3 Aug 2011 07:00
3 August 2011
INVISTA EUROPEAN REAL ESTATE TRUST SICAF
(the "Company"/ "Group")
ANNOUNCEMENT OF NAV AND INTERIM MANAGEMENT STATEMENT
FOR THE QUARTER ENDED 30 June 2011
Net Asset Value
As at 30 June 2011, the Company's unaudited Net Asset Value, calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax ("Adjusted NAV"), was €0.577 (51.8p) per share, reflecting an increase of €0.001 or 0.17% over the quarter and 1.20p or 2.34% in Sterling. Over the 12 months to 30 June 2011, the Adjusted NAV per share has increased by 8.4p or 19.4% in Sterling. The unaudited Net Asset Value, calculated under International Financial Reporting Standards, was €0.556 per share.
A breakdown of the unaudited Net Asset Value is set out below:
€ million | As at30 June 11 | As at31 March 11 | 3 month change | 3 month change (%) |
Property portfolio |
|
|
|
|
Independent valuation | 460.4 | 465.5 | -5.1 | -1.1% |
Valuation of assets held for sale4 | (6.4) | - | -6.4 |
|
Like for like direct property5 | 466.8 | 465.5 | +1.3 | +0.3% |
Net current assets | 50.0 | 51.9 | -1.9 | -3.7% |
Market value of swaps/FX | (17.9) | (17.3) | -0.6 | -3.5% |
Interest bearing loans and liabilities | (311.7) | (319.1) | +7.4 | -2.3% |
Preference shares | (29.2) | (29.7) | +0.5 | +1.7% |
Market value of warrants | (2.8) | (2.3) | -0.5 | +21.7% |
Net deferred tax liabilities | (4.4) | (4.3) | -0.1 | -2.3% |
Net Asset Value | 144.4 | 144.7 | -0.3 | -0.2% |
Adjusted Net Asset Value1 | 150.0 | 149.8 | +0.2 | +0.1% |
Adjusted Net Asset Value1 per ordinary share € | 0.577 | 0.576 | +0.001 | +0.2% |
Adjusted Net Asset Value per ordinary share fully diluted €1, 2 | 0.551 | 0.551 | - | - |
Net Asset Value per preferenceshare €3 | 1.11 | 1.16 | -0.05 | -4.3% |
Number of ordinary shares | 259,980,739 | 259,979,880 | 859 |
|
1 Net Asset Value adjusted to add back deferred tax (both current and non-current liabilities) and change in fair value of the warrants from book value
2 Assumes all warrants are exercised at 29p per share and that the fully diluted number of ordinary shares is 289,086,083
3 The NAV for preference shares is equal to the nominal value plus accrued interest divided by the total number of preference shares
4 Asset held for sale (Vitrolles, France) as at 30 June 2011, which wasn't classified as an asset held for sale at the end of March 2011
5 Excludes assets classified in March and June 2011 as held for sale, namely one asset in Warsaw, Poland and two assets in France in Marseille and Paris.
The unaudited Net Asset Value for the quarter ended 30 June incorporates a number of events and key factors, including:
§ The property valuation increased by €1.3 million or € 0.005 per share. This is made up of an increase in the value of the existing portfolio on a like-for-like basis of 0.3% in the quarter (equating to €1.3 million) and the disposal of two properties in France and Poland, previously valued at €23.1 million or € 0.09 per share
§ A €7.4 million or €0.03 per share reduction of the Senior debt following the sales of assets
§ A decrease in net current assets of €1.9 million or €0.007 per share.
The Company's unaudited Net Asset Value figure incorporates the independent property portfolio valuation as at 30 June 2011. The property portfolio will next be valued on 30 September 2011.
Figures converted into sterling assume a EUR per STG exchange rate of 1.1131 as at 30 June 2011.
Property Portfolio
As at 30 June 2011, the Company's property portfolio was valued at €487.7 million and comprised 41 assets (€509.5 million: 31 March 2011). The like-for-like portfolio value increased by €1.3 million (or 0.26%) during the quarter largely due to the successful completion of asset management initiatives to re-negotiate existing leases and let vacant space.
As at 30 June 2011, the Company's portfolio generated gross income of €40.9 million per annum, representing a Gross Income Yield ("GIY") of 8.38% and a Net Initial Yield ("NIY") of 7.76%. The portfolio void level decreased to 6.0% as at 30 June 2011 (6.9%: March 2011). As at 30 June 2011, the portfolio weighted average lease length to expiry was 6.23 years and 4.38 years to first break (as at 31 March the weighted average lease expiry was 5.92 years and 3.82 years to first break).
Taking into account the sale of two French logistics properties post quarter end, the Company's property portfolio, on a pro-forma basis, has reduced in size to €460.4 million and gross income has fallen to €38.8 million pa.
The portfolio's credit rating as measured by the Investment Property Databank's M-IRIS credit analysis system on 30 June 2011 was at 73 out of 100, which is classified as a "low-medium risk band".
As at 30 June 2011, the portfolio composition was as follows:
Sector Weightings
Sector | %* |
Office | 29.5% |
Logistics | 52.7% |
Retail | 17.8% |
Total | 100.0% |
*Percentage of aggregate asset value as at 30 June 2011
Country Weightings
Country | %* |
France | 45.4% |
Germany | 41.6% |
Spain | 4.5% |
Netherlands | 3.5% |
Belgium | 3.0% |
Czech Republic | 2.0% |
Total | 100.0% |
*Percentage of aggregate asset value as at 30 June 2011
Top 10 Properties
Property Location | Sector | %* |
Heusenstamm, Frankfurt, Germany | Office | 13.9% |
Riesa, Germany | Retail | 10.2% |
Lutterberg, Germany | Logistics | 5.6% |
Cergy, Paris, France | Office | 5.6% |
Trappes, Paris, France | Logistics | 3.9% |
Roth, Germany | Retail | 3.4% |
Grenoble, France | Office | 3.4% |
Monteux, France | Logistics | 3.1% |
Miramas, France | Logistics | 3.1% |
Marseille, France | Logistics | 3.0% |
Total |
| 55.2% |
*Percentage of aggregate asset value plus cash as at 30 June 2011
Top 10 Tenants
Tenant Name | %* |
Norbert Dentressangle | 15.2% |
Deutsche Telekom | 14.1% |
DHL | 9.6% |
Valeo | 5.3% |
Schenker Logistics | 4.3% |
Carrefour | 3.8% |
AVA Marktkauf | 3.0% |
SDV Logistique | 2.6% |
Real SB Warenhaus | 2.5% |
Tech Data | 2.4% |
Total | 62.8% |
*Percentage of aggregate gross rent as at 30 June 2011
Market Context
Europe's economic recovery has shown signs of losing momentum in recent months, in the face of uncertainty associated with the Eurozone's sovereign debt crisis and persistently high rates of inflation. Economic data published during Q2 2011 showed that GDP growth in the region would likely remain below trend for the rest of the year, while the marked divergence between the Eurozone's core and periphery would persist.A divergence of property activity and performance has also been more evident within the Continental European property market, as investment turnover continues to improve in Germany, France, Scandinavia and CEE, but fell again in the periphery. Investment performance has also held up better in the Eurozone core, notably in prime property segments where capital values have risen. However, there has so far been little evidence of this spreading to non-prime segments and even in the periphery prime capital values are increasing only marginally, underlining a continued aversion to risk.The outlook for property performance in Continental Europe is expected to follow a similar pattern, with capital values under pressure in the Eurozone's periphery and broadly stable in the core. In the absence of significant capital value growth, income returns are expected to be the main driver of overall property performance, favouring higher yielding segments such as industrial properties in the Eurozone core.
Disposals
During the quarter to 30 June 2011, the Company completed the sale of two logistics properties, one in Marseille, France and the other in Warsaw, Poland, for a total consideration of €22.5 million. The sale of the Polish investment follows agreement for a new lease with the tenant Gefco and effectively marks the exit of the Company from that market. Post quarter end, a prime distribution warehouse in Trappes, Paris which had been substantially extended and refurbished by the Company during the last three years, was sold for a total consideration of €20.7 million. Having agreed a new lease with the occupier, a logistics asset in Vitrolles, France was sold to a private investor on 29 July 2011 at a price of €6.6 million.
These sales were undertaken at an average of 1.3% discount to prevailing property valuations.
In accordance with the accelerated disposal programme, further assets are either being prepared for sale or are already in the market.
Active Asset Management
Following the recent announcement regarding the completion of new leases on 10.1% of portfolio income in Germany and France, including a letting of 1,780 sqm of office space to Rolls Royce in Grenoble, a number of additional lease negotiations have also been agreed during the quarter. Of particular note, two leases were extended with Oracle and Euromaster in Grenoble, France, securing 3.8% of portfolio income for an average weighted lease length of 4.5 years. In total, these five leases improved the weighted average lease length to first break from 3.82 years as at 31 March 2011 to 4.38 years as at 30 June 2011.
Heads of terms have also been agreed with Carrefour to extend their lease on a logistics asset in France representing 3.3% of portfolio revenue. A further 10.7% of portfolio income is currently under negotiation with existing tenants in order to continue to improve property income security.
Finance
As at 30 June 2011, the Company had drawn down a total of €328.0 million of senior debt in respect of its loan facilities with the Bank of Scotland and Credit Foncier. In addition, the Company had cash balances of €39.0 million (excluding tenant deposits of €4.2 million, and escrow accounts of €3.5 million) at that date, giving a net debt position of €289.0 million.
Following the period end, the proceeds from the sale of the logistics asset in Trappes, Paris, France plus €4.6 million of cash from the Company's balance sheet were applied to paying down a total of €15.2 million of debt with the Bank of Scotland and all of the outstanding €9.3 million of debt with Credit Foncier. As at the Interest Payment Date on 25 July 2011 therefore, and based on valuations of the property portfolio as at 30 June 2011, the Loan To Value ("LTV") ratio was 64.99% and accordingly the margin on the debt reduced from 2.50% to 2.25% pa. All debt is fully hedged against changes in European interest rates until December 2013, giving a total interest cost of 6.30% per annum at current LTV levels.
Following the sale of the logistics asset in Vitrolles, France on 29 July 2011, the Company currently has a total of €298 million of senior debt and its LTV is 64.7% which remains substantially below the LTV covenant of 82.5% in 2011.
Change of strategy and appointment of Investment Manager
On 30 June 2011, the Company announced a proposed change of strategy to a structured realisation and the prospective appointment of Internos Real Investors LLP as the new investment manager to implement this. A circular to shareholders with further details will be sent out in due course with a notice of a General Meeting of shareholders to approve the new investment objective.
For further information, please contact:
Invista Real Estate Investment Management
Tony Smedley/Chris Ludlam +44 20 7153 9369
Financial Dynamics
Dido Laurimore/ Olivia Goodall +44 20 7831 3113