Fusion Antibody Regulatory News (FAB)

22 Oct 2007 07:01

Fabian Romania Limited22 October 2007 22 October 2007 Fabian Romania Limited (FAB.LN) Net asset value as at 30 September 2007 Highlights • As at 30 September 2007, the Net Asset Value ("NAV") per share of the Company as determined in accordance with its Articles of Association was €1.607 (at 30 June 2007: €1.548) an increase of 3.8 per cent. over the second quarter and 18.5 per cent. year to date (at 31 December 2006: €1.356). • Adjusting the current NAV for the estimated future development profits of €0.535 per share indicates a potential future NAV ("Development Profit NAV" or "DPNAV") of €2.142 per share (at 30 June 2007: €1.923) an increase of 11.4 per cent. over the second quarter and 38.6 per cent. year to date (at the 31 December 2006: €1.546). • Lakeview building consent granted and area increased. The Lakeview office joint venture development with AIG/Lincoln received its full consents and the scheme is now estimated to have a net lettable office area of 24,100 square metres ("sqm") with 427 parking spaces, which exceeds the investment manager's initial expectations. • New Town residential scheme now well into construction and experiencing strong forward sales. The fixed price construction contract has been agreed with Mivan Kier. Sales commenced in July and 139 apartments have now been reserved off plan comprising nearly all of the first release of 119 apartments and a number from an initial 50 of the second release now for sale. • Growth in DPNAV driven by a €4.2 million first time contribution from the Cubic Center forward purchase valued at 7.15 per cent. yield and an uplift of €3.4 million in the valuation of the Lakeview office joint venture based on a 6.8 per cent. yield. • Further yield convergence for the Company's fully let office buildings to 6.8 per cent. as at 30 September 2007. • In total, nine investments executed or committed, with 62,850 sqm of lettable office space in Bucharest secured together with 443 residential apartments. To the shareholders of Fabian Romania, Fabian Romania Limited ("Fabian", "Fabian Romania" or the "Company"), the AIMquoted dedicated Romanian real estate investor announces its NAV as at 30September 2007 was €1.607 per share. This represents a rise of 3.8 per cent.from the preceding second quarter NAV of €1.548 per share. For the year to date,the NAV of the company has risen 18.5 per cent. from €1.356 per share as at 31December 2006. The published NAV was calculated according to the Company's Articles ofAssociation and the results are summarised below: (as at 30 September'07) Fabians' share Bank (debt) Net Worth Original of Market Value Investment •m •m •m •mCascades 16.6 (9.3) 7.3 12.2Banu 17.1 (8.9) 8.2 12.3New Town * (^) 17.4 (3.4) 14.0 5.8Lakeview * 9.7 (5.5) 4.2 5.4Cubic Center 12.3 - 12.3 12.3Baneasa Business Center 28.4 (19.6) 8.8 23.9Timisoara * 3.5 (1.8) 1.7 1.6Net Cash 26.3Other assets / (liabilities) (1.1)**Sub-total 105.0 (48.5) 81.7 73.4Shares (#) 50,831,130NAVPS (•) 1.607Growth in Q3 2007 3.8%* represents Fabians' share of the development, Lakeview after post-acquisition debt financing** includes deposits on Evocenter & Romana plus deferred tax liabilities added back(^) includes development WIP financed by bank debtincrease in original investment in the period as set out in text Future Development Profit Under the Red Book methodology of the Royal Institution of Chartered Surveyors,residual land valuations for development projects provided to Companies such asFabian Romania, exclude the net present value of future development profits. Asat 30 September 2007, the portfolio of the Company comprised the following typeof investments as a percentage of the net asset value of the Company. Income 30%Development 39%Cash and other assets / (liabilities) 31% 100% In order to provide transparency to investors as to the potential level of suchfuture development profits that may accrue to the Company, DTZ Echinox ("DTZ")has been asked to provide estimates of these development profits. Shareholdersmay then choose to discount these profits to estimate their net present value intoday's terms based on current market conditions. The forecast developmentprofit figures are stated gross and do not include all costs that may beincurred by Fabian over the course of the projects (in particular transactionfees and any carried interest payable to the investment manager). The impliedshare of future development profit figures for the New Town, Lakeview, Timisoaraand Cubic Center schemes based on the DTZ estimates are highlighted in the tablebelow. Project Implied Fabian Share of future Development Profit Final Year of from DTZ estimates (•m) Development *New Town 8.8 2009Lakeview 9.4 2009Timisoara 4.8 2010Cubic Center 4.2 2009NAV contribution (•m) 27.2 NAVPS contribution (•) 0.535 * Fabian Romania estimates Adding these forecast development profits of €27.2 million or €0.535 per shareto the NAV produces what the Directors have called the DPNAV of €2.142 pershare. This represents a rise of 11.4 per cent. over the 30 June 2007 DPNAV of€1.923 and 38.6 per cent over the DPNAV comparative figure as at the 31 December2006 of €1.546. Sales update at New Town A full sales launch for New Town commenced in mid July 2007. The first releasecomprised 119 apartments with an average selling price of €1,219 per sqmfollowed by the first 50 apartments from the second release, priced around 10per cent. higher. As announced in the interim results at the end of September,reservation levels have been strong with 139 apartments now reserved. City widenewspaper and radio advertising has been taken to support the releases. New Town is a scheme of 72,000 sqm above ground involving the construction of636 apartments targeted at Bucharest's emerging middle class. The scheme wasgranted final building consent at the start of April 2007. Subsequently, theCompany announced in July 2007 that its joint venture development company,Phoenix Park SRL, has agreed a fixed price build contract with Mivan Kier. The land valuation remains unchanged from the 30 June valuation, given by DTZ,of €27.9 million of which 50 per cent. is owned by Fabian. Lakeview building consent granted During the quarter, building consent has been granted for the Lakeviewco-investment office development project with AIG/Lincoln. This was the lastplanning hurdle before detailed construction tendering could commence. Theconsent allows for a building of 26,125 sqm above ground with a net lettablearea of 24,100 sqm. The amount of net lettable office space is higher than theinvestment manager initially expected. The below ground constructed area isestimated to be approximately 14,875 sqm including approximately 427 parkingspaces. Ground works are expected to commence in the first quarter next yearwith completion of the project estimated to be during the third quarter of 2009. DTZ, the Company's valuers, have given a land valuation, as at 30 September2007, of €16.9 million of which 50 per cent. is owned by Fabian. Forecast grossdevelopment value is €71.8 million based on a yield of 6.8 per cent.representing an increase of 24 per cent. since over the last valuation conductedas at 30 September 2006. The Baneasa Business Center - financing drawn down During the period, the Company took steps to increase the financial efficiencyof Baneasa by increasing the level of debt secured against the building. It hasdrawn down on a debt facility with Investkredit Bank AG to increase totalborrowings secured against Baneasa to almost €19.7 million at an interest rateof 6.28 per cent. fixed for three years. This has resulted in a net equity inthe company of approximately €4.2 million on an initial acquisition value of€23.9 million. As previously stated, the building is a Class A office building comprising 9,600sqm of net lettable area. The building hosts a range of multinational tenantsincluding Schering Plough, Colgate, Fresenius, Cargill and Volksbank. Theaverage lease length is around three years with a variety of reversionary leasesat rents between €12 per sqm/month to €16 per sqm/month. The fund manager is nowworking to extend leases as they come up for renewal and is hopeful of securingrental increases at the same time. As at 30 September 2007, the building was valued by DTZ at €28.4 million. Thisrepresents a satisfactory gain of almost 19 per cent. over the purchase price inJune 2007 or a 107 per cent. return on invested equity post debt drawdown. Timisoara - further land plot acquired During the second quarter, the Company purchased a 50 per cent. interest in aresidential development site to build 250 apartments in Timisoara for €4.7million. During the third quarter, a neighbouring plot of 1,820 sqm waspurchased by the joint venture for €819k. This will allow a combined total ofapproximately 35,000 sqm of residential development above ground, subject toplanning approval and building consents. The purchase price for both land plotsincluding acquisition expenses was approximately €5.7 million. This equates toaround €445 per sqm for the land and €166 per built sqm over ground, assuming35,000 sqm. The development company has already secured and fully drawdown on aland finance facility from Banca Romanesca for €3.6 million. Including near termworking capital needs, this leaves an initial net equity requirement ofapproximately €1 million for Fabian. A firm of UK architects has been employed by the development joint venture todevelop the concept design and to work with local architects to upgrade theplanning on the site. Progress is according to schedule. DTZ have given a land valuation, as at 30 September 2007, of €7.0 million ofwhich 50 per cent. is owned by Fabian. Forecast development profits by DTZamount to €9.6 million of which 50 per cent. is due to Fabian. This shows anuplift in the land valuation of €1.3m or 23 per cent. on the cumulativeacquisition price in June and July 2007. Cubic Center - first closing achieved During the quarter, the Company paid a further €7.25 million bringing the totalfirst instalment to €12.25 million of the anticipated purchase price upon thedeveloper securing full construction finance and building consent. At practicalcompletion of the building by the developer, the Company will pay the finalinstalment based upon a forward purchase yield of 7.4 per cent. to 7.8 per cent.applied to rents achieved. The total equity requirement for the Company isestimated to be €12 million and assumes debt financing on terms currentlyavailable in the market. Construction on site continues according to plan, withthe developer estimating practical completion to be achieved during the secondquarter of 2009. DTZ, have estimated the future value of the building based on a yield of 7.15per cent. and this implies the company's future profit over and above theacquisition cost, as at 30 September 2007, of €4.2 million. This equates to aforecast return on project equity of some 34 per cent. on the full acquisitionamount. The Property Market The sub prime lending crisis overseas has had a limited impact on the Romanianproperty market. There is anecdotal evidence that some investors whoseinvestment strategy involves high levels of gearing, have stepped back fromtransactions at the more speculative end of the office investment market. Inaddition, some overseas developers seeking to enter Romania or add to existingland holdings, have become more cautious in the size of schemes they are seekingto develop. Otherwise, most banks appear not to have fundamentally changed theirkey lending parameters such as loan to value, debt service coverage ratios oramortisation periods. Despite the concerns in the international credit markets, the period marked thefirst time in Romania that headline yields fell below 6 per cent.. GTC, anIsraeli developer, sold its America House building in August for a yield of 5.6per cent. to the French pension fund Ixis. However, as rents in the buildingaverage €19 per sqm/month, the effective yield is over 6 per cent. assumingfuture rents of around €21 per sqm/month are achievable given its location onVictoria Square. The investment manager anticipates that yields will consolidateat around the 6 per cent. level during the final quarter of the year. Following on from the Ixis transaction and the portfolio acquisition fromCharlemagne by Degi of Germany in the second quarter, a number of WesternEuropean open ended property, pension and insurance funds appear to be targetingthe country's property market over the remainder of the year and into 2008. Thisshould underpin current valuations and provide further evidence of yields in the6.00-6.25 per cent range. Forward purchase yields continue to be around 7.25 -8.00 per cent. depending on the location and project. The main trend to emerge during the second quarter was the upturn in officemarket rents. This has continued into the third quarter. In the investmentmanager's opinion, prime rents per sqm in Bucharest city centre have risen to€20-22 per sqm/month from €17-19 per sqm/month at the end of 2006. The upwardrise in rents has been driven by continuing low vacancy rates of sub 3 per cent.as well as continued strong foreign direct investment by new multinationals toRomania and by the expansion of existing multinationals. Several property agentsannounced, during the period, that the vacancy rate for Class A office space torent during the remainder of 2007 was now zero. The investment manager hasexperienced the shortage of space directly with the majority of tenants in theBaneasa Business Center office building seeking additional space. In terms of the new supply of office space, the investment manager believes thatcurrent forecasts of 300,000 sqm of new Class A office space to be delivered tothe market by the end of 2007 remain optimistic. Planning, land title andfinancing issues continue to act as a brake on new office developments actuallygetting off the drawing board. Regardless, total modern stock in Bucharest willremain substantially below commensurate levels in Warsaw, Prague and Budapestfor the next three years. Other activity and outlook As at 30 September 2007, approximately €21 million of equity (after refinancing)from the €38.1 million of net proceeds from the AIM listing has been earmarkedfor investment in the five transactions either executed or announced during theyear. This leaves approximately €17 million of equity to commit to furtherinvestments. The conditions for office co-investment developments continue to be attractive.The office and retail leasing markets continue to favour the developer andthough visibility is difficult, the office rental market appears well supporteduntil at least 2010. Even then, Bucharest will still have substantially lessClass A space than either Prague or Budapest in today's terms. The benefits tothe developer from rising rents and falling yields continue to more than offsetconstruction inflation. As stated previously, the investment manager no longer regards fully let officesat yields below 7 per cent. as attractive either on an absolute basis orrelative to the opportunities available in Romania in other sub-sectors of themarket or through co-development opportunities. Exciting opportunities continueto be pursued through participation in office co-investment developments andthrough the forward purchase of office buildings for delivery over the nexttwelve months where the taking of letting risk by the Company is compensated byattractive prices. The investment manager is looking at a number ofopportunities in both Bucharest and the regional cities for the purchase of landplots suitable for residential co-investment development. In retail and logistics, yields for fully let buildings or for forward purchasesof buildings once let continue to offer attractive yields of between 7.25 - 8.00per cent.. To date, the Company has not purchased any such assets. This is inlarge part due to their scarcity value, their large unit price relative to thesize of Fabian Romania and legal title issues. However, the investment manageris looking at a number of opportunities in both of these sub-sectors. The investment manager regards the outlook for the Company, the Romanianproperty market and Romania in general as attractive for remainder of thecurrent year. Mark HoldsworthFabian Capital Limited22 October 2007 Contacts: Fabian Capital LimitedMark Holdsworth Tel: +44 20 7499 9988 Shore Capital - Broker to FabianDru Danford Tel: +44 20 7408 4090 Deloitte Corporate Finance - Nominated Adviser to FabianJonathan Hinton / James Lewis Tel: +44 20 7936 3000 Notes to Editors Fabian Romania Limited is an experienced and well-known investor in theBucharest and wider Romanian real estate market and is quoted on AIM. Fabianseeks to generate attractive total returns for its shareholders through aportfolio of income producing buildings, co-development projects withexperienced partners and land investments. Fabian receives investment advicefrom Fabian Capital Limited, an independent investment management firm thatspecialises in Romanian real estate investments advice. (Fabian Capital does notcarry out any regulated activities in the UK) The directors of Fabian accept responsibility for the information contained inthis announcement. To the best of the knowledge and belief of the directors ofFabian (who have taken all reasonable care to ensure that such is the case) theinformation contained in this announcement is in accordance with the facts anddoes not omit anything likely to affect the import of such information. This information is provided by RNS The company news service from the London Stock Exchange