26th Nov 2007 07:01
Invista Foundation Property Tst Ltd26 November 2007 26 November 2007 Invista Foundation Property Trust Limited ("IFPT"/ the "Company"/ "Group") REPORT FOR THE SIX MONTH PERIOD ENDING 30 SEPTEMBER 2007 The Invista Foundation Property Trust has today announced its results for theperiod ended six months to 30 September 2007. Financial highlights • Net Asset Value per share of 137.2 pence (31 March 2007: 142.2 pence) • Property assets of £673.2 million (31 March 2007: £717.4 million) and net assets of £484.9 million (31 March 2007: £502.7 million) • Cash and cash equivalents of £78.8 million (31 March 2007: £24.6 million) • Borrowings as a percentage of total assets less current liabilities of 34.8% (31 March 2007: 30.7%). Consolidated borrowings as a percentage of total assets less current liabilities of 45% (31 March 2007: 45%) • Total dividend for the six months to 30 September 2007 of 3.375 pence per share Operational and strategic highlights • Income-oriented asset management strategy has been implemented focussing on increasing average lease length and tenant credit quality • During the period the Company reduced its weighting to Central London offices with the disposal of its 19.73% stake in MidCity Place, WC1 for £21.5 million, generating a return of 100% • Remaining Central London offices and asset management generating significantly more rental value growth than the Benchmark • Over the past 18 months the Company has taken advantage of strong market conditions to dispose of underperforming properties, particularly in the retail sector. Commenting, Andrew Sykes, Chairman of the Board, said: "The Company's portfolio is well diversified with a robust income stream backedby an above average tenant covenant quality. This should enable the Company tomaintain and grow income to increase the distributed dividend cover and, overthe medium term, supplement the attractive income return with capital growth.The cash held by the Group provides valuable liquidity and operationalflexibility. Asset management will be more critical than ever and we are wellplaced to direct our considerable resources to maximise returns." For further information: Duncan Owen Invista Real Estate Investment Management 020 7153 9345 Stephanie Highett / Dido Laurimore / Nicole Marino Financial Dynamics 020 7831 3113 CHAIRMAN'S STATEMENT Results The widely reported dislocation in credit markets over the last few months hashad, and continues to have, negative consequences for the UK commercial propertymarket. As a result of the consequent downward pressure on valuations, over thesix months to September 2007, the unaudited NAV of Invista Foundation PropertyTrust ("the Company") has fallen by 5 pence per share ('pps') or 3.52%, from142.2 pps to 137.2 pps. Shareholders have received total dividends of 3.375 ppsover this period, making a NAV total return of -1.16% over the six months. Overthe last twelve months, however the NAV total return has amounted to 8.5%. The underlying property portfolio owned by the Company and its subsidiaries("the Group"), which had performed well until June 2007, fell in value for thefirst time over the quarter to September. Over the six month period however thetotal return from the portfolio was 1.2%, marginally ahead of the IPD Benchmarkreturn of 1%. UK Property Market The Board is monitoring the current weakness in the UK commercial propertysector closely. Although a slowdown over 2007 and 2008 was widely anticipated,with our Manager taking defensive measures, the timing, speed and sharpness ofsuch corrections can never be predicted precisely in advance. The UK economyappears to be robust at present, but there are clear risks to growth both in theUK and globally if the credit crunch we have seen in wholesale markets spreadsto the personal sector. Portfolio Performance In contrast to previous UK commercial property downturns, the occupationalmarket remains robust with our Manager reporting good tenant interest andaverage rental growth of 4.0% across the market as a whole. There is a widedivergence in rental growth between the sub-sectors across the market in linewith the Manager's expectations, ranging from +2.2% in retail to +18% in WestEnd offices over the 12 months to September 2007. From this perspective theCompany has benefited from its exposure to Central London. Average UK property yields have increased by 0.16% to 5.56% between June andSeptember. In contrast with rental growth, so far there has been lessdifferentiation between the sectors although secondary property is expected tounderperform prime assets if yields continue to rise. Rising interest rates havebeen a key factor behind the increase in property yields, together with areduction in the availability of bank finance against the security of UKcommercial property, in the wake of the recent dislocation in credit markets. The Central London Office market warrants a specific mention given the Group'srelatively high exposure. We have benefited significantly from capital growth inCentral London, and whilst this is slowing, the Group is yet to benefit fullyfrom market rental growth through an increase in rents received. Our CentralLondon offices have significant rent reviews over the next 18 months and this,combined with strong tenant covenants and long unexpired lease terms, shouldmean they support valuations over the medium term. On a brighter note, it is pleasing to note that in August our Manager completedthe disposal of the Group's interest in MidCity Place for £21.5 million. Whilstthis was at a 5.5% discount to the NAV at the start of the period, the disposalwas well timed and, combined with the proceeds of the re-financing in 2006, hasgenerated an exceptionally strong return of £30 million on an initial investmentof £9.8 million. The Manager continues to focus on the active asset management of the underlyingproperty portfolio in order to build a portfolio that should perform better on arelative basis in a slowing market. Significant steps are being taken tomaintain a low vacancy rate, enhance tenant quality and increase the averagelease length. The Manager is also considering the options for two major projectsat Hinckley and Uxbridge where significant value has been added in securingplanning consents for alternative uses. Debt As at 30 September 2006 the Group had total on-balance sheet borrowings of£263.5 million representing 34.8% of total assets less current liabilities. Theincrease in the Group's securitised debt from £152.5 million to £263.5 millionfollowed the issuance of £111 million of additional securitised debt in May at alow margin of 25 basis points above LIBOR. This was well timed and the proceedswere used to repay existing more expensive debt with the balance allocatedtowards NAV enhancing asset management initiatives and increased cash reserves.All of the Group's on-balance sheet debt is fully hedged against interest ratesuntil 2014 at a total cost of funds of 5.58%. The impact of marking the Group's interest rate swaps to market has addedvolatility to the quarterly NAV as interest rates have fluctuated. The SeptemberNAV includes a positive valuation of £1.7 million for the swap hedging theprincipal securitised loan, compared to a valuation of £10.1 million as at June2007 and £3.2 million as at March 2007. These fluctuations have also had animpact on the Group's largest joint venture investment, Plantation Place. TheNAV of this investment benefits from a positive mark to market valuation on theswap related to the joint venture's debt of £5.2 million (the Group's share),down from £8.9 million in June and £5.3 million in March. The Group has off-balance sheet, non-recourse borrowings totalling £142.9million secured against the individual investments at Plantation Place EC3,Crendon Industrial Estate and Merchant Property Unit Trust. The on and off-balance sheet borrowings as at September 2007 total £407.1 million, representing45.3% of total assets less current liabilities, and the Board has set a limit onthe Group's total gearing (including on- and off-balance sheet borrowings) of50%. The disposal of MidCity place in August, noted above helped to reduce totalgross debt by £41 million. The Company currently has free cash of approximately £65 million representing13% of the NAV and 9% of total assets less current liabilities. These fundsprovide important operational flexibility in more challenging market conditions. Share price The Company's share price continues to be affected by negative sentiment and asat 23 November is 75.25 pence per share, a 45% discount to the September NAV.This is the largest discount since inception and compares with a 12% discount atthe time of the Annual Report issued in June 2007. The Board is monitoring thediscount and reviews regularly whether share buybacks are appropriate. In doingso, it takes into account other potential calls on the Group's cash resourcesand the potential returns from further investment in developing our propertyportfolio. Recent buybacks, following sharp falls in the Company's share price,have reflected this approach. Outlook In these more challenging market conditions, the Manager is seeking to offsetfurther declines in the value of UK commercial property over the coming monthsthrough a continued focus on asset management and other initiatives that willincrease income and performance relative to the market. An active approach toasset management, together with the financial flexibility afforded by theGroup's cash resources, should ensure that the Company is as well positioned aspossible to create longer term value for shareholders. Andrew Sykes Chairman Invista Foundation Property Trust Limited 23 November 2007 INVESTMENT MANAGER'S REPORT As at 30 September 2007, Invista Foundation Property Trust Limited ('theCompany') and its subsidiaries (together 'the Group') owned a property portfoliovalued at £673.2 million comprising 71 assets. Including the gross share ofjoint venture assets, this provides the Group with exposure to a largerportfolio valued at £816.13 million. The property portfolio has approximately 255 individual leases to 224 differenttenants which are well diversified by sector and geography with an above averageweighting to Central London offices. The property portfolio, excluding jointventures, has a weighted average lease length of 8.2 years assuming the earlierof lease expiry or break option. Over the period and in anticipation of the slowdown in the UK commercialproperty market, a more defensive and income-oriented strategy has beenimplemented focusing on increasing average lease length and tenant creditquality. This approach is proving successful and, based on independent tenantcredit covenant analysis, compared to its IPD peer group Benchmark, the Companyhas increased its weighting to tenants with a 'negligible' risk and reduced itsweighting to tenants with a 'medium-high' or 'high' risk. The income focused strategy is complemented by a number of significant NAVenhancing development and refurbishment projects at varying stages ofimplementation. Top 10 investments Value 09/07 %Minerva House, Montague Close, London,SE1 £59,300,000 8.8%National Magazine House, Broadwick Street, London W1 £58,700,000 8.7%Plantation Place, London EC3 (28.08% share*) £49,430,196 7.3%Portman Square House, London W1 (21.06% share) £35,170,000 5.2%6 - 9,Tokenhouse Yard, London EC2 £24,500,000 3.6%The Galaxy, Luton £22,100,000 3.3%Reynard Business Park, Brentford £19,400,000 2.9%Victory House, Trafalgar Place, Brighton £18,700,000 2.8%Churchill Way West, Salisbury £17,350,000 2.6%Union Park, Fifers Lane, Norwich £17,200,000 2.5% TOTAL £321,850,196 47.7% *Share of the NAV of the joint venture Top 10 direct tenancies* Annual Rent %The National Magazine Co Limited £2,305,100 7.0%Synovate Limited (Guarantor Aegis Group Plc)** £1,900,000 5.8%Reed Smith Services Limited £1,326,190 4.0%Mott MacDonald Limited £1,307,148 4.0%Wickes Building Supplies Limited*** £1,092,250 3.3%The British Broadcasting Corporation £850,100 2.7%Recticel SA £713,538 2.2%Partners of Cushman & Wakefield £574,128 1.8%Motorhouse 2000 Limited £570,150 1.7%Partners of Irwin Mitchell lawyers £555,000 1.7% TOTAL £11,193,604 34.2% * Excludes joint ventures ** Income will commence on expiry of 18 month rent free period *** Includes new lease at Basingstoke £692,500 with effect from 24 December 2007 As at 30 September 2007 the current portfolio rent was £29.27 million,increasing to £32.72 million on completion of outstanding rent free periods.This reflects a net initial income yield of 5.5% excluding the Group'sdevelopment sites and joint venture investments where surplus income supportsseparate, off-balance sheet financing. The market rental value of the Group'sportfolio is £36.96 million reflecting an income yield of 6.3%, excludingdevelopment sites and joint ventures. The Company's active approach to assetmanagement is being applied across the whole portfolio and results in a low voidrate of approximately 5% by rental income. The slowdown in parts of the UK commercial property market highlighted in ourlast Annual Report and Accounts has accelerated and the market has experienced asharp, yield-led correction in capital values over the period that has continuedinto the final quarter of 2007. There was a stark contrast in the Company'squarterly movements in NAV over the period under review, with a Net Asset Value('NAV') uplift of 4.70% over the quarter to June followed by a fall in the NAVover the quarter to September of 7.8%. A breakdown of what contributed to thesereturns is set out below: 31/03/2007 30/06/2007 3 month 30/09/2007 3 month Change (%) Change (£'000) (£'000) (£'000) (%)Investmentproperties atmarket value 717,388 722,143 0.7 673,197 (6.8)Like-for-likeuplift in:Wholly ownedportfolio - 11.5 2.5 (15.0) (2.4)Joint ventureportfolio - 6.2 7.5 (9.3) (14.0)Current assets 32,483 82,366 154 86,235 4.7Currentliabilities (32,094) (29,117) (9.3) (16,931) (42)On-balancesheetborrowings (218,288) (259,236) 18.8 (259,298) -Off-balancesheetborrowings (186,060) (185,344) - (142,925) (22.9)Market valueof principalinterest rateswap 3,163 10,137 226 1,734 (82.9)Net Asset Value 502,652 526,293 4.7 484,936 (7.9)Net AssetValue pershare (pps) 142.2 148.9 4.7 137.2 (7.9) Combined with the dividend of 3.375 pence per share, over the six month periodto September 2007 the Company generated a NAV total return of -1.16%, with theNAV falling 5.0 pence per share or 3.52% to 137.2 pence per share. This is thefirst fall in the NAV over any period since the launch of the Company in July2004 at 100 pence per share. The above table also illustrates the volatileimpact of marking to market the Company's interest rate swaps, which isunrelated to the fundamental performance of the property portfolio. This impactis accentuated by separate interest rate swaps included in calculating the NAVof the Group's joint venture investments. The Company's objective is to provide a total NAV return of 8% per annum or moreover the longer term through holding a diversified portfolio of UK commercialproperties, mainly invested in the three UK commercial property sectors ofoffices, industrial and retail. Since launch in July 2004 the objective has beenmaterially exceeded with an annualised NAV total return of approximately 18% perannum. The strategy to invest in the Central London office markets hascontributed significantly to the out performance relative to the originalobjective and its IPD peer group, demonstrating that it can respond quickly tochanging market conditions. We are now returning to more normal historic market conditions with a materialdifferential between the performance of sectors and regions at different timesin the cycle. The Company's active approach and track record of gaining exposureto growth markets increases the potential for relative out performance in thismore challenging environment, and this approach is evidenced by the performanceof the underlying property portfolio. Over the six months to September 2007 IPD calculate that the Group's underlyingproperty portfolio produced a total return of 1.2% compared with the Benchmarkof 1%, placing the Company on the 23rd percentile. Over the 12 months toSeptember 2007 IPD calculate that the Group's underlying property portfolioproduced a total return of 10.2% compared with the Benchmark of 6.9%, placingthe Company on the 3rd percentile. On the same basis IPD calculate that overthree years the Group's portfolio produced a total return of 17.7% compared withthe Benchmark of 14%, placing the Company in the 4th percentile. The IPDanalysis takes account of all the property related transaction costs incurredthrough implementing the active strategy. IPD also provide an attribution analysis of the underlying property portfolioover 12 months that highlights two positive features. Firstly, rental valuegrowth in the Company's directly held property portfolio contributed 8.2%towards capital value growth over the 12 months to September, compared with theBenchmark of 3.9%. It is also encouraging to note that on the same basis averagerental value growth was realised across all three main sectors with retail andoffices materially exceeding the Benchmark (6.3% vs. 2.2% and 13.4% vs. 8%respectively) and industrial just ahead (1.4% vs. 1.2%). This level of outperformance was relatively constant over three, six and 12 months. Rental value growth is of fundamental importance to long term performance andcan be attributed to an exposure to growth markets, good quality properties andactive asset management. The Group's principal joint venture investment,Plantation Place, is also performing well in terms of rental growth, with therental value increasing by 10% over the year from an average headline officerent of £52.50 per sq ft to £57.75 per sq ft as at September 2007. As evidenced above, the key driver of capital growth has been rental valuegrowth rather than the impact of falling yields. Falling yields can beinfluenced by wider market factors such as low borrowing rates and investorsentiment which can be short term and disconnected from property fundamentals.It is worth noting therefore that yield impact contributed significantly less tocapital growth relative to the peer group. Including the Group's joint venture properties, IPD calculate that the incomereturn of 5.1% for the 12 months to September 2007 exceeded the Benchmark of 5%.This is positive as the rental income generated by the joint venture investmentspays interest on the separate off-balance sheet borrowings. Sector Spread 30 September 2007 (%) Office 54%Industrial 22%Retail 16%Retail Warehouse 5%Other 3% 30 September 2007 (% grossed up*) Office 60%Industrial 20%Retail 13%Retail Warehouse 4%Other 3% Regional Spread 30 September 2007 (%) Central London 33%South East excl. CL 34%Rest of South 11%Midlands and Wales 13%North and Scotland 9% 30 September 2007 (% grossed up*) Central London 43%South East excl. CL 30%Rest of South 9%Midlands and Wales 11%North and Scotland 7% * The grossed up portfolio analysis includes the Group's share of theoff-balance sheet, non-recourse debt secured against the Joint Ventureinvestments at Plantation Place, Crendon and Merchant Property Unit Trust. The tables above and on the previous page show that the Company still has arelatively high weighting to Central London of 33% on a net basis, increasing to43% on a grossed up basis. This compares with the position in March 2007 of 34%and 46% respectively. During the period the Group reduced its weighting to Central London offices withthe disposal of its 19.73% equity stake in MidCity Place, WC1, acquired for £9.8million in August 2005. This was based on an underlying property acquisitionprice of £215 million. Upon acquisition the property was let at an averagerental of £38 per sq ft with the assumption that rents would exceed £50 per sqft over five years. Following the successful implementation of several assetmanagement initiatives generating headline rental evidence of £60 per sq ft theproperty was sold in August for £325 million, realising net disposal proceeds of£21.5 million for the Group. The net disposal proceeds compared to a valuationat the start of the period of £22.75 million, principally due to writing offunamortised finance arrangement fees. Including the re-financing proceeds of£8.2 million received in October 2006, the initial investment of £9.8 milliongenerated a return of £30 million. During the period the Company also sold three small High Street retailproperties in York, Northampton and Lancaster for a total consideration of£6.325 million. The properties produced £275,850 per annum and were let for anaverage lease length of 7.8 years. In each case asset management initiatives hadbeen successfully implemented and on the basis of the properties' limited scopefor future income and capital growth, a decision was made to dispose of theassets at an average initial yield of 4.1%. Over the last 18 months the Companyhas taken advantage of very strong market conditions to sell 10 small retailproperties at premium prices to realise significant profits. No new acquisitions were completed during the quarter, although the contracteddevelopment of the prime retail warehouse development in Basingstoke wascompleted in October. The property is let to Wickes Building Supplies Limitedfor 25 years producing £692,250 per annum, and is located in a prominentposition with good rental growth prospects. Upon completion in October theproperty was valued at £13 million compared with the cost of £11.9 million. The period under review has again been characterised by significant assetmanagement activity. At the retail warehouse investment in Salisbury, the newlease to Smyths Toys has been completed at £20 per sq ft, 20% ahead of theassumption at acquisition. This provides excellent rental evidence forforthcoming reviews that should result in a yield on cost by the end of 2008 of6.0%. The value increased over the period from the purchase price in January2007 of £15.02 million to £17.35 million, an increase of 15.5%. The Company's directly held Central London office investments have someimportant rent reviews over the next 18 months with the potential to exceed thecurrent independent valuation rental value. The four largest directly heldproperties are all in Central London and have a rental value of £9.7 millioncompared to the current rent of £7.9 million. By the end of 2009 the propertieshave the potential to generate additional rent of £1 million per annumreflecting an uplift of 12%. These were acquired following the C Share issue in2005 and illustrate the importance of the C Share strategy from both a capitaland an income growth perspective. The table below summarises larger, more capital intensive asset managementprojects being pursued by the Company, together with the budgeted costs andpotential profit: Property Objective Status(Sector / 30Sept 2007val)Coventry Change of use from industrial to Outline planning secured forRoad, retail warehousing and trade 100,000 sq ft retail warehousingHinckley (RUK counter units. Commence and 21,000 sq ft trade counter.Ind £8m) development when 50% pre-let. Advancing pre-let negotiations.Oxford Road, Extend and substantially Detailed planning consent forUxbridge (SE refurbish 1980's, 39,000 sq ft 71,000 sq ft Grade A buildingoffices office building to Grade A spec. achieved. Considering options.£10.5m)Victoria Convert upper parts to retail. Works currently on-site withPlaza, Bolton Pre-let to JJB Sports. Planning good interest in remaining(High St and all lease agreements in vacant unit.retail £11m) place.Minerva Following new agreement for lease Carrying out Synovate Grade AHouse, London to Synovate, pursuing major lease refurbishment works. InSE1 (CL surrender and possibility of surrender negotiations onOffices adding an additional floor. remaining space.£59.3m)Gate Centre, Following the opening of BMW In negotiations with VW for newBrentford dealership, potential to showroom premises at a(London ind materially enhance rents through materially higher rent.£15.5m) re-branding.Reynards West London industrial complex Considering mixed useBusiness Park close to A40. Potential mixed use redevelopment options on expiry(London ind development site. of current leases in 2010.£19.4m)Albion Working with Local Authority to In exclusive negotiations over aCentre, agree a Masterplan for a mixed formal development agreement. InIlkeston use redevelopment project centred discussion with three major(Shop Centre on the Albion Centre. supermarkets as an anchor£14.75m) pre-let.Olympic Reviewing development options for Discussions ongoing with aOffice the development site following number of parties.Centre, the opening of Wembley.Wembley (site£7.6m)Booker, Acton Secondary industrial premises in Discussions ongoing with a(London ind an area benefiting from higher number of parties.£7.15m) value uses being developed nearby. Pursuing site assembly strategy. Following recent disposals the Group currently has approximately £65 million offree cash, and we and the Board are acutely aware of the benefits of thisliquidity in more challenging market conditions. The use of these funds will toa large extent be determined by the performance of the investment andoccupational markets over the short to medium term. The value already addedthrough securing higher value planning consents in locations such as Hinckleyand Uxbridge provides the Company with the alternative of crystallising profitnow or potentially generating future income and profits by implementing thedevelopments. The longer term profitability of these and other initiatives willbe measured against the investment returns realised through the more short termstrategy of acquiring and cancelling the Company's shares. Finance In May and as planned the Company issued £111 million of additional securitiseddebt at a margin of 25 basis points over a fixed interest rate, increasing andconsolidating all of the Company's on-balance sheet debt in a single securitisedfacility of £263.5 million. This is a very efficient form of financing with theproceeds used to repay more expensive off-balance sheet debt and to providegeneral liquidity. The on-balance sheet loans are set out below: Grade (completion Amount (£) Expiry Fixed rate Margin Cost of fundsdate) (%) (%) (%)AAA (2005) 139,000,000 2014 5.10 0.20 5.31AA (2005) 13,500,000 2014 5.10 0.29AAA (2007) 111,000,000 2014 5.71 0.25 5.96 Total 263,500,000 5.58 The securitised debt set out in the table above is secured against assets of£597 million, reflecting a loan to value of 44% ratio compared with a bankcovenant of 60%. The interest cover ratio is 200% relative to the bank covenantof 150%. In addition to the £597 million of on-balance sheet assets, the Grouphas £24.5 million of direct property assets with no debt. It is worth notingthat the Company can reduce the securitised loan at any time with no pre-paymentfees, or alternatively inject property or cash to reduce the loan to value. The disposal of MidCity Place during the period reduced the off-balance sheetborrowings by £41 million and the current Company's off-balance sheet loans areset out below. Description (% Amount (£) Expiry Fixed rate Margin Cost of fundsownership) (%) (%) (%)PlantationPlace,(28.08%) 129,168,000* 2013 4.74 0.45 5.19Crendon IPL(50.00%) 10,440,000 2009 5.22 1.05 6.27Merchant PUT(19.40%) 4,033,260 2011 5.10 0.53 5.63 Total 143,641,260 5.28 *as at 22 October 2007 Plantation Place is the most significant loan, representing 90% of the totaloff-balance sheet loans. This loan is non-recourse and is securitised with theinterest rate fixed until 2013. The total loan is £457 million relative to anunderlying property valuation of £602 million as at 30 September 2007,reflecting a loan to value ratio of 76%. The loan can be re-paid in full or inpart at any time with zero pre-payment fees. In summary the Group's on balance borrowings amount to 34.8% of total assetsless current liabilities, increasing to 45.3% on a fully consolidated basis whenoff-balance sheet assets and liabilities are included. Outlook The yield-led correction in the UK commercial property market has been sharperthan anticipated and the long term impact of the wider financial market turmoilis uncertain. This has led to a fall in capital values that is likely to resultin an ungeared return of 0% for the UK commercial property for calendar 2007.Compared with previous downturns, there is sustained occupational demand andgood levels of rental growth in parts of the market. Whilst the Company has anoverweight exposure to growth markets, and specifically Central London, there isa risk to future performance if the financial market problems contaminate thewider UK economy. We have prudently begun to position the portfolio defensivelyand have started to crystallise the strong performance enjoyed in Central Londonover the last two years. Further London disposals could be considered atappropriate pricing levels. The Company's portfolio is well diversified with a robust income stream backedby an above average tenant covenant quality. This should enable the Company tomaintain and grow income to increase the distributed dividend cover and, overthe medium term, supplement the attractive income return with capital growth.The cash held by the Group provides valuable liquidity and operationalflexibility. Asset management will be more critical than ever and we are wellplaced to direct our considerable resources to maximise returns. Looking forward, these challenging conditions are likely to create opportunitiesduring 2008 to acquire assets for good value and we remain positive about theGroup's prospects. Duncan Owen Chief Executive, Invista Real Estate Investment Management Limited 23 November 2007 INVISTA FOUNDATION PROPERTY TRUST LIMITEDInterim Report, unaudited as at 30 September 2007-------------------------------------------------- Condensed Income Statement(unaudited) for the period from 1 April 2007 to 30 September 2007 Six months Six months Year to to to 30/09/2007 30/09/2006 31/03/2007 Notes £'000 £'000 £'000---------------------------- ------- --------- --------- ---------Rental income 14,799 14,760 30,701Other income 353 1,019 1,459Property operating expenses (810) (452) (882)---------------------------- ------- --------- --------- ---------Net rental and related income 14,342 15,327 31,278---------------------------- ------- --------- --------- ---------Profit on disposal of investmentproperty 1,097 1,648 6,075---------------------------- ------- --------- --------- ---------Net valuation (loss)/gain oninvestment property (4,397) 25,116 44,267---------------------------- ------- --------- --------- --------- ExpensesInvestment management fee (3,497) (3,175) (6,423)Performance fee - (3,000) (11,437)Valuers' and other professionalfees (676) (309) (525)Administrators and accounting fee (314) (111) (261)Audit fee (78) (86) (163)Directors' fees (95) (74) (177)Other expenses (108) (69)---------------------------- ------- --------- --------- ---------Total expenses (4,768) (6,755) (19,055)---------------------------- ------- --------- --------- --------- Net operating profit before netfinance costs 6,274 35,336 62,565 Interest receivable 1,041 1,041 1,767Interest payable (7,070) (5,701) (11,355)---------------------------- ------- --------- --------- ---------Net finance costs (6,029) (4,660) (9,588)Share of (loss)/profit inassociates (5,012) 26,110 44,421Loss from sale of associate (674) - ----------------------------- ------- --------- --------- ---------(Loss)/profit before tax (5,441) 56,786 97,398---------------------------- ------- --------- --------- ---------Taxation (83) (53) (690)---------------------------- ------- --------- --------- ---------(Loss)/profit for the period/year attributable to the equityholders of the parent ----------------------------------- (5,524) 56,733 96,708 --------- --------- ------------------------------------- -------Basic and diluted earnings pershare 3 (1.6p) 16.0p 27.4p---------------------------- ------- --------- --------- --------- All items in the above statement are derived from continuing operations.The accompanying notes form an integral part of the financial statements. INVISTA FOUNDATION PROPERTY TRUST LIMITEDInterim Report, unaudited as at 30 September 2007------------------------------------------------- Condensed Balance Sheet(unaudited) as at 30 September 2007 30/09/2007 30/09/2006 31/03/2007 Notes £'000 £'000 £'000 Investmentproperty 607,850 563,211 629,380Investmentproperty underdevelopment 8,650 - 4,337Investment inassociates andjoint ventures 5 56,697 91,062 83,671Interest rateswap 1,734 - 3,163----------------------- ---- ------- --------- --------- ---------Non-currentassets 674,931 654,273 720,551----------------------- ---- ------- --------- --------- --------- Trade andotherreceivables 7,477 5,066 7,935Taxation paidin advance - 225 -Cash and cashequivalents 78,758 25,404 24,548----------------------- ---- ------- --------- --------- ---------Current assets 86,235 30,695 32,483----------------------- ---- ------- --------- --------- ---------Total assets 761,166 684,968 753,034======================= ==== ======= ========= ========= ========= Issued capitaland reserves 484,936 470,009 502,652----------------------- ------ -------- --------- --------- ---------Equity 484,936 470,009 502,652----------------------- ------ -------- --------- --------- --------- Interest-bearing loans andborrowings 259,298 190,050 149,270Interest rateswap - 1,437 ------------------------ ------ -------- --------- --------- ---------Non-currentliabilities 259,298 191,487 149,270----------------------- ------ -------- --------- --------- --------- Interest-bearing loans andborrowings - - 69,018Trade andother payables 16,220 19,532 31,910Taxationpayable 712 - 184Provisions - 3,940 ------------------------ ------ -------- --------- --------- ---------Currentliabilities 16,932 23,472 101,112Totalliabilities 276,230 214,959 250,382----------------------- ------ -------- --------- --------- ---------Total equityandliabilities 761,166 684,968 753,034======================= ====== ======== ========= ========= ========= ----------------------- ------- -------- --------- --------- ---------Net AssetValue perOrdinary Share 6 137.2p 132.9p 142.2p----------------------- ------- -------- --------- --------- --------- The financial statements were approved at a meeting of the Board of Directors held on 23 November2007 and signed on its behalf by: ------------------------------- ---------------------------A Sykes, Director, (Chairman) H Dick-Cleland, Director The accompanying notes form an integral part of the financial statements. INVISTA FOUNDATION PROPERTY TRUST LIMITEDInterim Report, unaudited as at 30 September 2007-------------------------------------------------- Condensed Statement of Changes in Equity (unaudited) for the period from 1 April 2006 to 30 September 2006 Notes Share Hedge Revenue Total premium reserve reserve £'000 £'000 £'000 £'000------------------------------ ------ -------- ------- ------- -------- Balance as at31 March 2006 98,356 (3,875) 328,290 422,771 Gain on cashflow hedge - 2,438 - 2,438Profit for theperiod - - 56,733 56,733Dividends paid - - (11,933) (11,933)------------------------------ ------ -------- ------- -------- -------- Balance as at30 September2006 98,356 (1,437) 373,090 470,009 (unaudited) for the year ended 31 March 2007 and for the period from 1 April 2007 to 30September 2007 Notes Share Hedge Revenue Total premium reserve reserve £'000 £'000 £'000 £'000------------------------------ ------ -------- ------- -------- -------- Balance as at31 March 2006 98,356 (3,875) 328,290 422,771 Gain on cashflow hedge - 7,038 - 7,038Profit for theyear - - 96,708 96,708Dividends paid - - (23,865) (23,865)------------------------------ ------ -------- ------- -------- -------- Balance as at31 March 2007 98,356 3,163 401,133 502,652 Loss on cashflow hedge - (1,429) - (1,429)Loss for theperiod - - (5,524) (5,524)Unrealisedgain oninvestmentproperty underdevelopment - - 1,170 1,170Dividends paid 4 - - (11,933) (11,933)------------------------------ ------ -------- ------- -------- --------Balance as at30 September2007 98,356 1,734 384,846 484,936------------------------------ ------ -------- ------- -------- -------- The accompanying notes form an integral part of the financial statements. INVISTA FOUNDATION PROPERTY TRUST LIMITEDInterim Report, unaudited as at 30September 2007 --------------------------- -------- -------- -------- Condensed Statement of Cash Flows(unaudited) for the year end 31 March 2007 and for the period from1 April 2007 to 30 September 2007 Six months Six months Year to to to 30/09/2007 30/09/2006 31/03/2007Operating activities Notes £'000 £'000 £'000---------------------- ------- --------- --------- ---------(Loss)/profit for the period/year (5,524) 56,733 96,708Adjustments for:Profit on disposal of investmentproperty (1,097) (1,648) (6,075)Net valuation loss/(gain) oninvestment property 4,397 (25,116) (44,267)Share of loss/(profit) ofassociates 5,012 (26,110) (44,109)Loss on sale of associate 674 - -Net finance cost 6,029 4,660 9,588Taxation 82 53 690--------------------------- --------- --------- ---------Operating profit before changes in workingcapital and provisions 9,573 8,572 12,535 Decrease/(increase) in trade andother receivables 464 768 (1,914)(Decrease)/increase in trade andother payables (11,887) (2,640) 5,554---------------------- ------- --------- --------- ---------Cash (required for)/generatedfrom operations (1,849) 6,700 16,175Interest paid (5,409) (4,374) (10,500)Interest received 1,041 1,030 1,573Tax paid - (48) (276)--------------------------- --------- ---------Cash flows from operatingactivities (6,217) 3,308 6,972---------------------- ------- --------- --------- ---------Investing ActivitiesProceeds from sale of investmentproperty 18,880 5,080 30,394Acquisition of investmentproperty (8,256) (22,450) (94,453)Proceeds from sale of associate 21,080 - -Acquisition of associates - (33,401) (7,675)Loan to associate - 6,549 6,549---------------------- ------- --------- --------- ---------Cash flows from investingactivities 31,704 (44,222) (65,185)---------------------- ------- --------- --------- ---------Financing ActivitiesDraw down of loan facility 111,000 41,009 69,018Payback of existing loans (69,080) - -Finance costs paid (1,265) (366) -Dividends paid 4 (11,933) (11,933) (23,865)---------------------- ------- --------- --------- ---------Cash flows from financingactivities 28,722 28,710 45,153---------------------- ------- --------- --------- ---------Net increase/(decrease) in cashand cash equivalents for the -------period/year 54,210 (12,204) (13,060)---------------------- --------- --------- ------------------------------- -------Opening cash and cash equivalents 24,548 37,608 37,608---------------------- ------- --------- --------- ---------Closing cash and cash equivalents 78,758 25,404 24,548---------------------- ------- --------- --------- ---------NOTES TO THE INTERIM REPORT 1. Significant accounting policies The Invista Foundation Property Trust Limited ('the Company') is a closed-ended investmentcompany incorporated in Guernsey. The condensed financial statements of the Company for theperiod ended 30 September 2007 comprise the Company, its subsidiaries and its interests inassociates (together referred to as the 'Group'). Statement of compliance The condensed interim financial statements have been prepared in accordance with theDisclosure and Transparency Rules of the United Kingdom's Financial Services Authority andInternational Financial Reporting Standards ('IFRS') IAS 34 Interim Financial Reporting.They do not include all of the information required for the full annual financialstatements, and should be read in conjunction with the consolidated financial statements ofthe Group as at and for the year ended 31 March 2007. The financial statements have beenprepared on the basis of the accounting policies set out in the Group's annual financialstatements for the year ended 31 March 2007. The Group's annual financial statements refersto new Standards and Interpretations none of which had a material impact on the financialstatements. 2. Material agreements Under the terms of an appointment made by the Board on 24 June 2004, Insight InvestmentManagement (Global) Limited was appointed as Investment Manager to the Company. On 31 August 2006 the Board agreed to novate the Investment Management Agreement to InvistaReal Estate Investment Management Limited. This follows the de-merger of the InvestmentManager from Insight Investment and its subsequent independent listing on the AlternativeInvestment Market. The Investment Manager is entitled to a base fee and a performance fee together withreasonable expenses incurred by it in the performance of its duties. The base fee is equalto one quarter of 95 basis points of the gross assets of the Group per quarter. In addition, and subject to the conditions below, the Investment Manager is entitled to anannual performance fee where the total return per ordinary share during the relevantfinancial period exceeds an annual rate of 10 per cent (the "performance hurdle"). Where theperformance hurdle is met, a performance fee will be payable in an amount equal to 15 percent of any aggregate total return over and above the performance hurdle. A performance feewill only be payable where: (i) in respect of the relevant financial period, the totalreturn of the underlying assets meets or exceeds the Investment Property Databank ("IPD")Monthly Index balanced funds benchmark on a like for like basis; and (ii) the annualisedtotal return over the period from admission of the Company's Ordinary Shares to the end ofthe relevant financial period is equal to or greater than 10 per cent per annum. The NAV announced in July 2007 for the period from 1 April 2007 to 30 June 2007 included aprovision of £1.5m as an estimate of the Investment Manager's performance fee. Due to thefall in the NAV over the quarter to 30 September 2007 the provision has been removed. The Investment Management Agreement may be terminated by either the Company or theInvestment Manager on not less than twelve months notice in writing. The Board appointed Invista Real Estate Investment Management Limited as the AccountingAgent to the Company from 1 April 2007. The Accounting Agent is entitled to a fee equal to 5basis points of net asset value subject to a minimum annual fee of £250,000. The Board appointed Northern Trust International Fund Administration Services (Guernsey)Limited as the Administrator to the Company from 25 July 2007. The Administrator is entitledto an annual fee equal to £120,000. 3. Basic and diluted earnings per share The basic and diluted earnings per share for the Group is based on the net loss for theperiod of (£5,524,318), (March 2007: profit £96,708,000) (September 2006: profit£56,733,000) and the weighted average number of Ordinary Shares in issue during the periodof 353,560,000 (March 2007: 353,560,000) (September 2006: 353,560,000). 4. Dividends paid 01/04/2007 No. of ToIn respect of Ordinary Rate 30/09/2007 Shares (pence) £'000----------------------------------- --------- -------- --------- Quarter 31 March 2007 dividendpaid 18 May 2007 353.56 1.6875 5,967 millionQuarter 30 June 2007 dividendpaid 17 August 2007 353.56 1.6875 5,966----------------------------------- million -------- --------- --------- 3.375 11,933----------------------------------- --------- -------- --------- 01/04/2006 No. of ToIn respect of Ordinary Rate 30/09/2006 Shares (pence) £'000----------------------------------- --------- -------- --------- Quarter 31 March 2006 dividendpaid 26 May 2006 353.56 1.6875 5,967 millionQuarter 30 June 2006 dividendpaid 25 August 2006 353.56 1.6875 5,966----------------------------------- million -------- --------- --------- 3.375 11,933----------------------------------- --------- -------- --------- 01/04/2006 No. of ToIn respect of Ordinary Rate 31/03/2007 Shares (pence) £'000----------------------------------- --------- -------- --------- Quarter 31 March 2006 dividendpaid 26 May 2006 353.56 1.6875 5,966 millionQuarter 30 June 2006 dividendpaid 25 August 2006 353.56 1.6875 5,966 millionQuarter 30 September 2006dividend paid 24 November 2006 353.56 1.6875 5,966 millionQuarter 31 December 2006 dividendpaid 18 February 2007 353.56 1.6875 5,967----------------------------------- million -------- --------- --------- 6.7500 23,865----------------------------------- --------- -------- --------- 5. Investment in Associates and Joint Ventures Mid City Place, London WC1 In August 2005, the Group, through Invista Foundation (Mid City ) Limited, invested equityand subordinated debt of £9,917,000 for a 19.725% shareholding in DV3 Mid City Limited, acompany incorporated in the British Virgin Islands and which owns the Mid City Placeproperty in London. As at 31 March 2007 the value of the Group's investment in DV3 Mid City Limited was valuedat £22,751,000. In August 2007 the Group sold its investment in DV3 Mid City Limited for£22,077,000. Losses in the period to sale were £799,660. Plantation Place, London EC3 One Plantation Place Unit Trust had total assets of £644,529,175 (31 March 2007:£651,656,207), total liabilities of £468,495,715, (31 March 2007: £464,024,645) losses forthe six month period ended 30 September 2007 were £3,256,304 (30 September 2006: profit£1,555,000). As at 30 September 2007 the Group's 28.08% interest in One Plantation Place Unit Trust wasvalued at £49,430,196 (31 March 2007: £52,687,000), taking into account losses during theperiod. Crendon Industrial Estate Crendon Industrial Partnership Limited had total assets of £33,568,863 (31 March 2007:£32,552,290), total liabilities of £29,112,832 (31 March 2007: £28,281,161), losses for thesix month period ended 30 September 2007 were £630,560 (30 September 2006: £nil). As at 30 September 2007 the Group's 50% share in a joint venture company established toacquire Crendon Industrial Estate, near Oxford was valued at £4,602,440 (31 March 2007:£5,233,000), taking into account losses during the period. Merchant Properties Unit Trust Merchant Properties Unit Trust had total assets of £34,858,655 (31 March 2007: £40,505,581),total liabilities of £21,138,067 (31 March 2007: £25,057,589), losses for the six monthperiod ended 30 September 2007 were £325,990 (30 September 2006: £nil). As at 30 September 2007 the Group's 19.42% equity investment amounts to £2,664,010 (31 March2007: £3,000,000), taking into account losses during the period. 6. Net asset value per Ordinary Share The net asset value per Ordinary Share is based on the net assets of £484,936,078 (March2007: £502,652,000) (September 2006: £480,009,000) and 353,560,000 Ordinary Shares in issueat the balance sheet date. 7. Post balance sheet events Since 30 September 2007 the Company has purchased 2,171,048 of its own shares of nil parvalue for cancellation at an average price of 82 pence per share (March 2007: 353,560,000)(September 2006: 353,560,000). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Schroder Real