12 Feb 2010 07:00
12 February 2010
INVISTA EUROPEAN REAL ESTATE TRUST SICAF
(the "Company"/ "Group")
ANNOUNCEMENT OF NAV AND INTERIM MANAGEMENT STATEMENT FOR THE QUARTER ENDED 31 DECEMBER 2009
Capital Raising
On 30 December 2009, the Company concluded a successful capital raising of £53.5 million (€59.7 million) net of expenses by way of a Firm Placing and a Placing and Open Offer.
The capital raising enabled the Company, on 12 January 2010, to pay down €40.0 million of senior debt and enter into new debt terms with the Bank of Scotland which, amongst other benefits, extended the loan term by two years to 31 December 2013, relaxed loan covenants and provided the Company with access to debt at a lower cost.
The capital raising resulted in the issue of 145,685,674 ordinary shares, 29,137,134 new sterling preference shares and 29,137,134 new warrants. The preference shares have a semi annual coupon of 9% per annum and a seven year life; the warrants have an exercise price of 29p and a four year life. All the securities are listed on the London Stock Exchange. Further details of the securities are contained in the Prospectus dated 16 November 2009.
Although the capital raising has diluted the unaudited Net Asset Value per share by €0.52, it has allowed the Company to access more favourable debt terms through what may continue to be a challenging period in the credit markets. As a result the Company has now stabilised its balance sheet and can move onto the front foot in 2010.
Net Asset Value
As at 31 December 2009, post the capital raise and the issue of the new ordinary shares, the Company's unaudited Net Asset Value (adjusted to add back deferred taxation) was €0.595 (53.5p) per share, reflecting a decrease of €0.525 (49.1p) equating to 47.3% over the quarter. The unaudited Net Asset Value, calculated under International Financial Reporting Standards, was €0.555 per share. Over the 12 months to 31 December 2009, the Company's NAV has decreased by €1.235 per share or 67.5%.
The unaudited Net Asset Value movement incorporates a number of events and key factors which occurred during the quarter ended 31 December 2009 including:
§ The portfolio decreased in value on a like-for-like basis by 1.0% in the quarter equating to €5.1 million or (€0.02) per share (compared with a fall of 1.1% in the previous quarter to September 2009);
§ An increase in the mark-to-market valuation of the Company's interest rate swaps and currency hedging of €2.0 million, equating to €0.01 per share;
§ The successful capital raise of €59.7 million (net of expenses) on 30 December 2009 consisting of 145,685,674 new ordinary shares and 29,137,134 new preference shares with warrants attached had a combined impact of (€0.52) per share.
A breakdown of the unaudited Net Asset Value for the ordinary shares is set out below:
| In € million | 31 Dec 09 | 30 Sep 09 | 3 month change | 3 month change (%) |
| Direct property independent valuation | 526.7 | 532.9 | -6.2 | -1.2% |
| Valuation of assets sold | - | 1.1 | -1.1 | - |
| Like for like direct property | 526.7 | 531.8 | -5.1 | -1.0% |
| Net current assets | 72.4 | 9.6 | +62.8 | +654.2% |
| Market value of swaps | (27.1) | (29.1) | +2.0 | +6.9% |
| Senior debt | (384.8) | (385.3) | +0.5 | -0.1% |
| Preference shares | (32.6) | - | -32.6 | - |
| Net deferred tax liabilities | (10.4) | (10.2) | -0.2 | -2.0% |
| Net Asset Value | 144.2 | 117.9 | +26.3 | +22.31% |
| Adjusted Net Asset Value | 154.6 | 128.1 | +26.5 | +20.7% |
| Adjusted Net Asset Value per ordinary share (€)¹ | 0.595 | 1.120 | -0.525 | -46.9% |
| Adjusted Net Asset Value per ordinary share on a fully diluted basis (€)¹ ² | 0.567 | - | - | - |
¹Net Asset Value adjusted to add back deferred tax (both current and non-current liabilities)
²Assumes all warrants are exercised at 29p per ordinary share
Luxembourg regulations require companies to disclose the net asset value for each class of shares, accordingly the unaudited unit value for the preference shares is shown below:
| In € million | 31 Dec 09 | 30 Sep 09 | 3 month change | 3 month change (%) |
| Value of the preferences shares | 32.6 | - | +32.6 | - |
| Accrued coupon | 0.002 | - | +0.002 | - |
| Total value of the preferences shares | 32.602 | - | +32.6 | - |
| Unit value per preference share (€) | 1.12 | - | - | - |
The Company's unaudited Net Asset Value figure incorporates the external property portfolio valuation as at 31 December 2009. The property portfolio will next be valued by an external valuer as at 31 March 2010 and the next quarterly Net Asset Value per share is expected to be published in May 2010.
Figures converted into sterling assume a EUR per STG exchange rate of 1.1112 as at 31 December 2009.
Property Portfolio
As at 31 December 2009, the property portfolio owned by the Company was valued at €526.7 million comprising 45 assets (excluding one asset conditionally committed to acquire in Girona, Spain). This compares with the property portfolio as at 30 September 2009 which was valued at €532.9 million. The like-for-like decrease in property valuations excluding the committed asset and disposals over the three month period to 31 December 2009 was 1.0%, a fall of €5.1 million which demonstrates a slowing of valuation decline. The Company sold one logistics asset in Aix en Provence, France and a plot of surplus land in Entraigues, France, generating €1.3 million in sales proceeds, 14.3% above the September 2009 valuation.
As at 31 December 2009, the Group's portfolio generated a gross income of €43.8 million per annum, representing a Gross Income Yield of 8.18% (7.50% Net Initial Yield). The portfolio had a vacancy level of 7.73% by income and the Net Initial Yield on Estimated Rental Value was 7.68%.
The portfolio credit rating as measured by Experian in July 2009 was 69 out of 100 or "normal creditworthiness".
Sector Weightings
| Sector | %* |
| Office | 29.96% |
| Logistics | 54.54% |
| Retail | 15.50% |
| Total | 100.00% |
*Percentage of aggregate asset value (including committed asset) as at 31 December 2009
Country Weightings
| Country | %* |
| France | 44.65% |
| Germany | 36.32% |
| Belgium | 7.12% |
| Spain | 5.47% |
| Netherlands | 3.48% |
| Czech Republic | 1.77% |
| Poland | 1.19% |
| Total | 100.00% |
*Percentage of aggregate asset value (including committed asset) as at 31 December 2009
Top 10 Properties
| Property Location | Sector | %* |
| Heusenstamm, Frankfurt, Germany | Office | 11.28% |
| Riesa, Germany | Retail | 8.13% |
| Lutterberg, Germany | Logistics | 4.60% |
| Cergy, Paris, France | Office | 4.24% |
| Madrid, Spain | Logistics | 3.35% |
| Grenoble, France | Office | 2.84% |
| Monteux, France | Logistics | 2.83% |
| Roth, Germany | Retail | 2.80% |
| Marseille, France | Logistics | 2.74% |
| Trappes, Paris, France | Logistics | 2.58% |
| Total |
| 45.39% |
*Percentage of aggregate asset value plus cash (including committed asset) as at 31 December 2009
Top 10 Tenants
| Tenant Name | %* |
| Norbert Dentressangle** | 19.99% |
| Deutsche Telekom | 12.77% |
| DHL | 8.37% |
| Valeo | 4.12% |
| Schenker Logistics | 3.88% |
| Carrefour | 3.53% |
| AVA Marktkauf | 2.79% |
| Real SB-Warenhaus | 2.40% |
| Tech Data | 2.22% |
| Strauss Innovation | 2.14% |
| Total | 62.21% |
* Percentage of aggregate gross rent (including committed asset) as at 31 December 2009
** As of 1 January 2010, the weighting to Norbert Dentressangle reduced to 16.25%
Market Context
The Eurozone economy formally moved out of recession in Q3 2009, led by its largest constituents Germany, France and Italy. We expect this recovery to have continued in the fourth quarter. One-off fiscal stimulus programmes such as the 'car scrappage' schemes have been central to boosting industrial production in Europe, while accommodative monetary policy has, to an extent, eased the burden of debt servicing for individuals and corporates. The threat of long-term deflation in the Eurozone abated in the final months of 2009, reflecting an acceleration of oil price inflation, however the short-term outlook for inflation remains subdued.
As the Continental European economy began to recover from a deep recession in 2H 2009, investor sentiment and activity in the real estate sector also improved, largely driven by the wide margin between property yields and government bonds. According to CB Richard Ellis, investment turnover in 2H 2009 (at €44 billion) was 70% higher than in 1H 2009, with activity initially focusing on prime sub-markets (Source: CB Richard Ellis MarketView European Investment Quarterly Q4 2009). We believe that 2009 will prove to be the low point in the current cycle for property capital growth in Continental Europe, with performance improving as investment activity continues to grow.
To an extent, however, capital performance is forecast to be tempered by the leasing market which is expected to remain challenging during 2010. According to CB Richard Ellis, take-up volumes in 2009 were lower across Continental Europe and rents were generally under downward pressure throughout the year, particularly in Eurozone periphery countries such as Ireland, Portugal, Spain and Central & Eastern Europe (Source: CB Richard Ellis MarketView EMEA Rents and Yields Q4 2009). By contrast, rents in the core Eurozone have held up somewhat better and indeed we believe the larger Western European markets such as France and Germany, where the Company is most substantially invested, are likely to benefit from more stable leasing markets.
Active Asset Management
Asset sales are being undertaken where business plan initiatives have been achieved to reduce outstanding debt and return equity to the balance sheet. During the quarter, the Company completed two disposals in France for a total consideration of €1.3 million. Following the quarter end, the Company completed the transfer of an office building in Leuven, Belgium at a price 6.2% above the December valuation, generating total sales proceeds of €15.7 million. Also, post the quarter end, an additional asset was committed to be sold in Belgium and a further asset is under offer in France.
A number of lease re-negotiations are being undertaken to preserve the quality and duration of rental revenue. Such lease negotiations have also mitigated some of the potential impact of negative lease indexation in France. The Company is in active discussions with tenants representing 13.4% of portfolio income.
Active management has also reduced the portfolio weighting of our largest tenant, Norbert Dentressangle. Post 31 December 2009, the weighting has reduced from 19.99% to 16.25%. In parallel the Company has contracted lease terms with sub-tenants occupying these properties to maintain future income streams and ongoing occupancy. Upon signing these new lease terms, the portfolio weighted average lease length to expiry will increase from 5.99 years to 6.25 years (4.02 years to 4.20 years to break).
Finance
As at 31 December 2009, the Company had drawn down €400.2 million of senior debt in respect of its €416.5 million facility with the Bank of Scotland and its €12.0 million facility with Credit Foncier; in addition, the Company had cash balances of €94.8 million (before the pay down of €40.0 million of debt and excluding tenant deposits of €4.7 million) at that date, giving a net debt position of €310.1 million.
As at 12 January 2010 (after the pay down of €40.0 million of debt and the sale of the Leuven asset in Belgium), the Company's gross LTV (gross debt divided by market value of properties) based on the 31 December 2009 valuation was 68.0%.
As a result of the capital raising, disposals and the reduction of debt as described above, the Company has terminated a number of interest rate swaps. The associated break costs have mainly been cash settled however in some cases the rates of the remaining swaps have been adjusted so as to conserve existing cash resources. All debt is fully hedged against changes in European interest rates until December 2013 at a weighted average swap rate of 4.10%.
For further information, please contact:
Invista Real Estate
Tony Smedley/Chris Ludlam +44 20 7153 9369
Financial Dynamics
Dido Laurimore/Rachel Drysdale/Olivia Goodall + 44 20 7831 3113