2 Feb 2010 07:00
Treveria plc - Trading Statement
Treveria plc
("Treveria" or the "Group")
Trading update
02 February 2010
Treveria plc (AIM: TRV), the German retail focused real estate investment company, today provides an update on the Group's latest position ahead of its audited results for the year ended 31 December 2009 which it intends to announce on 13 April 2010.
Property Acquisitions, Sales and Valuation
The Group made no property acquisitions during the second half of 2009.
In the second half of 2009 the Group notarised a contract to sell one property located in Osnabrueck for a gross consideration of EUR2.5 million, compared with a valuation as at 30 June 2009 of EUR1.7 million.
In accordance with the Group's standard policies, a valuation of the portfolio as at 31 December 2009 is being carried out and this will be reflected in the Group's audited results.
Cash Balances
As at 31 December 2009, approximately EUR83 million of cash was held at the parent company level by Treveria plc to which the subsidiaries have no recourse. At the same date, the Group had overall cash balances, including amounts in blocked accounts for the payment of interest, totalling about EUR126 million.
Banking Facilities
As previously reported, the Group's first Deutsche/Citibank facility and its Eurohypo facility remain in cash trap as at 15 January 2010. In addition, the Group's second Deutsche/Citibank facility entered into cash trap as of 15 October 2009. As a result of this, surplus cash from the underlying assets after the payment of interest remains within each ring-fenced facility and is not available for other Group purposes. The remaining two facilities were not in cash trap as at 15 January 2010.
Interest cover/debt service cover ratios ("ICR") have declined during the second half as predicted tenant defaults and lease expirations take effect and also reflect an increase in tenant arrears and irrecoverable costs. The level of cover reported, according to the most recent quarterly bank reports, was between 112% and 146% in each debt silo, compared to hard breach covenants of between 110% and 125% and 'cash trap' covenants of between 125% and 145%.
The current loan to value ratios range between 70% and 107%, compared to hard breach covenants of between 76% and 95% and ´cash trap´ covenants of between 76% and 85%.
Discussions are ongoing between the Group and bank representatives of cash trap silos, with a view to agreeing a long term solution for each loan.
The Group's total bank loans, before adjusting for capitalised finance charges, have been reduced to EUR1,699 million as at 31 December 2009 from EUR1,719 million as at 30 June 2009. The current weighted average interest rate inclusive of margin on the Group's loan facilities is now approximately 4.8 percent, down from around 5.1 per cent at the end of 2008. This reduction is due to lower floating rates on the circa 5.5 per cent of loans that are at floating rates with interest rate caps.
First Deutsche Bank / Citibank loan facility:
As announced on 12 January, the Treveria C (silo C) loan facility was restructured in January 2010 and agreements were signed on 15 January 2010 pursuant to which the new property manager for the silo C portfolio will be Mayfield European Property Management Ltd ("Mayfield"), the asset manager will be CR Investment Management GmbH ("CRIM") and sales advisory services will be provided by Deutsche Immobilien Asset Management Limited. The asset management services will be provided by CRIM from 1 February 2010 and property management services by Mayfield from 1 May 2010.
Treveria Asset Management Limited, the wholly-owned subsidiary of Treveria which previously acted as asset manager for the silo C, will provide transitional support for an interim period to CRIM and continue to provide certain accounting and corporate services going forward to the silo C subsidiaries. The advisory fee income for such corporate services has been reduced to circa EUR1 million per annum from EUR2 million per annum.
In addition, the banks have agreed to change the mechanic for the disposals of properties, such that sale proceeds no longer have to be used to make an immediate mandatory prepayment but can, subject to agreement, be used for capital expenditure on the existing portfolio. The banks have retained control over disposals of the properties, but cannot force through a sale of the property without Treveria's approval. The banks have also agreed to waive the existing ICR breach and agreed that the next ICR test will be on 20 July 2010. The banks have agreed not to test the LTV covenant until 30 April 2010 at the earliest.
A termination letter was signed with Cushman & Wakefield ("C&W") terminating the existing property management agreement relating to Silo C with effect from 30 April 2010 and waiving any claims in return for a payment to C&W of EUR2 million. As a result of the Silo C portfolio no longer being managed by C&W, the relevant guaranteed base fees for 2010 and 2011 in the property management agreements for other Silos have been reduced pro rata.
The current outstanding loan amount relating to silo C as at 31 December 2009 is EUR553 million. The interest coverage ratio reported on the January 2010 interest payment date is 128% and the loan remains cash trapped. Vacancy rates on the portfolio are 8.1% by value and 11.6% by space. Reported arrears are EUR2.3 million. There is a significant risk that the Group will be unable to comply with the LTV and ICR ratio covenants in this loan facility at the end of the waiver period.
Second Deutsche Bank / Citibank loan facility:
The current outstanding loan amount as at 31 December 2009 is EUR222 million. The ICR reported on the January 2010 interest payment date is 112% and the loan is currently cash trapped. Vacancy on the portfolio is 10.5% by value and 15.3% by space. Reported arrears are EUR0.1 million. There is a significant risk that the Group will be unable to comply with the LTV and ICR ratio covenants in this loan facility in the foreseeable future.
ABN Amro loan facility:
The current outstanding loan amount as at 31 December 2009 is EUR436 million. The ICR reported on the January 2010 interest payment date is 133%. Vacancy in the portfolio is currently 7.0% by value and 16.0% by area. Reported arrears are EUR0.6 million.
Eurohypo loan facility:
The current outstanding loan amount as at 31 December 2009 is EUR442 million. The ICR reported on the January 2010 interest payment date is 146%. Vacancy in the portfolio is currently 6.5% by value and 11.6% by area. Reported arrears are EUR0.2 million. Under the terms of the restructuring, the LTV test has been waived until April 2011. There is a significant risk that the Group will be unable to comply with the LTV ratio covenants in this loan facility at the end of the waiver period.
JP Morgan loan facility:
The current outstanding loan amount as at 31 December 2009 is EUR47 million. The ICR reported on the November 2009 interest payment date is 138%. Vacancy in the portfolio is currently 12.1% by value and 24.7% by area. Reported arrears are EUR0.02 million.
Management Changes
As previously reported, Damian Wisniewski left Treveria Asset Management Limited on 15 January 2010. On 12 January 2010 the Company announced the appointment of Michael Neubuerger as Managing Director of the Company's subsidiary Treveria Asset Management GmbH, with overall operational responsibility for the management of the Group's assets. He will continue seeking to optimise the management structure of the Group.
Potential Tax Liability
Further to the announcement made by Treveria on 13 November 2009, the potential liability is related to German real estate transfer tax (RETT) of Treveria Holdings S.a.r.l., a 100% subsidiary of Treveria plc, while most of the silo C properties and some minor parts of other silos are RETT sheltered. The Group is in negotiations with the German tax authorities to clarify this issue and an update will be provided to shareholders as appropriate.
Asset Management
Following Treveria Asset Management taking back all letting responsibilities from C&W in July 2009, the asset management and letting team made good progress in the second half of 2009.
During this period, the team secured 155 new leases and lease extensions across the portfolio generating an annual rental income of EUR3.0 million; this represents an increase in overall rental income of approximately EUR0.2 million when compared to the previous leases in place. In addition to the permanent leases, 15 short term interim lease contracts were signed generating an annualised rental income of EUR1.9 million.
The asset management team has made significant progress towards re-letting some of Treveria's larger assets which were vacated last year due to tenant insolvency. Discussions with the insolvent tenant Deutsche Woolworth are progressing well; terms have been agreed for the tenant to remain in all six stores which they currently occupy. A new lease was signed with TK Maxx to occupy a vacant Hertie store in Aschaffenburg; the annual rent of €540,000 will be collected from April 2010.
The total annualised gross rental income from the portfolio as at 31 December 2009 was circa EUR149.2 million compared to EUR150.4 million at as at 30 June 2009. Adding back both the rent lost through property sales in the period and the expiry of two interim Hertie contracts, the rent roll shows an annualised increase of circa EUR40,000 in the period.
The average weighted lease length for the portfolio since June 2009 has increased from 4.9 year years to 5.0 years.
Analysts' conference call
There will be a call for analysts on 13 April 2010 at which the Group will present it full year 2009 results, Please contact Financial Dynamics at Treveria@fd.com if you wish to receive the details.
Enquiries:
Treveria Asset Management Limited
Michael Neubuerger / Lars Mohn
+44 20 7960 6525
Numis Securities Limited (NOMAD to the Company)
Nick Westlake / Hugh Jonathan
+44 20 7260 1000
Financial Dynamics
Richard Sunderland / Laurence Jones
+44 20 7831 3113