TIDMMAX
RNS Number : 2352U
Max Property Group PLC
29 November 2013
Results for the six months ended 30 September 2013
STRONG NAV PERFORMANCE THROUGH ASSET MANAGEMENT
Portfolio well positioned to deliver attractive returns
Max Property Group Plc ("Max" / the "Company" / the "Group")
today announces its half year results for the six months to 30
September 2013.
Highlights
Six months to 12 months to
30 September 2013 31 March Change in six months since Change in
2013 31 March 2013 52 months since listing
--------------------------- ------------------- -------------- -------------------------- ------------------------
Net assets GBP318.7m GBP294.1m up 8.4% up 51%
EPRA NAV per share(1) 146.8p 136.5p up 7.5% up 53%
EPRA earnings per share(2) 2.4p 6.3p
--------------------------- ------------------- -------------- -------------------------- ------------------------
Financial highlights
-- EPRA NAV per share up 7.5% to 146.8p per share in the six
months to 30 September 2013 and up 53% since listing in May
2009
-- EPRA earnings per share 2.4p (30 September 2012: 3.6p)
-- Property valuations up 3.8%(3)
-- Net loan to value ratio at 28.5% (30% including Hospitals
joint venture)
-- Uncommitted cash of c. GBP50 million available
Portfolio highlights
-- Initial yield of 7.2% with a reversionary yield of 9.5%,
including developments
-- 51% of vacant ERV is in ongoing London office
refurbishments
-- 46% of assets by value in London, showing c. 7% capital
growth in the six month period
-- 41% of assets by value in high yielding industrials seeing
renewed investor interest
-- Industrious vacancy rate at a new low of 11.2% of ERV
-- 82 new lettings in the six months with net rent roll of
GBP1.9 million (Max share GBP1.6 million)
-- ERVs up 2.2% with High Holborn Estate up 15.1%
-- 140,000 sq ft Commodity Quay to be completed at St Katharine
Docks in Spring 2014
1 excluding fair values of financial instruments and deferred tax
2 excluding property revaluation movements, profits or losses on
sale of properties, fair value movements on financial instruments
and deferred tax
3 Max share of portfolios
Aubrey Adams, Chairman of Max Property Group Plc, comments:
"Max is well placed to take advantage of the improving property
market, with just under half of its assets in London and a further
40% in high yielding industrial property.
"Our London offices comprise St Katharine Docks and the High
Holborn Estate which are both valued at under GBP400psf, undergoing
refurbishments and have vacancy rates of over 30%, presenting good
prospects for growth on securing lettings with further potential
upside from change of use to residential. Our well let London pubs
continue to be attractive to private investors with two pubs sold
in the period at a 4.9% initial yield and at 42% over cost. Our
industrial holdings offer an attractive 10% initial yield and we
have reported improved occupancy rates in every reporting period
since purchase in 2009.
"In markets that still retain some vulnerability to economic
pressures, our protection has been to maintain modest levels of
leverage, substantial free cash flow and a disciplined acquisition
approach, paying conservative prices for properties with asset
management angles, underpinned by occupational demand. This has led
to the creation of a balanced portfolio which we believe is well
positioned to deliver attractive returns up to anticipated
liquidation in 2016."
29 November 2013
ENQUIRIES:
Prestbury Investments Tel: 020 7647 7647
Mike Brown
Nick Leslau
Sandy Gumm
FTI Consulting Tel: 020 7831 3113
Stephanie Highett
Richard Sunderland
Nina Legge
Oriel Securities Tel: 020 7710 7600
Mark Young
Nicholas How
Notes to Editors
Max Property Group Plc ("Max" or the "Company") is a Jersey
resident real estate investment company. Its Board, chaired by
Aubrey Adams, is exclusively advised by Prestbury Investments LLP,
which is owned and managed by a team led by Nick Leslau and Mike
Brown.
The Company's strategy is to exploit cyclical weakness in the UK
real estate market through opportunistic investment and active
management with a view to realising cash returns for shareholders
over an investment cycle of approximately seven and a half years
from its listing in May 2009.
Forward looking statements
This document includes forward looking statements which are
subject to risks and uncertainties. You are cautioned that forward
looking statements are not guarantees of future performance and
that if risks and uncertainties materialise, or if the assumptions
underlying any of these statements prove incorrect, the actual
results of operations and financial condition of the Group may
differ materially from those made in, or suggested by, the forward
looking statements. Other than in accordance with its legal or
regulatory obligations, the Company undertakes no obligation to
review, update or confirm expectations or estimates or to release
publicly any revisions to any forward looking statements to reflect
events that occur or circumstances that arise after the date of
this document.
Chairman's Statement
Dear Shareholder,
I am pleased to report Max Property Group Plc's results for the
six months ended 30 September 2013.
Results and financial position
EPRA net assets per share rose by 7.5% to 146.8p during the half
year to 30 September 2013, and have increased 53% since the Company
listed in May 2009.
The growth in EPRA NAV in the six months and since listing is
set out below:
Six months since 52 months
31 March 2013 since listing
(pence per share) (pence per share)
--------------------------------- ------------------ ------------------
Net rental income 6.4 46.2
Running costs (1.4) (11.4)
Net finance costs (2.9) (16.8)
Surpluses on property sales 0.4 11.7
Tax (0.2) (2.3)
--------------------------------- ------------------ ------------------
Realised profit 2.3 27.4
Share of Hospitals joint venture - 0.6
Property revaluation 8.0 22.7
Growth in EPRA NAV per share 10.3 50.7
--------------------------------- ------------------ ------------------
Our London portfolio makes up 46% of our assets and showed a
6.6% uplift during the reporting period. Both St Katharine Docks
and the High Holborn Estate are valued at under GBP400psf, are
currently undergoing refurbishments and have vacancy rates of over
30%, presenting good prospects for further growth on securing
lettings combined with some change of use potential. Both
properties are attracting healthy levels of tenant interest and in
particular we have seen rental values rise by over 15% at the High
Holborn Estate. Our well let London pubs continue to be attractive
to private investors with two pubs sold in the six months under
review at a 4.9% initial yield and disposal prices at an average of
42% over cost.
Our industrial portfolio represents a further 41% of our
holdings and showed an uplift in valuation of 2.7%. We continue to
make progress reducing industrial vacancy rates, now down to 11% of
ERV, and the current initial yield of 10% compares favourably with
the level of prices we are now seeing being bid by investors
seeking to increase their exposure to this sector.
Most property companies exclude their developments when
calculating their valuation yields and vacancy rates expressed as a
proportion of the square footage or rental value of the portfolio.
By contrast, we believe that a key attraction of our portfolio is
that it generates an initial yield of 7.2% including vacant space
currently under refurbishment, which would rise to 8.7% on letting
up the empty space and capturing reversions at St Katharine Docks
and the High Holborn Estate. Furthermore, this assumes no
improvement in the vacancy rate in the rest of the portfolio
whereas, to date, we have consistently improved the occupancy rate
of our industrial and provincial office holdings. Our reversionary
yield, the yield on value assuming full occupancy, stands at a
conservative 9.5%.
Highly competitive bidding conditions have created a challenging
environment in which to profitably reinvest the recycled GBP50
million cash we have generated from rental income and sales, with
very few deals offering a similar level of profitability to our
previous purchases. Despite this, negotiations continue on a number
of fronts. In the meantime, Max has similar levels of net gearing
to many of the leading UK REITs and the portfolio remains well
positioned for future growth, as illustrated by this month's CBRE
index showing industrial property and London and South East offices
as the best performing sectors.
Outlook
It would appear that Quantitative Easing, having supported
prices in so many financial markets around the world, has finally
found some traction in the commercial property market outside
London. The yield gap between London and the regions is as large as
we can remember and, while interest rates remain exceptionally low,
investors have a clear incentive to chase yield. Indeed, in light
of this improved market sentiment, it may now seem odd that the
provincial market is only just recovering from eighteen months of
rising yields and falling capital values. However, that was when
the prevailing lack of availability of bank finance made it
difficult for investors to exploit the yield arbitrage, and
occupational demand was in the doldrums with an economy flirting
with recession. A welcome thawing of the debt markets combined with
a much improved economic outlook has unleashed animal spirits and
with it a torrent of investor demand - much of it from overseas -
well in excess of the amount of stock currently available to buy.
This squeeze is leading to deals often going through several rounds
of bidding with the winner paying a premium. Investors trying to
get ahead of the curve in an illiquid market see the logic of
buying in bulk so demand for portfolios is strong, commanding
prices greater than the sum of their parts. In any case, a
portfolio premium is not something recognised by the valuation of
individual assets in our balance sheet.
Whilst we have felt for some time that provincial yields had
significant recovery potential, we do think that the recent benefit
of a stronger economy will take longer to feed through into
occupational markets. To this extent we may see a one-off upward
adjustment in market pricing which will be followed by a pause
while occupational markets catch up with events. In the case of our
Industrious portfolio, however, where the majority of the leases
have been renewed or voids let since the Lehmans crash, we would
anticipate an earlier resumption of rental growth, representing a
recovery in those rents set at a time of weakest occupational
demand. In contrast, when we look at the broader market, there are
still many secondary provincial office and retail properties let at
rents set during the boom years which remain significantly above
today's rental values. As these leases expire, income returns will
decline with lease renewals at lower rentals or, worse, a vacancy.
Owners may witness an experience akin to walking up the down
escalator, their ultimate direction determined by whether the
investment market propels them up faster than their cash flow takes
them downwards. Some unfortunate investors will still end up
travelling in the wrong direction despite the nascent
investment-led recovery.
By comparison, the outlook for London offices seems
unremittingly positive. Investor interest, already strong, has
broadened with UK institutions back competing for assets. Vacancy
rates are low and unlikely to be troubled by the development
pipeline any time soon. Occupier confidence has strengthened and
the more favoured West End locations are seeing rents edging back
towards their all-time highs. The burgeoning TMT sector continues
its migration east to find more affordable accommodation and, in so
doing, is making formerly less fashionable areas more desirable.
Against this background, it is no accident that the highest vacancy
rates in our portfolio (at over 30%) are in our refurbishments in
the High Holborn Estate and St Katharine Docks as we seek to catch
the wave of rising rents in improving locations.
With such a positive prognosis our main worry about Central
London is that there seems so little to worry about. Real estate
markets this benign tend not to last and with yields close to
historic lows eventually investors will either start to discount
less exciting growth rates ahead or find more attractively priced
assets elsewhere, and yields will start to edge up. However, as we
are not nearly at that point yet, owners of London property should
continue to enjoy their time in the sun.
Given the experience of the last five years it would be
foolhardy to discount completely the risks posed at one extreme by
yet another derailing of the economy and at the other by the end of
QE and strongly rising interest rates. Our protection has been to
maintain modest levels of leverage, substantial free cash flow and
a disciplined acquisition approach, paying conservative prices for
properties with asset management angles, underpinned by
occupational demand. This has led to the creation of a balanced
portfolio which we believe is well positioned to deliver attractive
returns up to anticipated liquidation in 2016.
Aubrey Adams
Chairman
29 November 2013
Report from the Property Advisor
Prestbury Investments LLP exclusively advises Max Property Group
Plc and is pleased to report on the operations of the Group for the
six months ended 30 September 2013.
The portfolio
The portfolio combines exciting added value opportunities in
London with a high yielding predominantly industrial portfolio
spread throughout the UK, with small lot sizes and a broad spread
of tenants.
Portfolio valuation movements (Max share)
Fair value Fair value Fair value ERV change
change over change over change over over six
six months six months cost months
% GBPm % %
-------------------- ------------ ------------ ------------ ----------
St Katharine Docks 3.8% 4.4 8.6% 3.9%
High Holborn Estate 13.2% 6.4 13.1% 15.1%
London Pubs 6.6% 2.7 26.5% -
Industrious 2.7% 5.1 8.2% 0.8%
Provincial Offices 1.9% 0.8 43.8% 1.2%
Hospitals (0.4)% (0.1) 4.4% 2.7%
Nightclubs (24.2)% (1.8) (31.0)% (17.8)%
3.8% 17.5 11.9% 2.2%
-------------------- ------------ ------------ ------------ ----------
Portfolio valuation yields at 30 September 2013 (Max share)
Weighted
average
Net initial Equivalent Reversionary Capital unexpired
yield yield yield value psf lease term
-------------------- ----------- ---------- ------------ ---------- -----------
St Katharine Docks 4.9% 6.5% 8.9% GBP388 5.4 years
High Holborn Estate 2.7% 6.4% 8.4% GBP375 0.8 years
London Pubs 5.4% 7.0% 5.4% GBP386 32.4 years
Industrious 10.0% 10.4% 10.9% GBP32 3.6 years
Provincial Offices 9.5% 10.1% 12.5% GBP71 3.3 years
Hospitals 7.6% 7.6% 8.0% n/a 21.4 years
Nightclubs 2.5% 12.5% 14.7% GBP26 12.9 years
7.2% 8.4% 9.5% 6.4 years
-------------------- ----------- ---------- ------------ ---------- -----------
Portfolio breakdown at 30 September 2013 (Max share)
EPRA Vacancy rate
Gross value Proportion vacancy including
GBP000 of portfolio rate* developments
----------------------- ----------- ------------- -------- -------------
St Katharine Docks 119,568 25% 4.4% 31.9%
High Holborn Estate 54,935 12% 15.4% 30.9%
----------------------- ----------- ------------- -------- -------------
Central London offices 174,503 37% 7.6% 31.7%
London Pubs 43,595 9% 0.0% 0.0%
Industrious 193,670 41% 11.2% 11.2%
Provincial Offices 42,800 9% 24.9% 24.9%
Hospitals 14,729 3% 0.0% 0.0%
Nightclubs 5,745 1% 82.5% 82.5%
Cash n/a n/a n/a n/a
475,042 100% 12.6% 19.8%
----------------------- ----------- ------------- -------- -------------
* excluding assets not available for letting
Industrious (41% of gross assets, 33% of EPRA NAV)
A portfolio of multi-let industrial estates bought out of
receivership in October 2009 for GBP244.0 million (GBP31 psf
capital value).
Activity
-- Vacancy rate by ERV reduced to 11.2% at September 2013 from 12.2% in March 2013
-- Vacancy rate by floor area reduced to 12.0% at the date of
this report, from 13.2% in April 2013 and 20.7% at acquisition
-- Vacancy rate has fallen in every reporting period since
acquisition with more than 1,000 lettings and lease renewals over
4.7 million sq ft
-- 91% of the space vacant on acquisition has since been let or sold
-- Of the 721,000 sq ft currently vacant, 90,000 sq ft (12%) is under offer
-- 107,000 sq ft is thought to be coming vacant up to March 2014
-- Six sales in the period totalling GBP2.8 million at an
average 6.4% initial yield and GBP0.8 million (44%) profit over
purchase price (14% over book value)
-- Total sales since acquisition of GBP95.3 million at an
average 7.6% initial yield and GBP21.9 million (31%) profit over
purchase price
Current portfolio
-- 70 properties
-- 831 tenancies
-- 6.0 million sq ft
-- Average unit size: 5,800 sq ft
-- 46% by value in the South East of England
-- Highly liquid: 77% of properties by number are lot sizes of GBP3 million or below
-- Weighted average unexpired lease term: 3.6 years
-- GBP20.7 million rent roll
-- Average contracted rent: GBP3.96 psf
The portfolio predominantly comprises smaller units that appeal
to a wide variety of users. It also benefits from a range of exit
options, from individual units to a whole portfolio sale.
Martlesham Heath Business Park, Ipswich (504,000 sq ft) makes up
over 10% of the portfolio by value and no other property makes up
more than 7%.
30 September Capital Area
2013 valuation Percentage value sq ft Number Number
Region GBP000 of total psf GBP 000 of properties of units
------------ ---------------- ----------- --------- ------- --------------- ----------
South East 89,440 46% GBP54 1,668 20 416
Northern
regions 67,300 35% GBP25 2,657 27 419
Midlands 27,110 14% GBP23 1,162 16 139
South West 5,155 3% GBP37 141 3 27
Scotland 4,665 2% GBP12 398 4 31
193,670 100% GBP32 6,026 70 1,032
------------ ---------------- ----------- --------- ------- --------------- ----------
St Katharine Docks (25% of gross assets, 22% of EPRA NAV)
St Katharine Docks was acquired in a 60% joint venture in August
2011 for GBP164.5 million (GBP330 psf capital value). Situated on
the Thames adjacent to Tower Bridge and the Tower of London, it
enjoys unparalleled views and includes Central London's only
marina. The investment comprised 450,000 sq ft of offices,
predominantly in three buildings, with 50,000 sq ft of waterside
restaurants, bars and shops plus the ten acre, 160 berth marina.
The strategy is to create a premium office destination by
repositioning the estate, attracting footloose central London
occupiers to a beautiful location.
International House
70,000 sq ft of offices have been refurbished, 90% of which have
been let at rents typically in the high GBP30s psf against a
historic rental level of GBP30 psf. The reception area and common
parts have been comprehensively refurbished and new restaurant and
retail units have also been created, let to Côte and Tesco.
Commodity Quay
A GBP21 million comprehensive refurbishment of Commodity Quay is
well advanced to create 140,000 sq ft of offices and ancillary
space, with completion planned for Spring 2014. There has already
been a healthy level of interest in the offices and a 6,000 sq ft
restaurant has been pre-let to Tom's Kitchen.
Current estate
-- 515,000 sq ft, of which 140,000 is under development
-- Weighted average unexpired lease term: 5.4 years
-- GBP9.4 million rent roll
-- Average contracted rent: GBP31.43 psf
-- EPRA vacancy rate: 4.4%
-- Vacancy rate including Commodity Quay (undergoing refurbishment): 31.9% of ERV
Area Area (sq ft) EPRA vacancy Vacancy
(sq ft) in refurbishment rate rate
----------------------- --------- ------------------ ------------- --------
International House 215,000 - 5.0% 5.0%
Commodity Quay 140,000 140,000 n/a 100.0%
Devon House 90,000 - 0.0% 0.0%
Ivory House and other 70,000 - 8.4% 8.4%
----------------------- --------- ------------------ ------------- --------
515,000 140,000 4.4% 31.9%
----------------------- --------- ------------------ ------------- --------
High Holborn Estate (12% of gross assets, 18% of EPRA NAV)
A freehold island site of just under one acre in London WC1 with
frontages to High Holborn and Bedford Row, acquired in November
2012 for GBP47.7 million (c. GBP320 psf capital value).
On acquisition, nine buildings provided nearly 150,000 sq ft of
unrefurbished space let to 50 tenants at low rental levels
averaging just GBP15 psf on short term leases. The low rental
levels reflected the tenants' lack of security of tenure resulting
from the former landlord's development break clauses.
Of these nine buildings, High Holborn House represents over half
of the value of the estate. A comprehensive refurbishment of the
reception areas and common parts will be completed by Christmas
2013 at a cost of GBP1.7 million. Five office suites totalling
14,000 sq ft have been refurbished with the level of lettings
rising throughout the period from high GBP20s psf to mid/high
GBP30s psf. A pre-letting of 8,500 sq ft is in solicitors' hands
and further suites will be taken back and refurbished during
2014.
At Caroline House, vacant possession of all the offices has been
secured and a comprehensive refurbishment, including recladding the
High Holborn facade, is due to commence shortly at a cost of GBP2.2
million. We expect to quote rents in the mid/high GBP40s psf.
The smaller buildings fronting Bedford Row and Hand Court,
totalling 31,000 sq ft, have potential for change of use to
residential. The retail units fronting High Holborn (11,000 sq ft)
are being consolidated into larger units that enjoy stronger demand
from higher quality operators.
Area
(sq ft) Asset plan
---------------------------------- --------- ----------------------------
High Holborn House 87,000 Rolling refurbishment
Caroline House 19,000 Comprehensive refurbishment
Brownlow House 10,000 Rolling refurbishment
---------------------------------- --------- ----------------------------
Properties fronting High Holborn 116,000
Six properties fronting Bedford 31,000 Potential change
Row and Hand Court of use to residential
147,000
---------------------------------- --------- ----------------------------
The current rent roll is GBP1.6 million and the EPRA vacancy
rate is 15.4%. Including space under development, the vacancy rate
is 30.9%.
London Pubs (9% of gross assets, 9% of EPRA NAV)
29 freehold pubs with a total floor area of 150,000 sq ft,
situated in high value residential areas in London, were acquired
in January 2011 for GBP44.4 million (GBP300 psf capital value). The
pubs were located in Marylebone, Notting Hill, Chelsea,
Clerkenwell, Spitalfields, Southwark, Camden, Highgate, Islington,
Barnes, Sheen, Chiswick, Battersea, Wandsworth, Clapham, Balham,
Tooting and Fulham.
At acquisition, the initial yield on the portfolio was 6.7%,
which has subsequently risen to 7.2% on cost due to increases in
the rent roll and will rise further to at least 7.4% following the
next rent review in January 2014. The independently assessed vacant
possession value of the portfolio at the time of acquisition,
subject to existing use as pubs, was approximately the same as the
purchase price, and many of the properties are considered by the
management team to have a higher alternative value for residential
use in the event that they should fall vacant and planning consent
for change of use secured.
During the period, two pubs in Islington and Whitechapel were
sold at a combined price of GBP5.3 million, representing an initial
yield of 4.9% and a profit of 42% over cost. In March 2013, a
Notting Hill pub was contracted for sale for GBP1.5 million at an
initial yield of 4.4% and a profit of 37% over cost, with
completion after the balance sheet date. Including pubs sold in
prior periods, total profits on sale to date amount to GBP3.1
million, which is 31% over cost. Following these sales, the average
lot size is now GBP1.8 million at the most recent valuation.
The pubs are let on 35 year full repairing and insuring leases
commencing in January 2011 to Enterprise Inns Plc at market rents
well covered by trading profits. We consider Enterprise Inns to be
a sufficiently strong covenant to cover the rent, with their share
price having more than doubled in the past twelve months. Rents
initially totalled GBP3.0 million per annum (GBP2.3 million for the
portfolio still owned), with minimum 3% per annum and maximum 4%
per annum RPI-linked uplifts occurring annually for the first five
years and every five years thereafter. After the disposals
mentioned above, the passing rent is now GBP2.5 million per
annum.
Provincial Offices (9% of gross assets, 4% of EPRA NAV)
A portfolio of predominantly late 1980s air-conditioned offices
purchased in February 2010 for GBP39.0 million (GBP50 psf capital
value) from a property fund seeking liquidity to meet
redemptions.
Activity
-- Vacancy rate by area 25%, compared to 48% at acquisition and 26% in April 2013
-- GBP32.0 million raised in May 2012 on a non-recourse
financing of five properties with 18% vacancy rate
-- Two properties sold since acquisition for GBP6.7 million at 43% over purchase price
-- Remaining uncharged assets are valued at GBP11.3 million
(GBP52 psf) and have a 38% vacancy rate. 95% of that vacant space
is refurbished
Current portfolio
-- Nine properties (eight freeholds, one 102 year peppercorn leasehold)
-- 63% by value in the South East, 30% in Manchester, 7% in Bristol
-- 639,000 sq ft
-- Average lot size GBP5.0 million
-- GBP4.3 million rent roll
-- Average contracted rent GBP10.59 psf
Nightclubs Portfolio (1% of gross assets, 2% of EPRA NAV)
The Nightclubs portfolio was acquired in October 2010 for GBP9.8
million. At the time of acquisition, three of the 14 clubs were
vacant and the initial yield on acquisition was 14.9%. Three
properties were sold between 2010 and 2012 and net income since
acquisition, including those sale proceeds, is GBP5.4 million which
represents 55% of the original purchase price.
Nine of the nightclubs were let to Atmosphere Bars and Clubs
Limited. However, in May 2013 the tenant went into administration
and all but one of their units, which was sublet to other
occupiers, have now been closed. This led to a GBP1.8 million (24%)
writedown in the value of the portfolio to GBP5.7 million. Freehold
offers have since been received in respect of six of the
nightclubs.
Hospitals Portfolio (3% of gross assets, 1% of EPRA NAV)
Four freehold private hospitals in Blackburn, Liverpool, Ayr and
Stirling were acquired in a joint venture with Lloyds Banking Group
in May 2010. Max invested a nominal sum in the joint venture to
acquire a 45% interest and Lloyds injected the assets with
associated debt funding.
The joint venture paid GBP31.6 million for the portfolio, fully
debt financed on a non-recourse basis by Lloyds. Each hospital is
let on full repairing and insuring terms to BMI Healthcare Limited,
guaranteed by General Healthcare Group Limited, for a term of 25
years from May 2010 with a tenant option to renew for a further ten
years. The initial rent was GBP2.3 million per annum with annual,
upwards only uncapped RPI-linked rent reviews throughout the term.
During the period, the third rent review has resulted in a rental
uplift of 3% and the rent is now GBP2.65 million per annum.
In May 2013 Lloyds disposed of its interest in the debt to a
joint venture between Texas Pacific Group and Goldman Sachs. Since
the balance sheet date it has also disposed of its equity in the
Hospitals joint venture to the same purchaser.
Financial review
Balance sheet
Movements in net asset value
The increase in EPRA net asset value over the six months ended
30 September 2013 and since listing comprises:
NAV growth in six months NAV growth in 52 months
since 31 March 2013 since listing
----------------------------------------- -------------------------- -------------------------
Pence Pence
GBPm per share GBPm per share
----------------------------------------- --------- --------------- --------- --------------
Net rental income 15.1 6.8 111.2 50.6
Rent smoothing adjustments* (1.0) (0.4) (9.7) (4.4)
----------------------------------------- --------- --------------- --------- --------------
Net rent excluding future rental uplifts 14.1 6.4 101.5 46.2
Running costs (3.0) (1.4) (24.8) (11.4)
Net finance costs (6.4) (2.9) (37.0) (16.8)
Surpluses on property sales 1.0 0.4 25.9 11.7
Tax (0.6) (0.2) (5.1) (2.3)
----------------------------------------- --------- --------------- --------- --------------
Realised profits 5.1 2.3 60.5 27.4
Share of Hospitals joint venture - - 1.0 0.6
Property revaluation 17.5 8.0 50.0 22.7
EPRA NAV uplift 22.6 10.3 111.5 50.7
----------------------------------------- --------- --------------- --------- --------------
* Accounting standards require lease incentives and fixed or
guaranteed rental uplifts to be spread evenly over the term of a
lease. The amounts described above as "rent smoothing adjustments"
represent the effect of spreading uplifts and incentives, and
relate principally to the leases on the London Pubs portfolio where
there are 3% per annum minimum uplifts throughout the 35 year lease
term.
EPRA triple net asset value
EPRA triple net asset value is the EPRA net asset value after
making adjustments to include debt and hedging instruments at their
fair values, and after deducting any inherent tax liabilities not
provided for in the financial statements.
The Group's EPRA triple net asset value is shown below:
30 September 2013 31 March 2013
Pence Pence
GBPm per share GBPm per share
------------------------------------------------------- ------ ----------- ----- ----------
EPRA NAV 322.9 146.8 300.3 136.5
Fair value of hedging instruments, net of deferred tax (4.2) (1.9) (6.2) (2.8)
Fair value of fixed rate debt (0.1) (0.1) (0.6) (0.3)
EPRA triple net asset value 318.6 144.8 293.5 133.4
------------------------------------------------------- ------ ----------- ----- ----------
Gearing
The Group's operations are financed by a combination of cash
resources and non-recourse debt finance. Non-recourse debt means
that the assets at risk in the event that any debt facility were to
default are limited to those within a specific ring-fenced
structure. Max's debt facilities are not cross-collateralised.
The Group's share of gross and net debt (excluding the joint
venture) is as follows:
St Katharine Docks
Industrious (60%) Provincial Offices* London Pubs Unsecured assets Total
GBPm GBPm GBPm GBPm GBPm GBPm
Gross debt (90.9) (52.0) (31.4) (19.8) (194.1)
Secured cash 4.8 7.7 1.5 0.8 14.8
Free cash 4.4 1.2 0.1 3.8 38.0 47.5
--------------------- ----------- ------------------ ------------------- ----------- ---------------- --------
Net debt (81.7) (43.1) (29.8) (15.2) 38.0 (131.8)
--------------------- ----------- ------------------ ------------------- ----------- ---------------- --------
Property value at 30
September 2013 191.9 119.6 32.9 45.1 72.3 461.8
--------------------- ----------- ------------------ ------------------- ----------- ---------------- --------
Gross LTV 47.4% 43.5% 95.4% 43.9% 42.0%
Net LTV 42.6% 36.0% 90.6% 33.7% 28.5%
--------------------- ----------- ------------------ ------------------- ----------- ---------------- --------
* excluding 16.7% non-controlling interest in Milton Keynes
asset
The Hospitals portfolio is held in a joint venture where Max has
a 45% economic interest. The non-recourse debt is held within the
joint venture company where Max's capital at risk is limited to its
equity in that joint venture, which at 30 September 2013 was GBP1.1
million. Max's share of the Hospitals joint venture gross debt is
GBP12.8 million, net debt GBP12.4 million and property value
GBP14.7 million. The Group's net LTV including the Hospitals joint
venture is 30.3%.
The Group's gearing ratio (net debt to equity) at 30 September
2013 is 41.4% excluding the Hospitals joint venture and 45.2%
including the joint venture. The Group has unsecured cash and
property assets amounting to GBP110.3 million at their 30 September
2013 valuations.
All facilities remain within the relevant covenants and, subject
to continuing to remain so, are on interest only terms with a
weighted average term to expiry at 30 September 2013 of 2.9 years.
Debt maturities range between January and September 2016.
Cash flow
The movements in cash over the six months to 30 September 2013
and in the period since listing may be summarised as:
Cash flows in six months since 31
March 2013 Cash flows in 52 months since listing
GBPm GBPm
--------------------------------------- -------------------------------------- -------------------------------------
Cash from operations 9.6 112.0
Property acquisitions net of debt
raised (0.2) (238.6)
Net cash from investment property sales 4.2 40.7
Net interest payable (6.4) (33.3)
Capital expenditure (9.0) (26.5)
Benefit of Provincial Offices escrow
account - 5.5
Purchase of interest rate cap - (2.6)
Net funds raised on listing - 211.4
--------------------------------------- -------------------------------------- -------------------------------------
Cash flow in the period (1.8) 68.6
Cash at the start of the period 70.4 -
--------------------------------------- -------------------------------------- -------------------------------------
Cash at 30 September 2013 68.6 68.6
--------------------------------------- -------------------------------------- -------------------------------------
Group Max share
Comprising: GBPm GBPm
--------------------------------------- -------------------------------------- -------------------------------------
Free cash 48.5 47.5
Cash secured under lending facilities 20.1 14.8
--------------------------------------- -------------------------------------- -------------------------------------
68.6 62.3
--------------------------------------- -------------------------------------- -------------------------------------
The most significant capital project is the refurbishment of
Commodity Quay at St Katharine Docks, where the 140,000 sq ft
building has been stripped out and is undergoing a major internal
refurbishment and reglazing. The works are expected to complete in
Spring 2014. GBP6.7 million (Max share GBP4.0 million) was spent in
the six months ended 30 September 2013 and Max's share of the
remaining anticipated capital expenditure for the project from the
balance sheet date to completion is GBP6.0 million.
Capital expenditure totalling c. GBP5.0 million is planned for
the High Holborn Estate on a two to three year rolling
refurbishment programme, improving common parts and refurbishing
office space, of which GBP0.9 million was spent in the reporting
period.
Capital expenditure requirements in the rest of the portfolio
are relatively modest and expected to remain broadly in line with
levels of past expenditure. Excluding the major projects noted
above, routine capital expenditure has averaged around GBP2.9
million per annum over the last three and a half years.
Income statement
Movements in property valuations shown in the income statement
are described in the portfolio section of this report. The other
key elements of the income statement are described below.
Net income from property activities
Max's share of net rental surpluses and surpluses on sales have,
in the period from listing to 30 September 2013, contributed 57.9p
of the net 50.7p per share growth in that period, covering all
running costs, interest and tax by approximately twice.
Net income in
six months since Net income in 52 months since listing
31 March 2013
Pence Pence
GBPm per share GBPm per share
------------------------------------------------- ---------- ---------- ------------------ ---------------------
Gross rent 18.5 8.4 142.8 64.9
Direct property costs (3.4) (1.6) (31.6) (14.3)
------------------------------------------------- ---------- ---------- ------------------ ---------------------
Rental surplus 15.1 6.8 111.2 50.6
------------------------------------------------- ---------- ---------- ------------------ ---------------------
Proceeds from sale of trading properties - - 28.8 13.1
Cost of trading properties sold - - (22.8) (10.4)
------------------------------------------------- ---------- ---------- ------------------ ---------------------
Profit on sale of trading properties - - 6.0 2.7
------------------------------------------------- ---------- ---------- ------------------ ---------------------
Proceeds from sale of investment properties 8.3 3.8 86.1 39.1
Cost of investment properties sold (7.3) (3.4) (66.2) (30.1)
------------------------------------------------- ---------- ---------- ------------------ ---------------------
Profit on sale of investment properties 1.0 0.4 19.9 9.0
Property surplus reported in the income statement 16.1 7.2 137.1 62.3
Rent smoothing adjustments classified within
revaluation movements (1.0) (0.4) (9.7) (4.4)
Realised property surpluses attributable to
shareholders 15.1 6.8 127.4 57.9
------------------------------------------------- ---------- ---------- ------------------ ---------------------
Provisions for rent, service charge and other billed amounts
considered irrecoverable from tenants amounted to GBP0.1 million in
the period compared to GBP0.2 million in the year to 31 March 2013
and GBP0.1 million in the six months to 30 September 2012. Rental
bad debts were 0.2% of the rent billed compared to 0.4% in the year
to 31 March 2013 and 0.2% in the six months to 30 September
2012.
The Group's largest rent from a single tenant is payable by
Enterprise Inns Plc with GBP2.5 million passing rent per annum, c.
6.5% of the Group's total passing rent as at 30 September 2013. We
consider Enterprise Inns to be a sufficiently strong covenant to
service its lease liabilities comfortably, which relate to a
profitable part of their portfolio in desirable locations, but it
is worth noting that the acquisition cost of the London Pubs
portfolio was substantially underpinned by its vacant possession
value.
All other tenants each account for less than 5% of total passing
rent, and all but ten of those also represent less than 1% of total
passing rent. This, together with the fact that the portfolio
comprises over 1,000 tenants, provides a low concentration of
tenant risk, as borne out by a relatively low and consistent
default rate through tough economic times.
Net financing costs
The Group's net financing cost of GBP6.8 million (Max share
GBP6.0 million) for the period principally comprises GBP6.3 million
of cash interest payable on the four non-recourse secured loan
facilities (financing the Industrious, London Pubs, Provincial
Offices and St Katharine Docks portfolios), of which Max's share is
GBP5.4 million, and GBP0.6 million of amortised finance fees.
The Provincial Offices facility is fixed rate debt. On the
remaining floating rate facilities, interest rate risk is managed
through a combination of interest rate caps and swaps, with at
least 99% of the amount of notional principal hedged in each of the
debt facilities for the term of the relevant loan.
The average interest rates paid and potential maximum rates
payable during the six months to 30 September 2013 for each on
balance sheet facility were as follows:
Average rate Maximum rate
Hedging method paid payable
------------------- --------------- ------------ ------------
Industrious Swap/cap 5.4% 6.4%
St Katharine Docks Swap 4.6% 4.6%
Provincial Offices Fixed rate 9.0% 9.0%
London Pubs Cap 2.9% 5.9%
Average 5.4% 6.0%
------------------------------------ ------------ ------------
The risk of interest rate movements on the Hospitals portfolio
has been managed by interest rate swaps which fixed the total cost
of the debt at 5.5% per annum. At the end of October 2013, the
swaps were terminated at zero cost and replaced with a cap which
will keep the maximum potential interest rate exposure at the same
level but will enable the joint venture to benefit from a reduced
interest cost to the extent that rates remain at their current low
levels. This interest cost is reported through the share of profits
of joint venture line in the income statement.
The weighted average term to maturity of the Group's debt as at
30 September 2013 is 2.9 years, with the first debt maturity being
the London Pubs facility in January 2016 and the last being the
Provincial Offices facility in September 2016.
Tax
UK income tax is payable at 20% of net rental surpluses after
deduction of costs (principally financing costs and costs of
holding vacant property) and capital allowances. No tax is payable
in Jersey on the interest or dividend income of Jersey incorporated
and tax resident companies nor on investment property capital
gains. The tax charge for the period represents an effective
underlying tax rate of 8% on profits excluding property
revaluations, derivative revaluations and joint venture
contribution.
Mike Brown
Chief Executive
Prestbury Investments LLP
29 November 2013
Condensed Group Income Statement
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
Note GBP000 GBP000 GBP000
Gross rental income 20,874 22,498 45,093
Property outgoings (4,143) (4,431) (8,977)
------------------------------------ ----- ----------------- ----------------- ----------
Gross profit 16,731 18,067 36,116
Administrative expenses:
------------------------------------ ----- ----------------- ----------------- ----------
General administrative expenses (3,220) (3,099) (6,170)
Corporate costs (347) (386) (757)
------------------------------------ ----- ----------------- ----------------- ----------
Total administrative expenses (3,567) (3,485) (6,927)
Investment property revaluation 19,345 (6,489) (6,356)
Profit on sale of investment
properties 957 77 947
Other income 56 54 108
------------------------------------ ----- ----------------- ----------------- ----------
Operating profit 33,522 8,224 23,888
Share of profit / (loss)
of joint venture 9 42 154 (443)
Net finance costs 4 (6,779) (6,960) (14,009)
Profit before tax 26,785 1,418 9,436
Tax (charge) / credit 5 (655) 287 (67)
Profit for the period 26,130 1,705 9,369
------------------------------------ ----- ----------------- ----------------- ----------
Profit for the period attributable
to:
Owners of the parent 23,189 1,803 8,269
Non-controlling interests 6 2,941 (98) 1,100
------------------------------------ ----- ----------------- ----------------- ----------
26,130 1,705 9,369
------------------------------------ ----- ----------------- ----------------- ----------
Pence per Pence per Pence per
Earnings per share share share share
------------------------------------ ----- ----------------- ----------------- ----------
Basic and diluted 7 10.5p 0.8p 3.8p
------------------------------------ ----- ----------------- ----------------- ----------
All amounts relate to continuing activities.
Condensed Group Statement of Comprehensive Income
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
Note GBP000 GBP000 GBP000
Profit for the period 26,130 1,705 9,369
Other comprehensive income
- items that may be reclassified
subsequently to profit or
loss
Fair value adjustment of
interest rate derivatives
in effective hedges 13 2,376 (435) (119)
Amortisation of interest
rate derivatives, transferred
to income statement (84) (152) (284)
Tax effect of interest rate
derivative fair value adjustment 5 (453) 116 79
Share of fair value adjustment
of interest rate derivatives
in effective hedges in joint
venture, net of deferred
tax 9 60 55 159
----------------------------------- ----- ----------------- ----------------- ----------
Other comprehensive income
/ (loss) 1,899 (416) (483)
----------------------------------- ----- ----------------- ----------------- ----------
Total comprehensive income
for the period, net of tax 28,029 1,289 9,204
----------------------------------- ----- ----------------- ----------------- ----------
Total comprehensive income
for the period, net of tax,
attributable to:
Owners of the parent 24,609 1,631 8,172
Non-controlling interests 3,420 (342) 1,032
----------------------------------- ----- ----------------- ----------------- ----------
28,029 1,289 9,204
----------------------------------- ----- ----------------- ----------------- ----------
Condensed Group Statement of Changes in Equity
Period ended Equity attributable
30 September 2013 (unaudited) Stated Hedging Retained to owners Non-controlling
capital reserve earnings of the parent interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- --------- --------- ---------- -------------------- ---------------- --------
At 31 March 2013 (audited) 211,367 (4,849) 87,573 294,091 46,163 340,254
Profit for the period - - 23,189 23,189 2,941 26,130
Fair value adjustment
of interest rate derivatives - 1,881 - 1,881 411 2,292
Tax effect of interest
rate derivative fair
value adjustment - (521) - (521) 68 (453)
Share of fair value adjustment
of interest rate derivatives
in joint venture, net
of deferred tax - 60 - 60 - 60
-------------------------------- --------- --------- ---------- -------------------- ---------------- --------
Total comprehensive income
for the period, net of
tax - 1,420 23,189 24,609 3,420 28,029
At 30 September 2013
(unaudited) 211,367 (3,429) 110,762 318,700 49,583 368,283
-------------------------------- --------- --------- ---------- -------------------- ---------------- --------
Period ended Equity attributable
30 September 2012 (unaudited) Stated Hedging Retained to owners Non-controlling
capital reserve earnings of the parent interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- --------- --------- ---------- -------------------- ---------------- --------
At 31 March 2012 (audited) 211,367 (4,752) 79,304 285,919 39,346 325,265
Profit for the period - - 1,803 1,803 (98) 1,705
Fair value adjustment
of interest rate derivatives - (260) - (260) (327) (587)
Tax effect of interest
rate derivative fair
value adjustment - 33 - 33 83 116
Share of fair value adjustment
of interest rate derivatives
in joint venture, net
of deferred tax - 55 - 55 - 55
-------------------------------- --------- --------- ---------- -------------------- ---------------- --------
Total comprehensive income
for the period, net of
tax - (172) 1,803 1,631 (342) 1,289
Equity contribution from
non-controlling interests - - - - 600 600
-------------------------------- --------- --------- ---------- -------------------- ---------------- --------
At 30 September 2012
(unaudited) 211,367 (4,924) 81,107 287,550 39,604 327,154
-------------------------------- --------- --------- ---------- -------------------- ---------------- --------
Condensed Group Balance Sheet
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
Note GBP000 GBP000 GBP000
Non-current assets:
Investment properties 8 532,809 462,082 509,864
Investment in joint venture 9 1,073 1,464 971
Interest rate derivatives
at fair value 13 1,033 1,276 1,425
Deferred tax asset 5 1,029 1,601 1,546
535,944 466,423 513,806
------------------------------- ----- -------------- -------------- ----------
Current assets:
Trading properties - 864 -
Trade and other receivables 10 19,053 13,119 17,512
Cash and cash equivalents 11 68,550 113,791 70,386
87,603 127,774 87,898
------------------------------- ----- -------------- -------------- ----------
Total assets 623,547 594,197 601,704
------------------------------- ----- -------------- -------------- ----------
Current liabilities:
Trade and other payables 12 (20,097) (19,508) (20,705)
Tax payable (839) (62) (280)
Interest rate derivatives
at fair value 13 (2,284) (3,058) (2,384)
(23,220) (22,628) (23,369)
------------------------------- ----- -------------- -------------- ----------
Non-current liabilities:
Borrowings 13 (225,865) (236,045) (229,000)
Interest rate derivatives
at fair value 13 (3,874) (6,197) (6,764)
Obligations under finance
leases 13 (1,616) (1,652) (1,652)
Deferred tax liability 5 (689) (521) (665)
(232,044) (244,415) (238,081)
------------------------------- ----- -------------- -------------- ----------
Total liabilities (255,264) (267,043) (261,450)
------------------------------- ----- -------------- -------------- ----------
Net assets 368,283 327,154 340,254
------------------------------- ----- -------------- -------------- ----------
Equity attributable to owners
of the parent:
Stated capital 211,367 211,367 211,367
Hedging reserve (3,429) (4,924) (4,849)
Retained earnings 110,762 81,107 87,573
318,700 287,550 294,091
Non-controlling interests 6 49,583 39,604 46,163
Total equity 368,283 327,154 340,254
------------------------------- ----- -------------- -------------- ----------
Pence per Pence per Pence per
share share share
------------------------------- ----- -------------- -------------- ----------
Basic and diluted NAV per
share 14 144.9p 130.7p 133.7p
EPRA NAV per share 14 146.8p 134.1p 136.5p
------------------------------- ----- -------------- -------------- ----------
Condensed Group Cash Flow Statement
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
Cash flows from operating activities:
Profit before tax 26,785 1,418 9,436
Adjustments for non-cash items
Investment property revaluation (19,345) 6,489 6,356
Profit on sale of investment
properties (957) (77) (947)
Share of (profit) / loss of
joint venture (42) (154) 443
Net finance costs 6,779 6,960 14,009
Cash flows from operations before
changes in working capital 13,220 14,636 29,297
Change in trade and other receivables (1,847) (3,711) (6,035)
Change in trade and other payables (2,080) (512) (233)
Tax recovered / (paid) 297 (618) (898)
Cash flows from operations 9,590 9,795 22,131
Investing activities:
Investment property acquisitions - (478) (47,488)
Capital expenditure on investment
properties (9,027) (6,079) (11,165)
Recoveries from escrow account - 41 41
Proceeds from sale of investment
properties 7,953 3,084 8,251
Interest received 88 136 215
Cash flows from investing activities (986) (3,296) (50,146)
Financing activities:
Loans drawn down - 32,000 32,000
Loan arrangement fees paid (154) (1,362) (2,540)
Loans repaid (3,751) (884) (7,102)
Interest paid (6,506) (5,693) (12,373)
Purchase of interest rate cap (29) - -
Distribution to non-controlling
interests - - (15)
Capital contribution from non-controlling
interests - 600 5,800
Cash flows from financing activities (10,440) 24,661 15,770
Net (decrease) / increase in
cash and cash equivalents (1,836) 31,160 (12,245)
Cash and cash equivalents at
start of period 70,386 82,631 82,631
------------------------------------------- ----------------- ----------------- ----------
Cash and cash equivalents at
end of period 68,550 113,791 70,386
------------------------------------------- ----------------- ----------------- ----------
Notes to the Interim Report
1. General information about the Group
Max Property Group Plc was listed on AIM and CISX on 27 May
2009. It is a closed-ended real estate investment company
incorporated in Jersey on 17 April 2009.
The financial information set out in this report covers the six
month period to 30 September 2013, with comparative amounts
relating to the six month period to 30 September 2012 and the year
to 31 March 2013.
This financial report includes the results and net assets of the
Company and its subsidiaries, together referred to as the Group,
along with the Group's interest in the results and net assets of
its joint venture.
Further general information about the Company and the Group can
be found on its website: www.maxpropertygroup.com.
2. Basis of preparation
The financial information contained in this report has been
prepared in accordance with IAS 34, "Interim Financial Reporting"
as adopted by the European Union, and on a going concern basis.
The condensed financial statements for the interim period are
unaudited and do not constitute statutory accounts for the purposes
of the Companies (Jersey) Law 1991. They should be read in
conjunction with the Group's statutory accounts for the year ended
31 March 2013, which are prepared under IFRS and upon which an
unqualified auditors' report was given.
Except as noted below, the accounting policies adopted in this
report are consistent with those included in the financial
statements of the Group for the year ended 31 March 2013 and are
expected to be consistently applied in the year ending 31 March
2014. The annual report is available from the Investor Centre page
of the Company's website, www.maxpropertygroup.com, or by writing
to the Company Secretary.
In the current financial year the Group has adopted the
amendments to IAS 1 "Presentation of Items of Other Comprehensive
Income" and IFRS 13 "Fair Value Measurement". The amendments to IAS
1 require items of other comprehensive income to be grouped by
those items that will be reclassified subsequently to profit or
loss and those that will be never be reclassified, as well as their
associated income tax. IFRS 13 impacts the disclosure and
measurement of financial instruments held at fair value, as set out
in note 13.
The Group's financial performance is not subject to material
seasonal fluctuations.
3. Operating segments
During the current and prior periods, the Group operated in and
was managed as one business segment, being property investment. All
revenue arises from property investment and trading, with all
properties located in the United Kingdom. No single tenant
represented more than 10% of the Group's revenues during the
current or any prior periods.
4. Finance income and costs
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
----------------------------------------- ----------------- ----------------- ----------
Recognised in the income statement:
Finance income
Interest on cash deposits 87 136 215
----------------------------------------- ----------------- ----------------- ----------
Finance costs
Interest on secured debt (6,253) (5,965) (12,269)
Amortisation of loan issue costs (628) (503) (1,096)
Other finance costs (170) (287) (493)
Fair value adjustment of interest
rate derivatives in ineffective
hedges (note 13) 193 (404) (464)
Amount recycled from the hedging
reserve 84 152 284
Finance lease interest (92) (89) (186)
----------------------------------------- ----------------- ----------------- ----------
Total finance costs (6,866) (7,096) (14,224)
----------------------------------------- ----------------- ----------------- ----------
Net finance costs recognised in
the income statement (6,779) (6,960) (14,009)
----------------------------------------- ----------------- ----------------- ----------
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
----------------------------------------- ----------------- ----------------- ----------
Recognised in other comprehensive
income:
Fair value adjustment of interest
rate derivatives in effective
hedges 2,376 (435) (119)
Amount recycled to the income
statement (84) (152) (284)
----------------------------------------- ----------------- ----------------- ----------
Net finance income / (costs) recognised
in other comprehensive income 2,292 (587) (403)
----------------------------------------- ----------------- ----------------- ----------
Further information about the hedging instruments, including
details of their valuation at the balance sheet date, is included
in note 13.
The weighted average interest rate payable by the Group on its
secured loans for the period ended 30 September 2013, including all
lenders' margins but excluding amortised finance costs, was 5.4%
(30 September 2012: 5.2%; 31 March 2013: 5.3%). The maximum rate
payable in the period, had market rates exceeded the various fixed
and capped rates protected by hedging transactions, would have been
6.0% (30 September 2012: 5.9%; 31 March 2013: 6.0%).
5. Taxation
The tax charge / (credit) for the period recognised in the
income statement was as follows:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
------------------------------------- ----------------- ----------------- ----------
Current tax: current year 567 415 987
Current tax: adjustments in respect
of prior years - (840) (1,220)
Deferred tax 88 138 300
------------------------------------- ----------------- ----------------- ----------
655 (287) 67
------------------------------------- ----------------- ----------------- ----------
The tax assessed for the period varies from the standard rate of
income tax in the UK of 20%. The differences are explained
below:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
--------------------------------------- ----------------- ----------------- ----------
Profit before tax 26,785 1,418 9,436
--------------------------------------- ----------------- ----------------- ----------
Profit before tax at the standard
rate of income tax in the UK of
20% 5,357 284 1,887
Adjustments in respect of prior
years - (840) (1,220)
Adjusted for the effects of:
Revaluations not subject to tax (3,869) 1,298 1,271
Income and property disposal profits
not subject to tax (1,248) (1,408) (2,730)
Share of results of joint venture
shown after tax (8) (31) 89
Expenses not deductible for tax 186 403 610
Tax losses not yet utilised 234 6 160
Other 3 1 -
--------------------------------------- ----------------- ----------------- ----------
655 (287) 67
--------------------------------------- ----------------- ----------------- ----------
The movement on the deferred tax asset was as follows:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
------------------------------------- ----------------- ----------------- ----------
At the start of the period 1,546 1,453 1,453
Tax on interest rate derivative
fair value adjustment, (charged)
/ credited to the income statement (64) 32 14
Tax on interest rate derivative
fair value adjustment, (charged)
/ credited to other comprehensive
income (453) 116 79
------------------------------------- ----------------- ----------------- ----------
At the end of the period 1,029 1,601 1,546
------------------------------------- ----------------- ----------------- ----------
The movement on the deferred tax liability was as follows:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
----------------------------------- ----------------- ----------------- ----------
At the start of the period 665 351 351
Tax on recognition of fixed and
minimum guaranteed rent reviews,
charged to the income statement 24 170 314
At the end of the period 689 521 665
----------------------------------- ----------------- ----------------- ----------
Tax status of the Company and its subsidiaries
Any Group undertakings earning income are either tax resident in
Jersey or are tax transparent entities owned by Jersey resident
entities. Jersey has a corporate income tax rate of zero, so the
Company and its subsidiaries are not subject to tax in Jersey on
their income or gains. The Company is not subject to UK Corporation
tax on any dividend or interest income it receives.
The Group's real estate assets are located in the United Kingdom
and the net rental income earned, less deductible costs including
interest, is subject to UK income tax currently at a rate
applicable to Group undertakings of 20%. The joint venture
investment is held in two UK companies which were subject to UK
Corporation tax on profits at 23% for the period ended 30 September
2013 (30 September 2012 and 31 March 2013: 24%).
6. Non-controlling interests
The non-controlling interests represent a 16.7% investment by a
third party in three properties in Milton Keynes within the
Provincial Offices portfolio and a 40% investment by another third
party in St Katharine Docks.
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
--------------------------------------- ----------------- ----------------- ----------
At the start of the period 46,163 39,346 39,346
Capital invested by third party
in St Katharine Docks - 600 5,800
Share of profit / (loss) for the
period 2,941 (98) 1,100
Share of other comprehensive income
for the period 479 (244) (68)
Distributions paid to non-controlling
interests - - (15)
--------------------------------------- ----------------- ----------------- ----------
At the end of the period 49,583 39,604 46,163
--------------------------------------- ----------------- ----------------- ----------
7. Earnings per share
Earnings per share is calculated as profits attributable to
ordinary shareholders of the Company for each period divided by
220,000,002 ordinary shares in issue throughout each relevant
period during which profits were earned. There are no share options
or other equity instruments in issue and therefore no adjustments
to be made for dilutive or potentially dilutive equity
arrangements.
The European Public Real Estate Association ("EPRA") publishes
guidelines for calculating adjusted earnings designed to represent
core operational activities. The adjusted EPRA earnings per share
calculation is as follows, with all figures shown net of any
non-controlling interests:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
Pence Pence Pence
per share per per
GBP000 GBP000 share GBP000 share
----------------------------------- --------- ----------- --------- -------- ------- -------
Basic earnings attributable
to shareholders 23,189 10.5 1,803 0.8 8,269 3.8
Adjusted for:
Investment property revaluation (16,582) (7.5) 6,308 2.9 7,085 3.2
Profit on sale of investment
properties (957) (0.4) (77) - (947) (0.5)
Fair value adjustment of interest
rate derivatives, net of tax (439) (0.2) (131) (0.1) (464) (0.2)
Fair value adjustment of interest
rate derivatives within joint
venture, net of tax (11) - 3 - (11) -
EPRA earnings 5,200 2.4 7,906 3.6 13,932 6.3
----------------------------------- --------- ----------- --------- -------- ------- -------
8. Investment properties
Long Short
Freehold leasehold leasehold Total
GBP000 GBP000 GBP000 GBP000
------------------------------------------ --------- ---------- ---------- --------
Audited:
Carrying value as at 31 March
2012 386,729 76,268 1,128 464,125
Acquisition of the High Holborn
Estate 47,724 - - 47,724
Transfer from trading property 864 - - 864
SDLT recovery on Provincial Offices
portfolio (200) (36) - (236)
Capital expenditure net of dilapidations
receipts 11,113 (78) 57 11,092
Recoveries from escrow account (41) - - (41)
Disposals (6,424) (884) - (7,308)
Revaluation movement (3,316) (2,891) (149) (6,356)
------------------------------------------ --------- ---------- ---------- --------
Carrying value as at 31 March
2013 436,449 72,379 1,036 509,864
Unaudited:
Purchase of freehold of existing
leasehold property 1,090 (1,090) - -
Change in valuation of head leases - (36) - (36)
Capital expenditure net of dilapidations
receipts 10,755 (115) - 10,640
Disposals (7,004) - - (7,004)
Revaluation movement 18,579 781 (15) 19,345
Carrying value as at 30 September
2013 459,869 71,919 1,021 532,809
------------------------------------------ --------- ---------- ---------- --------
The following table reconciles the carrying values of the
investment properties to their fair values:
Long Short
Freehold leasehold leasehold Total
GBP000 GBP000 GBP000 GBP000
Audited:
Carrying value as at 31 March
2013 436,449 72,379 1,036 509,864
Headlease liabilities (note 13) - (1,634) (18) (1,652)
Rent free periods and fixed or
guaranteed rent reviews (note
10) 7,162 1,169 76 8,407
Capitalised letting fees 934 266 6 1,206
---------------------------------------- --------- ---------- ---------- --------
Portfolio valuation as at 31 March
2013 444,545 72,180 1,100 517,825
---------------------------------------- --------- ---------- ---------- --------
Unaudited:
Carrying value as at 30 September
2013 459,869 71,919 1,021 532,809
Headlease liabilities (note 13) - (1,598) (18) (1,616)
Rent free periods and fixed or
guaranteed rent reviews (note
10) 8,128 1,344 34 9,506
Capitalised letting fees 1,073 310 3 1,386
---------------------------------------- --------- ---------- ---------- --------
Portfolio valuation as at 30 September
2013 469,070 71,975 1,040 542,085
---------------------------------------- --------- ---------- ---------- --------
Revaluation movements comprise:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
----------------------------------- ----------------- ----------------- ----------
Property revaluation 20,624 (4,286) (1,974)
Movement in rent free periods,
fixed or guaranteed rent reviews
and capitalised letting fees (1,279) (2,203) (4,382)
----------------------------------- ----------------- ----------------- ----------
Investment property revaluation
in the income statement 19,345 (6,489) (6,356)
Investment property revaluation
attributable to non-controlling
interests (2,763) 181 (729)
----------------------------------- ----------------- ----------------- ----------
Investment property revaluation
attributable to owners of the
parent 16,582 (6,308) (7,085)
----------------------------------- ----------------- ----------------- ----------
The properties were independently valued as at 30 September 2013
by CBRE Limited, Commercial Real Estate Advisors, in their capacity
as external valuers. The valuation was prepared on a fixed fee
basis, independent of the property value, and in accordance with
RICS Valuation - Professional Standards (2012) on the basis of fair
value, supported by reference to market evidence of transaction
prices for similar properties. Fair value represents the estimated
amount that should be received for selling an investment property
in an orderly transaction between market participants at the
valuation date.
The historic cost of the Group's investment properties as at 30
September 2013 was GBP485.8 million (30 September 2012: GBP432.7
million; 31 March 2013: GBP480.3 million).
9. Investment in joint venture
The investment in joint venture represents the Group's 45%
economic interest (50% voting interest) in MPG Hospital Holdings
Limited, a company incorporated in England & Wales and
operating in the United Kingdom. The movement in the investment in
joint venture in the period was as follows:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
------------------------------------- ----------------- ----------------- ----------
At the start of the period 971 1,255 1,255
Share of profit / (loss) for the
period recognised in the income
statement 42 154 (443)
Share of other comprehensive income 60 55 159
------------------------------------- ----------------- ----------------- ----------
1,073 1,464 971
------------------------------------- ----------------- ----------------- ----------
The properties in the joint venture were independently valued as
at 30 September 2013 at GBP32.7 million (30 September 2012: GBP34.7
million; 31 March 2013: GBP32.9 million) by CBRE Limited,
Commercial Real Estate Advisors, in their capacity as external
valuers. The valuation was prepared on a fixed fee basis,
independent of the property value, and in accordance with RICS
Valuation - Professional Standards (2012) on the basis of fair
value, supported by reference to market evidence of transaction
prices for similar properties.
The Group has no capital commitments or contingent liabilities
in relation to the joint venture, and the joint venture itself has
no capital commitments or contingent liabilities.
10. Trade and other receivables
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
--------------------------------------- -------------- -------------- ----------
Trade receivables net of provisions 2,809 3,462 3,328
Investment property disposal proceeds
receivable 1,763 - 1,763
VAT receivable 499 972 408
Tax recoverable - - 305
Interest receivable - 1 1
Rent free periods and fixed or
guaranteed rent reviews - investment
properties 9,506 6,254 8,407
Rent free periods and fixed or
guaranteed rent reviews - trading
properties - 151 -
Capitalised letting fees 1,386 1,115 1,206
Prepayments and accrued income 962 977 1,713
Other receivables 2,128 187 381
--------------------------------------- -------------- -------------- ----------
19,053 13,119 17,512
--------------------------------------- -------------- -------------- ----------
GBP1.2 million (30 September 2012: GBP0.7 million; 31 March
2013: GBP0.8 million) of rent free periods and fixed or guaranteed
rent reviews are due within one year, with the remainder due in
more than one year. GBP0.3 million (30 September 2012 and 31 March
2013: GBP0.3 million) of capitalised letting fees are due within
one year, with the remainder due in more than one year. The
investment property disposal proceeds were received on schedule in
November 2013.
11. Cash and cash equivalents
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
----------------------------------- -------------- -------------- ----------
Cash and cash equivalents 48,500 97,603 43,201
Cash and cash equivalents secured
under lending facilities 20,050 16,188 27,186
68,550 113,791 70,386
----------------------------------- -------------- -------------- ----------
GBP6.3 million (30 September 2012: GBP5.6 million; 31 March
2013: GBP9.0 million) of the Group's cash and cash equivalents
balance is attributable to non-controlling interests.
12. Trade and other payables
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
--------------------------------- -------------- -------------- ----------
Trade payables 3,455 1,999 3,575
Rent received in advance 9,485 8,821 9,029
Other taxes and social security 1,382 1,217 1,917
Other amounts payable 610 3,506 1,926
Accruals and deferred income 5,165 3,965 4,258
--------------------------------- -------------- -------------- ----------
20,097 19,508 20,705
--------------------------------- -------------- -------------- ----------
All amounts above are due within one year and none incur
interest.
13. Financial assets and liabilities
Non-current financial liabilities
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
----------------------------------- -------------- -------------- ----------
Secured loans 229,353 239,422 233,104
Unamortised finance costs (3,488) (3,377) (4,104)
----------------------------------- -------------- -------------- ----------
225,865 236,045 229,000
Obligations under finance leases
(note 8) 1,616 1,652 1,652
Interest rate derivatives at fair
value 3,874 6,197 6,764
----------------------------------- -------------- -------------- ----------
231,355 243,894 237,416
----------------------------------- -------------- -------------- ----------
The fixed rate loan had a book value of GBP32.0 million (30
September 2012 and 31 March 2013: GBP32.0 million) and a fair value
of GBP32.1 million (30 September 2012: GBP32.5 million; 31 March
2013: GBP32.6 million). Otherwise there was no difference between
the book value and fair value of the non-current financial
liabilities shown above.
The Group's principal borrowing arrangements are as follows:
Facility Industrious St Katharine Provincial London Pubs
Docks Offices
Lender Wells Fargo Wells Fargo Longbow Investment Wells Fargo
Bank International/ Bank International No.2 Sàrl Bank International
Abbey National
Treasury
Services Plc
Recourse beyond
ring-fenced sub-group None None None None
Loan drawn May/June
October 2009 August 2011 2012 January 2011
Initial drawdown GBP127.7m GBP86.7m GBP32.0m GBP25.5m
Balance at 30 September
2013 GBP90.9m GBP86.7m GBP32.0m GBP19.8m
Fair value of secured
properties at 30
September 2013 GBP191.9m GBP199.3m GBP33.6m GBP45.1m
Gross LTV ratio
at 30 September
2013 47.4% 43.5% 95.4% 43.9%
Net LTV ratio at
30 September 2013 42.6% 36.0% 90.6% 33.7%
Current repayment Interest
terms Interest only Interest only only Interest only
Repayment date September
August 2016 August 2016 2016 January 2016
------------------------ -------------------- ------------------- ------------------ -------------------
The terms of the loans may, in the event of a covenant default,
restrict the ability of certain subsidiaries to transfer funds
outside the relevant security group. There have been no defaults or
other breaches of financial covenants under any of the loans during
the current or prior periods, or in the period since the balance
sheet date.
The Group had no undrawn, committed borrowing facilities at 30
September 2013 or at the end of any prior period.
Derivative financial instruments
The following derivative financial instruments were in place as
at 30 September 2013:
Notional amount Fair value
Unaudited Unaudited Audited Unaudited Unaudited Audited
30 September 30 September 31 March 30 September 30 September 31 March
Expiry 2013 2012 2013 2013 2012 2013
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- -------- -------------- -------------- ---------- -------------- -------------- ----------
August
2.6% swap 2016 63,755 - 63,755 (2,935) - (4,259)
August
3% cap 2016 32,843 - 32,843 97 - 43
4% amortising August
swap 2014 - 64,242 - - (3,998) -
August
4% cap 2014 56,750 56,750 56,750 - 2 -
2.3% amortising August
swap 2016 86,000 86,000 86,000 (3,223) (5,257) (4,889)
2.3% receivers August
swaption 2016 86,000 86,000 86,000 914 1,249 1,376
March
3.5% cap 2015 19,183 25,500 25,500 2 6 2
3.5% cap
from April Jan
2015 2016 19,183 - - 15 - -
3.5% cap
held for
future March
transactions 2015 80,817 74,500 74,500 5 19 4
-------------------- -------- -------------- -------------- ---------- -------------- -------------- ----------
(5,125) (7,979) (7,723)
----------------------------- -------------- -------------- ---------- -------------- -------------- ----------
The profile of the notional swapped and cap amounts have been
estimated to match the expected loan profiles reasonably closely.
Since the loan profiles cannot be predicted with certainty the swap
and cap profiles are monitored regularly and adjusted as
necessary.
Movements in the valuation of derivative financial instruments
in the period were as follows:
Unaudited Unaudited Audited
six months six months year to
to 30 September to 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
--------------------------------- ----------------- ----------------- ----------
At the start of the period (7,723) (7,140) (7,140)
Charged to the income statement
(note 4) 193 (404) (464)
Charged directly to the hedging
reserve 2,376 (435) (119)
Premium paid on acquisition of 29 - -
interest rate cap
At the end of the period (5,125) (7,979) (7,723)
--------------------------------- ----------------- ----------------- ----------
Derivative financial instruments are categorised as follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
------------------------ -------------- -------------- ----------
Financial assets
within one year - - -
in more than one year 1,033 1,276 1,425
Financial liabilities
within one year (2,284) (3,058) (2,384)
in more than one year (3,874) (6,197) (6,764)
(5,125) (7,979) (7,723)
------------------------ -------------- -------------- ----------
The derivative contracts and the fixed rate loan have been
valued by reference to interbank bid market rates as at the close
of business on 28 September 2013 by JC Rathbone Associates Limited,
and include the full LIBOR basis spread. All derivative financial
instruments are classified as "level 2" as defined in IFRS 13 as
their fair value measurements are those derived from inputs other
than quoted prices in active markets for identical assets and
liabilities, but that are observable either directly or
indirectly.
The fair values of hedging instruments change constantly with
interest rate fluctuations, but the exposure of the Group to
movements in interest rates is protected by way of the hedging
products listed above. These valuations do not necessarily reflect
the cost or gain to the Group of cancelling its interest rate
protection, which is generally a marginally higher cost or smaller
gain than a market valuation.
14. Net asset value per share
Net asset value per share is calculated as the net assets of the
Group attributable to shareholders at each balance sheet date,
divided by the number of shares in issue at that date.
There are no share options or other equity instruments in issue
and therefore no adjustments to be made for dilutive or potentially
dilutive equity arrangements.
The European Public Real Estate Association ("EPRA") has issued
guidelines aimed at providing a measure of net asset value ("NAV")
on the basis of long term fair values. The EPRA measure excludes
items that are considered to have no impact in the long term, such
as the fair value of derivative instruments and deferred tax
balances. The Group's EPRA NAV is calculated as follows, with all
figures shown net of any non-controlling interests:
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
Pence Pence Pence
per share per per
GBP000 GBP000 share GBP000 share
------------------------------------- -------- ----------- -------- ------- -------- -------
Basic NAV 318,700 144.9 287,550 130.7 294,091 133.7
Adjustments:
Fair value of financial instruments 4,987 2.3 7,686 3.5 7,366 3.4
Deferred tax (845) (0.4) (1,280) (0.6) (1,265) (0.6)
Fair value of financial instruments
in joint venture, net of deferred
tax 20 - 199 0.1 90 -
Fair value of trading property
in excess of book value - - 916 0.4 - -
EPRA NAV 322,862 146.8 295,120 134.1 300,282 136.5
------------------------------------- -------- ----------- -------- ------- -------- -------
15. Related party transactions and balances
Interests in shares
The direct and indirect interests of the Directors and their
families in the share capital of the Company are as follows:
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2013 2012 2013
--------------- -------------- -------------- -----------
Aubrey Adams 100,000 100,000 100,000
Mike Brown 5,000,000 5,000,000 5,000,000
Freddie Cohen 20,000 20,000 20,000
Keith Hamill 40,000 40,000 40,000
Nick Leslau 20,000,000 20,000,000 20,000,000
Alex Ohlsson 150,000 150,000 150,000
John Stephen 40,000 40,000 40,000
David Waters 25,000 25,000 25,000
--------------- -------------- -------------- -----------
Directors' fees
Directors' fees of GBP0.1 million (period to 30 September 2012:
GBP0.1 million; year to 31 March 2013: GBP0.2 million) were payable
for the period ended 30 September 2013. As at 30 September 2013,
GBP19,000 (30 September 2012 and 31 March 2013: GBP19,000) of these
fees remained outstanding and are included within other amounts
payable (note 12).
Management fees payable
Nick Leslau and Mike Brown hold partnership interests in, and
are Chairman and Chief Executive respectively of, Prestbury
Investments LLP, which is Property Advisor to the Group under the
terms of the Investment Advisory Agreement entered into on 21 May
2009. Under the terms of that agreement, management fees of GBP2.6
million (period to 30 September 2012: GBP2.5 million; year to 31
March 2013: GBP5.1 million) were payable to Prestbury in respect of
the period, of which GBPnil (30 September 2012 and 31 March 2013:
GBPnil) was outstanding as at the balance sheet date. GBP0.1
million (period to 30 September 2012 and year to 31 March 2013:
GBP0.1 million) of this fee has been reduced by the Property
Advisor in recognition of the fact that it directly receives a
management fee from the Hospitals joint venture described in note
9, in relation to the services provided which are sub-contracted by
the Company. This amount is included in other income in the income
statement.
In the course of its duties as Property Advisor and in
accordance with the terms of the Investment Advisory Agreement,
Prestbury is entitled to recover the costs and expenses properly
incurred in connection with its duties. During the period,
Prestbury has recharged at cost GBP13,000 (period to 30 September
2012: GBP12,000; year to 31 March 2013: GBP31,000) to the Group in
this respect, of which GBPnil (30 September 2012 and 31 March 2013:
GBPnil) remained outstanding as at the balance sheet date.
Incentive payments
Under the terms of the carried interest arrangements between the
Company, Prestbury (Scotland) Limited Partnership ("Prestbury
Scotland", a partnership in which Nick Leslau and Mike Brown have
49% and 25% interests respectively), and OZ UK Real Estate
Securities Limited ("Och-Ziff"), once the GBP211.4 million of net
funds raised on listing have been returned to shareholders, then
cash returns over and above that amount may ultimately be shared as
to 80% to shareholders and 20% to Prestbury Scotland and Och-Ziff,
subject to shareholders having first received an amount in excess
of a 'hurdle', being the net proceeds of share issues in cash plus
an 11% per annum preferred return.
The carried interest payments are payable only on cash
realisations other than where either the Investment Advisory
Agreement has been terminated (where the net asset value of the
Group is used in the calculation as if that amount had been
returned to shareholders in cash) or there has been a takeover of
the Company (in which case the offer price is used in the
calculation).
No carried interest payment has yet become payable. Taking
account of the fact that no fee has yet been earned, together with
the uncertainties arising from the length of the period over which
the incentive fee will be determined, the challenging future
returns required and current market index projections of general
property value growth over the medium term, the Directors have
concluded that it would not be appropriate to make a provision for
the incentive fee at this stage. The Board keeps this position
under review and, in accordance with the requirements of the
relevant accounting standard, IAS 37, will provide for a liability
for incentive payments if it is considered more likely than not
that payments will be made.
Once the investors in the St Katharine Docks joint venture have
received cash returns equal to their participations in St Katharine
Docks (currently totalling GBP103.1 million) plus an 11% per annum
preferred return, any cash returns over and above that amount will
be shared 84% to the Group and 16% to the non-controlling
interests. Taking into account the uncertainty over the ultimate
net disposal value of the joint venture's assets, no account has
yet been taken of potential incentive fees arising from this
arrangement.
16. Commitments and contingent liabilities
Unaudited Unaudited Audited
30 September 30 September 31 March
2013 2012 2013
GBP000 GBP000 GBP000
--------------------------------------- -------------- -------------- ----------
Capital commitments - Max share 10,280 1,099 11,316
Capital commitments - non-controlling
interests' share 5,108 588 7,309
15,388 1,687 18,625
--------------------------------------- -------------- -------------- ----------
Capital commitments are in respect of refurbishment works on
investment properties.
17. Events after the balance sheet date
On 4 October 2013, the sale of two industrial units in Romford
completed for cash consideration of GBP0.4 million. GBP0.1m of the
proceeds were subsequently used in part repayment of the loan
secured on the Industrious portfolio. On 6 November 2013, the sale
of the Portobello Star pub completed for cash consideration of
GBP1.5 million. GBP0.6 million of the proceeds were used in part
repayment of the loan secured on the London Pubs portfolio. In each
case, unconditional contracts for sale had been exchanged prior to
the balance sheet date. The profit on sale for Romford was included
in the results for the period ended 30 September 2013 while the
profit on sale for the pub was included in the results for the year
ended 31 March 2013. The sale proceeds are included on the balance
sheet in trade and other receivables, less any deposits paid by the
purchasers which are included in cash and cash equivalents.
Glossary
AIM The Alternative Investment Market of the
London Stock Exchange
CISX The Daily Official List of the Channel Islands
Stock Exchange
EPRA European Public Real Estate Association
EPRA EPS A measure of earnings per share designed
by EPRA to present underlying earnings from
core operating activities
EPRA NAV A measure of net asset value designed by
EPRA to present net asset value excluding
the effects of fluctuations in value in
instruments that are held for long term
benefit, net of deferred tax
EPRA Vacancy Rate ERV of vacant space divided by ERV of the
whole portfolio, excluding in each case
any property under development
EPS Earnings per share, calculated as the earnings
for the period after tax attributable to
members of the parent Company (that is,
excluding any non-controlling interests)
divided by the weighted average number of
shares in issue in the period
Equivalent Yield The constant capitalisation rate which,
if applied to all cash flows from an investment
property, equates to the fair value
ERV Estimated rental value: the open market
rental value expected to be achievable at
the date of valuation
Gross LTV LTV calculated on the gross loan amount
Initial Yield Annualised net rents on investment properties
as a percentage of the investment property
valuation
Investment Advisory Agreement The agreement made between the Company,
Prestbury Investments LLP and Gallium Fund
Solutions Limited under which Prestbury
provides certain services to the Group
LTV The outstanding amount of a loan as a percentage
of property value
NAV Net asset value
Net LTV LTV calculated on the gross loan amount
less cash balances
Property Advisor Prestbury Investments LLP
or Prestbury
psf Per square foot
Reversionary Yield The anticipated yield to which the Initial
Yield will rise once the rent reaches the
ERV
sq ft Square feet
This information is provided by RNS
The company news service from the London Stock Exchange
END
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