Sale and leaseback of Malmaison Aberdeen (UK)

MWB has announced that Malmaison (Aberdeen) Limited and Malmaison Aberdeen Property Holdings Limited, wholly owned subsidiaries of MWB's 82.5% owned subsidiary, MWB Malmaison Holdings Ltd, have concluded a contract for the sale and leaseback of the 80-room Malmaison hotel in Aberdeen for £16.1 million in cash (approx. €18.3 million).

The consideration reflects a yield which management considers to be a strong outcome for shareholders in the current market environment.

In conjunction with the sales and leaseback transactions announced on July 20, 2011, management has concluded that the sale of the property will be an advantageous way for the Group to reduce indebtedness without compromising the operations of the Group.

The 5,358-m² property is being sold to, and leased back from, CIP Property (AIPT) Limited on behalf of Citibank International plc as Trustee for Aviva Investors Property Trust. Management views the strength of the institutional counterparty as a significant endorsement of the Malmaison brand.

On completion, the property will be leased back to Malmaison (Aberdeen) Limited for an initial annual rent of £1.2 million. Malmaison (Aberdeen) Limited will enter into a 35-year lease (with a tenant's option to take a further lease for a period of 35 years) with five-year rent reviews, based on compounded indexation (capped and collared annually between 2% and 4%) and with a market rent review to take place at the end of the 35th year in the event that the tenant exercises its option to take the further 35-year lease.

There will be no operational impact from the transaction and Malmaison will continue to operate its highly regarded and award-winning brand from the property. The management considers the terms to be highly attractive in the current environment.

Given the effective long duration of the lease and the strength of the underlying operating business, management expects additional value to be recognized and capitalized in relation to the new lease.

This additional residual value has not yet been determined but management believes that, when added to the cash consideration of £16.1 million, the total will compare favorably with the property's book value of £16.5 million (£18.2 million including the operational fixtures, fittings and equipment which will be retained by the Company) at December 31, 2010, the date to which MWB's unaudited Second Interim Report and Accounts were prepared.

The transaction is conditional on approval by MWB shareholders, which will be sought by means of the issue of an explanatory circular and notice of General Meeting, such circular to be issued in due course.

Proceeds from the transaction will be used to reduce the indebtedness of Malmaison, which as at December 31, 2010, amounted to £272.1 million. The MWB Board has previously announced that the reason for extending the Group's accounting reference date to June 30, 2011 was to enable completion of the documentation relating to the proposed extension of all the Group's banking facilities. Discussions are ongoing and the Directors are confident of reaching a satisfactory conclusion. The Group continues to operate within the terms of the existing facilities.

Richard Balfour-Lynn, Chief Executive, commented: "This fifth sale and leaseback is enabling us to reduce Malmaison's debt by more than £100 million which, in today's market we regard as extremely beneficial. At the same time we are achieving our goal of maintaining a high proportion of freeholds within the portfolio of approximately 80% (by number), with the remainder made up of extremely long term operating leases.

The Malmaison and Hotel du Vin brands continue to show great resilience in the current economic climate and remain a firm favorite of our loyal customer base. We are now creating a platform to further expand our business both nationally and internationally."

Source: MWB Group Holdings Plc

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