LONDONMETRIC PROPERTY PLC
(“LondonMetric” or “the Company”)
PROPOSED PLACING TO FUND ATTRACTIVE ACQUISITIONS AND DEVELOPMENTS
LondonMetric Property Plc today announces a proposed placing of new Ordinary Shares (the “Placing Shares”) to institutional investors at the Placing Price (the “Placing”). In addition to the Placing, there will be a separate offer made by the Company of new Ordinary Shares via the PrimaryBid platform (the “Retail Offer Shares”) at the Placing Price (the “Retail Offer”), to provide retail investors in the UK only with an opportunity to acquire Retail Offer Shares. A separate announcement will be made shortly regarding the Retail Offer and its terms. The Retail Offer is conditional on the Placing but the Placing is not conditional on the Retail Offer.
It is intended that the Placing and the Retail Offer (together the “Issue”) will raise gross proceeds of approximately £175 million. The total number of Placing Shares and Retail Offer Shares (together, the “New Ordinary Shares”) is expected to represent approximately 7.4 per cent. of the Company's issued share capital.
The Company intends to use the net proceeds of the Issue (the “Net Proceeds”) to fund a programme of acquisitions and developments that are either committed or under offer.
Highlights
- Proposed Placing and Retail Offer to raise approximately £175 million of gross proceeds
- The macro trends remain supportive with structural tailwinds favouring the Company's logistics and grocery-led long income strategies which continue to deliver attractive income-led returns
- The Company has been a significant net acquirer in the financial year to date with its disposal programme now substantially complete and it is committed or under offer on attractive acquisitions and developments
The Issue will enable the Company to:
- invest in specific income-led acquisitions and developments within its structurally supported sectors of logistics and long income
- benefit from greater scale whilst maintaining a strong balance sheet; an
- further improve the quality and granularity of its income as well as further underpin its income growth prospects
The Company intends that the Net Proceeds will be used to fund existing committed and under offer deals which total approximately £282 million (the “Investments”) and which include the following:
- £39 million used to fund a committed and pre-let logistics development asset
- Approximately £122 million used to acquire a South East focused portfolio of 15 assets which is 75 per cent. logistics and 25 per cent. long income
- Approximately £53 million used to forward fund a pre-let logistics development
- Approximately £31 million used to fund urban logistics redevelopment opportunities
- Approximately £22 million used to fund a grocery and logistics sale & leaseback portfolio
- Approximately £15 million used to fund a pre-let grocery development asset
With this strong programme of Investments in place, the Company expects to deploy the Net Proceeds within three months and expects the Investments to be earnings enhancing in the next financial year
The Company's progressive dividend policy remains unchanged and the New Ordinary Shares will be eligible for all future dividends and distributions declared, made or paid, including the second quarterly interim dividend of 2.2 pence per share that the Company has today declared, which will be paid on 7 January 2022
Interim results
LondonMetric has today separately announced its half year financial results for the six months ended 30 September 2021:
- Total Property Return of 10.4 per cent., outperforming IPD All Property of 7.6 per cent
- EPRA NTA per share increased by 12.1 per cent. to 213.4p per share (March 2021: 190.3p per share), driven by 22.9p valuation gain
- Total Accounting Return of 14.5 per cent.
- EPRA earnings up 4.5 per cent. to £44.2 million (2020: £42.3 million), +2.5 per cent. on a per share basis
- Dividend progression of 4.8 per cent. to 4.4p per share, 111 per cent. covered, including second quarterly dividend declared today of 2.2p per share
- EPRA cost ratio down 50 bps to 13.2 per cent.
This Announcement should be read in conjunction with the Interim Results.
Andrew Jones, Chief Executive Officer of LondonMetric, commented:
“The performance of our favoured sectors, logistics and grocery-led long income, continue to benefit from structural tailwinds that show no sign of abating. As we look to scale our platform further, we have identified an attractive pipeline of opportunities which are underpinned by the technological and demographic shifts that support our investment strategy.
“We expect to deploy the proceeds of the Placing quickly into specific opportunities which will further enhance our earnings and provide additional underpinning to our covered and progressive dividend.”
Introduction
The Placing is being conducted, subject to the satisfaction of certain conditions, through an accelerated bookbuild (the “Bookbuild”) which will be launched immediately following this placing announcement (the “Announcement”) and will be subject to the terms and conditions set out in the Appendix. Peel Hunt LLP, J.P. Morgan Securities plc (which conducts its investment banking business as J.P. Morgan Cazenove) and Barclays Bank PLC (together, the “Banks”) have been appointed as joint bookrunners in respect of the Placing.
The price per Placing Share at which the Placing Shares are to be placed (the “Placing Price”) and the final number of Placing Shares will be decided at the close of the Bookbuild. The timing of the closing of the book, pricing and allocations are at the discretion of the Company in consultation with the Banks. Details of the Placing Price and the number of New Ordinary Shares will be announced as soon as practicable after the close of the Bookbuild.
The Company is separately carrying out the Retail Offer, which for the avoidance of doubt, is not part of the Placing and is the sole responsibility of the Company. Each of the Banks has no responsibility, obligation, duty or liability whatsoever (whether arising pursuant to contract, law, regulation or tort) in relation to the Retail Offer.
Background to the Issue
Over a number of years, the Company has tactically shifted the portfolio into the logistics and grocery-led long income sectors which it believes are on the right side of structural change and are aligned to technological advancement and changing consumer patterns. In addition, reflecting its belief that real estate strategies focused on income-led total returns will outperform, its activities have centred around further enhancing the portfolio's ability to generate reliable, repetitive and growing income.
As at 30 September 2021 (on an unaudited basis), 74 per cent. of its £3.0 billion portfolio is invested in logistics with a further 23 per cent. in long income. It is 99 per cent. occupied, let on average lease lengths of 11.6 years to a diverse range of occupiers with 60 per cent. of its income subject to contractual rental uplifts and a further 23 per cent. subject to urban logistics open market rent reviews where rental growth is particularly strong.
The highly supportive market dynamics for logistics have continued with the sector continuing to perform very strongly, driven by further yield compression and income growth. Demand for warehouse space has been buoyant with demand from traditional 3PLs and online retailers supplemented by other growing sources of take up, including manufacturing, renewable energy, ultrafast grocery and micro fulfilment. This has driven logistics warehouse availability to all-time lows with an acute shortage apparent around London and the South East as well as the Midlands.
In response to these strong dynamics and a wider search for long income assets let to high quality occupiers on long leases, the Company has been a substantial net acquirer of real estate. Including £136 million of logistics warehousing acquired since 30 September 2021, it has acquired or committed £305 million in the financial year to date. These acquisitions have a WAULT of 18 years and 45 per cent. are located in London and the South East. Disposals over the same period totalled £168 million, transacted with a WAULT of ten years, 99 per cent. of which were located in the Midlands and the North.
The Company believes that the structural tailwinds favouring its sectors continue to provide an attractive investment outlook as well as a strong foundation for the portfolio to deliver future income progression and capital performance
Use of Proceeds
The Company has consistently employed a strict internal competition for capital. It has funded recent investments primarily through ongoing disposals and consequently has only raised equity twice (in 2017 and 2020) since it was formed through the merger in 2013. The Company only looks to raise equity when management identifies what it believes to be compelling acquisition opportunities and it is confident of deploying the proceeds quickly.
The Company has identified a programme of Investments totalling £282 million with £39 million committed and a further £243 million under offer. The income-led Investments have a WAULT of 15 years, are 93 per cent. let or pre-let and expected to produce £13 million of additional rental income per annum with 59 per cent. of the rent subject to contractual uplifts. The Investments are approximately 79 per cent. logistics with approximately 49 per cent. made up of development commitments or fundings. The Investments have a blended yield of 4.3 per cent. and a reversionary yield of 4.9 per cent.
The Company intends that the Net Proceeds will be used to fund the committed and under offer Investments set out below:
- £39 million used to fund a committed logistics development asset in Ipswich which is pre-let to a rapidly expanding e-commerce company on a 20 year lease;
- Approximately £122 million used to acquire a South East focused portfolio of 15 assets totalling 480,000 sq ft which is approximately 75 per cent. logistics and 25 per cent. long income;
- Approximately £53 million used to forward fund a pre-let grocery logistics development;
- Approximately £31 million to fund three urban logistics redevelopment opportunities across 266,000 sq ft;
- Approximately £22 million used to fund a logistics and grocery sale & leaseback portfolio; and
- Approximately £15 million used to fund a pre-let grocery development asset
Financial impact
With this strong programme of Investments in place, the Company expects to deploy the Net Proceeds within three months. These acquisitions will further strengthen the income profile of the Company as well as further underpin its income growth potential. The Investments are expected to be earnings enhancing in the next financial year.
The Company's progressive dividend policy remains unchanged and it has today declared a second quarterly dividend for the current year of 2.2 pence per share which is to be paid on 7 January 2022. The New Ordinary Shares will be eligible for all future dividends and distributions declared, made or paid, including the second quarterly interim dividend of 2.2 pence per share.
LondonMetric continues to employ a rigorous balance sheet discipline and has a LTV of 31.1 per cent. (as at 30 September 2021 on an unaudited basis and taking into account sales that exchange in first half of the year but complete in the second half) and a current pro forma LTV of 35.0 per cent. (adjusted for acquisitions and disposals post period end and other capital commitments).
As previously announced, in the six month period ending 30 September 2021, LondonMetric arranged new debt facilities of £780 million which completed in the period, comprising a £380 million private debt placement and two revolving credit facilities totalling £400 million. These new facilities replaced existing short dated facilities and enabled the Company to increase its debt maturity to 7.2 years and hedging to 70 per cent., whilst maintaining a low average debt cost of just 2.5 per cent.
Details of the Placing
Prior to launch of the Issue, the Company consulted with a significant number of its shareholders to gauge their feedback as to the terms of the Issue. Feedback from this consultation was highly supportive and as a result the Board has chosen to proceed with the Issue. The Board intends to apply the principles of pre-emption when allocating the New Ordinary Shares to those shareholders that participate in the Issue.
The Placing is being structured as a Bookbuild to minimise execution and market risk. Under the terms of the Placing, LondonMetric intends to issue Placing Shares representing approximately 7.4 per cent. of the current issued ordinary share capital of the Company.
The Placing is being conducted, subject to the satisfaction of certain conditions, through an accelerated bookbuild process (the “Bookbuild”) to be carried out by the Banks. The book will open with immediate effect and may close at any time thereafter. The timing of the closing of the book, the Placing Price and the number of Placing Shares will be determined by the Company in consultation with the Banks following completion of the Bookbuild and will then be announced as soon as practicable on a Regulatory Information Service.
A description of certain relevant aspects of the placing agreement between the Company and the Banks (the “Placing Agreement”) can be found in the terms and conditions contained in the Appendix to this Announcement under the heading “Participation in, and principal terms of, the Placing”. The Placing will be made on a non-pre-emptive basis. The Company will rely on the waiver of pre-emption rights authorities given by shareholders of the Company at the Annual General Meeting held on 13 July 2021.
The Placing is conditional upon, inter alia, admission of the Placing Shares to listing on the premium listing segment of the Official List of the FCA and to trading on the main market for listed securities of the London Stock Exchange plc becoming effective not later than 8.00 a.m. (London time) on 22 November 2021 (or such later time and/or date, being not later than 8.00 a.m. (London time) on 30 November 2021, as the Banks may jointly agree with the Company) and the Placing Agreement not being terminated in accordance with its terms before that time.
The above proposed dates may be subject to change at the discretion of the Company and the Banks.
Application will be made for the New Ordinary Shares to be admitted to listing on the premium listing segment of the Official List of the FCA and to be admitted to trading on the main market for listed securities of the London Stock Exchange plc (the “London Stock Exchange”) (together, “ Admission “ ). Subject to Admission becoming effective, it is expected that settlement of subscriptions in respect of the New Ordinary Shares and trading in the New Ordinary Shares will commence at 8.00 a.m. on 22 November 2021.
The New Ordinary Shares will, when issued, be credited as fully paid and rank pari passu with the existing Ordinary Shares in the capital of the Company including the right to receive all future dividends and distributions declared, made or paid, including the second quarterly interim dividend of 2.2 pence per share that the Company has declared with the Company's interim results for the six month period ended 30 September 2021, which will be paid on 7 January 2022. The Company has agreed with the Banks to a 90 day lock-up from Admission, subject to certain exceptions.
The Appendix to this Announcement (which forms part of the Announcement) sets out the terms and conditions of the Placing. By choosing to participate in the Placing and by making an oral or written offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making a legally binding offer on the terms and subject to the terms and conditions in it, and to be providing the representations, warranties and acknowledgements contained in the Appendix.
The Retail Offer will be made on the terms outlined in a separate announcement to be made shortly regarding the Retail Offer and its terms.
Investors should read this Announcement in conjunction with the Company's Interim Results released earlier today.