Net Asset Value(s) and Interi

RNS Number : 7486V

Invista Foundation Property Tst Ltd

16 July 2009

 



16 July 2009

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 £139.4 million or 43.1 pence per share ('pps') as at 30 June 2009.  This reflects a 0.7 pps or 1.6% decline compared with the NAV as at 31 March 2009.  

The Company also announces an interim dividend of 0.88 pps in respect of the period 1 April 2009 to 30 June 2009.  The dividend payment will be made on 7 August 2009 to shareholders on the register on 24 July 2009. The ex-dividend date will be 22 July 2009.

The underlying property portfolio fell by £9.9 million or -3.2% on a like for like basis over the quarter and this was broadly off-set by a £8.7 million increase in the marked to market value of the Company's interest rate swaps. A summary of the NAV movement over the period is set out below:

	30/06/2009 (£m)	31/03/2009 (£m)	3 month change (£m)	3 month change (%)
Direct property independent valuation	296.1	308.1	(12.0)	(3.9)
Valuation of sales		(2.6)
Capital expenditure during the quarter		0.5
Like for like direct property	296.1	306.0	(9.9)	(3.2)
Joint venture investments	0	0	-	-
Market value of interest rate swap	(22.1)	(30.8)	8.7	28.3
Net current assets	75.8	76.8	1.0	1.3
On-balance sheet loan	(210.4)	(210.2)	(0.2)	(0.1)
Net Asset Value	139.4	141.8	(2.4)	(1.7)
Net Asset Value per share (pps)	43.1	43.8	(0.7)	(1.6)
Net Asset Value per share excluding swaps (pps)	49.9	53.3	(3.4)	(6.8)

Property Portfolio and Performance

The Company's direct property portfolio is valued at £296.1 million and comprises 60 assets with an average lot size of £4.94 million. The like-for-like fall in the capital value of the underlying property portfolio over the quarter was -3.2%, which compares with -7.3% for the quarter ending 31 March 2009.  The portfolio valuation reflects a net initial yield of 7.5%, increasing to 7.9% following expiry of rent free periods during calendar 2009.  The net reversionary yield of the portfolio is 9.06%.  The Group's three joint venture investments continue to be carried at nil value.

The following tables reflect the position based on the 30 June 2009 valuation:

Sector weightings

Sector	Weighting
Retail	26.0%
Offices	44.6%
Industrial	25.1%
Other	4.3%
Total	100%

Regional weightings

Region	Weighting
Central London	13.1%
South East excl. Central London	46.1%
Rest of South	12.9%
Midlands and Wales	18.2%
North and Scotland	9.7%
Total	100%

Top ten properties 

		Value (£)	%
1	Minerva House, Montague Close, London  SE1 (50% share)	21,000,000	7.1%
2	Portman Square House, 43/45 Portman Square, London W1 (21.6% share)	17,710,000	6.0%
3	Victory House, Trafalgar Place, Brighton	16,000,000	5.4%
4	The Galaxy, Luton	12,500,000	4.2%
5	Reynard Business Park, Brentford	12,000,000	4.1%
6	Retail Park, Churchill Way West, Salisbury, Wiltshire	10,750,000	3.6%
7	106 Oxford Road, Uxbridge	10,000,000	3.4%
8	Olympic Office Centre, Fulton Road, Wembley	9,300,000	3.1%
9	The Gate Centre, Syon Gate Way, Brentford	9,250,000	3.1%
10	Union Park, Fifers Lane, Norwich	8,100,000	2.7%
	Total as at 30 June 2009	126,610,000	42.7%

Top ten tenants

		Rent per annum (£)	%
1	Cushman & Wakefield Finance Limited	1,183,617	4.7%
2	Wickes Building Supplies Limited	1,092,250	4.3%
3	Synovate Limited1	950,000	3.8%
4	Mott MacDonald Ltd	940,000	3.7%
5	The British Broadcasting Corporation	918,250	3.6%
6	The Buckinghamshire New University2	900,000	3.6%
7	Recticel SA	713,538	2.8%
8	Winkworth Sherwood LLP3	663,095	2.6%
9	Motorhouse 2000 Limited4	570,150	2.3%
10	Tucker, Crossland Darke (Irwin Mitchell)	555,000	2.2%
	Total as at 30 June 2009	8,485,900	33.6%

1     Aegis Group plc are guarantor. Figures based on 50% ownership of Minerva House

2    The Buckinghamshire New University began paying 50% of their rent equating to £450,000 per annum from March 2009 and will increase to £900,000 per annum in June 2012

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

4    Six month rental deposit held

Transactions and Asset Management

The Company has now completed two small disposals at Burgess Hill and York, raising £2.75 million, slightly above their combined March 2009 valuation of £2.55 million. Following the disposal of National Magazine House, London W1 in April for £31.4 million, negotiations concerning the possible second part payment linked to the outstanding rent review are continuing. This is capped at £2 million and is dependent on a third party settlement and therefore not included in the NAV of the Company.  Further selective disposals may be considered where business plans have been completed.

Significant asset management activity is ongoing across the portfolio with the objective of maintaining and, where possible, enhancing income.  The portfolio void rate as a percentage of the independently assessed rental value has increased from 5.2% in March 2009 to 8.6% in June 2009 compared with the IPD Benchmark of 11.1%. The Company's void rate increases to 10.8% if tenants in administration but paying rent are taken into account. 2.4% of the increase between March and June was due to that fact that the Company's largest tenant, Mott MacDonald, recently released 40% of the space they occupy at Victory House in Brighton. This followed last year's beneficial lease restructuring whereby its lease break option in June 2009 was removed in exchange for a new 15-year lease on their remaining space at a rental that increased 20% on a like-for-like basis. Letting the vacant space at Victory House which as at 30 June 2009 has a rental value of £685,000 per annum (as at 30 June 2009) is a priority.  The Brighton lease extension, together with other positive activity has increased the average unexpired lease term to 8.8 years.

Market Background

The pace of capital value decline in the UK commercial property market continues to slow, with the Investment Property Databank ('IPD') Monthly Index confirming that average UK commercial property fell by -4.7% over the quarter to June compared with -8.9% over the quarter to March, resulting in a calendar year to date decline in capital values of -13.2%. Falling rents are having an increasing impact on capital declines, contributing -5.6% towards the capital value decline of -13.2% over the year to date compared with -1.8% and -20.3% respectively for the second half of 2008.  As a result of these capital value declines, UK commercial property now offers a historically high yield premium over UK gilts and we expect that values will stabilise over the remainder of 2009. Despite this positive trend we do not expect to see a strong short term recovery. This is due to two principal factors, further rental declines caused by amongst other things, falling Gross Domestic Product and the risk that banks will force disposals of distressed property.

Finance and Interest Rate Swaps

On 10 July 2009, the Company announced a proposed discounted tender offer to invest up to £55 million in the acquisition and cancellation of the Company's listed, securitised debt.  The actual investment made by the Company will depend on the discount available, the quantum of notes acquired and the costs associated with the transaction. The most significant cost is the requirement to break an amount of the interest rate swap pro-rata with the face value of the debt acquired. The Company has stated a price range of between 65 and 75 pence in the pound subject to a maximum face value of £75 million. The Company is under no obligation to proceed with the proposed debt buyback and the investment will depend on the pricing achieved. A successful outcome has the potential to enhance the Company's net asset value and dividend cover as well as reducing the Company's net loan to value.  We will update the market further during August 2009.

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

Amount (£)	Fixed rate	Margin	Total interest rate	Expiry	Mark to Market 30/06/2009 (£)	Mark to Market 31/03/2009 (£)
102,500,000	5.099%	0.20%	5.299%	15/07/2014	(8,162,514)	(11,703,275)
111,000,000	5.713%	0.20%	5.913%	15/07/2016	(13,914,894)	(19,126,572)
213,500,000	5.420%		5.622%		(22,077,408)	(30,829,847)

As at 30 June 2009 the Company had a loan to value ratio, net of all cash, of 44% against a loan to value ratio covenant of 60%. As at 30 June 2009 the interest cover ratio was 181% against a covenant of 150%. The interest cover ratio increases to over 200% including contracted income that is currently subject to rent free periods.

Strategy

The cash held by the Company provides it with a number of strategic options. The proposed discounted debt buy-back will, if successful, enhance net asset value and dividend cover and also reduce the net loan to value. Whilst pursuing these strategic options we remain focussed on pro-actively asset managing the portfolio to protect and ultimately enhance its capital value and income.

-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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