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Max Property Group Plc

Portfolio Acquisition

The board of Max Property Group PLC ('MPG') announces today that it has exchanged contracts to acquire a portfolio of principally light industrial property from Ernst & Young acting as Receivers for the Industrious Group for a consideration of £232.1m or £245.4m including stamp duty and acquisition costs.

At the time of its IPO, the board made clear that MPG's investment strategy was to exploit the current instability in the UK real estate market through opportunist acquisition, active asset management and judicious use of non-recourse borrowings to enhance shareholder returns at a time in the cycle with significant opportunities. This first transaction achieves all of these objectives, whilst diversifying specific risk across over 800 tenants.

The portfolio comprises some 7.6m sq ft of which 1.5m sq ft is currently or imminently vacant with over 800 tenants on 86 mainly freehold industrial estates throughout the UK.  46% of the portfolio by value is in London and the South East. The portfolio produces a gross rental income of c. £29.6m per annum reducing to £22.7m after allowing for empty rates, other non recoverable expenditure and management costs. The estimated rental value of the portfolio if fully let is in the order of £32.5m per annum.

The headline running yield on purchase price including stamp and transaction costs is 12.1% and the net yield is 10.3% after empty rates and other void property costs; however the board is firmly focused on the rent net of all costs including management costs of some £2.5m p.a.. The board believes it has the expertise to manage the portfolio to achieve a reduction in voids and associated costs which will boost what is already an attractive cash on cash return for our shareholders.

The acquisition will be part financed with a non recourse debt facility of up to £128.3m on a five year term, arranged by Eurohypo AG, with the balance of the consideration met from the Group's cash reserves.  MPG raised £211m net of expenses through its IPO in May 2009.  Completion of the acquisition is expected to occur by 7th October, 2009 following the fulfilment of certain conditions relating to the receivership.  

MPG was advised by Franc Warwick and Ernst & Young by King Sturge.  

Commenting on the transaction Aubrey Adams, Chairman of MPG stated:

 

'At approximately £32.50 per square foot capital value, representing almost half replacement cost, at the same time as delivering significant cash on cash returns, this exciting transaction affords us many opportunities to maintain rent in the short term and then materially increase our net income through intensive hands on management. As a result of the receivership the portfolio has suffered considerably from under-investment for some time now.  We must focus firstly on stabilizing rents and then increasing them in the medium term, which will afford us many opportunities to significantly enhance capital values over the next three to five years.'

5 August 2009

ENQUIRIES:

Prestbury Investments LLP	Tel: 020 7647 7647
Nick Leslau
Mike Brown
College Hill	Tel: 020 7457 2020
Alex Sandberg
Morgan Stanley (NOMAD)	Tel: 020 7425 8000
Jonathan Lane
Nick White

Editors' Notes

Max Property Group Plc ('MPG') is a Jersey incorporated closed-ended real estate investment Company, with an experienced Board, chaired by Aubrey Adams, and externally managed by Prestbury Investments LLP, which is owned and managed by a team led by Nick Leslau and Mike Brown. 

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