Last checked at 
19 May 2009 10:58
To: Company Announcements
Date: 19 May 2009
Company: AXA Property Trust Limited
Subject: Interim Management Statement
INTERIM MANAGEMENT STATEMENT - Three months to 31 March 2009
To the members of AXA Property Trust Limited
This is the Company's second interim management statement for the year ending 30 June 2009.
The Company's objective is to secure attractive Sterling-based total returns for Shareholders through a combination of dividends and capital appreciation from investment in commercial property in Europe.
CONSOLIDATED PERFORMANCE SUMMARY
| 6 months ended | 9 months ended | ||
| 31 December 2008 | 31 March 2009 | Quarterly Movement | |
| Pence per share | Pence per share | Pence per share | |
| Net Asset Value per share | 100.21 | 91.99 | -8.22 (-8.20%) |
| Earnings per share | -28.05 | -29.74 | -6.02 |
| Dividend declared in the period | 2.00 | 3.00 | 1.00 |
| Share price (mid market) | 16.50 | 30.25 | 13.75 (+83.3%) |
| Share price discount to Net Asset Value | -83.5% | -67.1% | 16.4 percentage pts |
| Total return | 12 months ended | 12 months ended |
| 31 December 2008 | 31 March 2009 | |
| Net Asset Value Total Return | -4.5% | -16.0% |
| Share price Total Return | ||
| - AXA Property Trust | -76.3% | -53.4% |
| - FTSE All Share Index | -29.9% | -29.3% |
| - FTSE Real Estate Index | -46.6% | -62.2% |
Source: Datastream; AXA REIM
Total net loss was £1.69 million (1.69 pence per share) for the three months to 31 March 2009, analysed as follows:
| 6 months ended | 9 months ended | 3 months ended | |
| 31 December 2008 | 31 March 2009 | 31 March 2009 | |
| £million | £million | £million | |
| Net property income | 5.43 | 8.49 | 3.06 |
| Investment Manager's fees | -0.78 | -1.21 | -0.43 |
| Other income and expenses | -1.44 | -1.53 | -0.09 |
| Net finance costs | -1.11 | -1.75 | -0.64 |
| Unrealised losses on revaluation of property and investments | -17.94 | -23.76 | -5.82 |
| Unrealised gains/(losses) on derivatives | -13.56 | -11.50 | 2.06 |
| Deferred tax | 1.47 | 1.73 | 0.26 |
| Current tax | -0.12 | -0.21 | -0.09 |
| Total net profit | -28.05 | -29.74 | -1.69 |
The total net loss for the 3 months ended 31 March 2009 of £1.69 million included £1.08 million of "revenue" profit and £2.77 million "capital" loss. The Company's net yield on current market valuation (after acquisition and operating costs) as at 31 March 2009 was 7.0% (6.8% as at 31 December 2008).
The Company's Consolidated Net Asset Value declined by £8.22 million on the position at 31 December 2008, which can be analysed as follows:
| £million | |
| Net Asset Value at 31 December 2008 | 100.21 |
| Net profit | -1.69 |
| Unrealised losses on derivatives | 0.01 |
| Dividends paid | -1.00 |
| Foreign exchange translation losses | -5.54 |
| Net Asset Value at 31 March 2009 | 91.99 |
The Net Asset Value is calculated under International Financial Reporting Standards. It includes all current year income and is calculated after the deduction of dividends paid prior to 31 March 2009, but does not include provision for the quarterly interim dividend announced 5 May 2009 to be paid 29 May 2009.
Share Price and Discount to Net Asset Value
As at close of business on 31 March 2009, the mid market price of the Company's shares on the London Stock Exchange was 30.25 pence, representing a discount of 67.1% on the Company's Net Asset Value at 31 March 2009.
As at close of business on 18 May 2009, the mid market price of the Company's shares was 41.50 pence, representing a discount of 54.9% on the Company's Net Asset Value at 31 March 2009.
Dividends
The third interim dividend of 1.00 pence per share in respect of the year ended 30 June 2009 was declared on 5 May 2009, with a payment date of 29 May 2009. The cumulative interim dividends of £3.0 million declared in respect of the year ended 30 June 2009 is 110.6% covered by revenue profits and 103.9% covered by cash flow for the nine month period to 31 March 2009.
STRATEGY AND MARKET
Country Allocation at 31 March 2009
Country % of portfolio
Germany 61%
Netherlands 20%
Italy 16%
Belgium 3%
Sector Allocation at 31 March 2009
Sector % of portfolio
Retail 59%
Industrial 17%
Office 15%
Leisure 9%
As we move into a more difficult occupier market, the Investment Manager and Real Estate Adviser are focussed on maintaining rental income as a first priority. This involves strengthening the existing relationships between tenants and our local asset managers across Europe and a willingness to deal proactively with tenants where income is threatened. The portfolio's income stream is well secured against strong tenant covenants and benefits from a low vacancy rate. The portfolio tenant base is weighted towards the defensive food retail sector and enjoys a long weighted average lease length of 5.8 years.
Capital expenditure is required to maintain and increase rental income and to protect capital values. The difficult real estate market and related financing issues demand even more careful appraisal of capital projects before any commitment is made. The Board and the Investment Manager are keen to take advantage of the potentially attractive development opportunity at Fuerth, but will only proceed with the project once the new unit is pre-let to the anchor tenant and the Company's financing position is secure.
AXA REIM, the Company's Real Estate Adviser, believes that the Continental European real estate market will continue to see a downward pressure on values over the second half of 2009 and into 2010, driven by deteriorating international economic and financial conditions and greater risk aversion on the part of both lenders and investors. The Company's portfolio is not immune from deteriorating capital markets and further valuation adjustment is anticipated in the second half of 2009. However, the defensive nature of the underlying properties and an established emphasis on prudent management should serve the Company well in this difficult economic environment.
FUND GEARING
| 31 December 2008 | 31 March 2009 | Movement | |
| £million | £million | £million | |
| Fund gearing | |||
| Property portfolio | 181.27 | 168.26 | -13.01 (-7.2%) |
| Borrowings | 86.35 | 82.98 | -3.37 (-3.9%) |
| Total gross gearing excluding Porto Kali | 47.7 % | 49.2% | 1.5 percentage pts |
| Total net gearing excluding Porto Kali | 30.3% | 31.2% | 0.9 percentage pts |
| Total gross gearing including Porto Kali | 50.8 % | 52.3% | 1.5 percentage pts |
Fund gearing increased by 1.5 percentage points over the quarter to 49.2% as at 31 March 2009.
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 - LOAN TO VALUE COVENANTS
| Gross Loan to Value | 31 December 2008 | 31 March 2009 | Maximum |
| Main loan facility covenant | 47.0% | 48.6% | 50.0% |
| Joint venture Property Trust Agnadello S.r.l. | 55.1% | 56.3% | 65.0% |
| Consortium investment Porto Kali | 68.9% | 69.8% | 65.0% |
Under the terms of the Company's main loan facility, the maximum permitted Gross Loan to Value (LTV) is 50%. At 31 March 2009 the Gross LTV was 48.6%. Gross LTV is calculated as debt over property portfolio at fair value.
A decrease in the Company's property valuations as at 31 March 2009 of over 2.9% would result in a breach of the Gross LTV covenant. As further downward valuations are anticipated, the Investment Manager is continuing its review of the management of the debt position which includes ongoing discussions with its lenders.
The Company and its subsidiaries held total cash of £21.27 million (EUR 22.96 million) at 31 March 2009, giving a Net LTV of 35.7% (34.4% at 31 December 2008). Net LTV is calculated as debt net of cash over property portfolio at fair value. Details are included for information purposes; it does not form part of the loan covenants.
The £21.27 million cash held by the Company at 31 March 2009 has been allocated between working capital and uncommitted capital expenditure of up to £13.0 million, principally to develop the Company's retail asset in Fuerth, Germany. The Fuerth capital expenditure is subject to Board approval of the final terms of the development and the Company's debt position. £13.0 million (EUR 14.0 million) cash has been invested in fixed term deposits which will be realised as required for the capital expenditure programme. If the cash allocated to uncommitted capital expenditure were utilised to repay part of the bank debt, property valuations could decline by over 19% before breaching the Gross LTV covenant.
The Company's loans with Calyon are fully hedged at an average rate of 5.21% via interest rate swaps and caps to April 2011 when the loan facility expires.
Under the terms of the Porto Kali consortium investment's loan facility, the maximum permitted Gross Loan to Value (LTV) is 65.0%. The LTV maximum was breached at 31 December 2008 and at 31 March 2009 the Gross LTV was 69.8%. Discussions with the lender HSH are in progress. The business plan strategy is under review.
| Interest Cover Ratio at 31 March 2009 | Historic | Minimum | Projected | Gross rental income headroom |
| Main loan facility covenant | 294.8% | 250.0% | 313.5% | 20.3% |
| Joint venture Property Trust Agnadello S.r.l. | 268.6% | 125.0% | 274.4% | 54.4% |
| Consortium investment Porto Kali | 180.0% | 120.0% | 267.0% | 26.2% |
Interest Cover Ratio is calculated as net financing expense payable as a percentage of gross rental income less movement in arrears.
Outlook
The Board continues to actively review the Company's bank facilities and cash position with the Investment Manager. It is currently considering a range of options to secure the Company's long term bank facilities to maximise the ability of the Investment Manager to generate returns for Shareholders. These options currently include a renegotiation of the existing main bank facility, a refinancing to ensure a new long term facility and also the application of the Company's cash holdings to reduce the overall level of debt. Any option decided upon by the Board is expected to achieve an improvement on the flexibility of the loan to value covenant and may result in an increase in the overall cost of debt. This increased cost of debt together with the outlook for the property portfolio performance are likely to have an impact on the Company's future revenue profits. Property portfolio performance will be affected by upcoming voids at two German assets, Bernau and Koethen, as well as the outcome of the restructuring of the Porto Kali portfolio investment in which the Company holds a 12% interest. The Company expects to be in a position to provide shareholders with further information on these matters on or before the announcement of the results for the year ending 30 June 2009.
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 2009 and the date of the publication of this Statement which would have a material impact on the financial position of the Company.
This statement has been produced to comply with the requirements of the Disclosure and Transparency Rules issued by the UKLA and should not be relied upon by any other party or for any other purpose.
Company website:
http://www.axapropertytrust.com
All Enquiries:
Investment Manager
AXA Investment Managers UK Limited 8th Floor 155 Bishopsgate London EC2M 3XJ
Tel: +44 (0)845 766 0184 (Option 3) Email: broker.services@axa-im.com
Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: +44 (0)1481 745529
Fax: +44 (0)1481 745085