IERE.L Regulatory News (IERE)

31 May 2013

INVISTA EUROPEAN REAL ESTATE TRUST SICAF

("IERET" or the "Company')

ANNOUNCEMENT OF HALF YEARLY RESULTS AND UNAUDITED NAV

Report for the six month period ENDed 31 March 2013 and update on Refinancing

Invista European Real Estate Trust SICAF today announces its results for the six month period to 31 March 2013, including its unaudited Net Asset Value ("NAV") for the last quarter, calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax.

Highlights

·; Unaudited NAV per share decreased by 3.8% over the quarter and 33.0% over the six month period to €0.26 or 22p (30 September 2012: €0.38; 31 December 2012: €0.27) principally from the fair value reduction of the properties of €31.9m (8.82%) over the six months, during which Savills was appointed as new valuer on 10 December 2012.

·; Property portfolio valued at €341.6 million on 31 March 2013 (30 September 2012: €373.5 million; 31 December 2012: €345.9 million on a like-for-like basis) comprising 37 properties.

·; Successfully executed the sales of three assets for total gross proceeds of €43.5 million, at an average 2.2% discount to valuation.

·; The current disposal programme is focused on vacant assets.

·; Repaid a total €42.1 million of outstanding debt during the period and post quarter end through sales proceeds and, as to €10.3 million, from cash reserves, which were used on 25 January to reduce the LTV level below the covenant of 72.5%.

·; A number of active management initiatives over the last six months have resulted in:

o Signing new leases on 29,583 sqm of vacant logistics space and agreeing heads of terms with potential tenants on 8,217 sqm of vacant logistics and office accommodation which in aggregate represents 18.6% of vacancy by area at the start of the period and both events should improve rental income by €1.8 million per annum (6.7% increase on gross rent).

o Securing 3.0% of existing rental income through lease re-gears and active negotiations on lease extension are on going on a significant proportion of other properties.

Update on Refinancing

Since the end of 2012, there have been signs of increased interest on the part of lenders in funding property assets of the sort held by IERET. As a result, the Company, advised by Rothschild, is pursuing negotiations with a number of potential debt providers to allow the portfolio to be refinanced. The Board is encouraged by the progress of discussions with potential lenders and the constructive attitude of the current lender, but there is no certainty that refinancing can be achieved and additional capital raising may be required as part of it.

In order to present the most appealing portfolio of assets to potential lenders, with good income return and diversification profile, the Company has modified its disposal programme, concentrating on the sale of vacant properties. In the event of a satisfactory refinancing package being achieved, the Company's investment strategy would revert to one of continuation, for which shareholder and regulatory approval would be sought at the time.

Tom Chandos, Chairman, commented:

"Encouraging progress has been made during the current financial year both in letting vacant properties and in negotiating extensions with existing tenants and we believe this trend should continue. This is particularly helpful to the discussions that we are now having with potential lenders to refinance the portfolio ahead of the expiry of our current facility at the end of the year, as well as reflecting the improving prospects for the market as a whole."

For further information:

Ludovic Bernard

Internos Global Investors 020 7355 8800

Michael Sandler

Hudson Sandler 020 7796 4133

Financial highlights

v Unaudited NAV per share decreased by 3.8% over the quarter and 33.1% over the six month period to €0.26 or 22p (30 September 2012: €0.38 December 2012: €0.27) principally due to the reduction in the fair market value of the properties of €31.9 million (8.82%) in the first six months.

v Loss per share of €0.1273 (September 2012: €0.1433)

Sources: Internos Global Investors Ltd

1 NAV is calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax. IFRS NAV was €66.0m on 31 March 2013 and €97.5m on 30 September 2012.

2 As at 31 March 2013, deferred tax liabilities of €18.3 million, based upon temporary differences at the time of initial recognition arising from transactions treated as asset acquisitions have not been recognised in accordance with IAS 12. The Group has deferred tax assets of €23.5 million which also have not been recognised.

3 Loss for the period divided by the weighted average number of ordinary shares in the period/year.

4 €:£ exchange rate used was €1.1856 as at 31 March 2013, €1.25679 as at 30 September 2012.

5 The NAV per preference share is equal to the nominal value plus accrued interest divided by the total number of preference shares.

6 Current liabilities include banking facilities as at March 2013.

Chairman's Statement

Adjusted net asset value decreased by 33.1% over the six month period from €0.38 (£0.30) to a figure of €0.26 (£0.22), principally driven by a decline in property valuation of 8.82%. The Company appointed Savills as new valuers on 10 December 2012; who have now valued the portfolio for the last two quarters. The Company has suffered declines in occupancy levels and valuation which have contributed to the weak performance over the past six months. However, a number of positive achievements have been made on lettings and asset sales that have helped stabilise income and generate a reduction in debt levels. In addition, corporate costs have been reduced as a result of a review and tendering process for the corporate accounting and administration.

Property Portfolio

The Company owns a diversified portfolio of 37 commercial property investments located mainly in France and Germany. As at 31 March 2013, the Company's property portfolio was valued at €341.6 million. Savills appointed as the new valuer in December 2012, has continued, as the previous valuer had done, to adjust values on vacant assets and assets with shortening lease terms. 

The portfolio's vacancy level reached 23.4% as at 31 March 2013 but has begun to fall from these levels since period end as a result of new lettings. A large portion of the increase in vacancy is concentrated in the logistics portfolio where a number of tenants have been suffering in the macroeconomic environment and have exercised breaks over the last twelve to eighteen months, often in response to the loss of individual contracts. However, in the last six months, the Company has secured two new lettings on 29,583 sqm of vacant logistics accommodation and agreed heads of terms on 8,217 sqm of vacant logistics and office space, both of which will enhance income generation and the portfolio's occupancy profile.

In addition, the Company is actively pursuing a number of sales in France of vacant assets and, if successful, these sales should ultimately improve operating income, by reducing vacancy costs and enhance the overall quality of the portfolio.  

Despite high vacancy, the Company generates a strong income return of 6.84% as at 31 March 2013, having remained fairly stable at 6.94% on a like for like basis over the six months from 30 September 2012.

An active sales strategy has been pursued in order to deleverage the Company, despite difficult market conditions, significant pending asset management initiatives and the potential impact of unrecognised deferred tax liabilities. The Company has sold three properties, generating €43.5 million of gross sale proceeds over the last six months and post quarter end. These sales have enabled the repayment of €31.8 million outstanding debt, and also results in a leaner corporate structure.

Results

The Company reports a decrease in the unaudited NAV per share (adjusted to add back warrants and deferred taxation) to €0.26 (22.0p), equating to a fall of 33.1% over the six month period to 31 March 2013. The decrease in NAV has arisen principally from the fair value reduction of the properties by €31.9m (8.82%) in the first 6 months.

In addition to the loan repayments out of sale proceeds described above, the Company used €10.3 million from its existing cash balances to make a further repayment of the senior debt facility in January thus reducing its drawn down debt facilities to €249.6 million, and decreasing the Loan to Value ratio (LTV) to below 72.5%, the current LTV covenant.

Refinancing Strategy

Since the end of 2012, there have been signs of increased interest on the part of lenders in funding property assets of the sort held by IERET. As a result, the Company, advised by Rothschild, is pursuing negotiations with a number of potential debt providers to allow the portfolio to be refinanced. The Board is encouraged by the progress of discussions with potential lenders and the constructive attitude of the current lender, but there is no certainty that refinancing can be achieved and additional capital raising may be required as part of it.

In order to present the most appealing portfolio of assets to potential lenders, with good income return and diversification profile, the Company has modified its disposal programme, concentrating on the sale of vacant properties. In the event of a satisfactory refinancing package being achieved, the Company's investment strategy would revert to one of continuation, for which shareholder and regulatory approval would be sought at the time.

Outlook

Encouraging progress has been made during the current financial year both in letting vacant properties and in negotiating extensions with existing tenants and we believe this trend should continue. This is particularly helpful to the discussions that we are now having with potential lenders to refinance the portfolio ahead of the expiry of our current facility at the end of the year, as well as reflecting the improving prospects for the markets as a whole.

Tom Chandos

Chairman

Invista European Real Estate Trust SICAF

30 May 2013

INVESTMENT MANAGER'S REPORT

As at 31 March 2013, the Company's property portfolio was valued at €341.6 million and comprised 37 assets (€352.8 million and 38 assets: 31 December 2012). On a like for like basis, the portfolio value decreased by €4.4 million or 1.26% during the quarter to 31 March 2013 and €31.9 million or 8.82% in the six months to 31 March 2013. The steep decline in values followed a change in valuer on 10 December 2013 to Savills who, given the constraints in the secondary market, have continued to lower the valuations of vacant properties and assets with shortening lease lengths.

The Company's portfolio generated gross income of €27.4 million per annum as at 31 March 2013 from 131 individual leases and 122 tenants. The portfolio had a Gross Income Yield ("GIY") of 8.02% and a Net Initial Yield ("NIY") of 6.84%.

A continued challenge in the last six months has been the sizable level of vacancy in the portfolio and weakening rental income as a result. As at the 31 March 2013, the portfolio vacancy rate measured by rental value was 23.4%, having increased from 20.3% on 31 September 2012 as a result of the sales of income producing assets and the lease breaks that occurred at the end of 2012. However, the vacancy level has improved slightly over the most recent quarter on a like for like basis from 24.6% on 31 December 2012 as a result of having leased, and the tenant taking occupation of, 16,989 sqm of vacant accommodation in France. An additional three leases signed or in agreed heads of terms on 25,206 sqm of vacant space should reduce the vacancy level to 21.1% and with disposals advancing on eight assets consisting of 52,964 sqm vacant space, the portfolio's occupancy and income generation should improve further.

The Company has made positive steps in executing sales and reducing the outstanding loan amount. Two assets, one in France and one in Germany have been sold during the reporting period and a property in Belgium was sold post quarter end, for a combined gross sales proceeds of €43.5 million reflecting a 2.2% discount to valuation. In completing these sales, the Company was able to repay €31.8 million of outstanding debt and generated €5.9 million in cash proceeds.

A further €10.3 million of cash on the balance sheet was used to pay down the loan to maintain an LTV level below 72.5%, the current loan covenant. As a result of cash payments and sales, a total of €42.1 million of debt has therefore been repaid in the six months to 31 March 2013 and post quarter end. This significant reduction in debt and cautious cash management have strengthened the Company's position in pursuing refinancing options ahead of the current debt maturity in December 2013.

While the active sales strategy has been beneficial in reducing debt levels and generating cash proceeds, the Company has been concerned that continuing to sell the most liquid, high quality assets would result in a portfolio that would be non-financeable and require a prolonged and value damaging realisation period. The Company has thus modified the disposal strategy, concentrating on the disposal of vacant properties, and the manager and Board, with the assistance of Rothschild are reviewing a number of refinancing options and advancing negotiations with potential lenders. Nevertheless, the Company will continue to sell properties where opportunities exist to dispose of non core assets, particularly weak and non core properties.

The Company maintains a relatively stable weighted average lease length profile, which at 31 March 2013, was 4.44 years to first break and 6.63 years to lease expiry. Following the sales of some income producing assets with particularly good covenants, the Company's credit rating, as measured by Investment Property Databank M-IRIS credit analysis system as at April 2013, was reduced to 61 out of 100 from 71 out of 100 in January 2013. However, this rating is still classified within the "Low to Medium risk band".  As at 31 March 2013 the portfolio composition was as follows:

Sector Weightings

*Percentage of aggregate asset value as at 31 March 2013

Country Weightings

*Percentage of aggregate asset value as at 31 March 2013

Top 10 Properties

*Percentage of aggregate asset value plus cash as at 31 March 2013

Top 10 Tenants

* Percentage of aggregate gross rent as at 31 March 2013

Click or paste the following link into your web browser to view the associated PDF document. Refer to page 7 for the relevant graph. http://www.rns-pdf.londonstockexchange.com/rns/9534F_-2013-5-30.pdf 

Data Table for RNS (Regulatory News Services)

Break dates of lease contracts

Click or paste the following link into your web browser to view the associated PDF document. Refer to page 8 for the relevant graph. http://www.rns-pdf.londonstockexchange.com/rns/9534F_-2013-5-30.pdf 

Data Table for RNS (Regulatory News Services)

Expiry dates of lease contracts

Property Market Performance

Economy

The issues surrounding the Eurozone remain unresolved and continue to create uncertainty that has weighed on both business and consumer confidence. A brief recovery in activity for the German private sector at the start of 2013 provided some hope that Europe's largest economy could generate sufficient momentum to breathe life into the wider regional economy. However, political issues evident during the negotiations of bailout conditions for Cyprus, an inconclusive Italian election and a rejection of austerity measures by the Portuguese constitutional court, coupled with a lower than anticipated levels of activity in the US and Chinese economies suggest policy makers will be forced into taking additional steps to stimulate growth. Of particular concern are the rising levels of unemployment in the region, having reached an historical high of 12.1% in March 2013. Significant differences between countries remain. The German economy is forecast to grow by 0.6% in 2013 (Bloomberg) and is experiencing robust levels of employment which is in contrast to southern economies where further contraction in output is expected.

Occupier Market

Take-up in the French logistics markets reflected the poor performance of the economy with occupiers postponing expansion plans. Leasing volumes in Q1 2013 were down 32% on Q1 2012 and follows the low volumes recorded in 2012 (BNP Paribas). Supply in Grade B and C quality assets continues to increase with a rising proportion experiencing obsolescence and proving difficult to let. In contrast, levels of supply for Grade A stock have declined driven by low levels of development.

The current strength of the German labour market, a sustained period of real wage growth and low inflation provide relatively robust underlying economic fundamentals for the German retail sector. National and international retailers continue to target Germany as a key market for sales growth but are focused on securing the locations offering optimal sales volumes. With availability of prime space remaining low, some good quality assets in secondary locations have experienced stability in demand from occupiers that are either priced out or unable to find suitable prime space. Tenants occupying lower quality secondary and tertiary assets may exercise break clauses or utilise bargaining power to negotiate more favourable lease terms either through an agreement with the landlord to provide capital expenditures to refurbish the asset and/or the provision of greater rental incentives.

Investment Market

During the past six months, a total of €74 billion was transacted in Europe representing growth of 19% on the same period last year (CBRE). The office sector was the most active sector accounting for 46% of transactions. Although, there was a noticeable increase in the proportion of capital investing in European industrial assets with a 9% share of total transactions.

Within the European markets, the UK and Germany experienced the most activity accounting for 54% of European investment (CBRE). According to BNP Paribas REIM the popularity of the seven largest Western European city markets continues to grow with investment up 10% year on year with Q1 2013 the highest first quarter volume since 2008. However, some markets that have been severely affected by the Euro crisis, experienced a significant increase in investment volumes (from a low base) with Spain and Ireland increasing in Q1 2013 by 66% and 2,069% per year, respectively. This increase in activity could reflect the lagged impact of the ECB's actions in July 2012 with the improved levels of investor confidence starting to be reflected in completed real estate transactions.

There were also indications in the 2013 CBRE Investor Intentions Survey that an increasing number of investors are starting to at least consider investments higher up the risk curve in respect to asset quality and recovering markets, favouring good secondary assets in sustainable locations. This recent trend, partly driven by relative attractiveness of secondary yields is also sustained by a slightly more liquid debt market. However, the majority of respondents still favour core investments in mature liquid markets with London and Munich remaining the top target locations for European investment.

Disposals

Over the six months to 31 March 2013 and post quarter end, the Company successfully achieved disposals of two office assets in France and Belgium and one logistics asset in Germany. Combined these sales have generated total gross proceeds of €43.5m, allowing a repayment of €31.8m in debt and generating €5.9m in net equity proceeds.

Active sales marketing on a number of assets has been modified to give priority to re-financing the current portfolio. However, the Company will continue to seek opportunities to dispose of assets where it is advantageous to the fund. Post quarter end, the Company exchanged contracts for the conditional sale of a 17,435 sqm vacant logistics asset in Chateauneuf de Gadagne, France. A further seven assets in Amiens, France are in advance negotiation to be sold in three separate deals. Combined, these assets represent over 38,869 sqm, of which 35,529 sqm is vacant. Concluding these sales would represent the disposal of most of the portfolio's weakest assets and thus improve the robustness of the portfolio income and the vacancy profile.

Active Asset Management

Weak occupational markets and a high proportion of breaks in 2012 created a challenging environment for the Company in retaining income stability and this is reflected in the portfolio's vacancy rate. However, relentless asset management to stabilise current income and attract new tenants has begun to yield positive results.

Over the last six months to 31 March 2013, the Company signed two new leases on 29,583 sqm of vacant logistics space which have become effective during the quarter and post quarter end. A further two leases on 8,217 sqm of vacant logistics and office space are under agreed heads of terms. In combination these four leases, which represent 18.6% of vacancy by area at the start of the reporting period, should improve rental income by €1.8 million per annum (6.7% increase on gross rent).

Although there is a lower proportion of lease breaks in 2013 than in 2012, there are a number of important existing leases that the Company wishes to secure ahead of next lease break. Over the last six months to 31 March 2013, the Company re-geared or agreed heads of terms on 3.0% of existing rental income to extend those lease terms for a weighted average 3.5 years. Progress is being made to re-gear leases on a significant portion of existing income.

Finance

As at 31 March 2013, the Company had drawn down a total of €249.6 million of senior debt in respect of its €359.3 million facility with Lloyds Banking Group. In addition, the Company had cash balances of €27.9 million (excluding tenant deposits of €2.6 million and escrow items of €2.4 million) at that date, giving a net debt position of €221.7 million.

The Company's gross Loan To Value ("LTV") ratio as at 31 March 2013 was 73.1% and the net debt LTV was 64.9%. As a result of the valuation decline in the last quarter, the Company's gross LTV under the Finance Documents with the Bank of Scotland rose to 72.2% (30 September 2012: 67.9%) which still remains below the LTV covenant of 72.5% applying until 30 June 2013. In January, the Company announced that it had used €10.3 million from its existing cash balances to make a further repayment of the senior debt facility and thus reduce its drawn debt facilities, thereby decreasing the LTV to below 72.5%, the next semi-annual LTV covenant test, at the reduced level of 70% will be against the 30 June 2013 valuation.

All debt is fully hedged against changes in European interest rates until December 2013, giving a total interest cost of 6.98% per annum at current LTV levels. 

Strategy

The Company recognises the pressures ahead with the debt maturity approaching at the end of the year and has made progress in reducing the outstanding debt through the active sales and cash utilisation. However, the Company is now is a position where refinancing the portfolio is of top priority and, as a result, the Company is modifying the current sales strategy to ensure the portfolio remains attractive for lenders and shareholders. In this regard, the manager remains focused on maintaining portfolio diversification, improving occupancy and income and sustaining adequate cash management.

Active asset management and focus on positioning the portfolio has begun to generate a number of successful results in stabilising income and in conjunction, the successful execution of a number of sales in the last six months has helped generate cash proceeds and reduce outstanding debt, enabling the Company to maintain flexibility on current and future debt obligations. The manager is further encouraged by the progress in securing existing income and generating new revenue, as well as actively pursuing disposals on vacant assets that will help reposition the portfolio profile and improve operating revenue. While modifying the current sales strategy, the Company nevertheless continues to pursue sales of assets where opportunities exist to maximise value or reduce exposure to vacancy.

Ludovic Bernard

Fund Manager

Internos Global Investors Ltd

30 May 2013

Responsibility Statement

We confirm that to the best of our knowledge:

(a) the condensed consolidated interim financial information for the six months ended 31 March 2013 have been prepared in accordance with International Accounting Standard (IAS) 34 - "Interim Financial Reporting" and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group;

(b) the interim Financial Information includes a fair review of:

i. important events having occurred during the six months ended 31 March 2013, together with their impact on the condensed consolidated interim financial information;

ii. the principal risks and uncertainties for the remaining six months of the financial year; and

iii. the information relating to related parties' transactions and changes therein.

 By order of the Board,

Tom Chandos Robert DeNormandie

Chairman Chairman of Audit Committee

30 May 2013 30 May 2013

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

Unaudited for the six months ended 31 March 2013

The accompanying notes 1 to 16 form an integral part of these condensed consolidated interim financial information. The figures of 31 March 2013 and 2012 are unaudited whilst the twelve months figures of 30 September 2012 are audited.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

Unaudited for the six months ended 31 March 2013

All items in the above statement are derived from continuing operations.

 The accompanying notes 1 to 16 form an integral part of these condensed consolidated interim financial information. The figures of 31 March 2013 and 2012 are unaudited whilst the twelve months figures of 30 September 2012 are audited.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

Unaudited as at 31 March 2013

The accompanying notes 1 to 16 form an integral part of these condensed consolidated interim financial information. The figures of 31 March 2013 and 2012 are unaudited whilst the twelve months figures of 30 September 2012 are audited.

The condensed consolidated interim financial information were approved by the Board of Directors on 30 May 2013 and signed on its behalf by:

Tom Chandos Robert DeNormandie

Chairman Chairman of Audit Committee

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Unaudited for the six months ended 31 March 2013

The accompanying notes 1 to 16 form an integral part of these condensed consolidated interim financial information. The figures of 31 March 2013 and 2012 are unaudited whilst the twelve months figures of 30 September 2012 are audited.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

Unaudited for the six months ended 31 March 2013

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS (CONTINUED)

Unaudited for the six months ended 31 March 2013

All items in the above statement are derived from continuing operations. 

The accompanying notes 1 to 16 form an integral part of these condensed consolidated interim financial information. The figures of 31 March 2013 and 2012 are unaudited whilst the twelve months figures of 30 September 2012 are audited.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

FOR THE SIX MONTHS ENDED 31 MARCH 2013

1 Reporting entity

Invista European Real Estate Trust SICAF ("the Company") was incorporated as a "société anonyme" under the laws of Luxembourg on 6 June 2005. On 17 November 2006 the Company was converted into an investment company with fixed capital "société d'investissement à capital fixe" ("SICAF"). Through its subsidiaries (together "the Group") its main activity is to evaluate, make and actively manage direct and indirect investments in real estate in Continental European countries.

The Company is a public limited liability company incorporated for an unlimited term. The registered office of the Company is established at 25C, Boulevard Royal, L-2449 Luxembourg. Information pertaining to the Company is included to the extent required by the London Stock Exchange listing rules. This information should not deem to represent statutory annual accounts, which are separately prepared in accordance with International Financial Reporting Standard (IFRS) as adopted by the European Union.

2 Basis of preparation

2.1 Statement of compliance

These condensed consolidated interim financial information for the six months ended 31 March 2013 have been approved for issue by the Board of Directors ("the Board") on 17 May 2013 and have been prepared in accordance with IAS 34 Interim Financial Reporting and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU).

These condensed consolidated interim financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group's annual consolidated financial statements for the year ended 30 September 2012.

2.2 Going concern

The Company's total debt is due for repayment in full on 31 December 2013. The Company has been pursuing a structured realisation of its assets in order to deleverage the portfolio ahead of maturity but, as acknowledged in previous reports, the timescale has been prolonged given the difficulties in the property investment markets and challenges in re-positioning assets ahead of sale.

The sales strategy has currently reached a point at which continuing active sales of the highest quality, income producing assets, would weaken the portfolio income profile to the extent of making it unattractive for all stakeholders and potential lenders. The Company has thus decelerated the disposal strategy and the board and manager, with the assistance of the Group's appointed debt advisor ("Rothschild"), are pursuing a number of refinancing options. At the same time, the Company continues to seek opportunities to dispose of assets where this would maximise value or reduce exposure to vacancy.

Since the end of 2012, there have been signs of increased interest on the part of lenders in funding property assets of the sort held by IERET. As a result, the Company, advised by Rothschild, is pursuing negotiations with a number of potential debt providers to allow the portfolio to be refinanced. The Board is encouraged by the progress of discussions with potential lenders and the constructive attitude of the current lender, but there is no certainty that refinancing can be achieved and additional capital raising may be required as part of it.

The Company currently meets all current debt covenants and is managing cash flow carefully in order to continue operating the business and meet the next debt covenants. Rental income is expected to remain stable and even improve on the back of recent lettings and limited upcoming lease breaks. In addition, the Company renegotiated terms on the corporate administration and accounting to reduce costs by 40% and has been effective from early 2013.

This is having a positive impact on net operating income and would mitigate any unexpected reduction in rental income.

In pursuing and completing a refinancing, the Company will incur one off fees and, in addition, a refinancing package may result in a higher margin on debt going forward, although this could be mitigated by a lower swap rate.

Further details in relation to the current bank borrowing are listed in note 10.

The factors summarised above together give rise to a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern and, therefore, to meet its liabilities as they fall due. The condensed consolidated interim financial statements do not include any adjustments that might result from the going concern basis of preparation being inappropriate.

In the light of the continuing discussions with potential new lenders and the robustness of the property portfolio's income stream, the Board is satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, it continues to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

2.3 Basis of measurement

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items:

- Investment in properties has been revalued as at 31 March 2013 (note 4),

- Derivative financial instruments are measured at fair value as at 31 March 2013 (note 13).

The significant accounting estimates and judgment applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the preparation of the Company's annual consolidated financial statements for the year ended 30 September 2012.

2.4 New and amended standards and interpretations

The Group has adopted the following new and amended standards and interpretations issued by the International Accounting Standards Board (IASB) or the IFRS Interpretations Committee (previously IFRIC) as of 1 January 2012:

i. IAS 12, Income taxes - Deferred taxes: Recovery of Underlying Assets - The amendment clarified the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale of the property. As a result of the amendment the Standing Interpretation Committee (SIC) issued SIC 21, Income Taxes-Recovery of Revalued Non-depreciable Assets, has been superseded and withdrawn. The amendment to IAS 12 is effective for annual periods beginning on or after 1 January 2013.

Standards and Interpretations recently issued but not yet effective

A number of new standards, amendments to standards and interpretations have been issued but are not yet effective up to the date of issuance of the Group's consolidated financial statements, and have not been applied in preparing these consolidated financial statements.

Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.

ii.  IAS 1, Financial Statement Presentation - Presentation of Items of Other Comprehensive Income - The amendment to IAS 1 changes the grouping of items presented in OCI. Items that could be reclassified (or 'recycled') to profit or loss at a future time (for example, upon de-recognition or settlement) would be presented separately from items that will never be reclassified. The amendment affects presentation only and has therefore no impact on the Group's financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012. The Group will apply the amendment to IAS 1 retrospectively from 1 January 2013 as endorsed by the European Union.

iii. IAS 27 (as revised in 2011) - As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The Group will apply IAS 27(revised 2011) prospectively from 1 January 2014.

iv. IAS 28 (as revised in 2011) - As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures , and describes the application of the equity method to investments in joint ventures in addition to associates. The standard defines significant influence as the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. The Group will apply IAS 28 (revised 2011) prospectively from 1 January 2014.

v. IFRS 9, Financial Instruments: Classification and Measurement - IFRS 9 as issued reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. IFRS 9 has two measurement categories: amortized cost and fair value through profit or loss. All equity instruments are measured at fair value. A debt instrument is stated at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise it should be measured at fair value through profit or loss. The adoption of the first phase of IFRS 9 will have no impact on classification and measurements of the Group's financial assets/financial liabilities. The Group will apply IFRS 9 retrospectively from 1 January 2015.

vi. IFRS 10, Consolidated Financial Statements - IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation - Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including 'special purpose entities'. The changes introduced by IFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. The Fund will apply IFRS 10 retrospectively except for certain provisions from 1 January 2014.

vii. IASB issued Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) on 31 October 2012. The amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities to measure particular subsidiaries at fair value through profit or loss. The amendments are effective from 1 January 2014 with early adoption permitted, which allow an investment entity to adopt the amendments at the same time as IFRS 10.

viii. IFRS 11, Joint Arrangements - IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non-monetary Contributions by Venturers - This standard provides for a more consistent reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The Group will apply IFRS 11 retrospectively from 1 January 2014.

ix. IFRS 12, Disclosure of Involvement with Other Entities - IFRS 12 includes all of the disclosure requirements that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity's interests in subsidiaries, joint ventures, joint arrangements, associates and structured entities. A number of new disclosures are also required. The Group will apply IFRS 12 retrospectively from 1 January 2014.

x. IFRS 13, Fair Value Measurement - IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. The requirements of IFRS 13, which are largely aligned between IFRSs and US Generally Accepted Accounting Principles (US GAAP), do not change when an entity is required to use fair value, but rather provide guidance of how to measure fair value under IFRS when fair value is required or permitted. The Group will apply IFRS 13 prospectively from 1 January 2013 as endorsed by the European Union.

The Group has considered the above new standards, interpretations and amendments to published standards and concluded that they are not expected to have a significant impact on the Group's consolidated financial statements, apart from additional disclosures.

3 Seasonality of operations

Rental income, other revenues and costs are received and incurred smoothly over the accounting period. Therefore no additional disclosures need to be made in the condensed consolidated interim financial statements as a result of seasonality.

4 Investment property

The steep decline in values followed a change in valuer on 10 December 2013 to Savills, who, given the constraints in the secondary market, have continued to discount vacant properties and assets with shortening lease lengths.

All of the above investment properties have been pledged as collateral on the interest bearing loans and borrowings disclosed in note 10.

The net change in the value of the investment property also includes the valuation of assets sold:

The investment properties disposed composed of 2 assets: the Lutterberg asset in Germany and the Nova asset in France.

5 Non-current assets classified as held for sale

As at 31 March 2013, some non-current assets were classified as held for sale.

6 Issued capital

Issuance of ordinary shares

The Company has issued share capital of €25,998,090 (30 September 2012: €25,998,090; 31 March 2012: €25,998,090) consisting of 259,980,909 shares (30 September 2012: 259,980,909 shares; 31 March 2012 259,980,909 shares) without indication of nominal value all of which have been fully paid up.

7 Net asset value per ordinary share

The net asset value per ordinary share is based on net assets of €66.0 million as at 31 March 2013 (30 September 2012: €97.5 million; 31 March 2012: €118 million) and 260.0 million ordinary shares outstanding at 31 March 2013 (30 September 2012: 260.0 million; 31 March 2012: 260.0 million).

(1) €:£ exchange rate of €1.1856 as at 31 March 2013; €1.2568 as at 30 September 2012; € 1.1986 as at 31 March 2012.

(2) Exercise price of warrants of £0.29

8 Earnings per share

The calculation of the basic earnings per share for the financial period ended 31 March 2013 is based on the loss attributable to ordinary shareholders of €33.1 million (30 September 2012: loss of €37.2 million; 31 March 2012: loss of €14 million), and the weighted average number of ordinary shares outstanding during the period ended 31 March 2013. The calculation of diluted earnings per share at 31 March 2013 is based on a diluted loss attributable to ordinary shareholders of €33.1 million (30 September 2012: loss of €37.2 million; 31 March 2012: loss of €14 million), and a weighted average number of ordinary shares outstanding during the period ended 31 March 2013 after the adjustment for the effect of all dilutive potential ordinary shares.

The conversion and assumed exercise of warrants to ordinary shares are ignored in the calculation of diluted loss per share since these are anti dilutive.

9 Preference shares dividend

On 30 December 2009 the Company issued 29,137,134 redeemable preference shares with one warrant attached per preference share. The preference shares confer the right to a cumulative preference share dividend payable semi-annually.

The payment dates for the preference share dividend are in the third week of June and the third week of December respectively, as changed by the Board on 23 November 2010.

Since 30 December 2009, six dividends of £0.09 per preference shares issued were paid on 28 May 2010 (€1.2 million), on 24 December 2010 (€1.7 million), on 24 June 2011 (€1.5 million), 23 December 2011 (€1.5 million), on 22 June 2012 (€1.5 million) and 21 December 2012 (€1.5 million).

The Group signed a forward exchange contract with Bank of Scotland's Treasury Group to protect the Euro payment of the next four GBP dividend payments until December 2014.

10 Interest bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost.

As at 31 March 2013, the Group had €249.6 million of outstanding indebtedness with the Bank of Scotland (30 September 2012: €286.7 million). The Company's loan to value ("LTV") (gross debt divided by market value of properties) under the Bank of Scotland loan documentation at that date was 72.2% (30 September 2012: 67.9%), against a covenant of 72.5% (30 September 2012: 75%).

Terms and debt repayment schedule

11 Related party transactions

The Company and the Group have related party transactions with its subsidiaries, shareholders and certain Directors.

There has been no material changes in the related party transactions described on page 59 of the annual report for the year ended 30 September 2012.

Directors' fees

The Directors of the Company were paid a total of €85,650 (2012 six months: €82,434) in Directors' fees during the period.

The Group also operates an inter-group trading account facility with its subsidiaries whereby it may receive income on behalf of its subsidiaries or pay expenses on their behalf. These balances are non-interest bearing and are settled on demand.

12 Investment management fees

Internos Global Investors Limited ("Internos") acted as the Investment Manager of the Group in the period under review. Internos received Investment Management fees of €0.5m (2012 six months: €1.2m). The conditions for payment of a performance fee to the Investment Manager were not met during the period under review and as such no provision for performance fees was made in the condensed consolidated interim income statement.

In addition the Group accrued to Internos accounting provisions fee of €0.1m for the period beginning 1 February 2013.

13 Derivative financial instruments

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

i. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

ii. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or the liability, either directly (e.g. as prices) or indirectly (i.e. derived from prices);

iii. Level 3: inputs for the asset or liability that are not based on observable market data.

Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 30 September 2012. A detailed explanation of the risks summarised below, together with the Group's objectives, policies and processes for measuring and managing them, can be found on pages 71 - 75 of the annual report and cover the following areas:

·; market and operational risks;

·; currency risk;

·; credit risk;

·; liquidity risk; and

·; financial risk management.

Furthermore reference is made to the issue of going concern. The debt of the Group matures on 31 December 2013 and should be repaid in full to the debt provider, Bank of Scotland. A detailed explanation with regards to this issue is provided in Note 2.2.

14 Segment reporting

The operating segments derive their revenue primarily from rental income from lessees. All of the Group's business activities and operating segments are reported within the segments below.

The segment information for the year ended 30 September 2012 is as follows:

15 Contingencies

Certain subsidiaries of the Group are involved in litigation resulting from operating activities. These legal disputes and claims for damages are routine resulting from the normal course of business. None of these legal disputes and claims is expected to have a material effect on the statement of financial position, the result or liquidity of the Group. The Montowest litigation has been finalised on 27 December 2012 and the €5.1 million included in trade receivables at 30 September 2012 in respect of the litigation was received.

16 Subsequent events

On 30 April 2013, the Company completed the sale by way of shares in the company owning the Rue Royal asset in Brussels, Belgium to Unibra Real Estate SA for a gross sale price of €7.2 million.

The Board of IERET agreed to enter into exclusivity for the sale of the Covadis asset in France. On the 12 April 2013, a promissory contract was signed to that effect.

Adjusted gross assets is the aggregate value of all of the assets of the Group, including net distributable but undistributed income, less current liabilities of the Group (excluding from current liabilities any proportion of monies borrowed for investment whether or not treated under accounting rules as current liabilities), as shown in the consolidated accounts of the Group.

CSSF, "Commission de Surveillance du Secteur Financier", which is responsible for the prudential supervision of credit institutions, other professionals of the financial sector, undertakings for collective investment, pension funds, SICARs, securitisation undertakings issuing securities to the public on a continuous basis, regulated markets and their operators, multilateral trading facilities and payment institutions. It also supervises the securities markets, including their operators.

Earnings per share (EPS) is the profit after taxation divided by the weighted average number of shares in issue during the period.

Net equivalent yield is the time weighted average yield between the net initial yield and the reversionary yield.

Estimated rental value (ERV) is the Group's external valuers' reasonable opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.

Gross rental income or gross rent is the annualised rental income receivable in the period prior to payment of non-recoverable expenditure such as ground rents, local taxes, insurance and property outgoings.

Gross initial yield (GIY) is the gross rent expressed as a percentage of the net valuation of property portfolio.

Group is Invista European Real Estate Trust SICAF and its subsidiaries.

Net asset value (NAV) are shareholders' funds, plus the surplus of the open market value over the book value of both development and trading properties, adjusted to add back the change in fair value of the warrants and deferred tax.

Net initial yield (NIY) is the net rental income expressed as a percentage of the gross valuation of the property portfolio.

Net rental income or net rent is the annualised rental income receivable in the period after payment of non-recoverable expenditure items such as ground rents, local taxes, insurance and property outgoings.

Potential rent is the rent achievable if all the remaining vacant space is let at the estimated rental value and added to the current gross rental income.

Reversionary yield is the anticipated yield, which the Net initial yield will rise to once the rent reaches the estimated rental value.

RNS, Regulatory News Services (UK stock market), which is the service used by the London Stock Exchange to publish company results, share issues, changes in the board of directors and other items which may affect the price of shares