CLS Holdings plc Acquires 34 UK properties for £118.6 million

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Further to the announcement made on 7 August 2013, and in the Half-Yearly Financial Report on 14 August 2013, CLS confirms that it has acquired a UK-wide portfolio of 34 primarily UK Government-occupied properties (the "Portfolio") for £118.6 million, excluding costs of £5.3 million. The purchase of four long leasehold properties in the Portfolio with an aggregate value of £12.7 million is conditional on gaining landlord's consent.
 
The Portfolio, the acquisition of which is classified as a Class 2 Transaction under the Listing Rules, was purchased through FRP Advisory LLP in its capacity as receiver for certain subsidiaries of Wichford plc.  The consideration was satisfied in cash, following the sale of the majority of the Group's corporate bond portfolio. 
 
78% of the rental income of the Portfolio is receivable from UK Government bodies, including HM Revenue & Customs, Police Authorities, Courts, the Immigration Service and the Department for Work and Pensions, and 20% from Trillium (Prime) Property GP Limited (a property outsourcing company providing services to the UK Government). The Portfolio generates, net of ground rents, a rental income of £15.1 million per annum, of which 66% is index-linked. The Portfolio has a weighted average lease term of 7.2 years, or 4.8 years to the first break, and provides a net initial yield after costs of 12.23%. The Portfolio is currently 99% let.
 
The acquisition is in line with the Group's existing strategy of opportunistically purchasing high-yielding, well-let office properties with opportunities to add value through active property management. The Portfolio will be proactively managed in-house in order for the Group to meet its customers' needs most efficiently.
 
Following the acquisition, 49% of the Group's total contracted rent will be receivable from government occupiers, and 32% from major corporations.
 
The process to provide medium-term financing of the Portfolio is under way.
 
Sten Mortstedt, Executive Chairman of CLS Holdings plc, commented:
 
"The acquisition of this portfolio will play to our core strengths.  It is well let to UK Government occupiers, adds £15.1 million per annum to our operating cash flow, and provides significant opportunities to add value."