Last checked at 
27 May 2015 10:09
To: Company Announcements
Date: 27 May 2015
Company: AXA Property Trust Limited
Subject: Net Asset Value 31 March 2015 (Unaudited)
SUMMARY
CAPITAL REDEMPTIONS
- The Company paid a capital redemption of £1.8 million on 26 May 2015, bringing the total capital returned to Shareholders to £7.9 million.
QUARTERLY RESULTS
- The Company's unaudited Consolidated Net Asset Value at 31 March 2015 was £47.60 million (31 December 2014: £50.25 million)
- The unaudited Net Asset Value per share at 31 March 2015 was 53.56 pence (31 December 2014: 56.55 pence per share)
- The Company made a net profit after tax of £3.41 million in the nine month period to 31 March 2015.
MANAGED WIND-DOWN STATUS
- The Company continues to progress the managed wind-down of its portfolio with a view to realising its investments by December 2015 in a manner that achieves a balance between maximising the value from the Company's investments and making timely returns of capital to shareholders.
- Although no sales have been completed during the quarter, the sales of Altenstadt-Lindheim and Kraichtal (both in Germany) have been notarized and completion for the transactions is expected on 29 May 2015 and 30 June 2015 respectively.
- Marketing of the properties at Curno and Agnadello has commenced as part of an Italian portfolio including a third asset owned by European Added Value Fund S.à.r.l. (a subsidiary of European Added Value Fund Limited) which is also the Company's 50% Joint Venture partner in Agnadello.
- Marketing of Venray and Fuerth is ongoing, while at Dasing and Rothenburg asset management initiatives are being finalised before approaching potential investors.
PORTFOLIO UPDATE
Country Allocation at 31 March 2015 (by asset value)
Country % of portfolio
Germany 64%
Italy 29%
Netherlands 7%
Sector Allocation at 31 March 2015 (by asset value)
Sector % of portfolio
Retail 56%
Industrial 28%
Leisure 16%
MARKET UPDATE
European overview
Economic growth in the eurozone was positive during the final quarter of 2014, with Gross Domestic Product (GDP) expanding by 0.3%, compared to the previous quarter, largely as a result of an increase in consumer spending. Despite the positive growth, Europe's recovery is still relatively weak. There are still several countries in Europe, such as France and Italy, which need to enact structural changes in order to stimulate growth, although the launch of eurozone-wide quantitative easing during the first quarter of 2015 has already had a major impact upon consumer confidence, which is growing, and on bank lending, which is increasing.
Government bond yields across the eurozone have continued to fall over the last year and the Euro has also weakened substantially. This is having a positive effect on European exports, which is likely to benefit the biggest exporters throughout 2015, with Germany benefiting more than other countries. As European bond yields have continued to fall, the yield differential to property has been expanding, despite further compression in property yields over the same period. While there are differences in the yield gap in some countries, the overall pattern holds for the bulk of Europe. This is likely to be supportive of further investment in property assets, particularly as investors searching for higher yields (the yield on property is still significantly above that available from government bonds) increase their allocations to property, fuelling additional demand.
European transaction volumes reached EUR53.8 billion during the first quarter of 2015 - down from EUR80.5 billion in Q4 2014, but higher than the EUR41.5 billion achieved in Q1 2014.
German Retail
Retail sales in Germany have been increasing since September 2014, growing at 0.7% year-on-year in March 2015. In Q1 2015, almost EUR3.7 billion was invested in German retail property, EUR960 million (35%) more than in the same quarter of the previous year. Compared to Q1 2014, investors have significantly increased their investment into shopping centres as well as retail warehouses and retail parks located in secondary locations, reflecting their higher risk tolerance. Prime rents have been flat over the last quarter, with the exception of Cologne and Munich. Cologne saw a EUR10/sq m/month decrease in prime rents to EUR270/sq m/month, while Munich experienced an increase by EUR10/sq m/month to EUR400/sq m/month.
Italian Industrial
The occupational market has slowed down since the beginning of the year and has been mainly tenant-friendly, characterized by the renegotiation of existing contracts and the consolidation of space. Logistics take-up in the first quarter of the year decreased by over 60% quarter-on-quarter to 80,000 sq m. Speculative development remained at a standstill so that quarterly take-up involved existing units, located in secondary locations within prime markets and with good accessibility. Lombardy and Emilia Romagna continued to be the regions with the strongest letting activity. With Grade 'A' space being the most sought after, availability in northern Italy has been decreasing, particularly in light of the scarcity of new speculative developments in the pipeline. However, vacancy rates across the country remained broadly stable during the quarter. 3PL operators were once again the most dynamic, accounting for circa 65% of the quarterly take-up. Overall, prime rents remained stable in the first quarter. The value of investments in Italy's industrial sector in Q1 2015 was approximately EUR90m, a sharp increase (60%) from the previous quarter.
Netherlands Logistics
In the Netherlands, the industrial market is continuing to benefit most from the country's economic recovery, due to its central location along the European logistics corridor. The Central and East Brabant and Limburg regions, which are focused on European distribution and high-tech sectors, continue to benefit from rents lower than elsewhere in the Netherlands, as well as good accessibility to the rest of Europe. Occupiers within the Netherlands are actively looking to relocate to more modern facilities with good accessibility but overall demand growth looks set to remain weak over the next few quarters, given the current uncertainty in the Eurozone. Following strong growth in 2014 along the European corridor (rental values were up 7.1% in Rotterdam), prime rents have remained stable in the first quarter of 2015 at EUR75/sq m/year. The investment market has, however, been relatively quiet in the first quarter, with EUR147 million invested. However, anticipated improving demand and stronger rental value growth prospects compared to other European markets has continued to push prime yields down in all locations.
CONSOLIDATED PERFORMANCE SUMMARY
Unaudited | Unaudited | ||
6 months ended | 9 months ended | ||
31 December 2014 | 31 March 2015 | Quarterly Movement | |
Pence per share | Pence per share | Pence per share / % | |
Net Asset Value per share | 56.55 | 53.56 | -2.99 / -5.29% |
Earnings per share | 3.42 | 3.84 | 0.42 |
Share price (mid market) | 42.63 | 43.38 | 0.75 / 1.76% |
Share price discount to Net Asset Value | 24.6% | 19.0% | 5.6 percentage points |
Total return per Share | Unaudited | Unaudited |
6 months ended | 9 months ended | |
31 December 2014 | 31 March 2015 | |
Net Asset Value Total Return | 3.6% | -1.7% |
Share Price Total Return | ||
- AXA Property Trust | 4.2% | 6.1% |
- FTSE All Share Index | -0.4% | 4.2% |
- FTSE Real Estate Investment Trust Index | 12.3% | 23.6% |
Source: Datastream; AXA Real Estate | ||
Total net profit was £3.41 million (3.84 pence per share) for the nine months to 31 March 2015, comprising £0.50 million of "revenue" profit (excluding capital items such as revaluation of property) and £2.91 million of "capital" gain, analysed as follows:
Unaudited | Unaudited | Unaudited | |
6 months ended | 3 months ended | 9 months ended | |
31 December 2014 | 31 March 2015 | 31 March 2015 | |
£million | £million | £million | |
Net property income | 2.20 | 1.34 | 3.53 |
Net foreign exchange (losses)/gains | (0.15) | (0.21) | (0.36) |
Investment Manager's fees | (0.23) | (0.11) | (0.33) |
Other income and expenses | (0.74) | (0.53) | (1.28) |
Net finance costs | (0.73) | (0.33) | (1.06) |
Revenue profit | 0.34 | 0.16 | 0.50 |
Unrealised (losses) / gains on revaluation of investment properties | 1.82 | 0.08 | 1.91 |
Net losses on disposal of investment properties | - | - | - |
(Losses) / gains on derivatives | 0.39 | 0.19 | 0.59 |
Share in losses of Joint Venture | 1.36 | 0.05 | 1.41 |
Finance costs | (0.38) | (0.08) | (0.46) |
Net foreign exchange losses | (0.13) | - | (0.13) |
Deferred tax | (0.37) | (0.04) | (0.40) |
Capital gain (loss) | 2.70 | 0.21 | 2.91 |
Total (net loss) / profit | 3.04 | 0.37 | 3.41 |
NET ASSET VALUE
The Company's unaudited Consolidated Net Asset Value decreased by £2.7 million during the quarter mainly as a result of the unfavourable movements in the Euro/Sterling exchange rate (-£9.38 million), which has been only partially compensated by the unrealised movement on derivatives (£6.35 million).
Unaudited | Unaudited | Unaudited | |
6 months ended | 3 months ended | 9 months ended | |
31 December 2014 | 31 March 2015 | 31 March 2015 | |
£million | £million | £million | |
Opening Net Asset Value | 50.43 | 50.25 | 50.43 |
Net (loss) / profit after tax | 3.04 | 0.37 | 3.41 |
Unrealised movement on derivatives | 0.13 | 6.35 | 6.48 |
Share Redemption | (2.00) | 0.00 | (2.00) |
Foreign exchange translation losses | (1.35) | (9.38) | (10.73) |
Closing Net Asset Value | 50.25 | 47.60 | 47.60 |
Net Asset Value per share as at 31 March 2015 was 53.56 pence (56.55 pence as at 31 December 2014).
The Net Asset Value attributable to the Ordinary Shares is calculated under International Financial Reporting Standards. It includes all current year income after the deduction of dividends and capital redemptions paid prior to 31 March 2015.
On a like-for-like basis the Euro valuation of the property portfolio decreased by 0.67% to EUR99.5 million for the quarter. In Sterling currency terms, the property valuation was £71.9 million (including the effects of valuation movements, capital expenditure and foreign exchange movements). The £/EUR foreign exchange rate applied to the Company's Euro investments in its subsidiary companies at 31 March 2015 was 1.382 (31 December 2014: 1.289).
The Company's net property yield on current market valuation (after acquisition and operating costs) as at 31 March 2015 was 7.99% (8.02% as at 31 December 2014).
SHARE PRICE AND DISCOUNT TO NET ASSET VALUE
As at close of business on 31 March 2015, the mid-market price of the Company's shares on the London Stock Exchange was 43.38 pence, representing a discount of 19.0% to the Net Asset Value of 53.56 pence per share.
As at close of business on 26 May 2015, the mid-market price of the Company's shares was 44.13 pence, representing a discount of 18.0% to the Company's Net Asset Value at 31 March 2015.
FUND GEARING
Unaudited | Unaudited | ||
31 December 2014 | 31 March 2015 | Movement | |
£million /% | £million /% | £million / % | |
Property portfolio * | 77.77 | 72.01 | -5.76 / 7.4% |
Borrowings (net of capitalised issue costs) | 32.39 | 27.11 | -5.28 / 16.3% |
Total gross gearing | 37.3% | 37.6% | 0.3 percentage points |
Total net gearing | 30.9% | 30.1% | -0.8 percentage points |
*Portfolio value based on the Company's independent valuation.
Fund gearing is included to provide an indication of the overall indebtedness of the Company and does not relate to any covenant terms in the Company's loan facilities. Gross gearing is calculated as debt over property portfolio at fair value. Net gearing is calculated as debt less cash over property portfolio at fair value.
LOAN FACILITIES
Gross Loan to Value (LTV) Covenants | Unaudited | Unaudited | |
31 December 2014 | 31 March 2015 | Maximum | |
Main loan facility | 43.3% | 43.6% | 60.00% |
As at 31 March 2015, the loan-to-value ratio on the main loan facility was 43.6% based on the Company's independent valuation. The loan has an LTV covenant of 60% through to its expiry in July 2016.
Interest Cover Ratio at 31 March 2015 | Historic | Minimum | Projected | Minimum | Net rental income |
Unaudited | Unaudited | headroom | |||
Main loan facility covenant | 2.84x | 2.0x | 3.0x | 1.85x | 0.38x |
Interest Cover Ratio (ICR) is calculated as net financing expense payable as a percentage of net rental income less movement in arrears. Net rental income headroom is based on projected interest cover.
CASH POSITION AND CAPITAL EXPENDITURE
The Company and its subsidiaries held total cash of £5.43 million (EUR7.43 million) at 31 March 2015. The Company returned a further £1.8 million to Shareholders on 26 May 2015. The anticipated capital expenditure over the next twelve months is £1.5 million.
MATERIAL EVENTS
Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 31 March 2015 and the date of the publication of this Statement which would have a material impact on the financial position of the Company.
Company website:
http://www.axapropertytrust.com
All Enquiries:
Investment Manager
AXA Investment Managers UK Limited
Broker Services
7 Newgate Street
London EC1A 7NX
Tel: +44 (0)20 7003 2345Email: broker.services@axa-im.com
Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Neil Winward / Mark Bloomfield
Tel: +44 (0)20 7710 7600
Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: +44 (0)1481 745324