18th Feb 2008 15:00
Invista European Real Estate Trust18 February 2008 INVISTA EUROPEAN REAL ESTATE TRUST SICAF (the "Company"/ "Group") ANNOUNCEMENT OF NAV AND INTERIM MANAGEMENT STATEMENT 18 February 2008 Commenting, Tom Chandos, Chairman of the Invista European Real Estate Trust,said: "Overall, property values in the Company have remained stable. As the marketmoves from one driven by capital markets to one driven by property fundamentals,the Company's strategic focus will be on maintaining and maximising income. Theportfolio has defensive income characteristics and low vacancy of 1.4% andfurthermore is highly diversified by operating across a number of differentoccupational markets in terms of both location and sector. This positions theCompany well to continue to provide attractive income returns. Active assetmanagement will continue to drive the capital performance of the portfolio andthe Company will realise ex-growth assets as part of the normal course ofbusiness. The tightening capital markets environment may lead to attractivebuying opportunities during 2008 which the Investment Manager will continue tomonitor." Net Asset Value As at 31 December 2007, the Company's unaudited Net Asset Value (adjusted to addback deferred taxation) was EUR2.98 (220p) per share, reflecting a decrease ofEUR0.13 (increase of 4 pence sterling) equating to 4.21% over the quarter. Thepayment of the second interim dividend in respect of the year ended 30 September2007 reduced this NAV by EUR0.09 per share. The unaudited Net Asset Value,calculated under International Financial Reporting Standards, was EUR2.74 pershare. Over the 12 months to 31 December 2007, the Company's NAV has increasedby EUR0.11 per share or 4.0%. Including dividends, the total NAV return overthe last 12 months has been 8.8%. A breakdown of the unaudited Net Asset Value is set out below:- In EURm 31/12/2007 30/09/2007 3 month changeDirect property independent valuation 755.4 724.3 31.1Market value of swaps 8.0 7.6 0.3Net current assets 22.7 47.7 (25.0)Senior debt (445.5) (424.5) (21.0)Net deferred tax liabilities (27.5) (26.4) (1.2)Net Asset Value 313.0 328.7 (15.7)Adjusted Net Asset Value* 340.5 355.1 (14.5)Adjusted Net Asset Value* per share (EUR) 2.98 3.11 (0.13) * Net Asset Value adjusted to add back deferred tax The unaudited Net Asset Value incorporates a number of events and key factorsduring the quarter ended 31 December 2007 including: • The property portfolio values, inclusive of all transactional activity, remained level: • The existing portfolio decreased marginally in value on a like-for-like basis by 0.3% in the quarter, equating to EUR2.0 million or EUR0.02 per share; • The purchase in December 2007 of five office assets in Brussels, Belgium valued as at 31 December 2007 at EUR33.1 million generated an unrealised gain of EUR2.2 million, equating to EUR0.02 per share; • the payment of the second interim dividend in respect of the year ended 30 September 2007 of EUR10.1 million, equating to EUR0.09 per share; • a provision of EUR5.0 million (equating to EUR0.04 per share) for a tax liability in respect of restructuring of finance leases in a number of French property owning companies. A corresponding net tax benefit of approximately EUR5.0 million will be recognised in local entity statutory accounts but which cannot be recognised in the consolidated Net Asset Value given the Company's accounting policies which must comply with IFRS; • an increase in the mark-to-market valuation of the Company's interest rate swaps of EUR0.3 million, equating to EUR0.003 per share; and • debt arrangement fees and abortive asset acquisition costs totalling EUR1.4 million, equating to EUR0.01 per share. The Company's unaudited Net Asset Value figure incorporates the externalproperty portfolio valuation as at 31 December 2007. The property portfoliowill next be valued by an external valuer as at 31 March 2008 and the nextquarterly Net Asset Value per share is expected to be published in May 2008. Figures converted into sterling assume a EUR per STG exchange rate of 1.3571 asat 31 December 2007. Property Portfolio The independent valuation of the property portfolio as at 31 December 2007 wasEUR755.4 million and consisted of 51 properties. An outstanding conditionalcommitment, valued at EUR12.0 million, increased the value to EUR767.4 million. During the quarter, the Company purchased a portfolio of five office propertieslocated in Brussels (Belgium) for €31 million with leasing upside and iscommitted to acquiring one further property valued at €12m. The property portfolio including committed assets is well diversified by bothcountry and sector and benefits from good quality, relatively long incomecharacteristics. The tenant base is classified as "Low - Medium Risk" under anExperian credit rating assessment undertaken in December 2007 and the portfoliohas 7 years weighted average lease length to expiry. The portfolio generates anet initial yield of 6.02% on valuation and a running yield of 6.53%. Invista Real Estate Investment Management (the "Investment Manager") continuesto focus on the most liquid, transparent and mature markets of Western Europe, astrategy which has proved successful to date, and in more defensive markets thisis expected to continue to support the Company's performance. The InvestmentManager is currently pursuing a number of asset management initiatives tooptimise returns further which, together with the benefits of lease indexation,positions the portfolio well for future value growth. Although the Company is currently fully invested, the Investment Managercontinues to see deal flow of over €3bn per month representing a wide range ofdifferent transactions. This is valuable for the Company as it enables theInvestment Manager to keep track of market movements which is particularlyimportant in the current uncertain capital markets environment. It remains theCompany's intention to realise profits and recycle capital from mature assets inthe portfolio - the cash proceeds from which will be deployed to maximisereturns for shareholders. Sector Weightings (1) Sector Weighting Logistics 51%Office 36%Retail 13% Country Weightings (1) Country Weighting France 50%Germany 32%Belgium 7%Spain 5%Netherlands 3%Czech Republic 2%Poland 1% (1) Valuation as at 31 December 2007, including committed assets Top Ten Properties (2) Address Sector %1 Heusenstamm, Germany Office 11.4%2 Riesa, Germany Retail 7.5%3 Cergy, France Office 5.0%4 Lutterberg, Germany Logistics 4.5%5 Ecully, Lyon, France Office 4.3%6 Guadalajara, Spain Logistics 3.6%7 Monteux, France Logistics 3.0%8 Marseille, France Logistics 2.9%9 Villeurbanne, France Office 2.9%10 Grenoble, France Office 2.8% Total as at 31 December 2007 47.9% (2) Calculated as percentage of aggregate asset value plus cash (includingcommitted assets) Top Ten Tenants (3) Tenant %1 Norbert Dentressangle 15.8%2 Deutsche Telekom 11.1%3 DHL 7.3%4 Tech Data Espana 3.4%5 Valeo 3.2%6 Sun Microsystems 2.8%7 Merial SAS 2.3%8 Carrefour 2.2%9 AVA Marktkauf 2.2%10 Coppal Logistics 2.1% Total as at 31 December 2007 52.4% (3) Calculated as percentage of aggregate gross rent (including committedassets) Finance As at 31 December 2007, the Company had drawn down EUR445.5 million of seniordebt in respect of its EUR460.0 million facility with the Bank of Scotland; inaddition the Company had cash balances of EUR43.8 million at that date. TheCompany's LTV (gross debt divided by market value of properties) is therefore59.0% and the Company's LTV covenant threshold is 70%. All debt is fully hedgedagainst changes in euro interest rates until 2013 at a weighted average swaprate of 4.053%. The facility with the Bank of Scotland expires on 31 December2008 and the Company fully expects to refinance this during 2008. Market Context Against the background of financial market volatility, it is difficult topredict the outcome for 2008. It is however expected that any pricingcorrections that may arise in Continental Europe will be less significant thanthose which are occurring in the UK markets. In contrast to the cyclicaldownturn of the early 1990s, occupational demand remains at healthy levels withlimited tenant default. The early 1990s were also characterised by highinflation and interest rates. The current consensus is for falling interestrates in the UK and a likelihood that the ECB will follow this lead unlessinflationary pressures persist. We anticipate that overall this will lead to asoft landing for property returns in the strongest markets of Continental Europein which the majority of the Company's assets are located. Active Asset Management An active asset management strategy remains central to delivering NAVperformance. Fundamental decisions concerning stock selection and identifyinggrowth markets, regions of countries or sectors that are forecast to eitheroutperform or underperform will become an increasingly important component ofproperty returns. The Investment Manager has always been focused on suchproperty level characteristics and on identifying growth opportunities that canbe generated through active management. Such initiatives, when complete, willgenerate further performance from the portfolio over the short to medium term.Some recent examples of activity currently being undertaken on the portfolio areset out below: - In Grenoble, France, the Company is finalising negotiations to surrender, renew and consolidate two office leases; - In an office property in Lyon, France, the Company is in negotiations with a major tenant to extend their lease; - In Amiens, France, the Company is in active negotiations to refurbish and lease vacant accommodation in a logistics property at above expected rental levels; - In Tiel, Netherlands, a feasibility study is being undertaken to determine the potential returns from installing additional floorspace in a logistics unit; and - In Riesa, Germany, an assessment is being undertaken to examine the reconfiguration of the layout of the shopping centre, development of surplus land, and whether existing leases and tenants' occupation can be rationalised on the same retail park. For further information, please contact: Investment ManagerTony Smedley / Chris Ludlam +44 20 7153 9433Invista Real Estate Investment Management Limited BrokersRichard Cotton / Angus Gordon Lennox +44 20 7588 2828JPMorgan Cazenove Alex Carter +44 20 7986 0520Citigroup Financial PRStephanie Highett / Dido Laurimore / Nicole Marino +44 20 7831 3113Financial Dynamics This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
IERE.L