NAV/Interim Dividend

RNS Number : 8948G

Invista Foundation Property Tst Ltd

29 October 2008

 

29 October 2008

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

ANNOUNCEMENT OF NAV AND INTERIM DIVIDEND

Net Asset Value

Invista Foundation Property Trust Limited today announces a Net Asset Value ('NAV') of 81.3 pence per share ('pps') as at 30 September 2008 and an interim dividend of 0.88 pence per share in respect of the period 1 July 2008 to 30 September 2008. The dividend payment will be made on 21 November 2008 to shareholders on the register on 7 November 2008. The ex-dividend date will be 5 November 2008.

The Company's NAV of 81.3 pps reflects a decline of 12.9 pence per share or 13.7% over the quarter.  This includes the significant impact of marking the Group's interest rate swaps to market which reduced the NAV by £11.2 million, representing 3.3 pence per share or 3.5% of NAV.  

		30/09/2008 (£m)		30/06/2008 (£m)		3 month Change (£m)
Direct property independent valuation		442.305		530.775		(88.47)
Valuation of sales				(56.269)		-
Capital expenditure during the quarter				0.668		-
Like for like direct property		442.305		475.174		(32.869)
Joint venture investments		0		5.337		(5.337)
Market value - of on balance sheet interest rate swap		(4.358)		6.800		(11.158)
Net current assets		90.508		47.191		43.317
On-balance sheet loan		(259.888)		(259.733)		-
Net Asset Value		268.567		330.370		(61.803)
Net Asset Value per share (pps)		81.3		94.2		(12.9)

Property Portfolio and Performance

The Company's direct property portfolio was valued at £442.3 million as at 30 September 2008 and comprises 66 assets with an average lot size of £6.7 million. The like for like fall in the capital value of directly held properties over the quarter was -6.9%. Including the Net Asset Value of joint venture investments, the like for like fall was -8.0%. This compares with -5.2% and -9.0% respectively for the quarter ending 30 June 2008.

Sector weightings

Sector	Weighting
Retail	24.8%
Offices	48.2%
Industrial	22.8%
Other	4.2%
Total	100%

Regional weightings

Region	Weighting
Central London	21.7%
South East excl. Central London	40.4%
Rest of South	10.7%
Midlands and Wales	16.5%
North and Scotland	10.7%
Total	100%

Top ten properties

		Value (£)	%
1	National Magazine House, Broadwick Street, London W1	£43,400,000	9.8%
2	Portman Square House, 43/45 Portman Square, London W1 (21.6% share)	£28,400,000	6.4%
3	Minerva House, Montague Close, London  SE1 (50% share)	£24,300,000	5.5%
4	The Galaxy, Luton	£18,420,000	4.2%
5	Victory House, Trafalgar Place, Brighton	£17,400,000	3.9%
6	Reynard Business Park, Brentford	£16,250,000	3.7%
7	Retail Park, Churchill Way West, Salisbury, Wiltshire	£13,250,000	3.0%
8	Union Park, Fifers Lane, Norwich	£12,720,000	2.9%
9	Olympic Office Centre, Fulton Road, Wembley	£12,500,000	2.8%
10	The Gate Centre, Syon Gate Way, Brentford	£12,300,000	2.8%
	Total as at 30 September 2008	£198.940,000	45%

Top ten tenants 

		Value (£)	%
1	The National Magazine Co Ltd	£2,508,690	8.3%
2	Mott MacDonald Ltd	£1,307,148	4.3%
3	Cushman & Wakefield	£1,280,016*	4.2%
4	Wickes Building Supplies Limited	£1,092,250	3.6%
5	Synovate Limited**	£950,000	3.2%
6	The British Broadcasting Corporation	£850,100	2.8%
7	Recticel SA	£713,538	2.4%
8	Reed Smith Rambaud Charot LLP	£663,095	2.2%
9	Motorhouse 2000 Limited	£570,150	1.9%
10	Partners of Irwin Mitchell	£555,000	1.8%
	Total as at 30 September 2008	£10,500,000	34.7%

* Rent review outstanding - independent valuation estimated rental value

** Synovate Limited will commence paying this rent in mid 2009

The Group's direct portfolio currently generates £29.2 million from 242 tenants, reflecting a gross yield of 6.61%, with the gross yield increasing to 7.7% based on current rental value.  

Market Background 

The IPD Monthly Index reported a capital value fall of 6.2% for the quarter to 30 September 2008.  The rate of decline accelerated over the quarter with the -1.8% and -1.6% falls in July and August respectively followed by -2.9% in September.  This reflects a peak to trough capital fall since July 2007 of -24.3%.  UK commercial property has generated a negative total return of -18.1% over the 12 months to September 2008.  Values are expected to fall further over the final quarter as transactional evidence from distressed sellers is adopted.  The average net initial yield according to IPD is now 6.0% which is back at the level last seen in November 2004.  

The very low levels of confidence in the banking sector are leading to significantly reduced liquidity in the property market with limited transactional evidence.  Coordinated action by European and American Governments to increase money market liquidity and the recent reduction in official interest rates indicate that the threat of recession now represents a more significant risk than inflation in the UK and  economy and worldwide.  Medium term interest swap rates have fallen dramatically in anticipation of further interest rate cuts, with the five year swap rate now at 4.56% compared with 5.2% at the beginning of September. Whilst falling interest rates should at some stage benefit the commercial property market, the key market risk at this stage in the economic cycle is tenant default in the face of tight constraints on funding for the corporate sector and falling output. The Board and the Manager are continuing to implement a defensive strategy in these deteriorating market conditions.

Transactions and Asset Management

Following the asset disposals totalling £47.3 million announced in July, further disposals totalling £22 million have now been unconditionally exchanged or completed. 

In July a retail property in Ipswich was sold for £2.5 million reflecting a net initial yield of 5.75%. This disposal was in line with the June valuation and followed the negotiation of a lease extension which increased the rent by 24%. The Quadrant industrial estate in Bristol was sold in August for £9.5 million reflecting a net initial yield of 7.5%. The price reflected a discount of 3.1% to the June valuation. Finally, subsequent to the September valuation the Victoria Plaza retail investment in Bolton has been sold for £10 million reflecting a net initial yield of 7%.  This reflects a discount of 7% relative to the September valuation. Further disposals are being considered to increase cash where asset management plans have been successfully implemented or where there are concerns over future performance.

Good progress is being made on defensive asset management initiatives to increase income. At Minerva House, London SE1, where the Company has a 50% share, as part of granting consent to a lease assignment from law firm Reed Smith to law firm Winkworths Sherwood, a five year lease extension from eight years to 13 years has been secured at a total annual rent of £1.326 million per annum.  

An important agreement for a new lease has been completed with Saint Gobain Building Distribution Limited (trading as Jewson) at Solent Road Industrial Estate in Havant. The secondary estate is located in a mixed industrial and retail area and the strategy has been to re-position the estate for trade counter use.  The Company has agreed a new 20 year lease with Jewson at a rent of £161,500 per annum with minimum rental uplifts of 2.5% per annum. The Company will construct the new Jewson property at a cost of approximately £1.5 million and planning consent has already been received for this. This unit comprises approximately 25% of the total site area and options are being explored for the balance of the site that is let on short term lease agreements.

Joint Ventures

Market conditions have negatively affected the separate non-recourse, off-balance sheet debt that is secured against the Group's three joint ventures. The Manager is pro-actively seeking to renegotiate banking terms to preserve value for the Group.

In July the Company announced that it had taken a full provision against the net asset value of the Group's 28.19% interest in the joint venture that owns Plantation Place, London EC3. The Board continues to believe that this is a prudent approach given ongoing discussions regarding a loan to value ratio covenant breach affecting the securitised debt facility secured against the property.  

The Group's two other joint ventures, Crendon Industrial Partnership and Merchant Property Unit Trust, which had a combined net asset value as at 30 June 2008 of £5.34 million, have ongoing negotiations in both cases for removal or waiver of their covenants and reasonable progress is being made. However, in light of market uncertainty the Board has taken a full provision against these two investments. 

Finance

As at 30 September 2008 the Group had securitised on-balance sheet debt of £263.5 million fully hedged against interest rates until 2014 at a total cost of funds of 5.58%.  As previously announced and as part of the strategic review on 15 October 2008 the Company re-paid £50 million of debt resulting in total on-balance sheet debt of £213.5 million.  Cancelling the proportionate part of the interest rate swap cost the Company an additional £915,000. Following the debt repayment and the disposal of Bolton referred to above the Company will have a loan to value ratio in the security pool of 46% relative to the loan to value ratio covenant of 60%.  

Following the debt repayment and disposal of Bolton the Company will have cash of £51.7 million and a loan to value ratio, net of all cash, of 37.5%. 

Share buy-backs

Additionally, since the strategic review in July the Company has acquired and cancelled 20.4 million shares for £8.84 million reflecting an average price of 43.3 pence per share. The Company now has 330,431,478 shares in issue.

-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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