Net Asset Value 30 June 2016 (Unaudited)

To:                   Company Announcements
Date:                31 August 2016
Company:         AXA Property Trust Limited
Subject:            Net Asset Value 30 June 2016 (Unaudited)

CAPITAL REDEMPTION

-     During the Financial year ending 30 June 2016 the Company returned £16.2 million capital to Shareholders (£5.2 million on 30 July 2015 and £11.0 million on 6 January 2016) bringing the total capital returned to Shareholders to £42.4 million.

-     Under the terms of the extension of the Company’s debt facility from 1 July 2016 to 31 December 2016, net sales proceeds and rents from the portfolio will be used to repay the debt in priority to shareholder distributions.

CORPORATE SUMMARY

-     The Company’s unaudited Consolidated Net Asset Value as at 30 June 2016 was £39.63 million and the NAV per share was 68.82 pence per share. This reflects an increase of £1.08 million (1.87 pence per share) compared to 31 March 2016 when the Consolidated Net Asset Value was £38.55 million (66.95 pence per share);

-     The Company and its subsidiaries made a profit after tax of £2.30 million for the twelve month period ended 30 June 2016 and £0.72 million in the three month period ended 30 June 2016.

MANAGED WIND-DOWN STATUS

-     The Company continues to progress the managed wind-down of its portfolio with a view to realising its investments in a manner that achieves a balance between maximising the value from the Company's investments and making timely returns of capital to shareholders.

-     During the Year ended 30 June 2016 the Trust completed the sale of the asset in Venray, The Netherlands and of the asset in Fuerth, Germany.

-     During the quarter ending 30 June 2016 contracts were signed for the sale of the Dasing asset. The sale was completed post-quarter and the net disposal proceeds received on the 25 August 2016 have been allocated to the reimbursement of the debt.

-     Of the remaining [three] assets, during the quarter ending 30 June 2016 asset management initiatives continued on the Rothenburg asset in order to prepare the asset for sale, and marketing commenced post-quarter.

-     The two Italian assets continued to be marketed on an individual basis.

-     Year end 2016 has been the target for the completion of all sales, however at present it is considered that the sales programme of the remaining assets is more likely to complete in the first half of 2017.

PORTFOLIO UPDATE

Country Allocation at 30 June 2016 (by value)

Country                         % of portfolio

Germany                                   53%

Italy                                          47%

Sector Allocation at 30 June 2016 (by value)

Sector                           % of portfolio

Retail                                        40%

Industrial                                   34%

Leisure                                      26%

MARKET UPDATE

Eurozone – Economic environment

Eurozone real gross domestic product grew by 0.6% Quarter-on-Quarter (QoQ) in Q1 2016, more than expected. Growth was principally driven by unexpected improvements in private spending and investment activity. The contribution of net exports continued however to be negative for the third quarter in a row. Among major Eurozone countries, Spain showed the strongest GDP growth (+0.8% QoQ), followed by Germany (+0.7% QoQ) and France (+0.6% QoQ). Italy’s growth was moderate, although positive and in slight acceleration (+0.3% QoQ).

Domestic demand is expected to remain the key driver of Eurozone growth; external demand, given recent economic difficulties faced by emerging markets, does represent a potential drag on expansion. Improvements in employment and earnings, as well as subdued inflation continue supporting disposable household income and thus private consumption. In Q2 2016 consumption is estimated to have marginally slowed (+0.3% QoQ), as some temporary effects faded away. Over the rest of 2016, consumption is expected to continue its recent trend rate (+0.4% QoQ) resulting, according to Ifo, INSEE and Istat, in an overall growth rate of 1.7%.

Eurozone growth in investment amounted to +0.8% QoQ in Q1, but is, according to Ifo, expected to decelerate to +0.5% QoQ in Q2 2016, along with the general slowdown in economic activity. Productive investment is likely to be supported by steady improvements in activity and the financial situation of businesses. Furthermore, the new ECB Corporate Sector Purchase Programme should continue easing already favourable financing conditions. Accordingly, investment is expected to gradually accelerate.

The result of the UK referendum has inevitably increased uncertainty over economic growth prospects in the Eurozone: while the short run impact on the activity of the area, via the trade channel, should be limited until Q4 2016, the medium term effect strongly depends upon the timing of the UK’s exit and the future trade agreements to be negotiated between UK and the EU.

All in all, Eurozone GDP is, according to Ifo, INSEE and Istat, expected to expand by 0.3% in Q2 2016 and by 0.4% in Q3. In Q4 the BREXIT effects are likely to drive slowdown in momentum reducing annual average GDP growth for the year to nearer 1.6% , slightly weaker than growth seen in 2015 (+1.7%). Under the assumption that oil prices remain stable at $49 per barrel, and the Dollar/Euro exchange rate fluctuates around 1.12 USD per EUR, inflation is expected to moderately increase during the rest of the year, bringing the annual average to +0.3%.

The German economy had a positive start to 2016, with Q1 GDP growth accelerating materially compared to late 2015. The industrial sector showed strong momentum in January, a notable loss in momentum was however visible throughout Q1 2016. The German economy grew at a seasonally-adjusted 0.7% QoQ in Q1 2016, accelerating from a 0.3% QoQ expansion in the previous quarter. Growth was mainly driven by household spending with foreign trade having a slight downward effect on growth. After a weak start to the second quarter, German business sentiment improved, with the Ifo Business Climate Index rising to 108.7 points in June from 107.8 points in May (seasonally adjusted).  The German economy is expected to continue rebalancing over  the  coming  years and both private and government consumption should remain key drivers for growth. Rising wage costs are likely however to place pressure on company profit margins.

The Italian economy grew by 0.3% QoQ in the three months to March of 2016 compared to a 0.2% QoQ expansion in the previous period. Growth was mainly driven by household expenditure and an accumulation of inventories, counter balanced by a slump in exports. Overall, GDP grew by 1.0% YoY in Q1 2016. The constitutional referendum, taking place in late 2016 represents a key risk to the economic outlook and Prime Minister Matteo Renzi has pledged to resign if he loses the referendum. The latest polls suggest the outcome is finely balanced and a resignation by Matteo Renzi could, given most recent polls, potentially lead to the Five Star Movement winning an absolute majority in subsequent general elections. A period of uncertainty and a further delay in the implementation of crucial reforms would most likely dampen prospective economic growth. Furthermore, a high stock of non-performing loans on Italian banks’ balance sheets present further shock risks to the economy with many retail investors exposed to these instruments believing them to be a secure as bank deposits.

Italian Logistics Market

According to CBRE and as at Q2 2016, prime rents stand at €52.00/sq m/year in Rome and at 50/sq m/year in Milan. RCA reported real estate investment volumes into the industrial [sector?] of €246m over Q2, this excluding the €535m sale concerning 300 Enel buildings. The quarter also saw a slight decrease in prime yields to 6.4%, both in Milan and Rome, representing a decline of 10bps QoQ in both cases. According to CBRE, yields are now down 60bps compared to Q2 2015 in both city markets reflecting increased demand from international investors.

German Retail Market

The first half of 2016 saw the signing of retail lease contracts representing over 236,500 sq m of retail space, broadly similar to levels seen in the first half of 2015. More than two-thirds of all rental contracts were concluded by international retailers. According to CBRE German prime retail rents remained largely stable over the second quarter of 2016 although Berlin recorded prime rental growth of 1.5%. Retail real estate investment volumes amounted to approximately €4.1bn in the first half of 2016 whilst JLL recorded prime high street yields in the Big 7 centres at 3.70% following a further, albeit slight, decline (by 5 basis points). Yields for shopping centres and retail parks fell by 15 basis points respectively to 4.10% and 5.10%.

German Logistics Market

During the first six months of 2016, Germany saw a logistics and industrial take up of on aggregate 3.3m sq m with the second quarter being the strongest quarterly result ever recorded. Occupier and developers are particularly active in secondary locations with nearly all of the deals exceeding 20,000 sq m having taken place in these locations. Overall, CBRE expects an all-time record take-up of 6.5m sq m for 2016. Prime rents remained stable year-on-year, with the exceptions of Munich and Berlin where both markets recorded significant rent increases of approximately 3.3% and 0.9% respectively. At €2.1bn, the transaction volume for German logistics properties over the first two quarters of 2016 has exceeded the previous entire year's volume by 45% and recorded a new half-year record.  The lack of prime products increasingly results in a shift of investors to a riskier set of existing properties as well as locations outside the top investment locations. The gross initial yield in the prime segment of the top markets declined by 65 basis points over the last 12 months to an average of 5.65%. Munich and Berlin saw prime yields of 5.3% and 5.4% respectively. Smaller cities, such as Bremen, Leipzig, Kassel and Nuremberg, saw yields standing at 5.85%. 

CONSOLIDATED PERFORMANCE SUMMARY

	Unaudited	Unaudited
	9 months ended	12 months ended
	31 March 2016	30 June 2016	Quarterly Movement
	Pence per share	Pence per share	Pence per share /(%)
Net Asset Value per share	66.95	68.82	1.87	2.80%
Share price (mid-market)	53.88	55.13	1.25	2.32%
Share price discount to Net Asset Value	19.5%	19.9%	0.4 percentage points

Total Return per Share	Audited	Unaudited
	12 months ended	12 months ended
	30 June 2015	30 June 2016
Net Asset Value Total Return	-5.4%	13.1%
Share Price Total Return
- AXA Property Trust	10.5%	29.6%
- FTSE All Share Index	2.6%	2.2%
- FTSE Real Estate Investment Trust Index	19.5%	-8.3%
Source: AXA Investment Managers UK Limited and Stifel Nicolaus Europe Limited.

Total net profit was £2.30 million (2.11 pence per share) for the twelve months to 30 June 2016, including -£1.43 million of “revenue” loss (excluding capital items such as revaluation of property) and £3.73 million “capital” gain, analysed as follows:

	Unaudited	Unaudited	Unaudited
	9 months ended	3 months ended	12 months ended
	31 March 2016	30 June 2016	30 June 2016
	£million	£million	£million
Net property income	2.27	(0.23)	2.04
Net foreign exchange (losses) / gains	(0.30)	0.10	(0.20)
Investment Manager's fees	(0.26)	0.04	(0.22)
Other income and expenses	(2.28)	0.01	(2.27)
Net finance costs	(0.65)	(0.13)	(0.78)
Revenue loss	(1.23)	(0.21)	(1.43)
Unrealised / gains on revaluation of investment properties	1.39	0.84	2.24
Net gain on disposal of investment properties	1.08	0.02	1.10
Net gains on derivatives	0.53	0.11	0.63
Share in losses of Joint Venture	(0.21)	(0.11)	(0.32)
Finance costs	(0.00)	(0.00)	(0.00)
Net foreign exchange losses	(0.02)	-	(0.02)
Deferred tax	0.03	0.07	0.11
Capital profit	2.81	0.93	3.73
Total profit	1.58	0.72	2.30

NET ASSET VALUE

The Company’s unaudited Consolidated Net Asset Value as at 30 June 2016 was £39.63 million (68.82 pence per share) an increase of £1.08 million compared to Net Asset Value as at 31 March 2016 of £38.55 million.

The Net Asset Value attributable to the Ordinary Shares is calculated under International Financial Reporting Standards. It includes all current year income after the deduction of dividends paid prior to 30 June 2016.

The £1.08 million increase in Net Asset Value over the quarter ended 30 June 2016 can be analysed as follows:

	Unaudited	Unaudited	Unaudited
	9 months ended	3 months ended	12 months ended
	31 March 2016	30 June 2016	30 June 2016
	£million	£million	£million
Opening Net Asset Value	49.37	38.55	49.37
Net (loss) / profit after tax	1.58	0.72	2.30
Unrealised movement on derivatives	0.57	0.18	0.75
Share Redemption	(16.19)	0.00	(16.19)
Foreign exchange translation losses	3.23	0.17	3.40
Closing Net Asset Value	38.55	39.63	39.63

On a like-for-like basis the Euro valuation of the property portfolio decreased by 1.31% to EUR 56.30 million for the quarter. In Sterling currency terms, the property valuation was £46.79 million (including the effects of valuation movements, capital expenditure and foreign exchange movements). The £/EUR foreign exchange rate applied to the Company’s Euro investments in its subsidiary companies at 30 June 2016 was 1.20 (31 March 2016: 1.26).

SHARE PRICE AND DISCOUNT TO NET ASSET VALUE

As at close of business on 30 June 2016, the mid-market price of the Company’s shares on the London Stock Exchange was 53.13 pence, representing a discount of 19.9% on the Company’s Net Asset Value at 30 June 2016.

As at close of business on 30 August 2016, the mid market price of the Company’s shares was 56.12 pence, representing a discount of 18.5% on the Company’s Net Asset Value at 30 June 2016.

FUND GEARING

	Unaudited	Unaudited
	31 March 2016	30 June 2016	Movement
	£million / %	£million / %	£million / %
Property portfolio *	45.23	46.79	1.56 3.3%
Borrowings	14.24	14.93	0.69 4.6%
Total gross gearing	31.5%	31.9%	0.4 percentage points
Total net gearing **	27.2%	26.5%	-0.8 percentage points
* Based on the portfolio’s independent market valuation, including that of the Company’s share in the Agnadello property
** Net Gearing is calculated as overall debt, net of unallocated cash held by the Group over the portfolio at fair value

The variation of the amount of borrowings is due to foreign exchange impacts. No debt reimbursement or drawing occurred during the quarter.

In view of the targeted disposal timetable for the Company’s remaining real estate assets AXA Property Trust concluded an extension of the Company’s loan facility until 31^st December 2016. Under the terms of the extension disposal proceeds and net rents will be allocated to debt reimbursement in priority to shareholder distribution.

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 unallocated cash over property portfolio at fair value.

As the wind down progresses, the level of gearing will continue to decrease as proceeds from sales are used to reduce debt over the next 6 months. 

LOAN FACILITIES

Gross Loan to Value (LTV) Covenants	Unaudited	Unaudited
	31 March 2016	30 June 2016	Maximum
Main loan facility	42.6%	42.6%	60.00%

As at 30 June 2016, the loan-to-value ratio on the main facility was 42.6% based on the bank’s independent valuation of the property portfolio.

Interest Cover Ratio at 30 June 2016	Historic	Minimum	Projected	Minimum
	(Unaudited)		(Unaudited)
Main loan facility covenant	332.0%	200.0%	297.3%	185.00%

Interest Cover Ratio (ICR) is calculated as net financing expense payable as a percentage of net rental income less movement in arrears.

CASH POSITION AND CAPITAL EXPENDITURE

£9.44 million cash was held by the Group, including the Company’s share of the cash in the Agnadello JV as at 30 June 2016.

The Company is currently holding £5.8 million (€7.0 million) as reserve to cover any potential claim on Representations & Warranties granted on assets which have previously been sold. It is intended that a master insurance policy will be secured to cover these potential obligations and when this is concluded these funds will largely be available for the reimbursement of the outstanding debt facility.

MATERIAL EVENTS

The disposal proceeds of Dasing were received on the 25^th August 2016 in the amount of €7.45 million. After disposal and ancillary expenses €6.5 million will be allocated to the loan reimbursement and other financing costs.

Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 30 June 2015 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:

Real Estate Adviser 
AXA Real Estate Investment Managers UK Limited
Broker Services
7 Newgate Street
London EC1A 7NX
Tel: [phone]
Email:[e-mail]

Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Tel: [phone]

Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: [phone]