Unitech Corporate Parks : Proposed £205.9m sale of Candor Investments Ltd

11 June 2014

Unitech Corporate Parks plc

("UCP" or the "Company")

Proposed £205.9 million sale of Candor Investments Limited to Brookfield,

Amendment to Investing Policy

and

Notice of Extraordinary General Meeting

Further to the announcement on 3 April 2014 that the Company had received an approach from a third party expressing interest in a potential acquisition of the Company's wholly owned subsidiary Candor Investments Limited, the holding company for UCP's property interests, the Company announces that it has today entered into an agreement with an affiliate of Brookfield Property Partners ("Brookfield") for the sale and purchase of the entire issued share capital of Candor.

·     The Disposal Agreement provides that Brookfield will acquire Candor, subject to certain conditions, for an aggregate cash consideration of approximately £205.9 million.

·     Following Completion and based on the Assumptions, the Company is expected to have the cash resources to make capital returns to Shareholders of approximately 56 pence per Ordinary Share in aggregate which represents:

-      a 45.0 per cent. premium to the Company's prevailing share price as at 2 April 2014 (being the day before the Company announced it had received an approach for Candor);

-      a 79.2 per cent. premium to the Company's lowest share price in the last twelve months on 25 September 2013; and

-      a premium to the Company's estimated NAV per Ordinary Share (as at 31 March 2014) of approximately 53 pence.

·     Completion of the Disposal will require, inter alia, the approval of Shareholders, in accordance with the requirements of the AIM Rules.

·     The Company will also seek Shareholder approval to adopt a new Investing Policy to return capital to Shareholders following the completion of the sale of Candor

·     A circular is being posted to Shareholders today setting out the background to and reasons for the Disposal and convening an Extraordinary General Meeting, for 11:30 a.m. on 27 June 2014. The Chairman's letter, as contained in the Circular, is set out below.

Terms used and not defined in this announcement bear the meaning given to them in the Circular to be published today.

Donald Lake, Chairman of UCP, commented:

"The offer for UCP's property interests from Brookfield at above the latest book valuation reflects the hard work put in over recent years to let the office space and grow income, in order to achieve the best possible price on behalf of investors in the Company. The Independent Directors believe that the proposed sale represents a very attractive opportunity for investors to realise strong value from the properties and facilitate a distribution of the proceeds, and I urge all Shareholders to vote in favour of the resolutions proposed at the Extraordinary General Meeting."

Enquiries:

Westhouse Securities Limited

Alastair Moreton / Hannah Young / Darren Vickers

Tel: +44 (0)20 7601 6118

FTI Consulting

Richard Sunderland / Stephanie Highett / Will Henderson

Tel: +44 (0)20 3727 1000

Email: richard.sunderland@fticonsulting.com

Letter from the Chairman of Unitech Corporate Parks plc

"Dear Shareholder

Proposals for the sale of Candor Investments Limited,
amendment to the Company's Investing Policy

and

Notice of Extraordinary General Meeting

1.      Introduction

On 3 April 2014, the Company announced that it had received an approach from a third party expressing interest in a potential acquisition of the Company's wholly owned subsidiary Candor Investments Limited, the holding company for the Company's Property Interests. The Company is therefore pleased to announce that it has today entered into an agreement with Brookfield for the sale and purchase of the entire issued share capital of Candor.  The Purchaser is an associate of Brookfield Strategic Real Estate Partners, a $4.4 billion global real estate fund.

The Disposal Agreement provides that Brookfield will acquire Candor, subject to certain conditions, for an aggregate cash consideration of approximately £205.9 million.  Following Completion and based on the Assumptions, the Company is expected to have the cash resources to make capital returns to Shareholders of approximately 56 pence per Ordinary Share in aggregate. The Independent Directors have been advised by Jones Lang LaSalle and Westhouse Securities in relation to the Disposal.

Completion of the Disposal will require, inter alia, the approval of Shareholders, in accordance with the requirements of the AIM Rules. The level of Shareholder approval required is more than 50 per cent. of Shareholders voting in respect of the Disposal.

In addition the Company will, as set out in more detail in paragraph 6 below, also need to seek Shareholder approval to adopt a new Investing Policy.

The purpose of this document is:

·     to provide Shareholders with the background to, and rationale for the Disposal;

·     to explain to Shareholders why the Independent Directors have decided to proceed with the Disposal, subject to Shareholders' approval;

·     to set out proposals for the future of the Company and the expected return of capital to Shareholders;

·     to provide details of the proposed New Investing Policy to be adopted by the Company; and

·     to provide details of the Extraordinary General Meeting at which the Independent Directors are unanimously recommending Shareholders vote in favour of the Resolutions to approve the Disposal and the adoption of the New Investing Policy.

Ajay Chandra is managing director of Unitech and since the Company's investment manager, Nectrus Limited, is an affiliate of Unitech, Ajay Chandra has not taken part in any of the Board's deliberations or participated in any Board vote regarding the Disposal due to a conflict of interest.

At the end of this document, Shareholders will find a Notice of Extraordinary General Meeting, which has been convened for 11:30 a.m. on 27 June 2014 at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP, at which the Resolutions will be put to Shareholders. It is important that Shareholders complete, sign and return the Form of Proxy for use at the Extraordinary General Meeting enclosed with this document, whether or not they intend to attend the Extraordinary General Meeting. The completion and return of a Form of Proxy will not preclude Shareholders from attending the Extraordinary General Meeting and voting in person, should they so wish.

If the Resolutions as set out in the Notice of Extraordinary General Meeting are passed, the completion of the Disposal will be subject to the satisfaction of certain other conditions which are more fully described in paragraph 3 below and in Part II of this document. Whilst the timeframe for the satisfaction of the conditions is difficult to estimate, it is currently expected that Completion will occur in approximately 3 months.

2.      Description of Candor Investments Limited

Candor Investments Limited is a wholly-owned subsidiary of the Company incorporated in Mauritius. It is the holding company for the Company's Property Interests, which comprise investments in six Projects in India, held via special purpose vehicles, such Projects being InfoSpace Gurgaon G1-ITC, InfoSpace Gurgaon G2-IST, InfoSpace Noida N1, InfoSpace Noida N2, InfoSpace Noida N3 and InfoSpace Kolkata K1. Candor's investments are held through separate Mauritius based, wholly-owned, subsidiaries which in turn hold a 60 per cent. interest in each of the Projects.

Until very recently, the remaining 40 per cent. interest in each of the Projects were held by Unitech and its affiliates, with the exception of the InfoSpace Kolkata K1 Project where Unitech held a 36 per cent. interest. On 14 May 2014, the Company was notified that the equity interests of Unitech in the special purpose vehicles through which investments in InfoSpace Gurgaon G1-ITC, InfoSpace Gurgaon G2-IST, InfoSpace Noida N2 and InfoSpace Kolkata K1 are held, were to be acquired by an independent third party. The Company has not been notified of any transfer of Unitech's remaining equity interests in the special purpose vehicles through which investments in InfoSpace Noida N1 and InfoSpace Noida N3 are held. In addition, in respect of the InfoSpace Gurgaon G2-IST ("G2") Project, a third party, Gurgaon InfoSpace Limited (''GIL'') holds the title to the land and through a joint development agreement is entitled to 28 per cent. of the revenue arising from that Project with Candor and the third party in their capacity as shareholders in the G2 Project being entitled to the remaining 72 per cent.

As at 31 March 2014, the estimated unaudited net assets of Candor amounted to approximately £195 million, and Candor's estimated unaudited loss before tax for the year ended 31 March 2014 is £0.4 million.

3.      Summary of the Disposal

Pursuant to the terms of the Disposal Agreement, the Company has conditionally agreed to dispose of the entire issued share capital of Candor to the Purchaser for an aggregate cash consideration of approximately £205.9 million payable at Completion (subject to adjustment (if any) as provided below).

The Disposal Agreement provides that the consideration is subject to adjustments and would be reduced to reflect:

·     any payments made since 31 March 2014 by Candor group entities to the Company or entities affiliated to it or in relation to the costs of the Transaction; and

·     60 per cent. of any fixed-term deposits made in the name of any Project Company with two Indian financial institutions to the extent that such deposits have not been repaid prior to or on Completion. The Project Companies' rights to receive repayment of 60 per cent of such deposits will, to the extent such deposits are not repaid, be assigned (subject to necessary approvals) making 60 per cent. of the outstanding deposits repayable to the Company or any recovery will be repaid to the Company, in each case after Completion. As at the date of this document, the Company's beneficial interest in such deposits is approximately £14.7 million.

The Disposal is conditional, inter alia, upon:

(i)           no law, order or judgment of any governmental authority having been issued or occurred prior to Completion which would have the effect of making Completion unlawful or illegal;

(ii)          the passing at the Extraordinary General Meeting of the Resolutions approving (a) the Disposal and (b) related changes to the Company's Investment Policy;

(iii)         no material adverse change taking place at the Group level, applying a material significance test and;

(iv)         the obtaining of an approval to the contemplated transfer of Candor's shares by the SEZ Board.

The Purchaser has confirmed that it has also agreed to acquire the third party interests in InfoSpace Gurgaon G1-ITC, InfoSpace Gurgaon G2-IST, InfoSpace Noida N2 and (other than a 4 per cent. interest) InfoSpace Kolkata K1.  The Purchaser confirmed that on a per share basis, the consideration payable for the relevant Projects to the third party is equivalent to the consideration payable for such Projects under the Disposal Agreement.

Whilst the timeframe for the satisfaction of the conditions is difficult to estimate, it is currently expected that Completion will occur in approximately 3 months.

Further details of the Disposal Agreement are included in Part II of this document.

4.      Background to and reasons for the Disposal

Since the Company's admission to AIM, UCP has been focussed on developing five of the original six Projects and securing a strong tenant base. The objective has been to seek to achieve the greatest value for Shareholders by concentrating on selling Projects where a substantial proportion of the development has been let and accordingly has strong visibility as a mature income producing investment.  As at 31 March 2014, progress on the Company's Projects was as follows:

In addition, letters of intent in relation to a further 1.21 million sq ft across the Projects have been signed

The Company has achieved significant lettings, particularly in relation to the G2- Project where total commitments currently amount to over 80 per cent. of the estimated lettable area. Accordingly a sale process for this Project, co-ordinated by Jones Lang LaSalle, was commenced last year and the Company was encouraged by the level of interest received from a number of parties. As noted above, unlike UCP's other projects which were set up as joint ventures between subsidiaries of the Company and affiliates of Unitech, in the case of G2 a third party, GIL, owned the land when the Project was conceived in 2004 and receives 28 per cent. of the revenue. The complexities of this structure meant that the sale process took longer than expected and, whilst the process was on-going, the receipt of an approach to acquire the Company's entire Property Interests through the acquisition of Candor provided the Company with an attractive alternative to realising assets on an individual basis and the Independent Directors believed this subsequent proposal merited further consideration. Accordingly, the Company announced on 3 April 2014 that the separate discussions in respect of the potential sale of G2 had terminated. The Independent Directors have been advised by Jones Lang LaSalle and Westhouse Securities in relation to the Disposal.

Following agreement on terms with the Purchaser to acquire Candor, subject to certain conditions, for an aggregate cash consideration of approximately £205.9 million, the Independent Directors have concluded that the Disposal is in the best interest of Shareholders as a whole and that, following Completion, on the basis of the Assumptions the Company is expected to have the cash resources to make capital returns to Shareholders of approximately 56 pence per Ordinary Share in aggregate.

The Independent Directors consider that the Disposal has the following principal benefits:

·      the expected cash resources of the Company, following Completion and on the basis of the Assumptions, of approximately £201.9 million, equates to an approximate value per Ordinary Share of 56 pence. This represents a 45.0 per cent. premium to the Company's prevailing share price as at 2 April 2014 (being the day before the Company announced it had received an approach for Candor) and a 79.2 per cent. premium to the Company's lowest share price in the last twelve months on 25 September 2013;

·      the Company's unaudited NAV per Ordinary Share at 30 September 2013, based on a valuation of the Property Interests by Knight Frank, amounted to 52 pence and the estimated unaudited NAV per Ordinary Share at 31 March 2014, based on a valuation of the Property Interests by CBRE, is approximately 53 pence. Accordingly, the Disposal provides, on the basis of the Assumptions, an opportunity to realise the Company's Property Interests and subsequently return these proceeds to Shareholders at a premium to NAV per Ordinary Share;

·      the Company's Ordinary Shares have persistently traded at a significant discount to NAV. As at 2 April 2014 (being the day before the Company announced it had received an approach for Candor) the Company's Ordinary Shares traded at a discount of approximately 28 per cent. to the estimated unaudited NAV per Ordinary Share as at 31 March 2014 and have traded at an average discount to NAV per Ordinary Share of over 25 per cent. (and up to a 39% discount) during the 6 month period to 2 April 2014;

·      the Disposal of the Company's entire Property Interests provides the opportunity to realise an immediate cash consideration, reducing the timeframe and overall risk of realising value for each of the Projects on an individual asset basis;

·      should the Disposal not proceed the Company would continue to develop the Property Interests in conjunction with Unitech and its affiliates; which is expected to be completed as quickly as tenant demand permits. Since the Company's original admission to AIM in December 2006, in aggregate 34 per cent. of the estimated lettable area of the Property Interests have been leased or are subject to pre-lease commitments and approximately 41 per cent. of the Property Interests are operational or ready for fitouts. Accordingly, the development risks associated with the Projects and potential uncertainties resulting from the third party's acquisition of Unitech's interests in four of the Projects, would be eliminated for the Company by a complete portfolio disposal;

·      the aggregate remaining estimated construction costs for the development of the Company's Projects at 31 March 2014 is approximately £272 million. Financing such construction costs will require the Company to seek additional funding. There can be no certainty that such funding will be made available for the Projects or that the borrowing facilities will be available on terms favourable to the Company. The disposal of the Company's entire Property Interests in a single transaction will therefore reduce the risks to Shareholders of possible difficulties in securing future development funding which could have an adverse effect on the value of the Property Interests;

·       the Disposal is subject to limited conditionality and limited warranties including capacity and title to the shares of Candor and customary protections in respect of the period between 31 March 2014 and Completion (and no other warranties related to the business of the underlying Projects). From the Company's perspective, the contractual arrangements are likely to be more favourable than would be the case if the Company pursued alternative disposal strategies involving the sale of individual Projects.

Accordingly, taking into account the above benefits, the Independent Directors believe that the Disposal is in the best interests of Shareholders and through the realisation of substantial cash proceeds will facilitate a return of capital to Shareholders.

5.      Proposals for the future of the Company and return of capital

Following Completion of the Disposal, the Board of Directors of the Company, in consultation with Shareholders, will seek advice on the most appropriate method to return the resulting net cash resources of the Company to Shareholders in a tax efficient manner. It is currently expected that the first return of capital to Shareholders will be within a period of 3 months from Completion. Further details will be provided to Shareholders in due course.

The consideration payable at Completion of approximately £205.9 million is subject to adjustment as set out in paragraph 2 above.  The consideration will be reduced, inter alia, to the extent that certain fixed term deposits which have been made in the name of a Project Company, with two Indian financial institutions have not been repaid by Completion. Currently, there is no certainty as to the repayment dates of such deposits. The Company's beneficial interest in the deposits referred to above and outstanding at the date of this document amounts to approximately £14.7 million. In the event that all or part of such deposits have not been repaid prior to or at Completion and give rise to an adjustment of the consideration payable by Brookfield, the Project Companies' rights to receive repayment of 60 per cent. of such outstanding deposits will be assigned (subject to necessary approvals) or any recovery will be repaid to the Company and any subsequent repayment to, or recovery by, the Company of the deposits is anticipated to be returned to Shareholders. 

The Board has been advised that the sale of Candor is not expected to result in a tax liability for UCP in either India or Mauritius.  The Company is, however, required to file a tax return in India after the end of the current tax year on 31 March 2015 and the Board has decided, conservatively, to retain an amount of £4 million until such tax return has been filed.  In light of the advice that no tax liability is expected to result from the Disposal, it is therefore anticipated that this sum should ultimately be able to be returned to Shareholders.

On the basis of the following assumptions (the "Assumptions"):

(i)           the consideration payable by the Purchaser at Completion amounts to £205.9 million;

(ii)          there is no adjustment of the consideration to reflect outstanding fixed term deposits or, in the event an adjustment is applied, the Company has subsequently recovered its relevant proportion of the amounts due in respect of such deposits;

(iii)         there are no claims by the Purchaser against the Company for breach of warranties or undertakings under the Disposal Agreement;

(iv)         transaction costs and the expected running costs of the Company in the period prior to completion of the return of capital amount to £4 million in aggregate; and

(v)          an amount of £4 million is retained by the Company until after the tax return has been filed in India and no liability in respect of Indian taxation arises;

the Company will have cash resources to make capital returns to Shareholders of approximately £201.9 million in aggregate, equivalent to approximately 56 pence per Ordinary Share.

The ability of the Company to make capital returns of up to approximately 56 pence per Ordinary Share and the timing of such return is not currently known with certainty and will be subject to factors which may include but not be limited to:

-      Shareholders voting in favour of the Resolutions at the forthcoming Extraordinary General Meeting;

-      The timing for satisfaction of all the conditions of the Disposal Agreement;

-      Shareholders approving the structure to enable returns of capital (to be proposed in due course);

-      The amount of deductions (if any) from the consideration payable at Completion pursuant to the terms of the Disposal Agreement;

-      Any claims by the Purchaser under the limited warranties or Company's undertakings in the Disposal Agreement

-      Any taxation liability resulting from the Disposal; and

-      Any differences between actual costs and the estimated running expenses of the Company until the final return of capital to Shareholders.

6.      Investing policy following the Disposal

If the Disposal is approved by Shareholders and the Company completes the disposal of Candor, the Company's investing activities will cease and the Existing Investing Policy of the Company (as included at Appendix I to this document) will no longer be appropriate. Accordingly, subject to Shareholder approval of the Resolutions, the Company will adopt the following New Investing Policy:

New Investing Policy

"The Company's Investing Policy is to return capital to Shareholders following completion of the sale of Candor. The return of capital, amounting to almost all of the expected net proceeds from the sale of Candor, is expected to be effected by way of a Shareholder distribution which will be subject to the formal approval by Shareholders of the Company at a future extraordinary general meeting. Such meeting is expected to be held within 3 months of Completion. Thereafter, the Company will conduct its affairs to comply with post Completion obligations relating to the Disposal and at the end of such period any residual funds will be returned to Shareholders by way of a members' voluntary winding up or other restructuring, subject to approval by Shareholders. On adoption of the New Investing Policy, the Company shall not make any new investments."

In accordance with paragraph 5.6 of the AIM Note for Investing Companies, which forms part of the AIM Rules, where a company quoted on AIM disposes of all, or substantially all, of its assets, it has a period of 12 months from the date of the disposal to implement its investing policy. If this is not fulfilled, the company's shares will be suspended from trading on AIM. Accordingly, if UCP has not implemented the New Investing Policy within 12 months of Completion, the Ordinary Shares will be suspended from trading on AIM.

7.      Related party transaction

As an associate of the Purchaser currently holds approximately 16.7 per cent. of the Ordinary Shares of the Company and is therefore a substantial shareholder (as defined in the AIM Rules), the Disposal is classified as a related party transaction pursuant to the AIM Rule 13. Accordingly, the Independent Directors confirm, having consulted with Westhouse Securities, that the proposed terms of the Disposal are fair and reasonable insofar as Shareholders are concerned.

8.      Extraordinary General Meeting

Shareholders will find at the end of this document a notice convening an Extraordinary General Meeting of the Company, to be held at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP at 11:30 a.m. on 27 June 2014.

At the Extraordinary General Meeting, the Resolutions will be proposed to approve (a) the sale of the entire issued share capital of Candor to the Purchaser and (b) the Company's New Investing Policy.

9.      Action to be taken

Shareholders will find enclosed with this document a Form of Proxy for use at the Extraordinary General Meeting.

Whether or not you intend to be present at the EGM, you are requested to complete and return the Form of Proxy so as to reach the Company's registered office at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP, either by personal delivery, post, facsimile transmission (+44 (0)1624 681392) or email (grainned@iomagroup.co.im), as soon as possible and, in any event, not later than 11:30 a.m. on 25 June 2014, being not less than 48 hours before the time appointed for the EGM.

Completion and return of the Form of Proxy will not, however, prevent you from attending the Extraordinary General Meeting and voting in person if you should wish to do so.

10.   Recommendation

The Independent Directors, taking into account the factors set out in this letter, believe that the Disposal and the amendment to the Company's Investing Policy are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Independent Directors unanimously recommend that Shareholders vote in favour of the Resolutions at the Extraordinary General Meeting, as they intend to do in respect of their own beneficial shareholdings.

Shareholders who have any questions with respect to the contents of this document may contact the Company Secretary, Philip Scales, on +44 (0)1624 681250.

Yours faithfully,

Donald Lake

Chairman"