Interim Management Statement

RNS Number : 8670G

AXA Property Trust Ld

19 May 2011

 



To:                    Company Announcements

Date:                19 May 2011

Company:         AXA Property Trust Limited

Subject:            Interim Management Statement

CORPORATE SUMMARY

-     The interim dividend of 0.75 pence per share in respect of the quarter ending 31 March 2011 was declared on 5 May 2011 and is due for payment on 27 May 2011;

-     The Company's unaudited Consolidated Net Asset Value at 31 March 2011 was £74.06 million (74.06 pence per share) (£73.52 million (73.52 pence per share) as at 31 December 2010), an increase of £0.54 million;

-     As the Porto Kali portfolio of Dutch office buildings continues to experience adverse market conditions, the estimated recoverable value of the Company's remaining investment (in the form of a loan to the Porto Kali vehicle) has been written down to £nil as at 31 March 2011;  

-     Further to the RNS on 1 April announcing the withdrawal of LBB and the agreement to a 3 month extension to the existing loan facility, the Company has entered into a new Term Sheet with Credit Agricole CIB and a new co-lender, Credit Foncier, to refinance the current facility on a pari passu basis;

-     Construction works for the new Edeka unit at Fuerth are being completed and are on schedule for the handover which is expected to take place on 27 May 2011. A number of retailers are being targeted as potential tenants for the unit to be vacated by Edeka. Terms have been agreed with C&A to take an enlarged unit on a new 10 year lease;

-     Following the signing of a 15 year lease at Koethen, the tenant, a franchisee of national DIY retailer Hagebau, is proceeding with fit out works and the unit is expected to open to the public by the end of May.

STRATEGY AND MARKET

Country Allocation at 31 March 2011

Country                                     % of portfolio

Germany                                   59%

Netherlands                              20%

Italy                                           17%

Belgium                                     4%

Sector Allocation 31 March 2011

Sector                                       % of portfolio

Retail                                        58%

Industrial                                  20%

Office                                       13%

Leisure                                     9%

Following the successful letting at Koethen, the Investment Manager's focus remains on increasing rental income, particularly at Fuerth. The portfolio's income is well secured against strong tenant covenants and a tenant base that is weighted towards the defensive food retail sector.

The development of the new Edeka unit in Fuerth is in its final stages and delivery is now scheduled for 27 May 2011, following minor re-configuration requests by Edeka. Negotiations with Fressnapf, a national pet food retailer, to occupy the majority of the unit currently occupied by Edeka, have ended. A number of retailers are being targeted to potentially take part or all of the unit.

ROFU, an existing tenant, has moved to the unit previously occupied by Pfennig-Pfeiffer (1,175m²) after signing a new 10 year lease. An agreement has been reached with C&A to take over the former ROFU unit together with an additional 205m². A new 10 year lease has been agreed.

Three other existing smaller tenants have agreed to 5 year lease extensions.

At Koethen, following the signing of a 15 year lease with a franchisee of the national DIY retailer Hagebau, the tenant has started their fit out works. These works are expected to be completed by the end of May in time for the opening of the store to the public.

In February 2011, Deutsch Bahn Schenker (a leading European logistics operator), the main tenant at Dasing, exercised their option to prolong their lease on halls one to four (7,294m²) until June 2012, at the same rental level. In return the Manager has agreed to grant two months rent free. Further negotiations have commenced with the tenant to extend their lease until 2014.The tenant has verbally agreed in exchange for a light refurbishment of their social area. The costs of these works are currently being analysed. This two year extension will be a significant result for the Company taking into consideration the high vacancy in the area.  

OUTLOOK

With limited rental value growth at the prime end of the market, it will generally take two or more years before it starts to trickle down to the more standard properties, and this is compounded by investors remaining risk averse towards assets that carry increased risk of tenant default.  The investor demand will remain firmly focussed on income, therefore. And growth will be a secondary consideration in almost all markets.

The ECB has already started to raise official interest rates and we expect that process to continue during 2011 and 2012. This is despite the fragile nature of the economic recoveries in Europe (burdened as they are by austerity programmes), and it will have a particularly adverse effect on the real estate market in terms of the cost of debt capital and upward pressure on investment yields.

Within that cautious outlook, Germanys' economy is moving forward positively, and it should - within the next six months - be back to its pre-recession output peak.  With the effect of increased vacancy levels, it will take some time before this translates into net new demand for property, but investors are starting to target the property markets in anticipation.

The Fund's strong income profile, exposure to Germany and conservative LTV should continue to produce positive results. Capital values are expected to remain stable, with increases occurring as a result of the successful implementation of identified asset management initiatives

CONSOLIDATED PERFORMANCE SUMMARY

	Unaudited	Unaudited
	6 months ended	9 months ended
	31 December 2010	31 March 2011	Quarterly Movement
	Pence per share	Pence per share	Pence per share /(%)
Net Asset Value per share	73.52	74.06	+0.54 (+0.73%)
Earnings per share	-6.42	-9.06	-2.64
Dividend declared in the  period	1.50	-2.25	+0.75
Share price (mid market)	46.75	57.00	+10.25 (+21.9%)
Share price discount to Net Asset Value	36.4%	23.0%	-13.4 percentage pts.

Total return	Unaudited	Unaudited
	6 months ended	9 months ended
	31 December 2010	31 March 2011
Net Asset Value Total Return	-3.8%	-2.2%
Share price Total Return
- AXA Property Trust	3.6%	28.0%
- FTSE All Share Index	22.0%	23.3%
- FTSE Real Estate Investment Trust Index	23.4%	30.7%

Source: Datastream; AXA Real Estate

Total net loss was -£9.06 million (-9.06 pence per share) for the nine months to 31 March 2011, including £3.01 million of "revenue" profit (excluding capital items such as revaluation of property) and -£12.07 million "capital" loss analysed as follows:

	Unaudited	Unaudited	Unaudited
	6 months ended	9 months ended	3 months ended
	31 December 2010	31 March 2011	31 March 2011
	£million	£million	£million
Net property income	5.07	7.58	2.51
Net foreign exchange losses	-0.27	-0.77	-0.50
Investment Manager's fees	-0.68	-1.02	-0.34
Other income and expenses	-0.61	-1.04	-0.42
Net finance costs	-1.10	-1.54	-0.44
Current tax	-0.12	-0.20	-0.08
Revenue profit	2.29	3.01	0.73
Unrealised gains/(losses) on revaluation of property	0.82	0.57	-0.25
Unrealised losses on revaluation of Porto Kali investment (loan receivable)	-6.27	-7.22	-0.95
Losses on derivatives (hedging interest rate and foreign exchange exposures)	-2.70	-4.67	-1.97
Finance costs	-0.65	-0.83	-0.18
Net foreign exchange gains	0.08	0.11	0.03
Deferred tax	0.01	-0.03	-0.05
Capital loss	-8.71	-12.07	-3.37
Total net loss	-6.42	-9.06	-2.64

NET ASSET VALUE

The unaudited Company's Consolidated Net Asset Value per share of AXA Property Trust Limited (the "Company") as at 31 March 2011 was 74.06 pence (73.52 pence as at 31 December 2010), an increase of £0.54 million.

The Net Asset Value attributable to the Ordinary Shares is calculated under International Financial Reporting Standards. It includes all current year income and is calculated after the deduction of dividends paid prior to 31 March 2011, but does not include provision for the quarterly interim dividend of 0.75 pence per share announced on 5 May 2011 and to be paid on 27 May 2011.

The £0.54 million increase in Net Asset Value over the quarter ended 31 March 2011 can be analysed as follows:

	Unaudited	Unaudited
	3 months ended	3 months ended
	31 December 2010	31 March 2011
	£million	£million
Opening Net Asset Value	78.09	73.52
Net loss	-4.90	-2.64
Unrealised gains on derivatives	+2.17	+1.14
Dividends paid	-0.75	-0.75
Foreign exchange translation (losses)/gains	-1.09	+2.79
Closing Net Asset Value	73.52	74.06

During the quarter, the portfolio valuation increased by £0.57 million (€0.67 million). After foreign exchange movements (+£4.53 million) the sterling valuation of the property portfolio increased by £5.10 million to £146.10 million (net of capital expenditure). This figure includes the recently sold asset at Bernau, Germany which was held for sale at 31 March 2011.

The Company's net property yield on current market valuation (after acquisition and operating costs) as at 31 March 2011 was 6.88% (6.74% as at 31 December 2010).

Porto Kali Investment

As the Porto Kali portfolio of Dutch office buildings continues to experience adverse market conditions, the estimated recoverable value of the Company's remaining investment (in the form of a loan to the Porto Kali vehicle) has been written down to £nil at 31 March 2011, resulting in a total impairment expense of £7.22m (€8.51) (excluding foreign exchange translation effects)  for the nine month period ended 31 March 2011.

SHARE PRICE AND DISCOUNT TO NET ASSET VALUE

As at close of business on 31 March 2011, the mid market price of the Company's shares on the London Stock Exchange was 57.00 pence, representing a discount of 23.0% on the Company's Net Asset Value at 31 March 2011 and a 5.3% annual dividend yield.

As at close of business on 17 May 2011, the mid market price of the Company's shares was 51.25 pence, representing a discount of 30.8% on the Company's Net Asset Value at 31 March 2010 and a 5.8% annual dividend yield.

DIVIDENDS

The interim dividend of 0.75 pence per share in respect of the quarter ending 31 March 2011 was declared on 5 May 2011, with an ex-dividend date of 11 May 2011, record date of 13 May 2011 and payment date of 27 May 2011. Dividends will be paid from the Company's cash resources of £7.27 million at the quarter end.

The cumulative dividends of £2.25 million declared in respect of the 9 months period ended 31 March 2011 were 133% covered by "revenue" profits. 

FUND GEARING

	Unaudited	Unaudited
	31 December 2010	31 March 2011	Movement
	£million /%	£million /%	£million /%
Property portfolio	141.00	146.10	+5.1 (+3.6%)
Borrowings	75.05	76.38	+1.3 (+1.8%)
Total gross gearing excluding Porto Kali	53.2%	52.3%	-0.9 percentage pts
Total net gearing excluding Porto Kali	44.2%	47.3%	+3.1 percentage pts
Total gross gearing including Porto Kali	57.3%	57.2%	-0.1 percentage pts

Fund gearing decreased by -0.9 percentage points over the quarter to 52.3% as at 31 March 2011.

Fund gearing is included to provide an indication of the overall indebtedness of the Company and does not relate to any covenant terms in the Company's loan facilities. Gross gearing is calculated as debt over property portfolio at fair value. Net gearing is calculated as debt less cash over property portfolio at fair value.

LOAN FACILITIES

Gross Loan to Value (LTV) Covenants	Unaudited	Unaudited
	31 December 2010	31 March 2011	Maximum
Main loan facility	52.8%	55.0%*	55.0%
Joint venture Property Trust Agnadello S.r.l.	58.1%	59.6%*	65.0%
Consortium investment Porto Kali	84.7%	94.9%	80.0%

*Portfolio value based on lenders valuation.

	Unaudited	Unaudited	Unaudited	Unaudited
Interest Cover Ratio at 31 March 2011	Historic	Minimum	Projected	Gross rental income headroom
Main loan facility covenant	350.0%	250.0%	359.5%	30.47%
Joint venture Property Trust Agnadello S.r.l.	654.3%	125.0%	493.7%	74.7%
Consortium investment Porto Kali	220.0%	120.0%	99%	n/a

Interest Cover Ratio (ICR) is calculated as net financing expense payable as a percentage of gross rental income (or in the case of Property Trust Agnadello, net rental income) less movement in arrears. Projected net financing expense payable assumes prevailing floating interest rates for the majority of the year (or in the case of the main facility, 3 months). Gross rental income headroom is based on projected interest cover.

MAIN LOAN FACILITY

Further to the RNS on 1 April announcing the withdrawal of LBB and the agreement to a 3 month extension to the existing loan facility, the Company's Investment Manager has found a suitable replacement co-lender. Crédit Foncier (as new Co-Lender) and Credit Agricole CIB have entered into a Term Sheet with the Company on 09 May 2011 to refinance the current facility on a pari passu basis.

Commercial terms are less favourable at a margin of 240bps, however, the Lenders are committed to complete their due diligence and loan documentation review without delay in an effort to close the refinancing shortly.

CASH POSITION AND CAPITAL EXPENDITURE

The Company and its subsidiaries held total cash of £7.27 million (€8.21 million) at 31 March 2011. The total capital expenditure for the nine month period stands at £2.20 million (including £1.70 million for the new Edeka unit at Fuerth, Germany), and has been paid from the Company's cash resources during the period.

MATERIAL EVENTS

Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 31 March 2011 and the date of the publication of this Statement which would have a material impact on the financial position of the Company.

Company website:

http://www.axapropertytrust.com

All Enquiries:

Investment Manager 

AXA Investment Managers UK Limited

Simon Hopper/Bobby Owen
7 Newgate Street

London EC1A 7NX

Tel: [phone]
Email: [e-mail]

Sponsor and Broker

Oriel Securities Limited

Joe Winkley

Tel: [phone]

Email: [e-mail]

Neil Winward

Tel: [phone]

Email: [e-mail]

Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

GY1 3QL

Tel: [phone]

Fax: [phone]

 

END

 

 

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