IMPT.L Regulatory News (IMPT)

19 Oct 2009 12:22



CLOSE HIGH INCOME PROPERTIES PLC (the "Company")

INTERIM MANAGEMENT STATEMENT

ANNOUNCEMENT OF NAV

The board of Close High Income Properties PLC advises that as at close of business on 30 September 2009, the unaudited net asset value per Ordinary Share of 1 penny each of the Company was 28.53 pence (31 August 2009: 28.10 pence). The unaudited net asset value per "D" Ordinary Share of 1 penny each was 1.94 pence (31 August 2009: 4.67 pence). This represents an increase of 1.51 per cent per Ordinary Share and a decrease of 58.46  per cent per "D" Ordinary Share.

The net asset value is based on the external valuation of the Company's property portfolio prepared by DTZ Debenham Tie Leung Limited at 30 September 2009. On a like for like basis there has been an average increase in valuation from 30 June 2009 of 0.27% across the Ordinary Share Portfolio and a decrease in valuation of 3.51% across the "D" Ordinary Share portfolio. The net asset value also incorporates the movement in the interest rate swap valuations as seen in the table below. 

During the month the market value of the interest rate swap liability entered into by Ordinary Share  decreased by £0.20 million to a liability of £3.64 million (31 August 2009: liability of £3.84 million). The movement during the month represented an increase in net asset value of 0.95 per cent per Ordinary Share. Whilst the total market valuation of the interest rate swap is currently in deficit, its value will run to zero over the term of the contract. The swap continues to provide a fixed rate of interest to the Company. It is not the intention of the Company to dispose of the swap and realise the deficit as the Company continues to benefit from fixed rate funding.

There were no property sales completed during September 2009.

The net asset value is calculated under International Financial Reporting Standards ("IFRS").

The property portfolio will next be valued by an external valuer at 31 December 2009 and the net asset value per share as at 31 October 2009 will be announced in November 2009.

PROPERTY PORTFOLIO PERFORMANCE

During the four months since 30 June 2009 voids have continued to rise peaking at a level of 18.6% at the end of September 2009 within the Ordinary Share Portfolio. Since then this has fallen back to 17.0% in October 2009 and there are signs that the letting market is improving. However the recovery remains fragile and could be short lived. The voids within the "D" Ordinary Share Portfolio have remained fairly static at 18.5% at 30 September 2009.

The fall in capital values appears to have levelled out and, at the end of the period, the total value of the Ordinary Share Portfolio showed a slight increase in value of 0.27% or £240,000. However the pressure on rental values remains and this caused further falls in the value of the "D" Ordinary Share Portfolio during the period of 3.51% or £730,000. This was less than this portfolio could have experienced due to the savings made in irrecoverable outgoings by the Property Manager.

Both portfolios have had significant capital expenditure over the period by way of refurbishment works to improve the quality of the vacant space which appears to be stabilising the void levels.

GROUP BORROWINGS

The Board of Close High Income Properties PLC is pleased to announce that it has successfully refinanced the funding of its loan facilities with Nationwide Building Society ("Nationwide") in respect of its subsidiaries, CHIP (Two) Limited ("CHIP Two") and CHIP (Six) Limited ("CHIP Six").

Nationwide's loan to CHIP Two of £9.8 million represents 15.1% of the secured loans of £64.9 million within the Ordinary Share Portfolio. The remaining 84.9%, or £55.1 million, represents loans made by Halifax Bank of Scotland Plc ("HBOS") to the remaining subsidiaries within the Ordinary Share Portfolio.

Nationwide's £18.9 million loan facility to CHIP Six represents the sole secured loan facility in respect of the "D" Ordinary Share Portfolio.

CHIP Two

On 8 October 2009, CHIP Two successfully completed the refinancing of its £9.8 million loan facility  with Nationwide until 23 October 2012.

All associated arrangement fees, costs and expenses in the transaction were paid from CHIP Two's  own resources.

The margin of the new funding to CHIP Two is 2.5% per annum above LIBOR reducing to 2.0% above LIBOR if the Loan to Value ("LTV") has been less than 60% for two consecutive quarters. Should the LTV increase to or above 60% then the margin would return to its prescribed rate. This increase in margin became effective from 18 May 2009. Of the total loan of £9.8 million £8.0 million has been fixed at a rate of 2.75% (exclusive of margin) from 15 October 2009 to 23 October 2012.

The LTV covenant has been waived until 1 April 2010 thereafter for the period until 31 March 2011 (inclusive) the LTV is not to exceed 75.0% of the Nationwide's most recent valuation and at anytime thereafter through until expiry of the facility the LTV is not to exceed 65.0%. The LTV based on the valuation at 30 September 2009 is 71.5%.

The revised facility to CHIP Two requires surplus rents are used to reduce part of the outstanding debt on a quarterly basis and that the Interest Cover Ratio shall not be less than 160% in any comparable period.

CHIP Six

On 13 October 2009, CHIP Six formally extended terms of its £18.9 million loan facility with Nationwide until 1 March 2013. 

All associated arrangement fees, costs and expenses in the transaction were paid from CHIP Six's own resources.

The margin of the new funding is 3.5% per annum above LIBOR reducing to 2.0% above LIBOR if the Loan to Value ("LTV") has been less than 60% for two consecutive quarters. Should the LTV increase to or above 60% then the margin would return to its prescribed rate. This increase in margin became effective from 18 May 2009. Of the total loan of £18.9 million £18.0 million has been fixed at the rate of 2.79% (exclusive of margin) from 12 October 2009 to 1 March 2013.

The LTV covenant has been waived until 1 April 2010 thereafter for the period until 10 April 2012 (inclusive) the LTV is not to exceed 90% of the Nationwide's most recent valuation and at anytime thereafter through until expiry of the facility LTV is not to exceed 85%. The LTV based on the valuation at 30 September 2009 is 94.1%.

The revised facility to CHIP Six requires surplus rents are used to reduce part of the outstanding  debt on a quarterly basis and that the Interest Cover Ratio shall not be less than 110% in any comparable period until April 2011 and not less than 130% thereafter.

FUTURE PROSPECTS

The Company remains focused on resolving the breaches of its banking covenants with HBOS, who has now provided indicative terms dated 13 October 2009 which is subject to formal Lloyds Banking Group PLC Credit Committee approval. Once these terms have been formally approved the Board intends putting forward to shareholders proposals for the continuation of the Company in advance of the shareholder vote which is scheduled for mid 2010.

The Property Investment Adviser to the Company remains focused on minimising voids and maximising net income from the property portfolios through intense active management of each property.

For further information contact:

Peter Roscrow

Close Investments Limited

020 7426 4174