BREI.L Regulatory News (BREI)

16 Apr 2008 15:37

ISIS Property Trust 2 Limited16 April 2008 ISIS Property Trust 2 Limited Interim Management Statement For the Three-Month Period from 1 January 2008 to 31 March 2008 Investment Objective The investment objective is to provide shareholders with an attractive level ofincome together with the potential for capital and income growth from investingin a diversified UK commercial property portfolio. Performance Summary For the three For the nine month period month period ended 31 March ended 31 2008 March 2008 Total Return * Net asset value per share -6.3% -20.2%Ordinary share price +9.4% -20.2%Investment PropertyDatabank UK MonthlyProperty Index -3.4% -12.5%FTSE All-Share Index -9.9% -11.8% As at As at 31 March 31 December Capital Values - 3 months 2008 2007 % Change Net asset value per share 122.4p 132.5p -7.6Ordinary share price 95.0p 88.5p +7.3FTSE All-Share Index 2,927.1 3,286.7 -10.9Discount to net asset 22.4% 33.2%valueNet gearing # 29.8% 28.1% As at As at 31 March 30 June Capital Values - 9 months 2008 2007 % Change Net asset value per share 122.4p 159.6p -23.3Ordinary share price 95.0p 125.5p -24.3FTSE All-Share Index 2,927.1 3,404.1 -14.0Discount to net asset 22.4% 21.4%valueNet gearing # 29.8% 19.0% 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 cash) divided by total assets less currentliabilities Dividends The second interim dividend for the year ended 30 June 2008 of 1.8 pence pershare was paid on 11 April 2008. In the absence of unforeseen circumstances itis the intention of the Board to maintain quarterly dividends at this rate,giving a total dividend of 7.2 pence per share for the 2007/8 financial year. Review for the Period In another difficult quarter for commercial property, the Company's net assetvalue total return was -6.3%. The share price total return was 9.4%, the shareprice having recovered to 95.0 pence per share as at 31 March 2008 from 88.0pence per share as at 31 December 2007. The discount narrowed during the periodfrom 33.2% at 31 December 2007 to 22.4% at the quarter-end. The property market has been challenging over the past few months, characterisedby falling capital values, negative total returns and limited investmentactivity. This in part reflects the reduced availability of credit but it isalso a response to earlier unsustainably low yield levels and a narrowing of thedifferential between prime and secondary stock. Prices were marked down sharplyand swiftly late in 2007 to reflect changed market conditions and sentiment.More recent downgrades have been less severe and property yields have now movedabove the risk-free rate and the borrowing rate. Although property has now become more fairly priced and may benefit from thecuts in interest rates, market sentiment remains cautious and risk-averse. Thereare downside risks if the credit crunch is prolonged or intensifies or ifeconomic growth slows markedly to affect the hitherto relatively resilientoccupational market. Investors are favouring prime, well-let investments inareas of restricted supply which can deliver a steady income. Over the quarter ending 31 March 2008, the value of the Company's propertyportfolio fell by 5.0% which, combined with an income return of 1.5%, produced atotal return for the period of -3.6%. This compares with the IPD Monthly CapitalValue Index which fell by 4.7% over the quarter and, combined with income,reported a total return of -3.4%. For the first nine months of the currentfinancial year the fall in capital value equates to 15.5% which, together withthe income return of 4.1%, gave a total return for the period of -11.9%. The IPDtotal return for the same period was -12.5%. Within the individual property sectors, movements across the sectors weresimilar, with the largest sector fall during the quarter in retail warehouse(consisting of the car showroom complex at Clifton Moor Gate, York) which saw afall of 5.3%. The office sector performed better than the portfolio average anddelivered a capital return of -4.7%, helped in part by the completion of therent review at No1, Royal Standard Place, Nottingham. The property at Hemel Gateway, Hemel Hempstead increased in value by 2.4% overthe quarter to £10.1m. The increase reflected the fact that all the costs forrebuilding the property, following the Buncefield Oil Storage explosion, werefully met by insurance. The largest drop in value was from Southampton International Park, Eastleighwhich fell by £1.4m (11.0%) to reflect an initial yield of 7.1%. The property at48/49 St James Street London SW1 fell in value by £1.3m (5.9%). Although theestimated rental value of this property increased, following evidence of newlettings, this was not enough to offset the further outward movement in yield asa result of market conditions. During the quarter the income stream further improved. A number of rent reviewsand lease renewals were concluded. In particular, the rent review on No1, RoyalStandard Place, Nottingham, due on 29 November 2006, was finally agreed at£402,000pa, an uplift of £28,625pa (7.6%). The rent review due on 25 December2007 at 7-8 High Street Winchester was agreed at £338,750pa giving an uplift of£57,750pa (20.5%). The Company's portfolio continues to enjoy a secure and stable income stream.The void rate within the portfolio was 2.2% at 31 March 2008. This is a resultof lease expiries at Lakeside Road, Colnbrook and at 48/49 St James's StreetLondon SW1. However, both of these units are now the subject of refurbishmentprojects which will enhance the quality of the accommodation and improve rentaland capital values. The current void rate compares favourably with the IPDaverage void rate of 9.3% (Source IPD Monthly Index March 2008). Top Ten Holdings 31/03/2008 Percentage of portfolio Property Sector48-49, St. James's Street, London, SW1 Offices 9.2% Unit 3663, Echo Park, Banbury Industrial 8.9% Units 1-8, Lakeside Road, Colnbrook Industrial 7.8% Mercury House, 1 Dove Wynd, Strathclyde Business Offices 7.0%Park 1-2 Lochside Way, Edinburgh Park, Edinburgh Offices 6.5% Southampton International Park, Eastleigh Industrial 5.9% 30/40, The Parade & 47/59A Warwick Street, Retail 5.6%Leamington Spa Hemel Gateway, Boundary Way, Hemel Hempstead Industrial 5.1% Clifton Moor Gate, York Retail 4.7% Warehouse Swift House, Cosford Lane, Rugby Industrial 3.8% Total 64.5% Geographical Analysis 31/03/2008 31/12/2007 Percentage Percentage of Portfolio of PortfolioLocationSouth East 45.8 45.9Scotland 14.8 14.7West Midlands 14.6 14.5London - West End 11.3 11.4Yorkshire and Humberside 4.7 4.7East Midlands 2.9 2.8Eastern 2.2 2.2Rest of London 1.6 1.6South West 0.7 0.8North East 0.7 0.7North West 0.7 0.7 Total 100.0 100.0 Sector Analysis 31/03/2008 31/12/2007 Percentage Percentage of Portfolio of PortfolioSectorOffices 30.1 30.1Retail 30.5 30.4Industrial 34.7 34.8Retail Warehouse 4.7 4.7 Total 100.0 100.0 The Board is not aware of any significant events or transactions which haveoccurred between 31 March 2008 and the date of publication of this statementwhich would have a material impact on the financial position of the Company. Quarterly and Key Information Further information regarding the Company, including performance since launchand the most recent annual and interim reports, can be found at the Company'swebsite www.isispropertytrust2.com, or at www.fandc.com. For further information please contact: Ian McBryde/Scott Macrae F&C Investment Business Limited Tel: 0207 628 8000 This information is provided by RNS The company news service from the London Stock Exchange