LR 15.5 Property investment companies

This section applies to a property investment company.

To be listed, a property investment company must comply with LR 2 (Requirements for listing - all securities) and LR 6 (Additional requirements for listing for equity securities), with the modifications and additional conditions set out in LR 15.5.3 G to LR 15.5.10 R and, if applicable, LR 15.5.11 R to LR 15.5.13 R, and either:

1. (1)

   the requirements for listing for an investment company set out in LR 15.2.2 R to LR 15.2.14 R and LR 15.2.18 G ; or

2. (2)

   the requirements for listing for an investment trust set out in LR 15.2.2 R and LR 15.2.17 R to LR 15.2.18 G.

In addition to complying with LR 15.2.6 R the board of directors of a property investment company must be similarly independent of any property manager or property adviser of the company.

No single property (including all adjacent or contiguous properties) can, at the time of initial listing, constitute more than 15% of the total assets of a property investment company, consolidated where applicable.

Income receivable from any single tenant, or tenants within the same group in any one financial year, must not exceed 20% of the total rental income of a property investment company in that financial year.

At least 90% by value of properties held by a property investment company must be in the form of freehold or long leasehold properties or the equivalent.

The term "long leasehold" in LR 15.5.7 R means a leasehold with over 60 years remaining either:

1. (1)

   at the time of initial listing; or

2. (2)

   at the time of acquisition of the leasehold, if acquired subsequent to initial listing.

The proportion of a property investment company's property portfolio which is unoccupied or not producing income or which is in course of substantial development, redevelopment or refurbishment must not exceed 25% of the value of the portfolio.

A property investment company that is not an investment trust must not retain more than 15% of its net profits, before gains and losses on the disposal of properties and other investments.

A new applicant must have net assets of at least 30 million, including any funds raised at the time of listing.

The articles of association of a new applicant must prohibit the borrowings of a property investment company from exceeding 65% of the gross assets of the company, consolidated where applicable.

A new applicant must ensure that all directors, associates of directors and promoters agree not to dispose of their shares, other than among themselves, for a period of two years from the date on which dealings first commence.

A property investment company must comply with LR 9 (Continuing obligations) and LR 15.4 subject to the modifications and additional conditions set out in LR 15.5.15 R to LR 15.5.23 R.

1. (1)

   A property investment company must comply, at all times, with:

   1. (a)

      LR 15.5.3 G to LR 15.5.4 R;

   2. (b)

      LR 15.5.6 R to LR 15.5.8 R;

   3. (c)

      LR 15.5.9 R except that properties acquired by a propertyinvestment company need not be counted as part of the property portfolio until six months after acquisition;

   4. (d)

      LR 15.5.10 R; and

   5. (e)

      LR 15.5.13 R.

2. (2)

   No single property (including all adjacent or contiguous properties) can, at the time of acquisition, constitute more than 15% of the gross assets of a property investment company, consolidated where applicable.

A property investment company must inform the FSA as soon as possible if it ceases to comply with LR 15.5.15 R.

A property investment company's annual accounts must:

1. (1)

   state whether LR 15.5.15 R has been met throughout the accounting period;

2. (2)

   provide an explanation for any failures to meet LR 15.5.15 R throughout the accounting period; and

3. (3)

   include a summary of the valuation, carried out in accordance with LR 15.5.18 R, of the property investment company's portfolio.

A valuation required by LR 15.5.17R (3) must:

1. (1)

   either:

   1. (a)

      be made in accordance with the Appraisal and Valuation Standards (5th edition) issued by the Royal Institution of Chartered Surveyors; or

   2. (b)

      where the valuation does not comply in all applicable respects with the Appraisal and Valuation Standards (5th edition) issued by the Royal Institution of Chartered Surveyors, include a statement which sets out a full explanation of such non-compliance; and

2. (2)

   be carried out by an external valuer as defined in the Appraisal and Valuation Standards (5th edition) issued by the Royal Institution of Chartered Surveyors.

The summary described in LR 15.5.17R (3) must include:

1. (1)

   the total value of properties held at the year end;

2. (2)

   totals of the cost of properties acquired;

3. (3)

   the net book value of properties disposed of during the year; and

4. (4)

   an indication of the geographical location and type of properties held at the year end.

In addition to the notifications required by LR 9.6.11 R to LR 9.6.15 G, a property investment company must, so far as practicable, consult the FSA in advance about any proposed changes to the board in order that the FSA may consider whether the board still has the experience required by LR 15.5.3 G.

An acquisition or disposal of a property by a property investment company will be treated in the same way as acquisitions and disposals of properties by a property company as set out in LR 10.7.1 R to LR 10.7.4 G.

A listedproperty investment company which applies to be listed as a property company will be treated as a new applicant and its existing listing will be suspended.