18 Nov 2009 07:00
IRP Property Investments Limited
Interim Management Statement
For the Three-Month Period from 1 July 2009 to 30 September 2009
Investment Objective
The investment objective is to provide shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.
Performance Summary
| Total Return * | For the three month period ended 30 September 2009 |
| Net asset value per share | 3.5% |
| Ordinary share price | 31.1% |
| Portfolio total return per IPD | 3.9% |
| Investment Property Databank UK Monthly Property Index | 3.3% |
| FTSE All-Share Index | 22.4% |
| Capital Values - 3 months | As at 30 September 2009 | As at 30 June 2009 | % Change |
| Net asset value per share | 73.7p | 72.9p | 1.1% |
| Ordinary share price | 73.5p | 57.5p | 27.8% |
| FTSE All-Share Index | 2,634.8 | 2,172.1 | 21.3% |
| Discount to net asset value | 0.3% | 21.1% | |
| Net gearing # | 34.1% | 34.4% | |
Sources: F&C Investment Business Limited, Investment Property Databank ('IPD'), Datastream.
* - All total returns are based on net dividends re-invested
# - Net gearing: Bank debt (less net current assets) divided by fair value of investment properties
Dividends
The fourth interim dividend for the year ended 30 June 2009 of 1.8 pence per share was paid on 25 September 2009. In the absence of unforeseen circumstances it is the intention of the Board to maintain quarterly dividends at this rate, giving a total dividend of 7.2 pence per share for the 2009/10 financial year.
Review for the Period
The third quarter of 2009 witnessed a turnaround in the fortunes of UK commercial property. The IPD UK Monthly Index recorded the first quarterly positive returns for over two years with capital values increasing by 1.2%, producing a total return for the quarter of 3.3%.
The improvement has been centred on the transactions market where a resurgence of investor interest in prime stock has coincided with a lack of supply and a consequential inward yield movement and higher capital values. However, transaction levels remain at historically low volumes with the majority of buyers being cash purchasers from overseas, or UK based funds.
Additionally, this improved tone has coincided with better economic news. Commentators believe that the monetary and fiscal stimulus measures are having some effect and as order is slowly being restored to the banking system, both consumer and business confidence are stabilising. Forecasts for 2010 are being revised upwards and there are hopes that real GDP will shortly turn positive.
The improvement in the economy and property investment has not been mirrored on the occupational side. The trauma of early 2009, with its raft of administrations and collapse of tenant demand has eased, but significant problems remain. Rents are still under pressure and fell by 1.7% in the quarter but the full impact is being disguised by concessions. According to IPD, void levels remained high equating to 12.0% of rental income with empty rates payable on vacant space.
The Company's portfolio increased in value by 1.9%, which together with an income return of 2.0%, produced a total return of 3.9% over the quarter, which is in excess of the IPD index of 3.3%.
The Company's industrial properties produced the best returns in the quarter of 5.6%, mainly as a result of strong performance from the 3663 Distribution unit in Banbury which increased in value by 8.2% to £15.05m. Southampton International Park, Eastleigh further increased in value by 6.2% to £9.93m. The Company also recorded strong performance from Clifton Moor Gate, York, a motor showroom complex, which increased in value by 5.8%.
The Company has completed a letting of Unit B Hemel Gateway, Hemel Hempstead. The unit of 27,636sqft has been let for ten years with a break at the fifth year at a rent of £201,289pa. The Company has let the majority of its vacant property at 7/11 Bridge Street Guildford to Tesco Stores Ltd on the basis of a new lease for fifteen years at £60,000pa. No 36 The Parade, Leamington Spa has been let to Paperchase on a ten year lease at £85,000pa.
The void rate of the portfolio has therefore now reduced to 2.4% compared with 5.7% at 30th June. This is well below the IPD average for commercial property of 12.0%; consequently empty rates and other non recoverable costs are being kept to a minimum.
The company maintains its overweight position to industrial property (mainly in the southeast) due to its beneficial and more attractive yield. The Company has approximately £15m in cash on deposit and the Manager is currently looking at opportunities to purchase, particularly to increase weightings to the out of town retail sector, which display characteristics in terms of income security and growth which will enhance the portfolio.
Top Ten Holdings
| Property | Sector | 30/09/2009 % of portfolio |
| Unit 3663, Echo Park, Banbury | Industrial | 11.1% |
| Units 1-8, Lakeside Road, Colnbrook | Industrial | 7.9% |
| Southampton International Park, Eastleigh | Industrial | 7.3% |
| Mercury House, 1 Dove Wynd, Strathclyde Business Park | Offices | 7.0% |
| 30/40, The Parade & 47/59A Warwick Street, Leamington Spa | Retail | 6.6% |
| 1-2 Lochside Way, Edinburgh Park, Edinburgh | Offices | 6.0% |
| Hemel Gateway, Boundary Way, Hemel Hempstead | Industrial | 5.4% |
| Clifton Moor Gate, York | Out of Town Retail | 4.6% |
| Swift House, Cosford Lane, Rugby | Industrial | 4.1% |
| 7-8 High Street & 50 Colebrook Street, Winchester | Retail | 3.5% |
| Total | 63.5% |
Geographical Analysis
| Location | 30/09/2009 Percentage of Portfolio | 30/06/2009 Percentage of Portfolio | |
| South East | 51.5 | 50.9 | |
| West Midlands | 17.2 | 17.1 | |
| Scotland | 14.7 | 15.5 | |
| Yorkshire and Humberside | 4.6 | 4.4 | |
| East Midlands | 3.2 | 3.3 | |
| Eastern | 2.8 | 2.7 | |
| London - West End | 2.3 | 2.3 | |
| Rest of London | 1.8 | 1.8 | |
| South West | 0.8 | 0.8 | |
| North West | 0.6 | 0.7 | |
| North East | 0.5 | 0.5 | |
| Total | 100.0 | 100.0 |
Sector Analysis
| Sector | 30/09/2009 Percentage of Portfolio | 30/06/2009 Percentage of Portfolio | |
| Industrial | 39.1 | 38.4 | |
| Retail | 35.2 | 35.0 | |
| Offices | 21.1 | 22.2 | |
| Out of Town Retail | 4.6 | 4.4 | |
| Total | 100.0 | 100.0 |
The Board is not aware of any significant events or transactions which have occurred between 30 September 2009 and the date of publication of this statement which would have a material impact on the financial position of the Company.
Quarterly and Key Information
Further information regarding the Company, including performance since launch and the most recent annual and interim reports, can be found at the Company's website www.irppropertyinvestments.com, or at www.fandc.com This interim management statement has been prepared solely to provide information to meet the requirements of the UK Listing Authority's Disclosure and Transparency Rules.
For further information please contact:
Ian McBryde/Scott Macrae
F&C Investment Business Limited
Tel: 0207 628 8000