15 October 2015
Mill Residential
REIT plc
("MRR", the
"Company" or the "Group")
Proposed
cancellation of admission to trading on AIM and trading update
The Company announces that, following a review by the Directors
of the Company’s continuing strategy and its day to day operation,
further to the Company’s interim results on 25 June 2015 (“Interim Results”), the Directors
have concluded that it is in the overall interests of the Company
and its Shareholders if the admission of the Ordinary Shares to
trading on AIM is cancelled and the Company commences a Members’
Voluntary Liquidation following such cancellation.
Under the AIM Rules, it is a requirement that cancellation of
admission to trading on AIM must be approved by not less than 75
per cent. of shareholders voting in general meeting. Accordingly,
the notice of General Meeting set out in a circular to shareholders
which will be posted today contains a special resolution to approve
the application to the London Stock Exchange for cancellation of
admission of the Company's shares to AIM. If the resolution is
approved, it is expected that trading in the Ordinary Shares on AIM
will cease at the close of business on 16
November 2015, with Cancellation expected to take effect at
7.00 a.m. on 17 November 2015.
Background to and reasons for the
proposed Cancellation
At IPO, the intention of the Company was to grow rapidly from
its small size, grasping the market opportunity of being the first
mainstream UK residential REIT and seeking out further equity
funding to deploy in opportunistic investments. The Company’s
stated strategy of investing in rental properties aimed to provide
the Company with reliable and increasing rental income over time,
together with steady sustained growth in net asset value.
Since the Company's admission to trading on AIM, the asset
management team has identified, evaluated and recommended a number
of acquisition targets which meet the Company's investment
criteria. However, obtaining equity funding for these has not been
achieved and so none have been pursued to a successful conclusion.
The management team engaged in an equity fund-raising supported by
the Company’s brokers. The fund-raising process included a
significant number of third-party institutional investors. While a
number of potential investors made indications of interest, the
Company was unable to attract capital of sufficient scale to grow
the business. Whilst the residential investment sector is
attracting investor interest from major institutions, some
institutions are initiating their own larger competing offers via
unquoted funds or direct investment. In addition, the size of the
Company was seen by some institutions as too small to attract
investment.
Without market support, the Company's strategy to acquire
property portfolios proved challenging as the Company could only
offer relatively illiquid shares and not cash to effect a
transaction. Furthermore, after allowing for liquidity and
contingencies, the cash held in the Company has not been sufficient
to make a sizeable investment. Notwithstanding the renegotiation of
administrative expenses in April
2015, which led to a 27 per cent. reduction in such costs
(referred to in the Interim Results), the current costs of
operation as a listed vehicle exceed income, resulting in the
continuing reduction in the Company’s net asset value.
The Board has considered a number of options such as the Company
continuing as a listed cash shell after the sale of investment
properties and the return of a majority of cash to Shareholders by
way of a dividend. However, the Board would also need to seek new
investment and a new board of directors to implement any revised
investment strategy. The Board considered that the potential for
significant costs, uncertainties and risks associated with this
option outweighed the potential premium that any new investor might
attach to the Company as a cash shell. The Board also
considered other ways of returning surplus capital to Shareholders
but concluded this was too costly and could generate dividends that
would be taxable to Shareholders as opposed to a return of
capital.
The Board has therefore reluctantly decided that it is in the
best interests of Shareholders to effect the Cancellation and will
make arrangements for an orderly sale of assets and return of cash
by way of a Members’ Voluntary Liquidation, which will maximise the
return to Shareholders. It is anticipated that, assuming the
Board’s recommendations receive required shareholder approval, the
Proposed Liquidators would plan to make orderly distributions of
capital to Shareholders on the sale of the seed portfolio on an
incremental basis. Based on the Company’s sale strategy of the seed
portfolio, the Proposed Liquidators anticipate that the final
distribution may take up to 10 months to complete from the date of
this announcement.
Taking into account prevailing market conditions and the
expected costs of both selling the investment properties and
winding up the Company, the Board estimate that, should the Company
take the recommended course of action, the surplus to be
distributed to Shareholders by the Proposed Liquidators may be
between £2.95 and £3.15 million (or between 85 and 90 pence per share). These amounts are
provided for guidance only and are not certain as they are
dependent on factors outside the control of the Board, including
sales proceeds, costs and taxation.
The Company has received irrevocable undertakings from the
Directors and certain Shareholders (whose holdings amount in
aggregate to 53.97 per cent. of the issued share capital of the
Company) that they will vote in favour of the Cancellation and the
Members’ Voluntary Liquidation. Therefore, it is expected that the
Resolutions will be passed at the General Meeting.
Trading update
The Company’s unaudited net assets as at 30 September 2015 were £3,209,000, including cash
of £765,000, resulting in a net asset value per share as at
30 September 2015 of 91.6 pence.
The Company announces that its wholly-owned subsidiary,
Investors in Housing (GP) Limited, has exchanged contracts for the
sale of 160 Walnut Tree Close for a cash consideration of
approximately £405,000, after costs. The contract is conditional on
completion and is expected to complete in the next 10 business
days. The net proceeds of this sale will be retained as cash and
then distributed to Shareholders in accordance with the proposals
included in this announcement regarding the Company’s intention to
dispose of its current portfolio.
This property and one other property in the MRR portfolio
require refurbishment in order for them to be able to be
re-let. The Board has decided that rather than incurring the
refurbishment costs the Company should dispose of these properties.
The other property currently has an accounting value of
£395,000.
At the date of this document, an offer has been accepted on the
other property and exchange of contracts is expected shortly. A
further announcement will be made at that time.
The combined sales price is in excess of the aggregate value of
the two properties as set out in the interim results which were
announced on 25 June 2015.
Cancellation Process
Under the AIM Rules, Cancellation requires the expiration of a
period of not less than 20 clear Business Days from the date on
which notice of the intended Cancellation is given to the London
Stock Exchange. The Company has notified the London Stock Exchange
of the proposed Cancellation. Subject to the passing of Resolution
1 (as set out in the Notice of General Meeting), Cancellation will
occur no earlier than five clear Business Days after the General
Meeting and it is expected that trading in the Ordinary Shares on
AIM will cease at the close of business on 16 November 2015, with Cancellation expected to
take effect at 7.00 a.m. on
17 November 2015.
Shareholders should be aware that if Cancellation is approved by
Shareholders and takes effect, they will as from that time cease to
hold shares in a company whose shares are admitted to trading on
AIM. Following Cancellation, there will be limited opportunities
for Shareholders to realise their investment in the Company other
than pursuant to the proposed Members’ Voluntary Liquidation.
Trading in the Ordinary Shares after
Cancellation
Following Cancellation, the Ordinary Shares will not be traded
on any public market and the CREST facility will be cancelled. The
Ordinary Shares will remain capable of being transferred in paper
form for a limited time until the Members’ Voluntary Liquidation is
completed with the sanction of the Proposed Liquidators. Transfers
of interests in shares in certified form should be sent to the
Company’s registrars, Share Registrars Limited, Suite E, First
Floor, 9 Lion and Lamb Yard, Farnham, Surrey GU9 7LL. Existing share certificates
remain valid until completion of the Members’ Voluntary
Liquidation.
Members’ Voluntary Liquidation
If the Resolutions are approved by Shareholders, the Company
will commence a Members’ Voluntary Liquidation following the
Cancellation and the appointment of a liquidator is accordingly
required. Subject to Resolution 4 being passed, the Proposed
Liquidators will be appointed following the Cancellation and
immediately upon the commencement of the Members’ Voluntary
Liquidation.
In a Members’ Voluntary Liquidation, the powers of the directors
cease (save to the extent that the Company in a general meeting or
the liquidators sanction otherwise) and the liquidators assume
responsibility for the Company’s affairs. The liquidators
deal with the realisation of assets, the agreement and discharge of
liabilities and the distribution of the Company’s surplus funds to
Shareholders as and when funds permit. Prior to distributing
cash to Shareholders, the liquidators must be satisfied that either
all liabilities have been settled or that sufficient cash has been
retained to discharge or provide for all actual and contingent
liabilities. This involves an initial period during which the
liquidators write to all known creditors, actual and contingent,
and advertise for claims against the Company being liquidated,
specifying a deadline of at least 21 days from the date of the
notice by which any claims must be notified to them. Cash can
be released as and when the liquidators determine that all actual
and contingent liabilities have been paid, provided for or
discharged and there is surplus cash available for
distribution. This process can take time, particularly if
there are liabilities such as taxation to be agreed with HM Revenue
& Customs or other contingent liabilities that are initially
difficult to quantify or agree. It is therefore usual for
cash to be distributed to Shareholders in a series of instalments,
the amount and timing of each being dependent on the cash available
and the status of known and potential liabilities.
Resolution 5 (as set out in the Notice of General Meeting) seeks
Shareholder approval to fix the Proposed Liquidators’ remuneration
at their normal charging rates according to the time properly spent
by them and members of their staff in attending to matters arising
in the winding-up of the Company (including those falling outside
their statutory duties) and to authorise them to draw sums on
account of their remuneration from time to time as the Members’
Voluntary Liquidation progresses. The Proposed Liquidators
will present full details of their remuneration to Shareholders as
the liquidation progresses.
The shareholder circular will be posted on the Company's web
site www.millresidentialreit.co.uk and copies are available from
the Company's registered office at 8th Floor, Alhambra House, 27-31
Charing Cross Road, London WC2H
0AU.
For further information please
contact:
Mill
Residential REIT Plc
Ian Ellis (Chairman) |
020 7930
8600 |
|
|
Sanlam
Securities UK (Nomad and Joint broker)
Virginia Bull |
020 7628
2200 |
|
|
finnCap Limited (Joint broker)
Tom Jenkins |
020 7220
0500 |
|
|
ALL MEDIA ENQUIRIES
TO: |
|
Positive Profile (Financial PR)
Henry Gewanter |
07774
228845 |
Definitions |
“Admission” |
admission to trading on
AIM; |
“AIM” |
AIM, the market of that
name operated by the London Stock Exchange; |
“AIM Rules” |
the “AIM Rules for
Companies” published by the London Stock Exchange from time to
time; |
“Board” |
the board of directors
of the Company; |
“Business Day” |
a day, other than a
Saturday or Sunday or public holiday in England and Wales, on which
banks are open in London for general commercial business; |
“Cancellation” |
the cancellation of
admission of the Ordinary Shares to trading on AIM; |
“Company” |
Mill Residential REIT
plc; |
“CREST” |
the relevant system (as
defined in the CREST Regulations) in respect of which Euroclear UK
& Ireland Limited is the Operator (as defined in the CREST
Regulations); |
“CREST
Regulations” |
the Uncertificated Securities
Regulations 2001 (SI 2001/3755); |
“Directors” |
the directors of the
Company; |
“General Meeting” |
the general meeting of
the Company to be held at the offices of the Company’s solicitors
Nabarro LLP at 125 London Wall, London EC2Y 5AL at 10.00 a.m. on 3
November 2015 or any adjournment thereof; |
“Group” |
the Company and its
subsidiary; |
“IPO” |
initial public
offering; |
“London Stock
Exchange” |
London Stock Exchange plc; |
“Members’ Voluntary
Liquidation” |
a Members’ Voluntary Liquidation
within the meaning of the Insolvency Act 1986 and the Insolvency
Rules 1986 (SI 1986/1925); |
“Notice of General
Meeting” |
the notice convening the General
Meeting; |
“Ordinary
Shares” |
the ordinary shares of £0.10 each in
the capital of the Company; |
“Proposed
Liquidators” |
John David Thomas Milsom and Allan
Watson Graham of KPMG LLP, 15 Canada Square, London E14 5GL; |
“Resolutions” |
the resolutions to be
proposed at the General Meeting to obtain the approval of
Shareholders to the Cancellation and the Members’ Voluntary
Liquidation, as set out in the Notice of General Meeting (and
“Resolution” means any one of the Resolutions as the context
requires); |
“Shareholders” |
holders of Ordinary Shares from time
to time; |
“UK” or
“United Kingdom” |
the United Kingdom of Great Britain
and Northern Ireland; and |