Interim Management Statement

RNS Number : 2103M

F&C Commercial Property Trust Ld

19 May 2010

 



F&C Commercial Property Trust Limited

Interim Management Statement

For the Period from 1 January 2010 to 19 May 2010

Investment Objective

The investment objective of the Company is to provide ordinary shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.

Performance Summary

Total Return	For the three month period ended 31 March 2010
Net asset value per share *	8.1%
Ordinary Share price	4.0%
Investment Property Databank All Quarterly and Monthly Valued Funds	6.0%
FTSE All-Share Index	6.4%

Capital Values	As at  31 March 2010	As at 31 December 2009	% Change
Net asset value per share *	92.1p	86.6p	+6.4
Ordinary Share price	92.1p	90.0p	+2.3
Premium/(discount) to published net asset value *	0%	3.9%
Gearing * #	26.8%	28.0%
Net gearing * $	17.1%	18.5%

Sources: F&C Investment Business Limited, Investment Property Databank ('IPD'), Datastream.

*  Calculated under International Financial Reporting Standards ('IFRS'). Net asset value total return is calculated assuming dividends are re-invested

#  Gearing: Secured Bonds/total assets (less current liabilities)

$  Net gearing: (Secured Bonds - cash)/total assets (less current liabilities and cash)

Review of the First Quarter

Property delivered total returns of 6.0% over the three months to 31 March 2010 according to the IPD Quarterly Index, a strong out-turn but lower than the record 10% seen in the previous quarter. Capital values rose by 4.3% over the period and are 14.5% above their cyclical low. The best performing sector was offices, with a total return of 6.6%, driven by Central London offices, with the City recording a total return of 9.5%, and West End and Midtown 8.9% over the three month period. Retail saw total returns of 6.3% supported by retail warehousing which delivered total returns of 7.4% over the quarter. Total returns for industrials were 4.2% with the south east outperforming.

The improvement in the property market has been investment led. Initial yields fell by a further 40bps to 6.5% in the three months to 31 March 2010 after a 70bps fall in the previous quarter. Investor interest has been focused on prime property and it is here that yields have seen the sharpest fall but there has been some decline in yields for secondary retail more recently as investors have struggled to secure stock. There is still a shortage of stock but since the start of the year both the depth of investor demand and the volume of transactions have reduced. Transactions totalled £5.6 billion during the period, a downturn from the previous quarter's £9.6 billion but an improvement on the £4.3 billion seen a year earlier at the cycle's low point. Institutions became net investors in property for the first time since 2006 in the final quarter of 2009 and invested a net £1.3 billion in the first quarter of 2010 making them the major driving force in the market during that period. Overseas buyers scaled back their purchases in the quarter but remained net investors at over £400 million. Some distressed properties are coming to market and the very tight credit conditions which existed a year ago are easing but finance is still difficult and more expensive to obtain and the resolution of problem loans on commercial property is still some way off.

The occupational market remains fragile with rental values still falling at the all-property level. The pace of decline has eased and rental growth for offices in both the City and West End turned positive during the period. There are signs that incentives, although still substantial, are stabilising and void rates, whilst remaining in double digits, have moved lower. However, there is still pressure on the income stream and with the economy projected to see modest rates of GDP growth on consensus estimates and fiscal policy set to tighten, occupier demand is expected to remain muted, cost sensitive and lease related - dampening the scope for rental growth.

The direct portfolio recorded a total return of 7.2% over the first quarter compared with the return of 6.0% from the IPD Quarterly Index referred to above.

As previously reported, during the quarter the Company completed the sale of 27/28 Commercial Street, Leeds, at a consideration of £8.80 million, and also completed the purchase of 77/77a Wigmore Street, London W1 for £2.96 million.

The Company has committed to the redevelopment of 24-27 Great Pulteney Street. The demolition of the existing building commenced in February 2010 and a building contract has been entered into with practical completion scheduled for October 2011. Total capital expenditure for the development is estimated to be approximately £10.6 million. The completed development will comprise approximately 34,000 sq ft.

At Newbury Retail Park a surrender has completed of the JJB lease on Unit 6 (15,000 sq ft) which was previously let at £356,400 pa. Planning consent has been obtained to extend the unit by 5,000 sq ft and to install a 15,000 sq ft mezzanine floor. A back to back agreement to lease with Matalan Retail Ltd has exchanged at an initial rent of £490,000 pa for a term of 15 years. Construction works to extend the unit have started on site and the approved capital expenditure for the scheme amounts to £2.48 million. Following the failure of Borders Books, the Company has secured possession of Unit 12 from the administrators and is expected to exchange shortly a lease to a major national multiple retailer at the previous rent passing of £300,000 pa.

As at 31 March 2010 the void rate (excluding properties held or in the course of development) was 2.5% which remains significantly better than the IPD Quarterly Index rate of 8.3%. Rent arrears and overdue debt continue to be managed and, at 1%, remain extremely low for a portfolio of this size, which reflects the quality of its property assets.

Dividends

Monthly interim dividends, in respect of the year ended 31 December 2009, each of 0.5 pence per share, were paid on 29 January, 26 February and 26 March 2010.

Top Ten Holdings

Property	Sector	31/3/2010 Percentage of portfolio
London W1, St Christopher's Place Estate	Retail	15.5
Newbury, Newbury Retail Park	Retail Warehouse	8.5
London SW1, Cassini House, St James's Street	Offices	7.5
Solihull, Sears Retail Park	Retail Warehouse	6.9
London SW19, Wimbledon Broadway	Retail	6.2
London SW1, 84 Eccleston Square	Offices	5.4
Uxbridge, 3 The Square, Stockley Park	Offices	4.7
London SW1, Charles House, 5-11 Regent Street	Retail Warehouse	4.4
Rochdale, Dane Street	Offices	4.3
Glasgow, Alhambra House, Wellington Street	Offices	3.4
Total		66.8

Geographical Analysis

Location	31/3/2010 Percentage of portfolio		31/12/2009 Percentage of portfolio
London - West End	39.3		36.9
South East	28.2		28.6
Midlands	14.4		14.9
North West	7.5		7.6
Scotland	6.4		6.6
Eastern	2.3		2.4
Yorkshire and Humberside	0.1		1.3
Rest of London	1.0		0.9
Indirect	0.8		0.8
Total	100.0		100.0

Sector Analysis

Sector	31/3/2010 Percentage of portfolio		31/12/2009 Percentage of portfolio
Offices	42.4		41.0
Retail	25.4		26.2
Retail Warehouse	19.8		20.1
Industrial	12.4		12.7
Total	100.0		100.0

Proposals Relating to the Company  

On 23 April 2010 the Board announced that it had received a proposal which would result in the merger of the Company with UK Commercial Property Trust Limited.

The Board continues to consider carefully this and other options with its advisers, taking into account the best interests of all of the Company's shareholders.  As stated in the announcement made on 23 April 2010, there can be no certainty as to whether or not the proposal will result in any scheme being implemented, and any further announcements on this matter will be made as and when appropriate. Shareholders are encouraged to take no action in the meantime until the Board is in a position to give further information, including in relation to the impact of the proposal and the substantial change in shareholdings in the Company.

The Board is not aware of any other significant events or transactions which have occurred since 31 March 2010 and the date of publication of this statement which would have a material impact on the financial position of the Company.

Annual General Meeting

At the Annual General Meeting held today all 11 resolutions were passed by shareholders.

Quarterly and Key Information

This statement and further information regarding the Company, including movements in the share price since the end of the period and the Group's most recent annual and interim reports, can be found at the Company's website www.fccpt.co.uk.

Enquiries:

Richard Kirby

F&C REIT Asset Management LLP

Tel: [phone]

 

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