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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Brixton | LSE:BXTN | London | Ordinary Share | GB0001430023 | ORD 25P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 61.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:8876E Brixton PLC 04 November 2004 BRIXTON plc November 4 2004 #600 million acquisition of Industrious by Brixton Introduction Brixton plc ("Brixton") announces that it has exchanged contracts to acquire various entities from subsidiaries of Industrious Holdings (Jersey) Limited, which includes a portfolio of 163 properties worth #675 million, ("Industrious"), (the "Acquisition"). Brixton will also be assuming a debenture which has been marked to market at #60 million together with working capital liabilities of #15 million. The net asset value of Industrious is #250 million, subject to completion date adjustments. In view of its size, the Acquisition is conditional upon shareholder approval. Summary and Highlights * Brixton has established a unique industrial management business model and this is being exported to other more secondary markets, as has already been done with Equiton and also at Trafford Park. * The Acquisition will consolidate Brixton's presence in the Manchester area and establish it in the Birmingham conurbation, with these offices being a springboard for further activity in these locations. * Brixton will become the largest industrial landlord in the UK, potentially raising the investor profile, particularly in Europe and the US. * Industrious includes 163 properties (with 2,262 units) covering 11.6 million square feet of almost entirely industrial stock, all in the UK. * The property portfolio (based on the #675 million figure) shows a net initial yield of 6.9%, an equivalent yield of 7.5% and a reversionary yield of 7.6%. The transaction is expected to be earnings enhancing from completion with potential for cost synergies. * Rationalisation of the structure of the Industrious operation will further improve returns. * The Acquisition will be financed from existing cash resources and through a new facility entered into with HSBC. * Brixton's gearing will rise to 131% as a result of the Acquisition and before any disposals. Tim Wheeler, Brixton's Chief Executive, commented: "This is a major strategic move and gives Brixton a one-off opportunity to acquire a sizeable portfolio extending our sphere of influence and will demonstrate that the B-Serv management skills can drive further rental value growth". Roger Carey, Chairman of Industrious, added: "Our sales process has generated a highly satisfactory outcome for MSREF and management. We are also pleased to conclude a transaction with Brixton as we have such complementary businesses in terms of assets and management initiatives". Enquiries: Tim Wheeler, Chief Executive Brixton 020 7399 4526 Steven Owen, Deputy Chief Executive Brixton 020 7399 4532 Simon Holberton / Rupert Young Brunswick Group 020 7404 5959 Roger Carey, Chairman Industrious 01926 455723 Jonathan Lane, Managing Director Morgan Stanley 020 7425 4611 Information on Industrious Industrious owns and operates predominantly industrial property assets. Industrious is based in Jersey with its UK asset management business carried on from Leamington Spa and 5 other regional offices. The company was previously known as Saville Gordon, and was de-listed in 2002 following its acquisition by Chambercroft Ltd, an acquisition vehicle backed by Morgan Stanley Real Estate Funds ("MSREF") and management. Following a restructuring in 2003 the majority of the properties were transferred into a Jersey-controlled business, Industrious Holdings (Jersey) Limited, managed under contract in the UK by Industrious Asset Management Ltd. Industrious holds 163 multi-tenanted industrial assets with 2,262 units covering approximately 11.6 million square feet. The portfolio is 83% freehold and 17% leasehold, and is generally let to small and medium sized enterprises ("SMEs") for industrial and warehouse uses, typically in small lot sizes. The properties have been valued for Brixton by CBRE and King Sturge and the portfolio has a passing rent roll of approximately #47 million per annum. The current vacancy level is 11% by area. The portfolio, based on the #675 million figure, shows a net initial yield of 6.9%, an equivalent yield of 7.5% and a reversionary yield of 7.6% and compares with Equiton's respective yield profile (based on June 2004 numbers) of 6.3%, 7.1% and 7.2% and the Brixton group's (at June 2004) of 5.9%, 6.8% and 7%. Rental growth of only 1.7% p.a from Industrious over 5 years is needed to achieve an ungeared return to beat Brixton's pre-tax WACC hurdle based on a conservative set of valuation assumptions. The Industrious portfolio is distributed across England and Wales: 45% in the South (including 1% in Wales); 37% in the Midlands; 18% in the North. No single tenant accounts for more than 3% of the passing rental income. The overall weighted average remaining lease length is over 6 years (assuming break options are not exercised) and just under 5 years assuming a worst case scenario that all breaks are exercised. The "Flexilet" leases which account for 8% of the portfolio by area are usually 6 year terms with a 15% rental uplift after 3 years. These typically allow 3 month breaks after the first year and include a payment for repairs, service charge, insurance and dilapidations as well as a premium payment for the flexibility offered. Net borrowings of Industrious principally comprise three facilities: two medium term loans and a debenture. The medium term loans, the outstanding amount of which is #330 million, will be repaid on completion but the debenture (#51.8 million 7.625% 2023) will be assumed by Brixton. As part of acquiring Industrious, the business of the Industrious operating company will be owned by Brixton. Industrious employs just over 80 people. Information on Brixton Brixton and its joint venture partners currently own 76 industrial estates with a combined floor area of approximately 17.6 million square feet. The portfolio is 90% industrial with over 90% of this space being in the South East. The wholly owned industrial estates tend to be large, with average lot sizes in excess of #30 million. Brixton runs and is a 30% owner of the Equiton fund which comprises 42 sub-#20m South East industrial properties totalling 2.9 million sq ft and worth approximately #300 million. The strategy has been to concentrate on areas of strategic strength in the UK where Brixton has identified the potential to develop dominant local positions and to utilise its leading edge management expertise through its B-Serv subsidiary. To date the geographical focus has been on London and the South East, with particular strengths in the Heathrow and Park Royal areas. The acquisition earlier this year of 2.7 million square feet of space at Trafford Park in Manchester added to its holdings in that area and provided strategic expansion and opportunities to enhance value using Brixton's proven skill base. As at 30 June 2004, Brixton's portfolio, as valued by CBRE and King Sturge, was worth #1,723 million compared with #1,558 million at the end of 2003. A chart comparing Brixton and Industrious prior to the Acquisition is shown below: BRIXTON INDUSTRIOUS (as at 30 June 2004) (as at 3 November 2004) Value of portfolio #1,723 million (1) #675 million (2) Size of portfolio (3) 17.6 million sq ft 11.4 million sq ft Number of estates/properties 80 163 Number of units 1,244 2,262 Average passing rent (3) #6.73 per sq ft #4.40 per sq ft (4) Average ERV (3) #7.43 per sq ft #4.50 per sq ft (4) Vacancy (by area) (3) 9.1% 10.4% Number of employees 60 82 Number of operational offices 3 6 (1) Includes #171m offices (2) Includes #13m non industrial and stamp duty benefit (3) Industrial only (4) Excluding Flexilet premium (applies to 8% of portfolio) Reasons for the Acquisition Brixton's portfolio has traditionally had a concentrated geographic focus, which has recently been broadened by the acquisition of Trafford Park. The success of the Company's intensive management approach has encouraged the Company to believe that it can be exported to other areas. The acquisition of Industrious reinforces Brixton's presence in the North and establishes it in the Midlands giving it critical mass in both locations. Both Brixton's B-Serv and Industrious have developed customer orientated approaches to occupancy provision. Brixton believes that this pro-active management approach can be applied to more secondary locations and stock where growth is more likely to be achieved through enhancing the rental income. The enlarged industrial portfolio will total over 29 million square feet, establishing Brixton as the largest industrial landlord in the UK. However, it is intended that approximately 50 properties totalling 4.6 million sq ft of the Industrious portfolio will be disposed of in due course as they have been identified as not fitting into the Company's strategy. The Acquisition provides "currency" (ie stock) for the post-REIT decision environment whether this is to involve institutions in new third party funds or an on-shore tax transparent structure. This expansion will not, however, interfere with or reduce Brixton's desire to continue to be the dominant landlord in Heathrow and West London where it sees growth prospects to be greatest. Indeed the Acquisition includes a further #230 million of South East industrials to be retained. Terms of the Acquisition Brixton has agreed, subject to shareholder approval, to acquire Industrious from subsidiaries of Industrious Holdings (Jersey) Limited which includes properties worth #675 million. The net assets of Industrious at completion will be #250 million, subject to completion date adjustments. The purchase consideration will be satisfied by existing cash resources of Brixton and a new bank facility which has been arranged with HSBC. As a result of the Acquisition, Brixton's gearing will rise from 61% to 131%. It is expected that this level will be reduced in the near term from sales from within Brixton - notably the office portfolio - and from the Industrious portfolio. It is envisaged that gearing will return to a range of 85 - 90% in consequence of this. The Industrious portfolio is to continue to be run through various Jersey property unit trusts and Jersey limited partnerships allowing beneficial tax treatment pending any further post REIT re-structuring. Current Trading and Prospects Since 30 June 2004, Brixton has traded in line with the Board's expectations. The Board continues to view the immediate future of Brixton with confidence. Extraordinary General Meeting An Extraordinary General Meeting ("EGM") will be convened to consider and, if thought fit, approve completion of the Acquisition as soon as practicable. A circular and notice of the EGM, along with proxy forms for voting, will be sent to shareholders in due course. This information is provided by RNS The company news service from the London Stock Exchange END ACQQKQKPABDDPDK
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