IMS / NAV / Dividend

RNS Number : 3519M

Invista Foundation Property Tst Ltd

28 January 2009

 



28 January 2009

Invista Foundation Property Trust Limited (the 'Company' / 'Group')

INTERIM MANAGEMENT STATEMENT, ANNOUNCEMENT OF NAV AND INTERIM DIVIDEND

Net Asset Value

Invista Foundation Property Trust Limited (the 'Company' / 'Group') today announces a Net Asset Value ('NAV') of 53.5 pence per share ('pps') as at 31 December 2008. Excluding the marked to market value of the Group's interest rate swaps results in a NAV of 62.7 pps.  

The Company also announces an interim dividend of 0.88 pps in respect of the period 1 October 2008 to 31 December 2008. The dividend payment will be made on 20 February 2009 to shareholders on the register on 6 February 2009. The ex-dividend date will be 4 February 2009. 

The like for like fall in the underlying property portfolio of -14% contributed to a decline in the Company's NAV of -26.8 pps or -33.4% over the quarter. Excluding the quarterly swap movement the NAV declined was -18.9 pps or -23.2%. A summary is set out below:

	31/12/2008 (£m)	30/09/2008 (£m)	3 month Change (£m)	3 month change (%)
Direct property independent valuation	370.9	442.3	(71.4)	(16.1)
Valuation of sales		(10.8)
Capital expenditure during the quarter		0.8
Like for like direct property	370.9	432.3	(61.4)	(14.2)
Joint venture investments	0	0	-	-
Market value of interest rate swap	(29.5)	(4.4)	(25.1)	(570.5)
Net current assets	42.0	87.2	(45.2)	(51.8)
On-balance sheet loan	(210.0)	(259.9)	49.9	19.2
Net Asset Value	173.3	265.3	(92.0)	(34.7)
Net Asset Value per share (pps)	53.5	80.3	(26.8)	(33.4)
Net Asset Value per share excluding swaps (pps)	62.7	81.6	(18.9)	(23.2)

Transactions and Asset Management

In December the Company completed the disposal of a retail property in Bolton at the agreed price of £10 million equating to a 7% discount to the 30 September 2008 valuation. The Company will seek to undertake further selective disposals in order to strengthen the Company's balance sheet.  

The Manager continues to make good progress in completing income enhancing asset management initiatives. In York the Company has paid £45,000 to take back a retail property from Jessops who were paying £90,000 per annum with four years unexpired and simultaneously re-let to Vodafone on a new 10 year lease at £110,000 per annum, a rental uplift of 22.2%. In addition two retail rent reviews have been completed at Chelmsford where DSG have agreed an increase of 16.7% to £245,000 per annum, and at Kingston-upon-Thames where Monsoon have agreed an uplift of 14.4% to £225,000 per annum.

Property Portfolio and Performance

The Company's direct property portfolio was valued at £370.9 million as at 31 December 2008 and comprises 64 assets with an average lot size of £5.8 million. The like for like fall in the capital value of the underlying property portfolio excluding capital expenditure over the quarter was -14% which compares with -6.9% for the quarter ending 30 September 2008.  The Group's three joint venture investments continue to be carried at nil value.  

The portfolio rental income is £27.9 million reflecting a net initial yield of 7.0% based on the December 2008 valuation. This will rise to £29.5 million equating to a net initial yield of 7.4% following expiry of rent free periods during 2009. Despite declining rental values across the UK commercial property market, the net reversionary yield is still 8.34% based on the independent value rental value of £33.3 million per annum.

Sector weightings

Sector	Weighting
Retail	23.6%
Offices	45.7%
Industrial	26.1%
Other	4.6%
Total	100%

Regional weightings

Region	Weighting
Central London	18.4%
South East excl. Central London	41.3%
Rest of South	12.9%
Midlands and Wales	18.6%
North and Scotland	8.8%
Total	100%

Top ten properties 

		Value (£)	%
1	National Magazine House, Broadwick Street, London W1	35,700,000	9.6%
2	Portman Square House, 43/45 Portman Square, London W1 (21.6% share)	23,200,000	6.3%
3	Minerva House, Montague Close, London  SE1 (50% share)	21,000,000	5.7%
4	Victory House, Trafalgar Place, Brighton	16,500,000	4.4%
5	The Galaxy, Luton	15,000,000	4.0%
6	Reynard Business Park, Brentford	13,150,000	3.5%
7	Retail Park, Churchill Way West, Salisbury, Wiltshire	11,000,000	3.0%
8	Olympic Office Centre, Fulton Road, Wembley	10,950,000	3.0%
9	The Gate Centre, Syon Gate Way, Brentford	10,350,000	2.8%
10	Union Park, Fifers Lane, Norwich	12,300,000	2.7%
	Total as at 31 December 2008	198,940,000	45%

Top ten tenants

		Rent per annum (£)	%
1	The National Magazine Co Ltd	2,508,690	8.3%
2	Mott MacDonald Ltd1	1,307,148	4.3%
3	Cushman & Wakefield Finance Limited	1,183,617	3.9%
4	Wickes Building Supplies Limited	1,092,250	3.6%
5	Synovate Limited2	950,000	3.1%
6	The Buckinghamshire New University3	900,000	3.0%
7	The British Broadcasting Corporation	863,100	2.9%
8	Recticel SA	713,538	2.4%
9	Winkworth Sherwood LLP4	663,095	2.2%
10	Motorhouse 2000 Limited5	570,150	1.9%
	Total as at 31 December 2008	10,751,588	35.6%

1    Rent will fall to £940,000 per annum in June 2009 following surrender and granting of new lease over Ground to third floors (approximately 60% of original space). Mott MacDonald Group Limited will remain guarantor 

2     Synovate Limited will begin paying this rent in June 2009.  Aegis Group plc are guarantor. Figures based on 50% ownership of Minerva House

3    The Buckinghamshire New University will begin paying 50% of their rent from March 2009 and will increase to full rent in June 2012

4    On assignment from Reed Smith Ramboud Charot LLP. Figures based on 50% ownership of Minerva House

5    Six month rental deposit held

Market Background

The deteriorating UK economy and the on-going de-leveraging in the financial system have continued to reduce capital values in the UK commercial property market. The UK IPD Monthly Index reported a capital fall of -15% for the quarter to 31 December 2008 which contributed to a total capital value fall of -27.1% for the year and a total return for the year of -22.5%. The quarterly and annual falls are the worst ever on record. The capital value fall in 2008 has been substantially caused by yield expansion with rents falling by only -1.4% over the year and limited differential for quality or between the sectors. The average net initial yield according to IPD is now 7% which is back at the level last seen in 2002.

Finance and interest rate swaps

The Group has two interest rate swaps that fully hedge the Group's interest payments for the duration of the principal securitised loan term that matures in July 2014. Details of the two swaps are set out in the table below:

Amount (£)	Fixed rate	Expiry	M2M 31/12/2008 (£)	M2M 30/09/2008 (£)
102,500,000	5.099%	15/07/2014	(10,653,145)	366,367*
111,000,000	5.713%	15/07/2016	(18,895,740)	(4,724,809)
213,500,000	5.420%		(29,548,885)	(4,358,442)

*     The notional amount of the 5.099% swap as at 30/09/2008 was £152,500,000 since it was pre the £50m debt repayment

In accordance with International Financial Reporting Standards ('IFRS'), the Group accounts for the marked to market value of its interest rate swaps in its balance sheet.  The marked to market value will change with movements in swap rates but the positive or negative value is only realised if debt is repaid in part or in full before maturity and the value is ignored for the purposes of testing the loan to value ratio covenant.  The swaps add volatility to the NAV but are wasting assets in that the value will always be zero at expiry.  The Group's securitised debt facility allows cash to be netted off the outstanding debt for the purposes of calculating the loan to value ratio covenant and future debt repayment will have regard to the cost of breaking the swaps.  

As at 31 December 2008 the Group had securitised on-balance sheet debt of £213.5 million at a total cost of funds, including margin, of 5.62%. The loan to value ratio covenant is 60%. As at 31 December 2008 and prior to the next dividend payment the Company has cash of approximately £50 million and a loan to value ratio, net of all cash, of 44%.

Share buy-backs

During the quarter the Company purchased and cancelled 6.84 million shares for £2.56 million or 37.5 pps. The Board has taken the decision to suspend the share buy-back programme for the time being. 

-ENDS-

For further information:

Invista Real Estate Investment Management Duncan Owen	020 7153 9300
Northern Trust David Sauvarin	01481 745529
Financial Dynamics Dido Laurimore / Rachel Drysdale	020 7831 3113

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