14 Aug 2008 07:00
INVISTA EUROPEAN REAL ESTATE TRUST SICAF (the "Company"/"Group")
ANNOUNCEMENT OF NAV AND INTERIM MANAGEMENT STATEMENT
FOR THE QUARTER ENDED 30 JUNE 2008
14 August 2008
Commenting, Tom Chandos, Chairman of the Invista European Real Estate Trust, said:
"Conditions in property investment markets remain challenging, primarily due to uncertainty in economic and financial markets caused by the global credit crunch and negative sentiment towards property investment generally. Under such conditions, property pricing in Continental Europe will inevitably come under pressure across all countries and sectors. During this quarter the portfolio performed in line with expectations and, given its relatively long leases and good quality tenants, is better placed to weather a downturn. Pursuing an active management strategy to realise sales, improve the portfolio and secure appropriate refinancing remain the priorities of the Company."
Net Asset Value
As at 30 June 2008, the Company's unaudited Net Asset Value (adjusted to add back deferred taxation) was EUR2.78 (220p) per share, reflecting a decrease of EUR0.13 (11p) or 4.5% over the quarter. The payment of the interim dividend in respect of the half-year ended 31 March 2008 reduced the NAV by EUR0.09 per share. The unaudited Net Asset Value, calculated under International Financial Reporting Standards, was EUR2.54 per share. Over the 12 months to 30 June 2008, the Company's NAV has increased in sterling terms by 14p per share or 6.9%. Including dividend payments, the total NAV return over the last 12 months has been 11.6%.
A breakdown of the unaudited Net Asset Value is set out below:
| In EURm | 30/06/2008 | 31/03/2008 | 3 month change |
| Direct property independent valuation | 728.8 | 754.3 | (25.5) |
| Market value of interest rate swaps | 17.5 | (0.5) | 18.0 |
| Net current assets | 14.7 | 21.2 | (6.5) |
| Interest bearing loans and borrowings | (443.2) | (442.0) | (1.2) |
| Net deferred tax liabilities | (27.4) | (25.9) | (1.5) |
| Net Asset Value | 290.4 | 307.1 | (16.7) |
| Adjusted Net Asset Value* | 317.9 | 333.0 | (15.1) |
| Adjusted Net Asset Value* per share (EUR) | 2.78 | 2.91 | (0.13) |
* Net Asset Value adjusted to add back deferred tax
The unaudited Net Asset Value incorporates a number of events and key factors during the quarter ended 30 June 2008 including:
the existing portfolio decreased in value on a like-for-like basis by 3.4% in the quarter, equating to EUR25.4 million or EUR0.22 per share;
the payment of the interim dividend in respect of the six months ended 31 March 2008 of EUR10.1 million, equating to EUR0.09 per share; and
an increase in the mark-to-market valuation of the Company's interest rate swaps of EUR18.0 million, equating to EUR0.16 per share.
The Company's unaudited Net Asset Value figure is calculated using the external property portfolio valuation as at 30 June 2008. The property portfolio will next be valued by an external valuer as at 30 September 2008 and the next quarterly Net Asset Value per share is expected to be published in November 2008.
Figures converted into sterling assume a EUR per STG exchange rate of 1.2640 as at 30 June 2008.
Property Portfolio
The value of the property portfolio as at 30 June 2008 was EUR740.2 million (31 March 2008: EUR 766.0 million) and comprised 52 properties including one committed property. The Company's portfolio, on a like-for-like basis, decreased in value over the quarter by 3.4%.
The property portfolio is balanced across three commercial property sectors spread across seven countries, with the majority located in France and Germany. The portfolio has been created to provide diversified exposure to Continental European commercial property investment. The objective of the Company is to maximise NAV total return through generating an above average income return and long run income and capital growth potential.
The Group's portfolio currently generates an income of EUR50.4 million per annum from 255 individual leases let to 177 different tenants, has 6.2 years weighted average lease length to expiry and produces a net initial yield of 6.32% on valuation and a running yield of 6.65%. The portfolio credit rating is 69/100 which is classified as "low to medium risk" (Source: Experian June 2008).
The current vacancy level within the portfolio is 3.6% which has decreased from 3.9% since the interim results were announced on 22 May 2008 as a result of leasing two logistics premises in Amiens, France. The Company continues to pursue its active strategy of reducing vacancies and is also engaging in discussions with existing tenants to lengthen leases. Economic uncertainty could begin to affect the occupational markets but the Company has not yet experienced any material change in the portfolio's vacancy rate, or the leasing potential of its properties. This is encouraging, although the situation will be monitored closely because of potential downside risks to the economic outlook.
Sector Weightings ¹
Sector Weighting
Logistics 50%
Office 36%
Retail 14%
Country Weightings ¹
Country Weighting
France 49%
Germany 33%
Belgium 7%
Spain 5%
Netherlands 3%
Czech Republic 2%
Poland 1%
¹ Valuation as at 30 June 2008 (including a committed asset)
Top Ten Properties ²
| Address | Sector | % | |
| 1 | Heusenstamm, Frankfurt, Germany | Office | 11.8% |
| 2 | Riesa, Germany | Retail | 7.8% |
| 3 | Cergy, Paris, France | Office | 4.8% |
| 4 | Lutterberg, Germany | Logistics | 4.5% |
| 5 | Ecully, Lyon, France | Office | 4.4% |
| 6 | Madrid, Spain | Logistics | 3.6% |
| 7 | Monteux, France | Logistics | 3.2% |
| 8 | Marseille, France | Logistics | 3.0% |
| 9 | Grenoble, France | Office | 2.9% |
| 10 | Villeurbanne, Lyon, France | Office | 2.9% |
| Total as at 30 June 2008 | 48.8% |
² Calculated as percentage of aggregate asset value plus cash (including a committed asset).
Top Ten Tenants ³
| Tenant | % | |
| 1 | Norbert Dentressangle | 15.4% |
| 2 | Deutsche Telekom | 11.0% |
| 3 | DHL | 7.1% |
| 4 | Tech Data España | 3.6% |
| 5 | Valeo | 3.3% |
| 6 | Sun Microsystems | 3.0% |
| 7 | Merial SAS | 3.0% |
| 8 | Carrefour | 2.8% |
| 9 | AVA Marktkauf | 2.4% |
| 10 | Copal Logistics | 2.2% |
| Total as at 30 June 2008 | 53.9% |
³ Calculated as percentage of aggregate gross rent (including a committed asset).
Market Context
Over the past six months, conditions in property investment markets have worsened, primarily due to uncertainty in economic and financial markets caused by the global credit crunch and negative sentiment towards property investment generally. Under such conditions, property pricing will inevitably come under pressure across all markets and sectors. However we believe that, as the market becomes more income-focused, good quality buildings occupied by strong tenants on relatively long leases, such as those owned by the Company, will be better positioned to weather a downturn.
Headline data suggests that occupational markets are generally still performing well, with leasing activity holding up, albeit at lower levels than the cyclical peak in 2007. However, we are beginning to see a divergence between markets in those countries with a stable economic outlook, such as France, Germany, Scandinavia and Central Europe, and those experiencing much sharper slowdowns, such as Spain and Ireland. We expect average rental growth to remain broadly positive although this will be subdued until inflationary pressure subsides and financial markets stabilise.
Active Asset Management
As reported previously, disposals are being considered where asset management plans have been successfully implemented, or where there are concerns over future performance. The Company is engaged in active negotiations in this respect and expects to make further announcements shortly.
Good progress is being made on asset management initiatives in the portfolio, with a number of lease re-negotiations taking place across all assets, countries and sectors. The timely implementation of the asset level business plans remains a key factor affecting performance.
Some examples of activity currently being undertaken on the portfolio are set out below:
In Trappes, France, the Company is investigating the possibility of developing a plot of land adjacent to an existing asset and, in parallel, engaging in negotiations to pre-lease the new building on the basis of a new six year firm contract;
in Marseille, France, the Company is finalising negotiations to consolidate one of the occupational leases in order to improve income security;
in Brussels, Belgium, the Company is finalising lease negotiations to let the last remaining office space at Rue Luxembourg in addition to actively marketing vacant accommodation in Waterloo Business Park; and
consistent with the Company's stated strategy to lengthen leases where possible, the Company has secured an extension of the lease to Christian Salvesen at the logistics premises in Amsterdam, The Netherlands.
Finance
As at 30 June 2008, the Company had drawn down EUR445.5 million of senior debt in respect of its EUR460.0 million facility with the Bank of Scotland; in addition the Company had cash balances of EUR29.5 million at that date giving a net debt amount of EUR416.0 million. The Company's gross LTV (gross debt divided by market value of properties) at that date was 61.1% and on a net debt basis was 57.1%; the Company's LTV covenant threshold is 70%. All debt is fully hedged against changes in European interest rates until January 2013 at a weighted average swap rate of 4.053%.
Securing refinancing of the Company's existing facility is a priority of both the Board and the Investment Manager. The Investment Manager is engaged in constructive discussions with a number of lending banks with a view to arranging the refinancing of the entire facility prior to expiry of the existing facility on 31 December 2008.
For further information:
http://www.ieret.eu
Investment Manager
Tony Smedley / Chris Ludlam +44 20 7153 9433
Invista Real Estate Investment Management Limited
Brokers
Richard Cotton / Angus Gordon Lennox +44 20 7588 2828
JPMorgan Cazenove
Alex Carter +44 20 7986 0520
Citi
Financial PR
Stephanie Highett / Dido Laurimore / Rachel Drysdale +44 20 7831 3113
Financial Dynamics