26th Jan 2009 16:45
Dear Investor,
Close High Income Properties PLC (the "Company")
Interim Management Statement
On 8 January 2009 Close Investments Limited, the Property Investment Adviser, issued an interim management statement on behalf of the Board of the Company to the London Stock Exchange in respect of the Ordinary Shares and "D" Ordinary Shares. I have set out below a summary of the key matters addressed in the statement as well as the information issued subsequently thereto.
Property Values
As at 31 December 2008 and following the independent valuation carried out by DTZ Debenham Tie Leung, the Company may now be in breach of the loan to value ("LTV") covenants in its debt facilities.
The latest valuation figures of the underlying properties in the Ordinary Share portfolio and in the "D" Ordinary Share portfolio have reduced in value by 9.66% and 18.40% respectively for the 3 months to 31 December 2008. The table below compares valuation changes for the 3 and 12 month periods to 31 December 2008 for the Company and both the IPD All Property Index and IPD Industrial Index:
|
3 month change |
12 month change |
|
|
Ordinary Share Class |
-9.66% |
-23.76% |
|
"D" Ordinary Share Class |
-18.40% |
-36.36% |
|
Combined Ord and "D" Ord |
-11.50% |
-26.58% |
|
IPD All Property Index |
-14.99% |
-27.13% |
|
IPD Industrial Index |
-13.23% |
-25.46% |
Please note that IPD provide information based upon a larger universe of properties and does not specifically track the type of properties that the Company's direct holdings consist of.
A further explanation of the economic and commercial property market drivers that have caused these valuation changes will be included in the end of year accounts to 31 December 2008 which should be distributed to shareholders by 31 March 2009.
Net Asset Value
As a result of the fall in property values, the unaudited Net Asset Value is 41.30p for Ordinary Shares and 15.17p for the "D" Ordinary Shares as at 31 December 2008. This represents a fall of 26.34% and 58.91% respectively for the month and 59.17% and 79.08% respectively for the year (or 54.35% and 75.63% respectively including dividends paid). The NAV falls are greater than the fall in value of the underlying property portfolios as a result of the gearing undertaken by the Company which amplifies falls (or rises) in property values.
Company Borrowing
Discussions are ongoing with the Company's lending banks following the likely breach of existing loan to value ("LTV") covenants. This means the loans represent a greater percentage of total property values than previously agreed with the banks.
At present, the Company has more than sufficient income to service its interest payments as they fall due and continue normal asset management activities. The Property Investment Advisor is seeking agreement with the Company's lending banks to ensure that normal operations can continue. It is intended that a specialist advisor is appointed to assist in negotiations.
Dividend Suspension
The Directors are not recommending the payment of any further dividends to either the Ordinary or "D" Ordinary Shareholders for the foreseeable future. This regrettable move follows the suspension of the "D" Ordinary Share dividend in October 2008 and is taken to preserve cash and help sustain liquidity. Surplus cash will also be used to help repair the LTV breaches with the lending banks.
Extraordinary General Meeting
I am pleased to confirm that all of the resolutions proposed at the Extraordinary General Meeting and the Separate Class Meetings of the Company held on 19 December 2008 were duly passed. Accordingly, the borrowing restrictions have been removed from the Articles of Association of the Company.
Outlook
I appreciate the matters raised above will raise concern with shareholders. However, the Company and its advisers are working hard to improve performance. The recent significant reduction in operating costs and change in asset management team will aid in this regard. However, we are dependent on a turnaround in the economy and commercial property market in particular before our position will noticeably improve.
Should you require any further assistance please do not hesitate to contact the Close Investments Client Services Team on 0845 600 1213* (weekdays 9am to 5:30pm) or e-mail [email protected].
Yours faithfully,
Jonathan Clague
Chairman
Related Shares:
IMPT.L