Group Strategy

The Directors believe that the costs of direct property acquisitions are typically between 5.5 and 6 per cent. of the consideration paid, comprising 4 per cent. SDLT plus legal, agency and other due diligence costs. The costs of acquiring companies are expected to be around 2 to 2.5 per cent. of their enterprise value, comprising 0.5 per cent. stamp duty on the consideration for shares plus legal, agency and other due diligence costs. Together with the HMRC entry charge of 2 per cent. this brings the total costs of corporate acquisitions to approximately 4 to 4.5 per cent. of their enterprise value. However, in view of the potential to extinguish latent tax liabilities, the Directors anticipate that many of these costs of acquiring corporate entities may be able to be covered through a reduction in the price agreed for the shares in the companies.

Whilst the majority of properties acquired through the acquisition of companies (or acquired directly) will be income producing (and, following the Group’s conversion to REIT status, such income will be tax exempt), the creation of value through development or refurbishment will also be actively pursued. It is expected that the majority of development and refurbishment opportunities will arise through the active management and re-evaluation of the properties acquired. There are certain restrictions imposed by the REIT regime on development activities of the Group, with which the Company intends to comply in full.

Following the acquisition of companies (or the direct acquisition of properties), selective disposals of properties may be undertaken in the interests of maintaining a portfolio with good potential for growth in rental income and capital values throughout the UK.

The Group may acquire properties through direct purchase where such purchase will enhance the value of an existing holding or provide a key to a potential redevelopment. However, no tax benefit on acquisition by virtue of the Group’s REIT status (once obtained) will accrue in this circumstance. Subject to obtaining appropriate professional advice, joint ventures may also be entered into in circumstances where the continuing involvement of existing landowners, local authorities or central government agencies is necessary, or for large projects, where a sharing of financial risk is appropriate. Subject to obtaining appropriate professional advice, the Group may also pursue other indirect investments through property investment partnerships or unit trusts or investments in the equities of other property investment or property holding companies.

The Group does not intend to make acquisitions of companies holding property assets with a gross value of less than £5 million, except where they involve the acquisition of smaller or adjacent properties with the intention of bringing them together to create one larger holding. Properties acquired may be multilet, let to a single occupier or vacant, but the majority of the holdings should be income producing. The structure to be used for each acquisition of a company or of a property will be reviewed in the context of each particular acquisition, and the Group will make such acquisitions by means of any structure considered to be appropriate in the circumstances of the proposed acquisition. Accordingly, the Group may, without limit, incorporate subsidiaries or acquire the share capital of companies, units in unit trusts, or partnership interests in partnerships which own one or more properties or property owning companies.