25th Feb 2016 09:53
LONDON (Alliance News) - F&C UK Real Estate Investments Ltd on Thursday said it enjoyed a positive performance in the first half of its financial year, with the trust continuing to see "an element of capital growth".
The trust's net asset value total return per share for the period was 5.6% in the six months to December 31. That was helped by the trust's gearing, or borrowing, levels.
Following a refinancing with Canada Life Investments and Barclays Bank PLC, which enabled the trust to repay a GBP102 million term-loan facility provided by Lloyds Bank PLC ahead of maturity in January 2017, total current borrowings amount to GBP110 million, equivalent to 31% of total assets at the end of the first half. Barclays provided GBP20.0 million in a five-year revolving credit facility, while Canada Life provided a GBP90 million 11-year non-amortising term loan facility. The money was drawn down to repay the Lloyds facility.
The weighted average interest rate, including amortisation of refinancing costs, on the group's total current borrowings is 3.3% per annum. The annual rate on the group's total borrowings has therefore fallen by 2.5% following the refinancing," the trust said.
Although there was no early repayment penalty for the Lloyds facility, the trust took a GBP5.5 million hit from terminating interest-rate hedging arrangements associated with that debt package. No interest rate swap arrangements have been agreed with the new lenders.
The trust's NAV per share at the end of December was 99.9 pence.
The share price performance also was positive with a total return of 4.8% over the period. The shares were trading at a 1.9% premium to the NAV at the end of the first half, a smaller premium than the 2.6% seen at the start of the year.
The trust's report warned of signs that after three years of double-digit total returns, property may be moving towards a period of "more modest" performance, driven primarily by income.
"Nevertheless, values on average are still 15% below their peak in 2007, and the market may well be supported by continued low interest rates, a growing economy, improving tenant demand and a relatively conservative lending environment," the report said.
There are some headwinds from the forthcoming EU referendum which could delay decision-making and from the economic slowdown in some parts of Asia and the Middle East which may lead to a reduced pace of inward investment or possible repatriation of funds. Investors are becoming more cautious and the period of yield compression could be drawing to a close," the report said.
"Asset fundamentals and the ability to manage the income stream to capture rental growth will be critical to delivering performance in the coming years," it added.
Shares in the trust were down 0.1% at 97.41 pence on Thursday morning.
By Samuel Agini; [email protected]; @samuelagini
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