TAP.L Regulatory News (TAP)

21 Jan 2008 07:00

Teesland Advantage Property Inc Tst21 January 2008 21 January 2008 Teesland Advantage Property Income Trust Limited ("TAP" or the "Company") Net Asset Value as at 31 December 2007 and Strategy Update Net Asset Value The unaudited net asset value per share of Teesland Advantage Property IncomeTrust Limited ('TAP') as at 31 December 2007 is 97.6 pence. This represents adecline of 15.4 pence per share or 13.6 per cent from the net asset value pershare as at 30 September 2007 of 113.0 pence. The net asset value is calculated under International Financial ReportingStandards ("IFRS"). The net asset value includes all income to 31 December 2007 and is calculatedafter deduction of all dividends paid prior to that date. It does not include aprovision for the dividend for the quarter to 31 December 2007 which is expectedto be paid in February 2008. Breakdown of NAV movement Set out below is a breakdown of the change to the unaudited net asset value pershare calculated under IFRS over the period from 30 September 2007 to31 December 2007. Pence per % of opening share NAVNet asset value per share as at 30 September 113.0Unrealised decrease in valuation of property portfolio (14.2) (12.5)(including the effect of gearing)Realised gains on sales of properties 0.2 0.1Decrease in interest rate swap valuation (0.8) (0.7)Movement in revenue reserves (0.6) (0.5)Net asset value per share as at 31 December 2007 97.6 Property Portfolio Values \* The ungeared decrease in the valuation of the property portfolio over thequarter to 31 December 2007 was 7.4% on a like for like basis. The property portfolio will next be valued by an external valuer during March2008 and the net asset value per share as at 31 March 2008 will be announced inApril 2008. Property Portfolio Value at Dec 2007 £260.9mNet Initial Yield 6.13%Equivalent Yield 6.57% TAP comprises 78 properties located in the UK. The portfolio has a strong,diverse occupier base and is weighted by sector as follows: Retail 38.6%, Offices 34.2%, Industrial 23.6% and 3.6% in Leisure with ageographical bias to the South East. When compared to its IPD benchmark TAP isunderweight Retail, overweight Office and Industrial. This reflects theportfolio strategy which seeks higher initial income and income growth. The capital value of the property portfolio has fallen by 7.4% on a like forlike basis in the fourth quarter and 8.6% in 2007. This compares favourably withthe IPD monthly index, which shows reductions of 9.7% and 10% respectively. Thefall in market values reflects a general increase in yields, a consequence ofthe increase in the risk premium required by investors following the creditcrunch. On a total return basis, the performance has been estimated at -5.8% un-gearedfor the fourth quarter, compared to the IPD monthly return of -8.5% over thesame period. On an annual basis, the TAP estimated total return is -3.5%,against an IPD monthly return of -5.5%. TAP is well placed to deliver market plus performance going forward as a resultof the portfolio bias toward the high income sectors and lack of exposure to thevolatile Central London market. More importantly the portfolio benefits from asignificant number of individual asset management initiatives including the tworecent acquisitions in Leeds and Northampton, where strong characteristics havemaintained the values above the acquisition prices. Disposals The Directors have considered the future strategy of the Company in the light ofcurrent difficult trading conditions and have resolved that capital released bysales through normal portfolio management should be applied to reduce thecurrent level of debt, which will have a beneficial effect on dividend cover.This policy will be kept under regular review and is considered to be moreappropriate to current market conditions than share buybacks. Debt Strategy The Company currently has two separate source of debt: Facility Drawn LTV LTV CovenantHBoS £98,320,000 £88,293,082 48.7% 55% until 2010Capmark £37,461,250 £37,461,250 47.0% 70% The HBoS facility attracts a total interest rate including margin of 6.5%(assuming Libor at 5.7%) The Capmark facility attracts a total interest rate including margin of 5.28% The overall current level of debt at 48.2% LTV is within the Company's originaltarget operating range. The debt covenant thresholds are well above the LTVlevels and current pipeline sales will reduce further the LTV on the HBoSfacility. Whilst the Company is of the view that market conditions may wellbegin to improve shortly, it is well positioned to cope with a continuation ofthe difficult conditions experienced in the second half of 2007. Currently TAP has approximately 60% of its debt at fixed rates of interest. Allof the floating rate debt is drawn from the HBOS facility, which matures in2015. The Directors are currently considering fixing the interest cost on themajority of the outstanding floating rate debt through the use of interest rateswaps. The fixed rate for 7 year swaps that is currently achievable in themarket is of the order of 4.90%, before margin and mandatory costs. This rate isbelow that of the original swaps put in place at the launch of the company inFebruary 2005. Based on this swap rate, and assuming all of the floating rateddebt was fixed, the blended average interest rate on the total debt would be5.7%. A further modest improvement in interest cost will be realised in February whenthe margin on the HBoS facility falls to 74 basis points from its original 79basis points. Dividend cover In recent months particular emphasis has been placed on reducing property costsand the Company has started to see the benefits of this through an improvementin the level of property management costs in the quarter ending 31 December 2007. Further improvements are anticipated although in any individual quarteroperating costs may be below or above the anticipated long-run average level. The Board regularly review the level of dividend cover and how it will evolveover time. Looking ahead, capturing the existing reversion within theportfolio will increase the level of income and hence potentially the level ofdividend cover. It is hoped that significant improvements in the level ofdividend cover can be achieved within three years. Company Name Following the recent integration of Teesland into Valad Property Group, theCompany intends to apply for the consent of its shareholders to change its nameand further details of this proposal will be announced shortly. For further information: Brett Robinson, Teesland plc: 020 7659 6666Jeremy Carey, Tavistock Communications Limited: 020 7920 3150Anson Fund Managers Limited, Company Secretary 01481 722260 E&OE - in transmission This information is provided by RNS The company news service from the London Stock Exchange