NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF REGULATION 11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310.
27 April 2021
WALLS & FUTURES REIT PLC
(“Walls & Futures” or the “Company”)
Walls & Futures is an Ethical Housing investor on a mission to address the unfulfilled demand for specialist supported housing in the UK. The Company designs, funds and develops specialist supported housing (“SSH”) which are let on full repairing and insuring (“FRI”), inflation linked leases to local authorities, registered providers and charities.
The Directors of Walls & Futures (the “Board”) are pleased to provide a trading update for the year ended 31 March 2021.
- Net Asset Value (“NAV”) as at 31 March 2021 of 102p per share – a fall of 4.95% from 31 March 2020
- Outperformed 2020 benchmark MSCI UK Residential Property Index by 519% (3.53% vs. 0.57%)
- 100% of SSH rents collected in financial year
- Generated over £1.3m cash through sale of two Private Rented Sector (“PRS”) properties with funds to be invested in new SSH
- Repaid entire £600,000 revolving credit facility
Against the challenging economic backdrop caused by Covid-19, which has seen many property companies experience non-payment of rents and significant falls in asset values, we are pleased with the robust performance of our portfolio.
For the 12 months to 31 March 2021, we collected 100% of the SSH and 99.97% of PRS rents due.
Part of our strategy, as we have previously outlined, has involved selling our London PRS properties, which were let on Assured Shorthold Tenancies (“AST”), to fund further SSH investments. These sales were delayed by emergency legislation introduced by the government to protect tenants on AST, with notice periods increased to six months. Working with our tenants, we completed the sale of two of the three properties in our portfolio.
Our Wimbledon property completed in June 2020 for a sale price of £656,000 and was followed by one of our Southfields properties which completed in January 2021 for £660,000. This generated a total of £1,136,000 in cash before fees, part of which was used to pay down our £600,000 revolving credit facility in full. The remaining Southfields property is currently on the market and we will provide a further update in due course. For so long as the Company remains in an offer period any sale of the property would be subject to shareholder approval in general meeting, in accordance with the requirements of Rule 21.1 of the City Code.
The Board has obtained a valuation of our property assets as at 31 March 2021 by John D. Wood & Co which shows a total value of the three properties of £3,215,000. The valuation was prepared in accordance with valuation standards published by the Royal Institution of Chartered Surveyors on a basis consistent with past practice in relation to the assets concerned. The Board confirms that the valuer has confirmed that an updated valuation as at 27 April 2021 would not be materially different. The valuation report can be viewed by clicking here.
The valuation reflects that there has been a modest fall in the value of our remaining PRS property, which the Board considers to be a consequence of the issues the PRS sector is having as a result of the financial effects of the pandemic. Our two SSH assets have remained at the same valuation as at 31 March 2020. As at 31 March 2021, after taking account of £658,468 of cash and cash equivalents and making appropriate balance sheet adjustments, which have been subject to management review, the Company’s unaudited Net Asset Value (“NAV”) fell by 4.95% to 102p per share (31 March 2020: 107p per share), reflecting current weakness in the London PRS market, while our SSH portfolio continued to hold up well in the existing market. No provision has been made for any tax liability on eventual sale of the properties as no tax will be payable due to the Company being a REIT.
Further supporting the resilience of our portfolio and investment strategy, we are delighted to announce that for the 2020 calendar year, our portfolio outperformed the benchmark MSCI UK Residential Property Index delivering a total return of 3.53% vs 0.57%. This is the fourth consecutive year we have outperformed the benchmark.
In respect to the Social Housing market, the Regulator of Social Housing (“RSH”) has taken a more active role due to the number of private companies investing in the sector.
RSH has concluded that in certain cases providers are not compliant with the rent standard and/or have been unable to provide adequate assurances that the accommodation they provide meets the government’s definition of SSH and/or do not meet governance and/or viability requirements. The RSH has issued judgements and notices against a number of registered social housing providers for breaches.
We welcome the increased involvement from the RSH as our ethical approach to investing ensures our focus on delivering high quality homes which can adapt with the residents needs at a rent level that is sustainable and offers value for money to the public purse.
Furthermore, the Board believes that none of our existing supported housing partners or (those that we are currently in discussion with) are subject to regulatory reviews, judgements or notices.
Statement re unsolicited offer
While our share price has continued to trade at a large discount to the Company’s NAV, the Board believes this disparity is a function of the market being focused away from the property sector, rather than reflecting the performance of the underlying business. The Board considers that the unsolicited firm offer from Virgata Services Ltd (“Virgata”) (“the Firm Offer”) is opportunistic in the light of the recent share price weakness. As stated in our announcement on 8 April 2021, the Board considers that the Firm Offer substantially undervalues the Company at 50p per share, less than half the unaudited NAV per share reported today. The Board notes the deadline for Virgata to publish its offer document by 6 May 2021 and the Company will publish its defence document within 14 days of the publication of the Virgata offer document. The Board recommends that shareholders take no action until it has received the defence document from the Company.
A further announcement will be made as and when appropriate.
Walls & Futures REIT PLC 0333 700 7171
Joe McTaggart, Chief Executive
Allenby Capital Limited (Corporate and Financial Adviser)
Nick Harriss/James Reeve/David Worlidge 020 3328 5656
Disclosure requirements of the Takeover Code
Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel’s website at www.thetakeoverpanel.org.uk , including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Takeover Panel’s Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.
Allenby Capital Limited (“Allenby Capital“), is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Allenby Capital is acting as financial adviser exclusively for Walls & Futures and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters set out in this announcement and will not be responsible to anyone other than Walls & Futures for providing the protections afforded to clients of Allenby Capital or its affiliates, or for providing advice in relation to the contents of this announcement or any other matter referred to herein.
Publication on a website
In accordance with Rule 26.1 of the Code, a copy of this announcement and the valuation prepared by John D. Wood & Co will be available at https://reit.wallsandfutures.com/investors/. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.