TIDMDIGS
RNS Number : 2655X
GCP Student Living PLC
27 August 2020
GCP Student Living plc
("GCP Student" or the "Company", together with its subsidiaries
the "Group")
LEI: 2138004J4ID66FK38H25
AMMENT TO MANAGEMENT ARRANGEMENTS
GCP Student, the UK's first REIT focused on student residential
assets, today announces amendments to the Company's investment and
property management arrangements.
Investment management arrangements
The Investment Manager, Gravis Capital Management Limited, is
currently entitled to receive a management fee at an annual rate of
one per cent of the prevailing net asset value ("NAV") of the
Group, payable quarterly in arrears. From its investment management
fee, the Investment Manager is responsible for the payment of
annual property management fees of up to 0.25% of the Group's NAV
that is attributable to its operational assets.
For the 12-month period ended 30 June 2020 the investment
management fee earned by the Investment Manager, net of payments
made by it in respect of property management fees, was 0.82% of the
Group's average NAV over that period.
Under the terms of the revised investment management agreement
(the "Revised IMA") the investment management fee structure will be
modified such that a reduced investment management fee shall be
payable on the Group's existing asset base. In addition, different
tiers of investment management fees will be introduced depending on
the size of the Company, as measured by the NAV. Accordingly,
Shareholders should benefit from economies of scale as the Company
grows over time.
The Investment Manager will not be responsible for the payment
of any property management fees under the Revised IMA. The Group
will assume responsibility for the payment of all such fees
directly.
The modified investment management fee levels will be as set out
below:
NAV Revised investment management Current investment
fee (annualised) management fee (annualised)
including property
management
Up to GBP950 million 0.7500% 1.00%
------------------------------ -----------------------------
Above GBP950 million
and up to GBP1.5 billion 0.6375% 1.00%
------------------------------ -----------------------------
Above GBP1.5 billion 0.5625% 1.00%
------------------------------ -----------------------------
The current investment management arrangements were agreed for a
minimum term of six years from 21 September 2015, subject to
termination by the Company on not less than 12 months' written
notice, such notice to expire no earlier than 21 September
2021.
Pursuant to the Revised IMA, the termination clauses in the
agreement have been updated such that the agreement can be
terminated by the Company or the Investment Manager at any time
with 24 months' written notice to the other party. The amendments
allow the Company to secure the services of the Investment Manager
for a suitable period of time, also taking into account the
specialist nature of the Group's assets and the time therefore
taken to identify pipeline assets and to complete their
acquisition, particularly where there are forward funding and/or
development arrangements which often take more than 12 months to
complete. Further, in exchange for the amendments to the
termination clauses the Company has secured a reduction to the
investment management fees payable by it and which will result in
an immediate reduction to its cost base.
The Investment Manager is a related party of the Company under
Chapter 11 of the FCA's Listing Rules and the amendments to the
investment management agreement constitute a smaller related party
transaction under Listing Rule 11.1.10.
Property management arrangements
The Group receives property management services from Scape
Student Living Limited ("Scape") in respect of all but two of its
operational assets, Water Lane Apartments, Bristol and Circus
Street, Brighton.
In the period since the Company's IPO in 2013, Scape and its
affiliates has grown into a global developer, manager and operator
of purpose built student accommodation ("PBSA") in the UK,
Australia and Europe with c.30,000 student beds in operation or
under construction globally.
In order to align the Group's property management arrangements
with those entered into by Scape and its affiliates globally, new
property management agreements have been entered into between the
Group and Scape (the "PMAs"), including in respect of Circus
Street, Brighton and the Group's Scape Brighton asset, which is
currently under construction.
Under the terms of the PMAs, Scape will be entitled to an annual
property management fee (payable quarterly in arrears) in respect
of the management of PBSA of 4% of the total income and 1.25% of
net operating income attributable to the Group's PBSA managed by
Scape.
An annual property management fee (payable quarterly in arrears)
of 2% of income shall be payable in respect of the management of
the Group's non-PBSA commercial space.
The property management fees payable by the Group to Scape shall
be subject to a minimum fee where the provision of academic
services by UK Higher Education Institutions is affected such that
the Group's occupancy is materially and adversely affected by a
pandemic and/or epidemic, including in the current Covid-19
pandemic. Such fee shall be calculated as 80% of the Group's
relevant budgeted annual property management fees, payable
quarterly in arrears.
The Group shall be responsible for all fees payable to Scape
under the PMAs.
The revised arrangements between the Group and Scape provide for
the assumption by Scape of certain employment cost overheads which
are currently incurred by the Group. By way of illustration, the
assumption by Scape of such costs would have reduced costs incurred
by the Group by approximately GBP0.8 million for the 12 month
period ended 30 June 2020.
Under the terms of the PMAs, Scape may license the Scape brand
to third parties. It is not permitted to license the Scape brand to
entities which are traded on the London Stock Exchange (subject to
certain limited exceptions).
As part of a wider separation of the businesses of the
Investment Manager and Scape, and in light of their time
commitments to the Scape business, Nigel Taee (Chairman of Scape)
and Tom Ward (Global CEO of Scape) have resigned as directors of
the Investment Manager. Tom Ward served as the Company's lead
portfolio manager in its early years following IPO. The Directors
thank Mr. Ward for his substantial contribution to the Company
during that time. For the avoidance of doubt, neither Mr Taee nor
Mr Ward were involved in the provision of investment management
services to the Company immediately prior to their resignations.
One remaining director of the Investment Manager indirectly owns a
small minority interest of approximately 6% in Scape.
On 7 April 2020, the Company announced the termination of the
forward purchase agreement in respect of Scape Canalside. It is
noted that the pipeline agreement entered into at IPO between the
Company and Scape has lapsed.
Impact of the changes to management arrangements on the Group's
cost base
The revised investment management and property management
arrangements will provide the Company with competitive fee
arrangements and seek to better align property management fees to
relevant operational metrics in a manner which is more akin to the
market standard seen with PBSA operators in the UK.
Further, the amendments to these arrangements will result in an
immediate reduction to the Group's cost base.
By way of illustration, were these arrangements to have been
entered into on 1 July 2019, the Group would have benefitted from
approximately GBP0.6 million of cost savings for the 12 month
period ended 30 June 2020. This represents a reduction to the
Group's aggregate investment and property management costs for the
period of approximately 7% on a like-for-like basis.
The Company has consulted with shareholders representing
approximately 22% in connection with the amendments set out in this
announcement.
The amendments to the investment management and property
management arrangements shall come into effect immediately, with
the relevant fee arrangements effective from 1 July 2020.
For further information please contact:
Gravis Capital Management Limited +44 020 3405 8500
Nick Barker
Dion Di Miceli
Stifel Nicolaus Europe Limited +44 020 7710 7600
Mark Bloomfield
Mark Young
Buchanan / Quill +44 020 7466 5000
Helen Tarbet
Henry Wilson
About GCP Student
The Company was the first student accommodation REIT in the UK,
investing in modern, purpose-built, private student residential
accommodation and teaching facilities.
Its investments are located primarily in and around London where
the Investment Manager believes the Company is likely to benefit
from supply and demand imbalances for student residential
accommodation. GCP Student's property portfolio comprises eleven
assets with c.4,100 beds, including one asset which is under
construction. At 30 June 2020, its property portfolio was valued at
GBP1.0 billion.
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