TIDMBARK
RNS Number : 7768R
Barkby Group PLC
31 October 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT
FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018 ("MAR"), AND IS DISCLOSED IN ACCORDANCE WITH
THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF MAR.
Barkby Group PLC
("Barkby" or the "Company")
Formation of Roadside Real Estate Joint Venture
Corporate update
Barkby, (AIM: BARK) the Roadside Real Estate business, is
pleased to announce the formation of a joint venture with Meadow
Partners LLP ("Meadow"), to acquire and develop a portfolio of
UK-based Roadside Real Estate assets, (the "JV").
Highlights:
-- Joint venture aiming to create a substantial portfolio of
modern Roadside Real Estate assets, to be funded by up to GBP100
million of equity with an intention to add appropriate levels of
leverage
-- The JV is targeting a double-digit portfolio internal rate of
return ("IRR") over the 30 month initial investment period
-- Meadow will initially own and fund 97% of the JV while Barkby will own and fund 3%
-- Barkby has the option to increase its ownership percentage in
the JV up to a maximum aggregate holding of 10% within the first 12
months following the JV's establishment (the "Additional Investment
Option")
-- Barkby will receive a share of surplus capital as a
performance fee dependent on an IRR hurdle
-- In line with good corporate governance practices the Company
is progressing the appointment of a Non-Executive Chair, at which
point Charles Dickson will become Chief Executive
-- Barkby intends to change its name to 'Roadside Real Estate
plc' to reflect its strategy, alongside a proposed share
consolidation
-- Stifel Nicolaus Europe Limited ("Stifel") appointed financial
adviser and joint corporate broker
Charles Dickson, Executive Chairman, said:
"We are delighted to be working with Meadow to implement a fully
funded strategy to institutionalise a new asset class within the
real estate sector. Roadside Real Estate will offer exciting
potential for investors and we believe this JV has the opportunity
to create a portfolio worth GBP250 million over time.
" Having successfully developed a small number of roadside sites
which have proven our concept, w e will seek to rapidly convert our
acquisition pipeline to create value for shareholders and our joint
venture partner, whilst delivering valuable community amenities -
not least increased access to electric vehicle charging."
The Joint Venture
The Company has explored a variety of options to fund its
strategy amidst a challenging capital markets environment. The
Board has concluded that the JV offers the best structure to
support the successful implementation of its strategy, maximising
the creation of sustainable shareholder value. The formation of the
JV creates a well-capitalised vehicle capable of rapidly deploying
investment in target assets.
Meadow is a real estate private equity manager based in New York
and London with US$6.2 billion gross AUM. Meadow specialises in
middle-market real estate transactions across all sub-sectors and
risk profiles. Its partners have been responsible for the
acquisition and ongoing asset management of over US$30 billion of
real estate assets located in the United States, Europe and Asia.
Meadow is now investing Fund VI.
The JV will focus on acquiring sites where it can offer
consumers a mix of Drive Thru, Foodvenience, Local Logistics and
Trade Counter businesses alongside opportunities to increase EV
charging facilities.
Over the 30 month investment period, the JV intends to create a
modern roadside portfolio worth over GBP250 million(1) through
acquisition, asset management and development, including
opportunities across the portfolio for electric vehicle charging
infrastructure.
Pipeline and Barkby's current portfolio
The JV has a prospective Roadside Real Estate investment
pipeline in excess of GBP150 million as more stock comes to the
market and additional approaches are being made to the Company by
vendors. Tenant demand for these sites is strong, attracting
high-quality nationwide operators, underpinning reliable, long term
income streams.
The pipeline includes a site in Stoke which is currently owned
by Meadow, which the JV may consider as an initial JV acquisition,
however it is still subject to due diligence and negotiation by the
Development & Asset Manager (as defined below).
As announced in the trading update of 29 September 2023,
Barkby's existing wholly-owned portfolio of Roadside assets
comprises two schemes which the JV may consider as investments:
-- Wellingborough, which achieved practical completion in May
2023 and is fully let, providing a contracted rent of GBP232,300
per annum across a total rentable space of 14,100 sq.ft. Occupiers
include Greggs, Formula One Autocentres, City Plumbing Supplies and
Brewers Decorator Centre
-- Maldon is expected to reach practical completion imminently
and has a contracted rent of GBP280,000 per annum, 78% of which is
index-linked with caps and collars, across a total rentable space
of 14,200 sq.ft.
Principal terms of the JV
Initially, Meadow will own and fund 97% of the JV while Barkby
will own and fund 3%. Barkby may exercise the Additional Investment
Option within the first 12 months following the JV's establishment,
to increase its aggregate ownership percentage to up to a maximum
of 10%. The exercise of the Additional Investment Option is at
Barkby's sole discretion, including as to if the Additional
Investment Option were to be taken up in full, in part or not at
all.
The JV, which will have an initial investment period of 30
months, will be able to request up to GBP100 million of equity
funding from Barkby and Meadow to facilitate the purchase of assets
within the scope of its business. Acquisitions will be funded pro
rata to the parties' shareholdings and, accordingly, Barkby's
initial maximum aggregate capital commitment will be GBP3 million,
absent Barkby electing to increase its stake in the JV to up to 10%
via the Additional Investment Option. A funding obligation on the
JV's shareholders will only be crystalised when an asset or
development site fitting the JV's investment criteria is identified
by the Development & Asset Manager, commercial negotiations are
completed and the investment is approved by the JV's board. If a
party fails to provide requested funding and the other party does
not elect to satisfy the shortfall, this will constitute an event
of default. In the case of an event of default, the defaulting
party may be required to transfer its shares in the JV at an
independently determined fair value.
The Board stresses that, due to the time intensive nature of the
Roadside Real Estate developments which the JV will be investing
in, the full GBP100 million equity commitment will in practice only
be capable of being drawn down by the JV over the 30-month
investment period and not within the first 12 months (being the
term that the Additional Investment Option can be exercised).
Therefore, the Additional Investment Option exercise is highly
unlikely to result in the maximum GBP10 million equity commitment
being provided by Barkby over this 12 month period.
The JV, registered as Roadside Retail Limited (Jersey
incorporated), will be subject to investment accounting treatment
by Barkby and will therefore not be consolidated into Barkby's
financial statements.
Meadow will be entitled to appoint two directors of the JV and
Barkby will be entitled to appoint one director. Certain limited
decisions in connection with the JV will require the consent of
both parties.
The JV is targeting a double-digit portfolio IRR for the
investment period. Surplus proceeds from the realisation of the
JV's portfolio, after an initial rate of return hurdle for Meadow,
will be distributed to Barkby and Meadow. Barkby may also receive
an additional share of surplus proceeds as a performance fee,
dependent on aggregate returns to the parties.
As part of the JV, Barkby has established a subsidiary vehicle,
Roadside Asset Management Limited (UK incorporated), that will
provide development and asset management services, (the
"Development & Asset Manager") of which Barkby will own 51%,
with Meadow owning 49%. The JV will pay the Development & Asset
Manager an annual fee based on Gross Asset Value under management
and development management fees on the hard construction costs of
those assets being developed.
Barkby and Meadow will each be entitled to appoint two directors
of the Development & Asset Manager, and there are certain
reserved matters in relation to the operation of the Development
& Asset Manager which require the approval of both parties. The
shareholders' agreement for the Development & Asset Manager
contains compulsory provisions in the case of a deadlock and events
of default, as well as "drag and tag" provisions consistent with
the JV shareholders' agreement.
During the initial investment period, Barkby and the Development
& Asset Manager will offer all future Roadside Real Estate
projects to the JV. If the JV elects not to pursue a project,
Barkby will be permitted to pursue it independently provided that
the Development & Asset Manager is appointed as the asset
manager and development manager in connection with such
project.
There can be no guarantees that the JV will ever drawdown the
full GBP100 million of equity available to it under the JV
agreement and therefore there can be no guarantees that Barkby will
ever be required to fund the maximum GBP10 million equity
commitment to the JV even if the full 10% Additional Investment
Option were to be taken up.
Exit provisions
There is not a pre-agreed exit mechanism for the JV's
shareholders in normal circumstances. However, the JV agreement
does include certain compulsory transfer provisions in
circumstances qualifying as an event of default. As described above
if a party fails to fund their pro rata proportion of a drawdown
request by the JV up to the maximum agreed aggregate quantum, and
the other party does not elect to satisfy the shortfall, this will
constitute an event of default. In the case of an event of default,
the defaulting party may be required to transfer its shares in the
JV at an independently determined fair value. Additional scenarios
qualifying as an event of default include:
-- an insolvency event of Barkby or its associates;
-- material breach by Barkby and its associates of the JV
agreement, the asset management agreement and any development
management agreement entered into with the Development & Asset
Manager;
-- a party committing a fraudulent act or being guilty of misappropriation of funds; and
-- a party breaching anti-corruption undertakings in the JV agreement.
An event of default occurring does not automatically terminate
the JV agreement or give rise to a termination right. However, the
non-defaulting party could effect a compulsory transfer of all of
the defaulting party's JV holding to itself or to a
third-party.
The JV agreement also contains standard "drag and tag"
provisions.
Board changes
The Company is in negotiations with a potential Non-Executive
Chair whose expertise and experience would make them a valuable
addition to the Board. Further announcements will be made as
appropriate. Upon the appointment of a Chair, Charles Dickson will
become Chief Executive.
Furthermore, following appointment of a new Chair, the Board
intends to refresh its composition with the aim of increasing its
diversity to reflect, in so far as is possible, a broader range of
backgrounds and expertise.
Proposed change of name, disposals and share consolidation
Change of name and listing identifier
As a result of the formation of the JV and the Company's new
operational focus, the Company intends to change its name to
'Roadside Real Estate plc'. Accordingly, the Company intends to
change its listing identifier from 'BARK' to 'ROAD.' For the change
of name to take effect, shareholders will be asked to pass a
special resolution at a General Meeting of the Company. The change
of listing identifier is contingent on shareholder approval for the
change of name.
Disposals
As noted in the Company's recent trading update:
-- Workshop Coffee was sold to its management team on 31 July 2023
-- Centurian Automotive wound-down trading activity from the start of the 2023 calendar year
-- The Board is exploring options in relation to divesting Barkby Pubs
Cambridge Sleep Sciences, ("CSS") has made significant progress
on its Software-as-a-Service license-based business model and
agreed several global licensing deals. CSS continues to seek new
licensee opportunities and is in advanced negotiations with a
leading global hotel group, a sports watch designer and a leading
home entertainment equipment manufacturer.
Castle Corporate Finance continues to undertake a strategic
review of the business with the aim of evaluating the most
appropriate corporate setting and structure for the company. The
Board currently believes that the best interests of Barkby's
shareholders will be served by either a third-party sale or
demerger . There can be no certainty that any offer or sale will
ultimately be made for CSS or as to the value of any such proposed
deal.
Share consolidation
T he Board is also proposing a share consolidation, to reduce
the volatility associated with price movements in the Company's
shares.
A circular will be sent to shareholders in due course providing
further information on matters requiring shareholder approval.
Appointment of Financial Adviser and Joint Corporate Broker
Stifel acted as financial adviser to Barkby in connection with
the formation of the JV. Barkby is pleased to announce the
appointment of Stifel as financial adviser and joint corporate
broker, with immediate effect.
- Ends -
Enquiries:
Barkby Group PLC
Charles Dickson, Executive Chairman
c/o Montfort
+44 (0)78 1234
Montfort 5205
Olly Scott +44 (0)75 4284
Georgia Colkin 6844
Cavendish Capital Markets Limited (Nomad and
Broker)
Carl Holmes / Simon Hicks / Fergus Sullivan
(Corporate Finance) +44 (0)20 7220
Tim Redfern (ECM) 0500
Stifel Nicolaus Europe Limited (Financial Adviser
and Joint Corporate Broker)
Mark Young
Jonathan Wilkes-Green +44 (0)20 7710
Catriona Neville 7600
Notes
1. Portfolio value comprised of the JV's equity investment in
addition to the Board's reasonable expectations around portfolio
value accretion and leverage.
About Barkby
Barkby is a roadside real estate business focused on building
and scaling a high-quality portfolio of modern assets.
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