Last checked at 2 Mar 2009 07:00
Date: 2 March 2009
On behalf of: First Property Group plc ("First Property" or the "Group")
Embargoed for: 0700hrs
First Property Group plc
Trading Update
First Property Group plc (AIM: FPO), the AIM-listed property fund management group, today issues a trading update ahead of the year ending 31 March 2009.
The Group's core commercial property fund management division is continuing to progress well. Total assets under management currently amount to approximately £314 million (30 September 2008 - £290 million). Despite difficult economic conditions, the funds managed by the Group earned an annualised rate of return on equity of some 12% (based on third party valuations), in the nine months to 31 December 2008. The current year will most likely prove more challenging than 2008 but the Group expects its portfolio of assets to perform relatively well during this period.
Whilst First Property is able to raise debt for property acquisitions, it is now more expensive and many banks have ceased lending in Central and Eastern Europe ("CEE"). As a result, yields have risen creating some excellent buying opportunities. In light of this, the Group is currently working on a number of property acquisitions.
The Group's property trading activities have also made good progress; in December 2008 the Group acquired a 28% interest in an office block ("Blue Tower") located in a prime position in Warsaw's Central Business District. Blue Tower is multi-let to various Government agencies as well as small to medium sized International and Polish businesses. The purchase was made by a wholly owned subsidiary of First Property Group plc and part financed by a non-recourse bank loan. At the time of purchase, the rents payable by the tenants in Blue Tower were at a significant discount to market rents and, even at these low rents, the rate of return being earned by the Group on the equity invested in the property (approximately £1.7 million) is some 25% per annum. It is the Group's intention to negotiate new leases at higher rents with tenants as leases expire and the Company has already made good progress in this regard.
First Property Services Limited, the Group's facilities maintenance and building services subsidiary has continued to trade well and is expected to make an important contribution to the Group's overall results for the current year. Its recent successes include the award of a contract to install air conditioning on a new floor in the Moody's Investor Service building in Canary Wharf.
The Group is also pleased to report that it has recently recruited a full time sales executive, firstly in order to grow the funds under management for First Property Asset Management, and secondly to earn fees for raising money on behalf of third parties. Jeremy Barkes joins following a 10 year career in equity sales, most recently at KBC Peel Hunt, where he was a director of sales, and before that at JP Morgan Securities. Jeremy will operate through a new division named FJB Capital Advisers.
The Group's management expects to report profit before tax comfortably ahead of market expectations.
First Property expects to issue its preliminary results in early June.
Macro-Economic Outlook for CEE
The macro-economic fundamentals of Poland, where the majority of the Group's assets are located, held up very well in 2008. It is being affected by the downturn in Global economic activity, with a slow down in exports and GDP growth but its fundamentals remain stronger than virtually all other CEE countries and certainly much stronger than the UK. The Polish Zloty ("PLN"), which strengthened against the Euro for the period from the beginning of the credit crunch until late last year has weakened considerably recently. The Group believes that some weakening in the PLN is helpful for Poland's economy but the extent of the recent reduction in value may stress businesses with obligations denominated in foreign currencies, such as rents payable, which are often denominated in Euro. However, debt levels in Poland at a Government, consumer and business level are relatively low by comparison to other European countries and the Group expects this to cushion the negative effects resulting from the PLN's weakness.
Ben Habib, Chief Executive of First Property Group plc, said:
"We are very pleased with our progress so far this year. Despite the Global economic environment, First Property Group remains a secure and growing business capable of delivering excellent returns to its clients and shareholders.
"Our financing capability, coupled with our expertise and the £40 million in equity we still have to invest on behalf of our clients puts the Group in a very strong position. We remain cautious but will take advantage of attractively priced property where we believe the rental streams to be secure."
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Enquiries to:
Ben Habib, Chief Executive www.fprop.comFirst Property Group plc Tel: 020 7731 2844
Chris Hardie, Corporate Finance Director chris.hardie@arden-partners.comArden Partners Tel: 020 7398 1639
Adam Leviton / Kathryn Hurford firstproperty@redleafpr.comRedleaf Communications Ltd Tel: 020 7566 6700
Notes to Editors: