Worsley Inv Ltd Regulatory News (WINV)

6 Aug 2009 14:15

To: Company Announcements

Date: 6 August 2009

Company: AXA Property Trust Limited

Subject: Net Asset Value 30 June 2009

CONSOLIDATED PERFORMANCE SUMMARY (UNAUDITED)

*See below for further details

Source: Datastream; AXA REIM

Total net loss was £0.40 million (0.40 pence per share) for the three months to 30 June 2009, analysed as follows:

The total net loss for the 3 months ended 30 June 2009 of £0.4 million included £0.80 million of "revenue" profit and £1.20 million "capital" loss. The Company's net yield on current market valuation (after acquisition and operating costs) as at 30 June 2009 was 7.5% (7.0% as at 31 March 2009).

NET ASSET VALUE

The unaudited Company's Consolidated Net Asset Value per share of AXA Property Trust Limited (the "Company") as at 30 June 2009 was 83.46 pence (91.99 pence as at 31 March 2009).

The Net Asset Value attributable to the Ordinary Shares is calculated under International Financial Reporting Standards. It includes all current year income and is calculated after the deduction of dividends paid prior to 30 June 2009, but does not include provision for the quarterly interim dividend of 0.75 pence per share announced in this Statement to be paid 28 August 2009.

The £8.53 million decline in Net Asset Value over the quarter ended 30 June 2009 can be analysed as follows:

SHARE PRICE AND DISCOUNT TO NET ASSET VALUE

As at close of business on 30 June 2009, the mid market price of the Company's shares on the London Stock Exchange was 40.5 pence, representing a discount of 51.5% on the Company's Net Asset Value at 30 June 2009.

As at close of business on 5 August 2009, the mid market price of the Company's shares was 44.50 pence, representing a discount of 46.7% on the Company's Net Asset Value at 30 June 2009.

DIVIDENDS

The fourth interim dividend of 0.75 pence per share in respect of the year ended 30 June 2009 was declared today, with a payment date of 28 August 2009. The cumulative interim dividends of £3.75 million declared in respect of the year ended 30 June 2009 is 110% covered by revenue profits and 93% covered by the operating cash flow (excluding capital expenditure, foreign exchange and partial loan repayments). Further commentary on the dividend rate is included in the Outlook section below.

STRATEGY AND MARKET

Country Allocation at 30 June 2009

Country % of portfolio

Germany 61%

Netherlands 20%

Italy 16%

Belgium 3%

Sector Allocation at 30 June 2009

Sector % of portfolio

Retail 59%

Industrial 17%

Office 15%

Leisure 9%

As attention in the market shifts from outward movements in yield levels to falls in rental value, the Investment Manager and Real Estate Adviser continue to maintain their focus on 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 rental 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 weighted average lease length of 5.7 years.

In some cases to protect rental income and capital values it is necessary to undertake capital expenditure, such as the attractive development opportunity within the Fuerth retail centre, where the anchor tenant wishes to expand into new, larger premises and extend their lease. The Board and Investment Manager believe the further development of the retail centre will boost capital value, enhance rental income and protect its value. Subject to confirmation of the viability of the scheme, the Company intends to proceed with the project as soon as Company financing has been secured and lettings and local consents are in place

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 both further outward movement of property yields, as well as declining rental values. Further valuation adjustments to the Company's portfolio are anticipated in the second half of 2009 and potentially into 2010. 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

Fund gearing increased by 1.6 percentage points over the quarter to 50.8% as at 30 June 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 

Interest Cover Ratio is calculated as net financing expense payable as a percentage of gross rental income less movement in arrears.

MAIN LOAN FACILITY

Currently, under the terms of the Company's main loan facility, the maximum permitted Gross Loan to Value (LTV) is 50%. On 29 June 2009 the Fund repaid £1.5 million (EUR 1.75 million) of its main Calyon facility from cash deposits, thereby ensuring that the Fund remained within its 50% LTV covenant on the testing date of 30 June 2009. Gross LTV is calculated as debt over property portfolio at fair value. 

Further property valuation declines after 30 June 2009 would require additional repayments of the facility. As an approximate guide, for every 1% decrease in the Company's property valuations from 30 June 2009, a repayment of around EUR 0.8 million would be required. The Board and Investment Manager aim to manage the repayment requirements as part of the financing review currently under way in order to minimise or eliminate the need for further cash outflows. 

The Company and its subsidiaries held total cash of £17.32 million (EUR 20.34 million) at 30 June 2009, giving a Net LTV of 37.0% (35.7% at 31 March 2009).  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 £17.32 million cash held by the Company at 30 June 2009 has been allocated between working capital and uncommitted capital expenditure, principally to develop the Company's retail asset in Fuerth, Germany. The £4.5 million (EUR 5.3 million) Fuerth capital expenditure is subject to Board approval of the final terms of the development and securing the Company's debt position following the refinancing review. £11.9 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 18% from 30 June 2009 levels before breaching the current Gross LTV covenant. 

The Company's loans with Calyon are fully hedged at an average rate of 5.21% via interest rate swaps until July 2010 and then by interest rate caps at a strike rate of 4.5% until April 2011 when the loan facility expires.

PORTO KALI LOAN FACILITY

Under the terms of the Porto Kali consortium'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 30 June 2009 the Gross LTV was 72.0%. Significant progress has been made in discussions with the lender HSH Nordbank AG. 

AXA REIM has adopted a tactical approach to sales and lettings as part of the business strategy of the Porto Kali portfolio. The sale of the asset -s Gravendijkwal, Rotterdam completed on 14 July 2009 for EUR 3.7 million (in line with the valuation at 30 June 2009). An offer for the asset Hoofdstraat, Apeldoorn has been accepted and the purchaser is now undertaking due diligence. Capital expenditure is being deployed where it has an immediate impact on tenant retention and lettings. During the quarter eight new leases and 11 renewals/regearings were signed for a total rent of EUR 0.91 million (2% above Estimated Rental Value (ERV)). 

OUTLOOK

The Investment Manager continues to make good progress in its negotiations with Calyon Corporate and Investment Bank to refinance the Company's £67.0 million (EUR 78.6 million) long term bank facility to maximise the ability of the Fund to generate returns for Shareholders. Any refinancing decided upon by the Board is likely to result in an increase in the overall cost of debt. The objective is to achieve an improvement on the other terms of the facility including the loan to value covenant and will increase the scope of the Investment Manager to manage the portfolio to achieve long term growth in income and capital value. This increased cost of debt together with the medium term outlook for the property portfolio performance is likely to have an impact on the Company's future revenue profits. The Board's decision to cut the quarterly dividend to 0.75 pence per share from this quarter anticipates this in the current financial year to 30 June 2010 based on the terms currently under negotiation with Calyon.

Property portfolio performance will be affected by upcoming voids at two German assets, Bernau (from August 2010) and Koethen (from July 2009), 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 in the coming weeks. 

MATERIAL EVENTS

Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 30 June 2009 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 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