TIDMIERE
RNS Number : 1322Y
Invista European Real Estate Trust
27 February 2012
INVISTA EUROPEAN REAL ESTATE TRUST SICAF ("IERET" or the
"Company")
ANNOUNCEMENT OF NAV AND INTERIM MANAGEMENT STATEMENT
FOR THE QUARTER ENDED 31 DECEMBER 2011
27 February 2012
Net Asset Value
As at 31 December 2011, the Company's unaudited Net Asset Value
calculated using International Financial Reporting Standards and
adjusted to add back the change in fair value of the warrants and
deferred tax was EUR0.483 (40.5p) per share, reflecting a decrease
of EUR0.040 or 7.7% over the quarter and 5.0p or 11.0% in
Sterling.
As at 31 December 2011, the unaudited Net Asset Value,
calculated under International Financial Reporting Standards, was
EUR0.471 per share.
A breakdown of the unaudited Net Asset Value is set out
below:
In EUR million As at As at 3 month 3 month
31 Dec 30 Sept change change (%)
11 11
------------------------------- ----------- ----------- ------- -----------
Property portfolio
Independent valuation 441.1 451.1 -10.0 -2.2%
Valuation of assets sold - - - -
Like for like direct property 441.1 451.1 -10.0 -2.2%
Net current assets 33.7 33.0 +0.7 +2.1%
Market value of swaps/FX (19.5) (20.1) +0.6 -3.0%
Interest bearing loans
and liabilities (296.2) (295.9) -0.3 +0.1%
Preference shares (31.7) (30.3) -1.4 +4.6%
Market value of warrants (1.1) (2.3) +1.2 -52.2%
Net deferred tax liabilities (3.7) (4.3) +0.6 -14.0%
------------------------------- ----------- ----------- ------- -----------
Net Asset Value 122.6 131.2 -8.6 -6.6%
------------------------------- ----------- ----------- ------- -----------
Adjusted Net Asset Value(1,4) 125.7 136.1 -10.4 -7.6%
Adjusted Net Asset Value(1,4)
per ordinary share EUR 0.483 0.523 -0.040 -7.7%
Adjusted Net Asset Value
per ordinary share fully
diluted EUR(1, 2) 0.470 0.504 -0.034 -6.8%
Net Asset Value per preference
share EUR(3,4) 1.20 1.18 +0.02 +1.7%
Number of ordinary shares 259,980,909 259,980,739 +170
------------------------------- ----------- ----------- ------- -----------
1 Net Asset Value adjusted to add back deferred tax (both
current and non-current liabilities) and change in fair value of
the warrants from book value
(2) Assumes all warrants are exercised at 29p per share and that
the fully diluted number of ordinary shares is 289,086,083
(3) The NAV for preference shares is equal to the nominal value
plus accrued interest divided by the total number of preference
shares
(4) As at 30 September 2011, deferred tax liabilities of EUR24.9
million, based upon temporary difference at the time of initial
recognition arising from transactions treated as asset acquisitions
have not been recognised in accordance with IAS 12. The Group as
deferred tax assets of EUR14.2 million which also have not been
recognised.
The unaudited Net Asset Value incorporates a number of events
and key factors during the quarter ended 31 December 2011
including:
-- The property valuation has decreased by EUR10.0 million or
EUR0.04 per share. This reflects the change in value of the
existing portfolio, as there have been no property transactions in
the quarter.
-- A reduction in the marked-to-market valuation of the
Company's interest rate swaps of EUR0.6 million.
-- A reduction in the fair value of the Company's warrants of EUR1.2 million.
-- An increase in the value of the Company's preference shares
of EUR1.4 million, largely due to foreign currency difference,
partially offset by a 0.6 million gain on sterling cash
balances.
The Company's unaudited Net Asset Value figure incorporates the
independent property portfolio valuation as at 31 December 2011.
The property portfolio will next be valued on 31 March 2012.
Figures converted into sterling assume a EUR per STG exchange
rate of 1.1933 as at 31 December 2011.
Property Portfolio
As at 31 December 2011, the Company's property portfolio was
valued at EUR441.1 million and comprised 39 assets across 6
countries. This compares with the property portfolio as at 30
September 2011, which comprised 39 assets valued at EUR451.1
million in 6 countries. The like-for-like decrease in the property
valuation over the quarter was 2.2%, a decrease of EUR10.0 million
which reflects tightened liquidity and negative sentiment in
Eurozone markets since June 2011.
As at 31 December 2011, the Company's portfolio generated gross
income of EUR36.9 million per annum, representing a gross income
yield of 8.38% and a net income yield of 7.41%. The portfolio void
level remained stable over the quarter at 10.2% as at 31 December
2011.
The portfolio's credit rating as measured by the Investment
Property Databank's M-IRIS credit analysis system in December 2011
was 73 out of 100, which is classified in the "low to medium risk
band".
As at 31 December 2011 the portfolio composition was as
follows:
Sector Weightings
Sector %*
----------- -------
Office 31.3%
----------- -------
Logistics 50.6%
----------- -------
Retail 18.1%
----------- -------
Total 100.0%
----------- -------
*Percentage of aggregate asset value as at 31 December 2011
Country Weightings
Country %*
---------------- -------
France 43.5%
---------------- -------
Germany 42.9%
---------------- -------
Spain 4.8%
---------------- -------
Netherlands 3.4%
---------------- -------
Belgium 3.3%
---------------- -------
Czech Republic 2.1%
---------------- -------
Total 100.0%
---------------- -------
*Percentage of aggregate asset value as at 31 December 2011
Top 10 Properties
Property Location Sector %*
------------------------- ----------- ------
Heusenstamm, Frankfurt,
Germany Office 14.2%
------------------------- ----------- ------
Riesa, Germany Retail 10.1%
------------------------- ----------- ------
Cergy, Paris, France Office 6.2%
------------------------- ----------- ------
Lutterberg, Germany Logistics 6.1%
------------------------- ----------- ------
Grenoble, France Office 3.8%
------------------------- ----------- ------
Roth, Germany Retail 3.5%
------------------------- ----------- ------
Miramas, France Logistics 3.5%
------------------------- ----------- ------
Monteux, France Logistics 3.5%
------------------------- ----------- ------
Marseille, France Logistics 3.2%
------------------------- ----------- ------
Madrid, Spain Logistics 3.1%
------------------------- ----------- ------
Total 57.2%
-------------------------------------- ------
*Percentage of aggregate asset value plus cash as at 31 December
2011
Top 10 Tenants
Tenant Name %*
----------------------- ------
Deutsche Telekom 15.6%
----------------------- ------
Norbert Dentressangle 12.0%
----------------------- ------
DHL 10.0%
----------------------- ------
Valeo 5.8%
----------------------- ------
Schenker Logistics 4.8%
----------------------- ------
Carrefour 4.3 %
----------------------- ------
AVA Marktkauf 3.3%
----------------------- ------
SDV Logistique 2.9%
----------------------- ------
Tech Data 2.8%
----------------------- ------
Real SB-Warenhaus 2.8%
----------------------- ------
Total 64.3%
----------------------- ------
* Percentage of aggregate gross rent as at 31 December 2011
Market Context
In Q4, the GDP of both the EU-27 and EA-17 contracted by 0.3%,
QoQ. In Germany, the economy contracted by 0.2% with France
experiencing low growth of 0.2%. The ongoing sovereign debt crisis
has kept consumer and producer confidence subdued and this has been
reflected in a decline of the annual growth rate in retail sales,
industrial production and international trade.
With the economic outlook remaining uncertain, occupiers are
likely to remain risk adverse with many businesses postponing
expansion plans. Where there is demand, it is focused on modern
space in core markets. In the French logistic market demand for
prime modern stock remained healthy in H2 2011, with much of the
activity focused on the North-South axis of Lille, Lyon, Marseille
& Paris with the Ile-de-France region accounting for 42% of
total annual take-up in 2011 (CBRE). However, demand for
secondary/tertiary space remains weak.
The same trend is evident in the German retail market with
demand focused on the prime locations. Tenants in good locations
are negotiating lease extensions with large national retailers
retaining much of the bargaining power in lease negotiations as
landlords seek security. Secondary and tertiary assets in poor
locations are seeing lower level of demand with retailers becoming
increasingly discerning in locations where catchment areas are
deemed not to provide sufficient demand to drive sales.
Investment increased 15% QoQ during Q4, with a total of
EUR31.9bn of transactions completed in Europe (CBRE). However, with
Q4 typically seeing higher levels of activity, a comparison with Q4
2010 shows that in all markets except France, the quarterly
investment figures were down on the previous year, reflecting
increased uncertainty and a tightening in lending conditions.
Asset Management Results
Over the quarter, the Company transitioned to a new investment
manager, Internos Real Investors ("Internos") on 15 December 2011.
With the transition, the Company has preserved a quality standard
of asset management and generated new momentum in executing asset
management initiatives. Over the quarter and post quarter end,
2,000 sqm of vacant retail and office space was let to existing
tenants in Germany and France and will result in an additional
EUR221,000 pa of rental income. In addition, three tenants
representing 11.6% of portfolio income have agreed heads of terms
on lease extensions for an average weighted lease length to break
of 7.9 years. Securing these leases will result in reducing the
risk to portfolio income over the next 12 months as well as
positioning assets for future disposal.
Despite positive results with some tenants, other occupiers in
the portfolio continue to confront challenges in the market and
this has resulted in a few tenants serving notice to vacate on
upcoming lease break. Vacancy increased post quarter end to 12.5%
following the lease break on 26,965 sqm logistics space in France.
Other tenants in logistics and retail have served notice to break
their leases, which could potentially impact portfolio revenue in
the next six months. Despite these challenges, the Company is still
in negotiations with tenants to agree new lease terms as well as
actively approach existing tenants ahead of notice period in order
to secure longer lease terms and support portfolio stability. As a
result, a further 6.6% of portfolio income is in advance
negotiations with existing tenants and 10,877 sqm of vacant space
is in discussion with both existing and potential occupiers.
The Company continues to pursue a proactive programme of
disposals and is in advance discussions with a number of potential
purchasers on assets in Germany, France and Belgium.
Borrowings
As at 31 December 2011, the Company had drawn down a total of
EUR298.0 million of senior debt in respect of its EUR359.3 million
facility with the Bank of Scotland. In addition, the Company had
cash balances of EUR33.9 million (excluding tenant deposits of
EUR4.2 million and escrow accounts of EUR3.8 million) at that date,
giving a net debt position of EUR264.1 million.
The Company's gross Loan To Value ("LTV") ratio as at 31
December 2011 was 67.6% and the net debt LTV was 59.9%.
On 25 January, the Company used EUR11.3 million of existing cash
balances to make a further repayment of the senior debt facility
with the Bank of Scotland. The interest rate on senior loan
facility with Bank of Scotland was set on 25 January 2011 and
tested on the Company's LTV ratio based on the back dated 31
December 2011 valuation. With LTV above 65% on the 31 December 2011
valuation, the debt repayment executed on 25 January 2011 reduces
the Company's LTV ratio below 65% for the purposes of the test and
will thereby continue to benefit from a reduced margin and
resultant lower interest charges.
All debt is fully hedged against changes in European interest
rates until December 2013, giving a total interest cost of 6.45%
per annum at current LTV levels.
Investment Manager
The Board appointed Internos to execute the proposed new
investment objective and policy pursuant to an Investment Advisory
Agreement dated 22 September 2011. The appointment of Internos was
approved by the Commission de Surveillance due Secteur Financier
("CSSF") as the Company's regulator (in relation to Internos acting
as manager and promoter of the Company); and Bank of Scotland in
its capacity as facility agent in connection with the credit
facility provided by it to the Company. Following both approvals on
the change of manager, the Company announced on 15 December 2011
that Internos has taken over the role of Investment Manager with
effect from 15 December 2011.
Strategy
On 14 October 2011, an Extraordinary General Meeting ("EGM") of
the Company's shareholders was held to approve a proposed new
investment objective to realise the existing property portfolio
owned by the Group and return capital to shareholders. This
resolution was approved by shareholders subject to approval by the
Commission de Surveillance due Secteur Financier ("CSSF"). The CSSF
has approved the appointment of Internos as Investment Manager and
promoter and discussions continue with the CSSF regarding the
investment objective and policy.
In the meantime, in line with the shareholder approval the
Company will continue to pursue an accelerated, proactive programme
of disposals in order to reduce the level of borrowings where this
is beneficial to the Group, to maximise returns and to enhance NAV
performance. This will include regular reviews of the relative
performance of the countries, regions and sectors in which the
Company has invested and managing asset, country and sector
allocation. The Board believes that the proposed new investment
strategy is the most appropriate course of action for the
Company.
The Company remains focused on actively managing the existing
property portfolio to generate investment performance and maximise
return on disposals. This approach will involve the implementation
of initiatives set out in asset level business plans such as
re-negotiating leases, maximising net rent receivable from tenants,
extending lease duration to preserve income security, letting up
current vacancy and stabilising rent.
For further information, please contact:
Internos Real Investors
Ludovic Bernard +44 20 7355 8800
Citco REIF Services (Luxembourg) SA
Marta Kozinska +352 47 23 23 267
Hudson Sandler
Michael Sandler +44 20 7796 4133
This information is provided by RNS
The company news service from the London Stock Exchange
END
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