing Shares except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act;

8. represents and warrants that the issue to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services) and that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to transfer Placing Shares into a clearance system;

9. represents and warrants that it has complied with its obligations under the Criminal Justice Act 1993, the Market Abuse Regulation and in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000, the Terrorism Act 2006, the Money Laundering Regulations 2007 (the "Regulations") and the Money Laundering Sourcebook of the FCA and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;

10. if a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, represents and warrants that the Placing Shares purchased by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the EEA which has implemented the Prospectus Directive other than Qualified Investors, or in circumstances in which the prior consent of Stifel has been given to the offer or resale;

11. represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to persons in the United Kingdom, except to Qualified Investors or otherwise in circumstances which have not resulted and which will not result in contravention of section 85(1) of the FSMA;

12. represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to persons in the EEA prior to Admission except to Qualified Investors or otherwise in circumstances which have not resulted in and which will not result in the requirement to publish a prospectus in any member state of the EEA within the meaning of the Prospectus Directive;

13. represents and warrants that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) relating to the Placing Shares in circumstances in which section 21(1) of the FSMA does not require approval of the communication by an authorised person;

14. represents and warrants that it has complied and will comply with all applicable provisions of the FSMA and the Market Abuse Regulation with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving, the United Kingdom;

15. represents and warrants that if it resides in a member state of the EEA it is a Qualified Investor within the meaning of the Prospectus Directive;

16. represents and warrants that if it resides in the United Kingdom it is a Qualified Investor within the meaning of the Prospectus Directive and a person (a) who has professional experience in matters relating to investments and is an "Investment Professional" falling within article 19(5) (investment professionals) of the Order, or (b) who falls within article 49(2)(a) to (d) (high net worth companies, unincorporated associations etc.) of the Order;

17. represents and warrants that it and any person acting on its behalf is entitled to acquire the Placing Shares under the laws of all relevant jurisdictions and that it has all necessary capacity and has obtained all necessary consents and authorities to enable it to commit to this participation in the Placing and to perform its obligations in relation thereto (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms and conditions set out or referred to in the Announcement) and will honour such obligations;

18. undertakes that it (and any person acting on its behalf) will make payment for the Placing Shares allocated to it in accordance with this Appendix on the due time and date set out herein and it has obtained all necessary consents and authorities to enable it to give its commitment so to subscribe, failing which the relevant Placing Shares may be placed with other Placees or sold as Stifel may in its sole discretion determine and without liability to such Placee, who will remain liable for any amount by which the net proceeds of such sale falls short of the product of the Placing Price and the number of Placing Shares allocated to it and may be required to bear any stamp duty, stamp duty reserve tax or other similar taxes (together with any interest or penalties due pursuant to the terms and conditions set out or referred to in the Announcement) which may arise upon the placing or sale of such Placee's Placing Shares on its behalf;

19. acknowledges that none of Stifel, nor any of its affiliates, nor any person acting on behalf of any of them, is making any recommendations to it, nor advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of Stifel and that Stifel does not have any duty or responsibility to it for providing the protections afforded to its clients or customers or for providing advice in relation to the Placing nor in respect of any representations, warranties, acknowledgements, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

20. undertakes that the person whom it specifies for registration as holder of the Placing Shares will be (i) itself or (ii) its nominee, as the case may be. Neither Stifel nor the Company will be responsible for any liability to stamp duty, stamp duty reserve tax or any similar tax resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to participate in the Placing and it agrees to indemnify the Company and Stifel on an after tax basis in respect of the same on the basis that the Placing Shares will be allotted to the CREST account of Stifel or its affiliate or agent who will hold them as nominee on behalf of such Placee until settlement in accordance with its standing settlement instructions;

21. acknowledges that any agreements entered into by it pursuant to these terms and conditions, and all non-contractual or other obligations arising out of or in connection with them, shall be governed by and interpreted in accordance with English law and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract (including any dispute regarding the existence, validity or termination of such contract or relating to any non contractual or other obligation arising out of or in connection with such contract), except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by either the Company or Stifel in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange;

22. agrees to indemnify on an after tax basis and hold the Company, Stifel and its affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this Appendix and further agrees that the provisions of this Appendix shall survive after completion of the Placing;

   23.        it is either: 

(a) not a US person within the meaning of Rule 902 of Regulation S (a "US Person") and is located outside the United States; or

(b) a QIB and, in each case under this sub clause (b), it has duly executed an investor letter in a form provided to it and delivered the same to Stifel or one of its affiliates and to the Company;

24. understands and acknowledges (and each account for which it is acting has been advised and understands and acknowledges) that the Placing Shares have not been and will not be registered under the Securities Act or the securities laws of any state of the United States, and that they may not be offered, sold, resold, transferred or delivered to, directly or indirectly, in the United States or to any US Person, other than in limited circumstances;

25. understands and agrees that the Placing Shares are being offered in a transaction not involving any public offering within the meaning of Section 4(a)(2) of the Securities Act, and that it is not purchasing the Placing Shares as a result of any general solicitation or general advertising within the meaning of Rule 502 under the Securities Act or as a result of any directed selling efforts (as defined in Rule 902 of Regulation S);

26. is acquiring the Placing Shares for its own account, or, for the account of one or more other persons (which, in the case of US Persons or persons located in the United States, are QIBs) for which it is acting as duly authorized fiduciary or agent with sole investment discretion with respect to each such account, and in each case with full authority to make the acknowledgments, representations and agreements herein with respect to each such account (including delivery of a duly executed investor letter as contemplated by paragraph 23(b) above), in each case for investment and not with a view to any resale or distribution;

27. unless it has received the written consent of the Company, it is not and will not be, acquiring the Placing Shares with the assets of or on behalf of, (i) an "employee benefit plan" as described in section 3(3) of the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA") that is subject to the provisions of title I of ERISA, (ii) a "plan" to which section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the "Code") applies or (iii) an entity whose underlying assets are deemed to include the assets of an employee benefit plan or plan described in (i) or (ii) above, (b) if it is a non-U.S. plan, "governmental plan" or "church plan", the purchase and holding of the Placing Shares or any interest therein does not violate any law or regulation that is substantially similar to ERISA or Section 4975 of the Code or any statute, regulation, administrative decision, policy or other legal authority applicable to such non-U.S. plan, governmental plan or church plan and the purchase and holding of the Placing Shares or any interest therein will not result in the assets of the Company being deemed to include the assets of such non-U.S. plan, governmental plan or church plan and (c) it will not sell or otherwise transfer any such securities or interest to any person without first obtaining the same foregoing representations, warranties and covenants from that person.

28. in the case of any Placee located in the United States or which is a US Person, acknowledges and agrees that there may be certain consequences under United States and other tax laws resulting from an investment in the Placing Shares, and it has made such investigation and has consulted its own independent advisers or otherwise has satisfied itself concerning, without limitation, the effects of United States federal, state and local income tax laws and foreign tax laws generally and the US Employee Retirement Income Security Act of 1974, the US Investment Company Act of 1940 and the Securities Act;

29. acknowledges and agrees that it has had access to such financial and other information, if any, regarding the Company and the Placing Shares as it has requested in connection with its investment decision to purchase Placing Shares. It acknowledges that neither the Company, the Investment Adviser nor Stifel, nor any person representing or otherwise acting on behalf of the Company, the Investment Adviser or Stifel has made any representation, express or implied, to it with respect to the Company or the Placing other than (in the case of the Company and its affiliates only) the information (i) contained in this Announcement, (ii) published by the Company by notification through a Regulatory Information Service on or prior to the date of this Announcement, or (iii) contained in annual audited accounts or interim financials published by the Company (including for the year ended 31 December 2015 and six months ended 30 June 2016), and upon which it is relying solely in making its investment decision with respect to the Placing Shares. It acknowledges that it has not relied on any information contained in any research reports prepared by Stifel or any of its affiliates;

30. represents and warrants that it is a corporation, partnership or other entity having such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment decision to receive or purchase the Placing Shares, and it and each of the discretionary accounts for which it is receiving or purchasing Placing Shares (i) in the normal course of business, invest in or purchase securities similar to the Placing Shares, (ii) is a highly sophisticated investor that has such knowledge and experience in financial and business matters as to be capable of evaluating such securities, (iii) has made its own independent investigation and appraisal of the business results, financial condition, prospects, creditworthiness, status and affairs of the Company, and is not entitled to rely on any investigation that any other person may have conducted with respect to the Placing Shares or the Company, (iv) has evaluated the merits and risks of its investment in the Placing Shares, (v) has satisfied itself concerning legal, regulatory, tax, business and financial considerations in connection herewith to the extent it deems necessary and it and any accounts for which it is acting are each able to bear the economic risk of it or their investment in the Placing Shares, (vi) will not look to the Company, its directors, officers or affiliates or to Stifel for all or part of any such loss or losses it or they may suffer, (vii) is able to sustain a complete loss on its or their investment in the Placing Shares, (viii) has no need for liquidity with respect to its or their investment in the Placing Shares and (ix) has no reason to anticipate any change in its or their circumstances, financial or otherwise, which may cause or require any sale or distribution by it of all or any part of the Placing Shares;

31. agrees not to deposit any of the Placing Shares it may acquire into any unrestricted depositary receipt facility established or maintained by a depositary bank, unless, subject to the terms of any applicable deposit agreement, at the time of deposit such Placing Shares are no longer "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act;

32. understands and acknowledges that an investment in the Placing Shares involves a considerable degree of risk and no US federal or state or non-US agency has made any finding or determination as to the fairness for investment or any recommendation or endorsement of any such investment;

33. acknowledges that the Company, Stifel, their respective affiliates and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations, warranties and agreements and agrees that if it is purchasing Placing Shares as a fiduciary or agent for one or more investor accounts, it represents and warrants that it has sole investment discretion with respect to each such account and that it has full power to, and does, make the acknowledgements, representations, warranties and agreements made herein on behalf of such account;

34. represents and warrants that it has neither received nor relied on any confidential price sensitive information concerning the Company in accepting this invitation to participate in the Placing; and

35. if it is a pension fund or investment company, its purchase of Placing Shares is in full compliance with applicable laws and regulations.

The foregoing representations, warranties, confirmations, acknowledgements and undertakings (as the case may be) are given for the benefit of the Company and Stifel and are irrevocable.

In addition, Placees should note that they will be liable for any stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the subscription by them of any Placing Shares or the agreement by them to subscribe for any Placing Shares.

Each Placee, and any person acting on behalf of the Placee, acknowledges and agrees that Stifel does not owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings or indemnities in the Placing Agreement.

Each Placee and any person acting on behalf of the Placee acknowledges and agrees that Stifel or any of its affiliates may, at its absolute discretion, agree to become a Placee in respect of some or all of the Placing Shares.

When a Placee or person acting on behalf of the Placee is dealing with Stifel, any money held in an account with Stifel on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations of the FCA made under the FSMA. The Placee acknowledges that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated from Stifel' money in accordance with the client money rules and will be used by Stifel in the course of its own business and the Placee will rank only as a general creditor of Stifel.

If the Company or Stifel or their respective affiliates request any information about a Placee's agreement to subscribe for Placing Shares and/or any evidence supporting the representations and warranties given above, such Placee shall (and it undertakes to) promptly disclose such information or evidences (as applicable to them).

All times and dates in the Announcement may be subject to amendment. Stifel shall notify the Placees and any person acting on behalf of the Placees of any changes.

IMPORTANT INFORMATION

The content of this Announcement has been prepared by and is the sole responsibility of the Company.

This Announcement is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The Placing Shares are only available to, and any invitation, offer or agreement to subscribe or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this Announcement or any of its contents.

The information contained in this Announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this Announcement or its accuracy, fairness or completeness.

This Announcement does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or other securities of the Company in any jurisdiction, including the United States, Canada, Japan, South Africa or Australia or in any jurisdiction in which such offer or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. The Placing and the distribution of this Announcement and other information in connection with the Placing in certain jurisdictions may be restricted by law and persons into whose possession this Announcement, any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this Announcement nor any part of it nor the fact of its distribution shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

The Placing timetable may be influenced by a range of circumstances, including market conditions. Acquiring investments to which this Announcement relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such an investment should consult an authorised person specialising in advising on such investments.

This Announcement does not constitute a recommendation concerning the Placing. The value of the Company's shares can decrease as well as increase. Potential investors should consult a professional adviser as to the suitability of the Placing for the person concerned. Past performance cannot be relied upon as a guide to future performance.

This Announcement is not for distribution, directly or indirectly, in whole or in part, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia), Canada, Japan, South Africa or Australia or any other jurisdiction where it is unlawful to distribute this Announcement. In particular, this announcement is not an offer of securities for sale in the United States.

The Placing Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") or under any securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. Any offering of the Placing Shares to be made in the United States will be made only to a limited number of "qualified institutional buyers" as defined in Rule 144A under the Securities Act pursuant to an exemption from the registration requirements of the Securities Act in a transaction not involving any public offering and outside the United States in offshore transactions in accordance with Regulation S under the Securities Act. There will be no public offer of the Placing Shares in any jurisdiction, including in the United States, Canada, Japan, South Africa or Australia.

The Placing Shares have not been registered under the applicable securities laws of Canada, Japan, South Africa or Australia and, subject to certain exceptions, may not be offered or sold within Canada, Japan, South Africa or Australia or to any national, resident or citizen of Canada, Japan, South Africa or Australia.

The Announcement contains forward-looking statements. These statements relate to the future prospects, developments and business strategies of the Company. Forward-looking statements are identified by the use of such terms as "believe", "could", "envisage", "estimate", "potential", "intend", "may", "plan", "will" or variations or similar expressions, or the negative thereof. The forward-looking statements contained in the Announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. If one or more of these risks or uncertainties materialise, or if underlying assumptions prove incorrect, the Company's actual results may vary materially from those expected, estimated or projected. Given these risks and uncertainties, certain of which are beyond the Company's control, potential investors should not place any reliance on forward-looking statements. These forward-looking statements speak only as at the date of the Announcement. Except as required by law, the Company undertakes no obligation to publicly release any update or revisions to the forward-looking statements contained in the Announcement to reflect any change in events, conditions or circumstances on which any such statements are based after the time they are made.

Stifel, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as sole bookrunner and nominated adviser connection with the matters referred to herein, and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the contents of the Announcement or any transaction or arrangement referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on Stifel by the FSMA or the regulatory regime established thereunder, Stifel does not accept any responsibility whatsoever, and makes no representation or warranty, express or implied, in relation to the contents of the Announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on behalf of it, the Company, the Directors, Prestbury or any other person in connection with the Company, the Placing, the shares or the matters referred to herein, and nothing in this Announcement is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Stifel accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of the Announcement or any such statement.

Certain figures contained in this Announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this Announcement may not conform exactly with the total figure given.

Neither the content nor the Company's website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

This information is provided by RNS

The company news service from the London Stock Exchange

END

MSCBIGDCUBGBGLR

(END) Dow Jones Newswires

September 08, 2016 02:01 ET (06:01 GMT)

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