BREI.L Regulatory News (BREI)

1 Nov 2007 07:30

ISIS Property Trust 2 Limited01 November 2007 ISIS Property Trust 2 Limited Interim Management Statement For the Three Month Period from 1 July 2007 to 30 September 2007 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 month period ended 30Total Return * September 2007 Net asset value per share -4.9%Ordinary share price +0.1%Investment PropertyDatabank All MonthlyValued Funds -1.0%FTSE All Share Index -1.8% As at As at 30 September 30 JuneCapital Values 2007 2007 % Change Net asset value per share 149.9p 159.6p -6.1Ordinary share price 123.7p 125.5p -1.4FTSE All-Share Index 3,316.9 3,404.1 -2.6Discount to net asset 17.5% 21.4%valueNet gearing # 26.2% 18.3% 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 fourth interim dividend for the year ended 30 June 2007 of 1.81 pence pershare was paid on 28 September 2007, giving a total dividend of 7.0 pence pershare for the 2006/7 financial year. Review for the Period In a difficult quarter for commercial property, the Company's net asset valuetotal return was -4.9%. The majority of the negative return can be attributed tothe portfolio performance discussed below, however, a drop in the 10 year swaprate has reduced the value of the Company's cash flow hedge, and was responsiblefor -0.9% of total return. The share price total return was +0.1%, with thediscount reducing from 21.4% at 30 June 2007 to 17.5% at the quarter end. The exceptional returns which have been enjoyed by the UK commercial propertymarket in recent years have slowed significantly. Yield compression, which hasbeen a key driver of returns, has now come to a halt with this trend beingreversed in the last quarter. In September all sectors of the property marketexperienced reductions in capital values as yields were marked out for the firsttime since December 2001. The IPD Monthly Index showed a negative return of 1.0%over the quarter, although total returns for property over the last 12 monthswere +7.2%. This correction in pricing has been seen in a period of relativelyfew transactions. Against this background, the Company's property portfolio returned -2.4% duringthe quarter. The capital value of the Company's properties fell by 3.5% with thestandard retail element of the portfolio seeing the largest fall at 4.7%. On 28 August 2007, the Company purchased the freehold interest in 1-2 LochsideWay, Edinburgh Park, Edinburgh for £14.4m, reflecting a net initial yield to theCompany of 5.5%. The property is an office building situated on one ofScotland's premier out-of-town business parks. The accommodation comprises42,401 sq ft, together with 143 car spaces. The property is let to HSBCSecurities Services (UK) Ltd, with a guarantee fromHSBC Bank plc, on two leases expiring in August 2014 at £837,380 per annum. Thenext review is due on 29 August 2009. The purchase is in line with the strategyto seek prime investments, well let to good tenant covenants. Following thepurchase, the Company's net gearing has increased, to 26.2% of total assets from18.3% as at 30 June 2007. The portfolio enjoys a secure income stream from relatively low risk tenants (asmeasured by IPD) together with an average unexpired lease term of 9.0 years. Thevoid rate in the portfolio currently stands at 2.0%, which is below the IPDaverage of 7.2%. The level of vacant property has increased from June as aresult of lease expiries but this provides opportunities to add value. AtColnbrook, Unit 6 has become available and will be refurbished prior tomarketing. In addition a floor has become available at 48/9 St James's StreetLondon SW1. This will also be refurbished which will see an increase in theestimated rental value of the building. Top Ten Holdings 30/09/2007 Percentage of portfolio Property Sector 48-49, St. James's Street, London, SW1 Offices 9.5% Unit 3663, Echo Park, Banbury Industrial 8.8% Units 1-8, Lakeside Road, Colnbrook Industrial 7.4% Mercury House, 1 Dove Wynd, Strathclyde Business Offices 6.8%Park 1-2 Lochside Way, Edinburgh Park, Edinburgh Offices 6.4% Southampton International Park, Eastleigh Industrial 6.2% 30/40, The Parade & 47/59A Warwick Street, Retail 5.4%Leamington Spa Clifton Moor Gate, York Retail 4.9% Warehouse Hemel Gateway, Boundary Way, Hemel Hempstead Industrial 4.7% Swift House, Cosford Lane, Rugby Industrial 3.9% Total 64.0% Geographical Analysis 30/09/2007 30/06/2007 Percentage Percentage of Portfolio of PortfolioLocationSouth East 44.9 48.2West Midlands 15.2 16.3Scotland 14.6 8.9London - West End 11.5 11.8Yorkshire and Humberside 4.9 5.1East Midlands 2.6 2.8Eastern 2.2 2.4Rest of London 2.0 2.2South West 0.7 0.8North East 0.7 0.8North West 0.7 0.7 Total 100.0 100.0 Sector Analysis 30/09/2007 30/06/2007 Percentage Percentage of Portfolio of PortfolioSectorIndustrial 34.2 36.5Retail 31.1 33.6Offices 29.8 24.8Retail Warehouse 4.9 5.1 Total 100.0 100.0 The Board is not aware of any significant events or transactions which haveoccurred since 30 September 2007 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 MacraeF&C Investment Business LimitedTel: 0207 628 8000 This information is provided by RNS The company news service from the London Stock Exchange