19th Nov 2013 11:07
Duet Real Estate Finance Limited
("DREF" or the "Company")
Interim Management Statement for the period from 1 July 2013 to 19 November 2013 and NAV and Dividend Announcement
Dividend and NAV
The board of the Company is pleased to announce a dividend of 5 pence per Ordinary Share in respect of the quarter to 30 September 2013, payable on 20 December 2013 to those Shareholders on the register as at 29 November 2013. The dividend per Ordinary Share consists of 2.2 pence received in connection with the ordinary course of business of the Master Fund, together with a further 2.8 pence, received as income following the receipt of cash proceeds from the realisation of the Master Fund's CMBS 2 investment in October 2013.
The board anticipates that the Company is on track to provide Shareholders with dividends which, taken over the course of a twelve month period, will be in excess of 7 per cent per annum based on the issue price, as adjusted for returns of capital.
In addition, the Company is able to report an unaudited net asset value as at 30 September 2013 of 99.8 pence per Ordinary Share.
Portfolio Update
The portfolio of the Master Fund as at 30 September 2013 consisted of 15 investments totalling £273.7 million of principal and accrued interest together with the value of foreign exchange hedging derivatives. The portfolio had a current blended loan-to-value ratio of 71.3%, (including payment-in-kind interest accrued where applicable), along with a blended cash pay coupon and payment-in-kind coupon of 9.9% and 2.2% respectively. The portfolio provides the income and total return as targeted in the Company's prospectus, whilst maintaining a resilient risk profile, and is detailed in the tables below:
Asset Types: | Region: |
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Offices | 45% | UK | 46% |
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Hotels | 31% | Germany | 24% |
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Retail | 13% | France | 17% |
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Healthcare | 8% | Denmark | 5% |
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Mixed | 3% | Netherlands | 6% |
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Belgium | 2% |
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Portfolio Investment | Asset Type | Country | Balance (including accrued interest) | Description | ||||
Loan 1 | Retail | Denmark | €17.0m | mezzanine loan secured by a retail property | ||||
Loan 2 | Offices | United Kingdom | £18.7m | mezzanine loan secured by an office | ||||
Loan 3 | Hotels | Germany | €14.7m | mezzanine loan secured by 8 hotels | ||||
Loan 4 | Offices | France | €44.3m | mezzanine loan secured across a diversified portfolio of assets | ||||
Loan 5 | Healthcare | United Kingdom | £17.5m | mezzanine and senior loan secured by a portfolio of care homes | ||||
Loan 6 | Hotels | United Kingdom, Netherlands | £40.6m | mezzanine loan secured by 8 hotels | ||||
Loan 7 | Retail | Germany | €23.2m | mezzanine loan secured by a portfolio of 45 retail properties | ||||
Loan 8 | Office | France | €11.8m | mezzanine loan backed by an office and light industrial park | ||||
Loan 9 | Mixed | United Kingdom | £7.9m | senior loan secured by a business park | ||||
Loan 10 | Offices | Netherlands | €8.2m | senior loan backed by an office and warehouse portfolio of 23 assets | ||||
Loan 11 | Offices | Belgium | €7.4m | mezzanine loan secured by an office | ||||
Loan 12 | Hotels | Germany | €38.6m | mezzanine loan backed by a portfolio of 20 hotels | ||||
Loan 13 | Offices | United Kingdom | £40.2m | mezzanine loan secured by an office | ||||
CMBS 1 | Healthcare | United Kingdom | £4.2m | securitisation backed by a portfolio of private hospitals | ||||
CMBS 2 | Offices | United Kingdom | £6.6m | securitisation comprising loans secured largely by office properties | ||||
Some specific updates are as follows:
In October, the Master Fund received a full repayment of £8.6 million on its CMBS 2 investment realising a profit and internal rate of return in-line with its stated return objective.
The Master Fund continues the process of enforcing its rights under the loan security package to recover outstanding amounts owed under Loan 4, and the Investment Adviser expects that these actions will result in full recovery of principal, accrued interest and expenses.
In respect of Loan 5, the borrower group's financial performance this year has not met with expectations set-out in the business plan. The magnitude of this underperformance leads the Investment Adviser to believe that a further rescheduling event is required, and as such, expects to take steps during Q4 with a view to recognising a reserve against ultimate recovery. It is the Investment Adviser's current expectation that such a reserve may amount to between 60-70% of the current value of the investment of £17.5m for the Master Fund, which would lead to a future reduction in the Company's NAV from that as at 30 September 2013 of between 3.4 and 4.1 pence per Ordinary Share.
Investment Performance
The Company raised £76.0m and has, to 30 September 2013, paid dividends totalling £8.8m and returned capital of £0.9m through share buy-backs. By adding the Company's current NAV to dividends and capital received and dividing this by the amount raised the Company can report a total value to paid-in ratio at 30 September 2013 of 1.11x.
Following completion of the Master Fund Investment Programme, and in light of expected future returns of capital in due course from the Master Fund, the Company envisages that such returns will be passed on to shareholders, commencing in 2014.
The Company's Articles provide for a return of capital to be carried out through an issue or issues of redeemable B shares and subsequent redemption of those shares. The B shares may be issued only to existing shareholders pro rata to their holding at the time of the relevant issue. The full provisions are summarised in the Company's Prospectus, which may be accessed via the Company's website (www.dreflimited.com).
For further information, please contact:
DRC Capital LLP +44 (0)20 7042 0600
Dale Lattanzio
Cyrus Korat
Oriel Securities Limited +44 (0)20 7710 7600
Neil Winward
Mark Bloomfield
Tunga Chigovanyika
Related Shares:
DREF.L