TIDMIFD
RNS Number : 4139S
Invista Foundation Property Tst Ltd
21 November 2011
21 November 2011
Invista Foundation Property Trust Limited
("IFPT"/ the "Company"/ "Group")
Half Yearly Report for the period ended 30 September 2011
Invista Foundation Property Trust today announces its Half
Yearly results for the period ended 30 September 2011.
Financial overview
-- Net Asset Value ('NAV') of GBP168.4 million or 47.3 pence per
share ('pps') (31 March 2011: GBP181 million or 50.9 pps), a
decline of 3.6 pps or -7.1%
-- NAV negatively affected by a -GBP7.4 million or -2.1 pps
movement in the Group's interest rate swaps
-- NAV total return of -3.7% for the period
-- Profit before tax of GBP1.6m (30 September 2010: GBP4.1m)
-- Earnings per share 0.3 pps (30 September 2010: 1.0 pps)
-- Pre-tax dividend cover over the period increased to 53%,
increasing further to approximately 80% post the period end as a
result of the appointment of Schroders and the acquisition of the
BT Building in West Bromwich, as set out below
-- Controlled gearing with the Company's LTV ratio, net of all
cash and after post period end transactions, of 42.3% (31 March
2011: 38.83%)
-- Dividend declared and paid of 1.76 pence per share ('pps') (30 September 2010: 1.76 pps)
Operational overview
-- Schroder Property Investment Management Limited to be
appointed as investment manager resulting in annual cost savings
for the Company of GBP1.8 million per annum, adding 14.1% to
dividend cover
-- Continued progress with asset management initiatives, with
the key strategic objective of increasing net income and dividend
cover:
o Additional contracted future rental uplifts of GBP2.8 million
by the end of 2014, with GBP1.9 million commencing over the next
twelve months
o Significant asset management initiatives ongoing such as the
revised planning application submitted at Reynards Business Park,
Brentford for a 275 unit residential scheme
o Activity over the period has maintained the portfolio's
defensive qualities, with an average unexpired lease term at 8.2
years and a tenant covenant profile on the 12(th) percentile of the
IPD Benchmark
-- Disposal proceeds from lower yielding disposals reinvested
into higher yielding property offering good fundamentals and asset
management potential
-- Acquisition of the BT Building in West Bromwich completed
post-period end for GBP14.9 million, which has subsequently been
re-valued at GBP18.9 million. The acquisition offers defensive
characteristics and increases dividend cover by a further 11.9%
-- Following extensive due diligence and open discussions, the
board did not consider a merger approach from Picton Property
Income Limited sufficiently compelling to recommend to
Shareholders
Commenting, Andrew Sykes, Chairman of the Board, said:
"There has been good progress on the management of the
portfolio, despite the corporate activity and uncertainty around
the Manager over the period. The management programme contributed
to an increase in pre-tax dividend cover to 53% which, since the
period end, has been augmented further by approximately 24% owing
to the rental income stream from the recent acquisition of the BT
building in West Bromwich and the costs savings which will flow
from the appointment of Schroders. As a result, the Company will
move significantly closer to achieving its objective of having a
fully covered dividend.
"The Company is now in a strong position to move forward with a
clear strategy to deliver long-term value to shareholders. The
appointment of Schroders, with its considerable resources and
expertise, combined with continuity of the current management and
recent accretive transactions, provides the Company with a sound
platform to continue improving our income and asset base, while at
the same time providing resilience to the challenges which are
likely to emerge in a weak economy and volatile markets."
-Ends-
For further information:
Invista Real Estate Investment Management
Duncan Owen / Nick Montgomery 020 7153 9345
------------------------------------------- --------------
Northern Trust
David Sauvarin 01481 745529
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FTI Consulting
Stephanie Highett / Richard Sunderland
/ Olivia Goodall 020 7831 3113
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Invista Foundation Property Trust Limited
Interim Report as at
30 September 2011
Financial Summary 2
Chairman's Statement 3
Investment Manager's Report 6
Responsibility Statement 15
Condensed Statement of Comprehensive Income 16
Condensed Balance Sheet 17
Condensed Statement of Changes in Equity 18
Condensed Statement of Cash Flows 19
Notes to the Interim Report 20
Independent Auditor's Review Report 24
Corporate Information 25
Invista Foundation Property Trust Limited aims to provide
Shareholders with an attractive level of income together with the
potential for income and capital growth from investing in UK
commercial property.
Invista Foundation Property Trust Limited and its subsidiaries
(the 'Company'/the 'Group') hold a diversified portfolio of UK
commercial properties, which is mainly invested in three commercial
property sectors: office, retail and industrial. The Group may also
invest in other sectors from time to time. The Group will not
invest in other listed investment companies. In pursuing the
investment objective, the Investment Manager concentrates on assets
with good fundamental characteristics, a diverse spread of
occupational tenants and with opportunities to enhance value
through active management.
Financial Summary
-- Net asset value (NAV) per share decreased by 7%
-- Earnings per share of 0.3p
-- The Company has declared and paid dividends amounting to 1.76p per share
30/09/2011 31/03/2011 % change
NAV(1) (GBP000) 168,385 181,025 (7.0)
NAV per ordinary share(1) (pence) 47.3 50.9 (7.1)
Share price (pence) 33.0 38.1 (13.4)
Share price (discount) /premium to
NAV (30.3%) (25.1%)
NAV total return(2) -3.7% 4.2%
FTSE All Share Index 2,654.4 3,067.7 (13.5)
FTSE EPRA/NAREIT UK Real Estate Index 1,024.9 1,195.9 (14.3)
Total Group assets less current liabilities
(GBP000) 381,969 386,853 (1.3)
Borrowings as % of total assets less
current liabilities 45.4% 44.8% (0.6)(3)
Loan-to-value ratio, net of all cash(4) 40.3% 38.8% (1.5)(3)
Sources: Invista Real Estate Investment Management and
Datastream based on returns during the period from 1 April 2011 to
30 September 2011.
1 Net Asset Value is calculated using International Financial
Reporting Standards.
2 NAV total return calculated by Invista Real Estate Investment
Management Limited.
3 Percentage point change.
4 Loan to value ratio is total borrowings less total cash as a
percentage of investment property
Chairman's Statement
Results
The Company's Net Asset Value ('NAV') as at 30 September 2011
was GBP168.4 million, or 47.3 pence per share ('pps'), which
compares with GBP181 million or 50.9 pps as at 31 March 2011. This
reflected a decline of 3.6 pps or -7.1% over the period.
Shareholders received total dividends of 1.76 pps over the period
resulting in a NAV total return of -3.7%. From the launch of the
Company to 30 September 2011, its NAV total return has been
-3.6%per annum.
The value of the underlying property portfolio was largely
unchanged over the period, supported by income and value enhancing
asset management activity. However, the Company's NAV was adversely
affected by a further negative movement in the mark-to-market value
of the Group's interest rate swaps of GBP7.45 million, contributing
-2.1 pps of the -3.6 pps decline over the period. As at 30
September 2011 the swaps are valued at -GBP30.6 million,
representing 18% of the NAV or 8.6 pps.
Corporate activity
In March 2011 the Board gave notice to the current manager,
Invista Real Estate Investment Management ('IREIM'), of the
termination of its investment management contract. As previously
announced, the Board subsequently conducted an extensive review of
the options open to the Company, culminating in a competitive
process in which a number of parties were invited to make proposals
to the Board. On 17 August the Company entered into non-binding
Heads of Agreement to appoint Schroder Property Investment
Management Limited ('Schroders') to manage the Company's
portfolio
On 19 August the Company announced that it had received a merger
approach from Picton Property Income Limited ('Picton'). The Board
and its advisors then engaged in extensive discussions with Picton
and their advisors, with both Companies conducting an extensive due
diligence process. At the end of this process, the Board concluded
that it was not minded to recommend Picton's offer as being in the
best interests of all shareholders at this time. This position was
based on a consideration of a number of factors including dividend
cover, loan to value ratios, portfolio potential and income
quality, refinancing risks, merger costs and prospects for future
marketability. The Board cooperated fully with Picton, urging it
and its advisors to announce their indicative terms so that all
shareholders could consider the merits of their indicative offer.
In the event, however, Picton's Board made the decision not to
proceed with the offer.
Detailed negotiations to appoint Schroders continued in parallel
through this process and on 31 October an Investment Management
Agreement was signed, with Schroders' appointment due to take
effect upon certain conditions being satisfied. These include
formal consents from the Company's lenders, termination of the
IREIM contract and the recruitment by Schroders of certain key
senior individuals currently employed by IREIM. Once the
appointment takes effect, Schroders will receive a fee of 1.1% per
annum of the Company's NAV to provide investment management and
accounting services, resulting in annual cost savings for the
Company of approximately GBP1.8 million.
The conditions are in the process of being satisfied and the
transition from IREIM to Schroders is expected to take place in
November. The appointment of Schroders with members of the existing
management team provides continuity and an attractive and viable
platform to drive value for shareholders.
Market overview
Since the summer, sentiment towards UK commercial property has
weakened in the face of falling occupational demand, reducing
rental values and the lack of finance, together with significant
volatility across equity and debt markets, led most recently by
concerns over Eurozone sovereign debt liabilities. This has
coincided with more property investments being offered for sale,
particularly by banks and forced sellers, and reducing demand for
all property types. There is still selective demand for prime
assets at current prices, particularly in Central London and the
South East, and this should be maintained given low interest rates
and the quantitative easing stimulus. Relative pricing between
prime and poor secondary / tertiary property has increased further,
led by concerns over tenant default, falling rental values and
voids, and weak secondary and tertiary property values are at risk
of further falls in the coming period.
The latest Investment Property Databank ('IPD') Monthly Index
for the six months to 30 September 2011 showed that average UK
commercial property capital values increased by 0.63%, contributing
to a total return of 4% for the period. The rate of monthly capital
growth has continued to slow with the increase in the quarter to
September of 0.21% the lowest quarterly rise since mid 2009. The
office sector generated the strongest capital growth over the
period at +1.7%, largely driven by Central London, where prime
yields are now close to historic lows. The retail and industrial
sectors generated materially weaker growth at 0.11% and -0.09%
respectively, which at a sector level was driven by negative rental
value growth. As expected, the IPD analysis also shows that there
has continued to be a wide divergence in performance by sub-sector,
geography and property type.
Property performance
The Board continues to monitor the performance of the Company's
underlying property portfolio compared to its IPD peer group
Benchmark. The latest available data to September 2011 showed that
over 12 months the portfolio produced a total return of 6.7%
compared to the Benchmark of 7.8%, with the underperformance
largely driven by a below average weighting to Central London. The
longer term relative performance remains positive, with a three
year total return of 2.7% compared to the Benchmark of 1.8%, and a
five year total return of -0.3% compared to the Benchmark of
-1.6%.
Financing
The Company has a single on-balance sheet loan facility of
GBP173.5 million that matures in July 2014. As at 30 September
2011, allowing for transactions since the period end, the Company's
on-balance sheet loan to value ratio, net of cash, is 42.3% against
a net loan to value ratio covenant of 60%. Following the
acquisition of West Bromwich the Group has total cash of GBP25.1
million, excluding the liquidity facility, of which GBP15 million
is outside the security pool charged to the Group's lenders. The
Company continues to have significant headroom on its Interest
Cover Ratio of 226% compared with the covenant of 150%, calculated
on a simplified basis of rental income as a proportion of interest
cost.
Recent problems in the Eurozone have heightened concerns over
the willingness of the banking sector to provide finance for real
estate. The Manager and the Board will be considering the optimum
refinancing strategy well in advance of the loan maturity in July
2014.
Strategy and Outlook
The Company's activities are directed towards meeting its key
objectives including particularly increasing net income, improving
dividend cover and positioning the portfolio for the forthcoming
re-financing event in 2014. The Board has concluded that following
the recent appointment of the new Manager it would be both timely
and appropriate to review the structure of the portfolio and
individual property asset management plans and, if necessary, to
implement changes so as to optimise the meeting of the objectives.
This review is underway and will be completed early in the New
Year.
Despite the corporate activity and uncertainty around the
Manager over the period, there has been good progress on the
management of the portfolio. This contributed to an increase in a
pre-tax dividend cover to 53% over the period, including the
provision for the project costs relating to the Picton merger
proposal. Since the period end, the rental income stream from the
recent acquisition of the BT building in West Bromwich and the
costs savings which will flow from the appointment of Schroders
should add a further GBP3 million to net income, increasing
dividend cover by approximately 26% and moving the Company closer
to achieving its objective of having a fully covered dividend.
Within the property portfolio, the Manager's plans to secure
planning permission at the Reynards Trading Estate in Brentford and
to realise the Company's stake in Plantation Place could
potentially have a material impact on dividend cover and net asset
value. These are described in more detail in the Manager's
review.
Summary
There has been a great deal of activity over the last nine
months arising from the Picton proposal, the change of Investment
Manager and the implementation and consolidation of some important
transactions. These challenging circumstances have required the
continued energy and attention of the Board, as well as the
Manager, and I am grateful to all my colleagues (and the Company's
advisors) for their considerable efforts over the period.
The Company is now in a position to move forward with certainty
around the management and a clear strategy to deliver long-term
value to shareholders. The appointment of Schroders, with its
considerable resources and expertise, and the completion of recent
transactions provide the Company with a sound platform to continue
improving our income and asset base, while at the same time
addressing the challenges which are likely to confront us in a weak
economy and volatile markets.
Andrew Sykes
Chairman
Invista Foundation Property Trust Limited
18 November 2011
Investment Manager's Report
Performance and strategy
The recovery in the UK commercial market recovery has slowed
over the reporting period with muted capital growth. Against this
background, the value of the Company's property portfolio fell
slightly by -0.2% over period, compared with +0.6% for the six
months to 31 March 2011. This, combined with a material increase in
the negative mark-to-market value of the Group's interest rate
swaps and the dividend shortfall resulted in a Net Asset Value
('NAV') total return of -3.7% over the 6 month period, compared
with growth of 4.2% for the year to March 2011.
As highlighted in the Chairman's Statement, progress continues
to be made in the implementation of the Company's strategy. This is
reflected in both an increase in dividend cover to 53% over the
period as well as additional improvements resulting from increases
in rental income that have been agreed and will take effect over
the next few months and years. In summary, highlights contributing
to this improvement over the period include:
- Recycling capital by selling a shop in York for GBP5.5 million
at a 5% net initial yield and redeploying proceeds in a shop in
Liverpool for GBP5.5 million at a net initial yield of 11.3%.
- Increasing contracted future rental uplifts, prior to West
Bromwich, to GBP2.8 million from GBP2.55 million with GBP1.9
million commencing in the course of the next twelve months.
- Reduction in the void rate to 12.0% from 12.9% with further
new lettings terms agreed for additional leases that will reduce
the void rate to 10%.
- Tight control of a reduced expenses budget, prior to
exceptional items relating to corporate activity.
Key events since the period end that increase dividend cover
further include:
- Completion of the acquisition of the BT Building in West
Bromwich for GBP14.9 million, which has since been revalued at
GBP18.9 million, generating rental income with immediate effect and
increasing dividend cover by 11.9% above the level achieved in the
quarter to 30 September.
- The appointment, to take effect shortly, of Schroders as the
new investment manager, which will reduce management costs by
GBP1.8 million per annum, increasing dividend cover by a further
14.4%.
Against the backdrop of continuing economic uncertainty and
volatility, portfolio activity has maintained the defensive
qualities of the portfolio, including:
- A net loan to value of 42.3% following the acquisition of West
Bromwich, set against a loan to value covenant ratio of 60%.
- Cash of GBP25.1 million, excluding the liquidity facility, of
which GBP15 million is outside the security pool charged to the
Group's lenders and consequently provides operational
flexibility.
- Average unexpired lease term, assuming all tenants vacate at
earliest opportunity, of 8.2 years.
- Good tenant covenant profile, with IPD ranking the portfolio
on the 13(th) percentile of the Benchmark in terms of tenant
quality and lease length.
Market
As highlighted in the Chairman's statement, the latest
Investment Property Databank ('IPD') Monthly Index for the six
months to 30 September 2011 showed that average UK commercial
property values increased by 0.63%, contributing to a total return
of 4% for the period. However, values remain 28.6% below their peak
in 2007 and the pace of growth decelerated over period. The IPD
Monthly Index for October also only recorded a nominal capital
value increase of 0.1% and the continued growth is notable both for
its slowing rate as well as the disconnect between rising capital
values and ongoing falling rental values. Therefore, although UK
commercial property values have increased slightly over the period,
the weak UK economy is restricting future growth prospects.
Both this challenge, and how the Government responds, are
affecting different sectors in the property market in different
ways. These challenges are negatively impacting secondary and
tertiary property more than prime, where longer leases and the
upwards only review patterns are typically insulating investors
against actual rental declines. Prime property has also benefited
from the Bank of England restarting quantitative easing with up to
GBP75 billion to be invested in Government Securities. This is
reducing the risk-free rate and increasing values for well secured
investments, particularly where there is protection against
inflation through either index-linked or fixed rental uplifts.
Prime and good quality secondary property have also benefited more
generally through the attractive initial income return offered in
comparison to the other main asset classes.
The polarised market can be illustrated by IPD Quarterly Index
yields, with a spread of 4.75% between average prime (25(th)
percentile of IPD) and average secondary (75(th) percentile) as at
the end of September 2011. This compares to a spread of 2.13% at
the peak of the market at the end of June 2007. As a consequence,
'average prime' property produced a return of 3.9% over the period,
compared with 2.3% for 'average secondary'. The Company's direct
portfolio largely comprises good secondary assets, which combined
with the lower exposure to Central London contributed to the
relative underperformance over the year to June 2011, the latest
available data.
In summary, average values in the UK commercial property market
may decline over the short term, but with increasing polarisation
between the sectors and regions. This presents the opportunity for
a well-resourced and well-connected management team to spot value
and secure out performance by acquiring undervalued assets and
actively managing them for income growth. Rising yields,
particularly in regional markets where secondary property can offer
high initial income returns, may present the Company with the
opportunity to acquire good quality income at affordable prices.
The challenge will be to acquire assets very selectively in those
markets where relative out performance can be derived from
maintaining income returns through targeted and pro-active asset
management. The Company will focus on these areas as well as
continuing to drive value from its existing portfolio through
pro-active asset management.
Property portfolio
As at 30 September 2011, adjusting for the acquisition of West
Bromwich that completed after the period end, the directly owned
portfolio was independently valued at GBP350.5 million, excluding
accounting adjustment for lease incentives. On the same basis the
portfolio generates rental income of GBP23.55 million per annum,
reflecting a net initial yield of 6.4%. The independent valuer has
estimated that the current market rental value of the portfolio is
GBP28 million, reflecting a reversionary yield of 7.6%.
Asset management activity over the last twelve months will
deliver increases in aggregate rental income of approximately
GBP2.8 million per annum by December 2014, of which approximately
GBP1.9 million will commence in the course of the next twelve
months. The two most significant of these contracted rental uplifts
are the BUPA letting at Victory House in Brighton, generating
GBP0.97 million per annum, and the Buckinghamshire New University
in Uxbridge, generating a further GBP0.45 million per annum,
commencing with effect from April 2011 and May 2012
respectively.
The Company continues to have an above average weighting to the
office sector of 49.2% compared with 30.1% for the Benchmark, and a
below average weighting to retail of 22.6% compared with 45.8% for
the Benchmark. Geographically, the direct portfolio continues to be
weighted towards the South East of England, albeit with a below
average weighting to Central London (apart from Minerva House and
the joint venture at Plantation Place), where income yields are
currently too low to meet the Company's income objectives .
Sector weightings by value (adjusting for the acquisition of
West Bromwich)
Sector Weighting %
----------- -----------
Retail 22.6
----------- -----------
Offices 49.2
----------- -----------
Industrial 24.1
----------- -----------
Other 4.1
----------- -----------
Regional weightings by value (adjusting for the acquisition of
West Bromwich)
Region Weighting %
-------------------------------- -----------
Central London 7.9
-------------------------------- -----------
South East excl. Central London 45.9
-------------------------------- -----------
Rest of South 12.7
-------------------------------- -----------
Midlands and Wales 20.2
-------------------------------- -----------
North and Scotland 13.3
-------------------------------- -----------
Top ten properties by value (adjusting for the acquisition of
West Bromwich)
As noted above, with continued economic uncertainty impacting
property investment and occupier markets, there is a focus on
improving the portfolio's defensive qualities. This is reflected in
the strength of the top ten assets which comprise approximately 46%
of the Company's overall portfolio by value. These properties
exhibit some of the strongest tenants and longest leases across the
portfolio (i.e. assuming all tenants break at the earliest
opportunity, the average unexpired term in the top ten properties
is 11.7 years) as well as being good quality assets, concentrated
in the South East of England. This core of the portfolio underpins
the overall defensive qualities and should provide a good
foundation.
Value
(GBPm) %
--- --------------------------------------- -------- -----
1 London SE1, Minerva House 27.8 7.9
--- --------------------------------------- -------- -----
2 Brighton, Victory House 24.6 7.0
--- --------------------------------------- -------- -----
3 West Bromwich, All Saints, BT Building 18.9* 5.4
--- --------------------------------------- -------- -----
4 Salisbury, Churchill Way West 15.2 4.3
--- --------------------------------------- -------- -----
5 Uxbridge, 106 Oxford Road 14.6 4.2
--- --------------------------------------- -------- -----
6 Luton, The Galaxy 14.3 4.1
--- --------------------------------------- -------- -----
7 Wembley, Olympic Office Centre 12.7 3.6
--- --------------------------------------- -------- -----
8 Brentford, Reynards Business Park 12.3 3.5
--- --------------------------------------- -------- -----
9 Brentford, The Gate Centre 11.3 3.2
--- --------------------------------------- -------- -----
10 Basingstoke, Churchill Way 10.7 3.0
--- --------------------------------------- -------- -----
Total as at 30 September 2011 162.4 46.2
--- --------------------------------------- -------- -----
* Revalued by Knight Frank at completion of the acquisition for
GBP14.86 million
Top ten tenants by rent per annum (adjusting for the acquisition
of West Bromwich)
Rent per annum
(GBP) %
--- -------------------------------------- --------------- -----
1 British Telecommunications plc(1) 1,200,000 4.7
--- -------------------------------------- --------------- -----
2 Wickes Building Supplies Limited 1,092,250 4.3
--- -------------------------------------- --------------- -----
Norwich Union Life and Pensions
3 Ltd 1,039,191 4.1
--- -------------------------------------- --------------- -----
4 BUPA Insurance Services Limited(2) 960,755 3.8
--- -------------------------------------- --------------- -----
5 Synovate Limited (3) 950,000 3.7
--- -------------------------------------- --------------- -----
6 The Buckinghamshire New University(4) 900,000 3.5
--- -------------------------------------- --------------- -----
7 Mott MacDonald Ltd(5) 790,000 3.1
--- -------------------------------------- --------------- -----
8 Recticel SA(6) 731,038 2.9
--- -------------------------------------- --------------- -----
9 Lloyds TSB Bank PLC 664,000 2.6
--- -------------------------------------- --------------- -----
10 Winkworth Sherwood LLP(7) 663,095 2.6
--- -------------------------------------- --------------- -----
Total as at 30 September 2011 8,990,329 35.3
--- -------------------------------------- --------------- -----
(1) Acquisition completed 24 October 2011. Lease benefits from
annual fixed rental uplifts of 3% per annum
(2) Currently subject to rent free that expires April 2012
(3) Aegis Group plc is guarantor. Figures based on 50% ownership
of Minerva House
(4) The Buckinghamshire New University has a half rent period
equating to GBP450,000 per annum from March 2009 which will
increase to GBP900,000 per annum in May 2012. The lease benefits
from a further fixed uplift to GBP1.02 million per annum in March
2014
(5) Mott MacDonald Group Limited are Guarantor
(6) The tenant has a half rent period equating to GBP365,519 per
annum which will increase to GBP731,038 per annum in January
2014
(7) On assignment from Reed Smith Ramboud Charot LLP. Figures
based on 50% ownership of Minerva House
The acquisition of the asset in West Bromwich and other asset
management activity has maintained the whole portfolio average
unexpired lease term, assuming all tenants vacate at the earliest
opportunity, at 8.2 years. The table below shows the maturity
profile of both current and contracted income in five year
increments assuming all tenants lease at the earlier of lease
expiry and tenant break. This ignores the potential for rental
uplifts at future open market rent reviews as well as lease fixed
uplifts:
% of rent passing
---------------- -------------------------------------------------
Years to expiry Company earliest Company assuming
termination / IPD no breaks / IPD Benchmark
Benchmark earliest assuming no breaks
termination
---------------- -------------------- ---------------------------
Up to 5 45.19 / 40.20 37.74 / 29.40
---------------- -------------------- ---------------------------
5 to 10 15.74 / 27.20 18.07 / 32.00
---------------- -------------------- ---------------------------
10 to 15 27.33 / 18.70 26.63 / 22.80
---------------- -------------------- ---------------------------
15 to 20 8.07 / 7.90 11.73 / 8.70
---------------- -------------------- ---------------------------
Over 20 3.77 / 6.00 5.83 / 7.10
---------------- -------------------- ---------------------------
The portfolio is actively managed to reduce voids, void costs
and other expenses. The current void rate is 12% of rental value
which compares to 10.7% at 31 March 2011 and the latest IPD
Benchmark average of 8.1%. The increased void since March is
principally due to Reynards Business Park in Brentford, noted
below, where planning consent is being sought for higher value
residential use. Approximately 2% of the overall void is currently
under offer to new tenants which has the potential to generate
additional rent of GBP0.55 million per annum. The cash held by the
Company enables it to undertake capital expenditure selectively
where required to improve letting prospects and maintain the
overall quality of the underlying portfolio.
The Company receives quarterly reports from the IPD Rental
Information Service ('IRIS'), which compares the overall quality of
the tenants and portfolio's income with its IPD Benchmark funds
within the peer group. This results in a weighted risk score that
takes into account tenant credit ratings, lease length, tenant
concentration, reversionary potential and vacancy. As at 30 June
2011, the latest available data, the Company's weighted risk score
puts it on the 13(th) percentile of its peer group funds. The table
below shows the percentage of rental income generated by the
portfolio graded by risk band, using credit ratings provided by
Experian. For comparison, also shown below is the June data updated
for the West Bromwich acquisition.
Tenant Maximum High Medium-high Low-medium Low Negligible Unscored Ineligible
risk band (%) (%) (%) (%) (%) (%) (%) (%)
--------------- -------- ----- ------------ ----------- ------ ----------- --------- -----------
Company's
portfolio 3.52 3.91 2.05 4.98 24.04 58.95 2.54 0.00
--------------- -------- ----- ------------ ----------- ------ ----------- --------- -----------
Company's
portfolio,
adjusted
for West
Bromwich 3.34 3.71 1.94 4.72 22.80 61.07 2.41 0.00
--------------- -------- ----- ------------ ----------- ------ ----------- --------- -----------
IPD Benchmark 8.41 5.16 2.76 7.43 18.54 52.35 5.22 0.14
--------------- -------- ----- ------------ ----------- ------ ----------- --------- -----------
The IRIS analysis assists in illustrating headline trends but
the credit rating scores provide limited detail. Consequently, the
Manager supplements the IRIS analysis with a detailed analysis of
individual tenants.
Property portfolio performance
Investment Property Databank ('IPD') has analysed the
performance of the Group's underlying direct property portfolio
relative to its peer group Benchmark for the period up to 30
September 2011, the latest available data.
IPD Sector IFPT total return IPD total return Relative pa (%)
pa (%) pa (%)
----------------- ------------------------ ------------------------ ------------------------
Period One Three Five One Three Five One Three Five
year years years year years years year years years
----------------- ------ ------- ------- ------ ------- ------- ------ ------- -------
All Retail
(inc Leisure) 5.9 4.0 -0.1 7.3 2.1 -1.9 -1.3 1.8 1.8
All Offices 6.3 2.6 -0.2 8.5 0.7 -1.7 -2.0 1.9 1.5
All Industrials 8.3 1.1 -0.9 7.7 1.7 -1.5 0.6 -0.6 0.7
----------------- ------ ------- ------- ------ ------- ------- ------ ------- -------
All Sectors 6.7 2.7 -0.3 7.8 1.8 -1.6 -1.0 0.9 1.3
================= ====== ======= ======= ====== ======= ======= ====== ======= =======
The IPD analysis shows that the Company's direct property
portfolio has underperformed slightly over the year to 30 September
2011. The longer term performance record remains strong, both in
terms of total return and rental value growth. The total return to
30 September 2011 including the Company's joint venture investments
at NAV increases the total return slightly to 6.8%.
Transactions and asset management
Three material transactions have completed since 31 March 2011,
one disposal and two acquisitions, adding GBP1.6 million net of new
rental income. The acquisition strategy has focussed on selectively
acquiring good quality property offering attractive property
fundamentals at above average income yields.
Liverpool, Church Street
In July the Company acquired a retail property on 88-94 Church
Street, Liverpool for GBP5.55 million reflecting a net initial
yield of 11.3%. The property comprises a prominent retail and
office property arranged over basement, ground and seven upper
floors at the junction of Hanover Street and the pedestrianised
Church Street, Liverpool's prime retail pitch. The entire property
is let to Lloyds TSB Bank plc at GBP0.664 million per annum, on a
full repairing and insuring basis, until December 2014. Lloyds
occupies the basement to second floors as a bank and the third to
seventh floor offices are sub-let to a legal firm until Lloyds'
lease expiry.
As well as offering an attractive initial yield, the property
offers scope for asset management, including the potential for a
lease extension with Lloyds as well as the sub-tenant in the upper
parts. Furthermore, although the rent paid currently exceeds the
market rent, the prominent location and the planning consent for
bank use should assist future letting prospects.
The acquisition followed the disposal in June 2011 of a retail
property on Market Street in York for GBP5.48 million, reflecting a
net initial yield of 5%. The property was let to Superdrug until
2027 at GBP290,000 per annum, and was sold following the successful
extension of the lease by five years. The price was GBP1.2 million
or 27% above the value immediately prior to the lease
extension.
West Bromwich, BT Building
Since the period end the Company has completed the acquisition
of the BT building in West Bromwich for GBP14.86 million,
reflecting a net initial yield of 7.63%. The Company had previously
paid a deposit of GBP0.75 million and at completion made a
balancing payment of GBP14.11 million.
The property comprises a 75,000 sq ft new office development
constructed to a high specification capable of flexible future
occupation. It is let for fifteen years without break options to
British Telecommunications plc, now the Company's largest tenant,
paying a rent of GBP1.2 million per annum. Rent is payable
immediately as there is no rent free period. The lease benefits
from annual compounded fixed rental uplifts of 3% per annum,
thereby increasing the rent every year of the lease term.
Knight Frank valued the property upon completion on 26 October
at GBP18.9 million which reflects a net initial yield of 6%. This
represents a 27% increase relative to the purchase price and is
expected to increase the Company's future NAV, after all
acquisition costs, by approximately GBP3.1 million. In addition,
the Company has received rental payments in advance for the period
from 25 October to 24 December 2011 of GBP204,000.
As noted in the Chairman's Statement, there are key asset
management initiatives ongoing elsewhere in the portfolio that have
the potential to enhance income and value. Most notable is Reynards
Trading Estate in Brentford, a multi-let industrial estate on six
acres, currently valued at GBP12.25 million. The estate was vacated
in April 2011 by the majority tenant and now produces GBP0.15
million per annum on short term lease contracts. The estate is
located in a predominantly residential area and in June 2011 an
outline planning application was submitted for 315 dwellings
totalling 250,000 sq ft.
Following feedback from local residents the application was
withdrawn to facilitate more detailed discussions with both the
local residents and Hounslow Council. Following these discussions,
a revised outline application has been submitted for 275 units
totalling 224,000 sq ft. From our discussions with the Council, we
now understand that a residential scheme is acceptable in principle
and a decision on the application is expected over the coming
months. Assuming a planning consent is received for the higher
value use, the property will be sold with the intention to deploy
proceeds of the disposal into materially higher yielding assets in
order to further enhance dividend cover.
More generally and as noted above, a significant number of new
lettings are being progressed across the portfolio that have the
potential to generate additional rent and also reduce property
expenses such as empty business rates and service charge
shortfalls. A number of lease extensions are being progressed that
will maintain income and improve the portfolio's defensive
qualities further.
Finance
The Company has a single on-balance sheet loan facility of
GBP173.5 million that matures in July 2014. As at 30 September
2011, adjusting for the acquisition of West Bromwich that completed
since the period end, the Company has a net loan-to-value ('LTV')
ratio 42.3% compared with a net LTV covenant ratio of 60%. The
Company has total cash, excluding the liquidity facility, of
GBP25.1 million, of which GBP15 million is outside the security
pool charged to the Group's lenders and consequently provides
operational flexibility.
The other key banking covenant is the interest cover ratio
('ICR'), calculated as a percentage of total annual rent over total
annual interest. Net rent is defined as the amount to be received
during the twelve months following the test date. Deducted from
this rent is the annualised rent for any tenancies where the tenant
has rental arrears greater than 60 days and also any interest
earned on cash in the security pool. Calculating the covenant in
this way results in an ICR of 213% compared with an ICR covenant of
150%. The acquisition of West Bromwich will increase the ICR to
224%, providing significant cover.
The table below sets out the a breakdown of the Group's annual
interest costs including details of the interest rate swaps that
fully hedge its interest payments for the duration of the loan term
that matures in July 2014.
Details of the Company's debt and two swaps are set out in the
table below:
Rating Loan Swap Margin Total Swap M2M* M2M*
amount Rate (%) interest Maturity 30/09/2011 31/03/2011
(GBPm) (%) rate
(%)
------------- -------- ---------- ------- ---------- ----------- ------------ -----------
5.099
AAA 62.5 Fixed 0.20 5.299 15/07/2014 (7.47) (6.26)
------------- -------- ---------- ------- ---------- ----------- ------------ -----------
5.713
AAA 111 Fixed 0.20 5.913 15/07/2016 (23.16) (16.93)
------------- -------- ---------- ------- ---------- ----------- ------------ -----------
Loan 5.420
total 173.5 Fixed 0.20 5.692 N/A (30.63) (23.18)
------------- -------- ---------- ------- ---------- ----------- ------------ -----------
Liquidity 0.55
facility** 11.2 Libor*** 0.662 1.2 N/A N/A N/A
------------- -------- ---------- ------- ---------- ----------- ------------ -----------
* M2M or marked to market
** Securitised debt facility has a Liquidity Facility of GBP11.2
million provided by Lloyds Banking Group ('Lloyds'). Liquidity
Facility Agreement requires the provider to have a minimum Standard
& Poor's ('S&P') credit rating of A-1+, which Lloyds
breached in March 2009 when they were downgraded by S&P to A-1.
Breach requires the Liquidity Facility to be drawn down in full and
placed in a blocked deposit account or alternatively a new provider
put in place. Accordingly, on the 23 September 2009 the Liquidity
Facility was drawn down.
*** Libor as at 12 October 2011
The movement in the negative mark-to-market value of the Group's
interest rate swaps over the period means that they now represent
18% of the NAV or 8.6 pps. The mark-to-market value has been
impacted by falling interest rate expectations and also the period
to maturity.
Although the Company's on-balance sheet loan does not mature
until July 2014, longer term re-finance strategies are being
considered, having regard to issues such as reducing the overall
interest cost, the optimum loan to value, spreading loan maturities
and avoiding crystallising swap break costs.
Joint ventures
Progress continues to be made with the Company's joint ventures
which all have separate, non-recourse, off-balance sheet debt. Two
of them, Merchant Property Unit Trust and Crendon Industrial
Partnership Limited, increased in value by a total of GBP0.18
million or 4.62% over the period, with One Plantation Place Unit
Trust remaining at nil. Further details are provided below:
Merchant Property Unit Trust - 19.5% share
The value of the underlying portfolio of 32 properties let to
Travis Perkins increased over the period by GBP0.58 million, or
1.4%, to GBP40.98 million. The increase in value was due to the
properties being let for 19 years without breaks with guaranteed
minimum rental uplifts of 3% per annum compound every five years.
This valuation movement, combined with a negative movement in the
mark-to-market value of the interest rate swaps, led to an increase
of GBP0.11 million in the NAV of the Company's 19.5% share in MPUT
to GBP2.81 million. The loan to value ratio is now 60% compared to
a covenant of 100% which tapers down to 75% at loan maturity in
2013 and the interest cover ratio is 144% compared to a covenant of
125%.
As at 30 September 2011 the total negative marked to market
value of the interest rate swaps that are matched to the loan term
was -GBP1.81 million, split between a current swap of -GBP268,184
expiring in December 2011 and a forward starting swap of -GBP1.55
million, meaning that as at 30 September 2011 the Company's share
of NAV is diluted by approximately -GBP0.35 million. The forward
starting swap is at a lower fixed rate which when combined with the
guaranteed uplifts, could add approximately GBP0.5 million to the
Company's NAV by loan maturity in September 2013. All surpluses are
currently being used for amortisation of the loan. There is limited
potential for value enhancement through asset management with
activity focussed on a re-financing or a disposal of part.
Crendon Industrial Partnership Limited ('CIPL') - 50% share
The value of the underlying secondary industrial estate was
unchanged over the period at GBP24.75 million. The value was
supported over the period by a small increase in the rent from
GBP2.14 million to GBP2.2 million per annum and by successful asset
management including extending leases to improve the average
unexpired lease term. This activity led to an increase of GBP70,000
in the NAV of the Company's 50% share in CIPL to GBP1.27 million.
The loan against the property totals GBP26.05 million reflecting a
net loan to value, after taking account of GBP2.6 million of cash,
of 95%. There is no loan to value covenant prior to loan maturity
in May 2013 and the interest cover is well within compliance at
153% compared to the covenant of 125%.
Significant asset management activity is ongoing including
submitting a planning application for an industrial and warehouse
redevelopment of part of the site. This is being funded from CIPL's
existing cash resources. If planning is achieved, the sites could
be sold on with the benefit of the consent. Finally, discussions
are ongoing with its lender regarding the prospects for a loan
extension.
Plantation Place, London EC3 - 28.2%
On a like for like basis, the independent valuation of One
Plantation Place Unit Trust's ('OPPUT') underlying property,
increased over the period by GBP17.6 million, or 3.7%, to GBP495.6
million, an uplift of GBP17.6 million or 3.7%, reflecting a net
initial yield of 5.5%. The increase in value followed a further
improvement in prime City of London property values and successful
asset management activity, notably achieving positive retail rent
review settlements. This independent valuation continues to be
prepared on the assumption of a disposal of the unit trust in which
the property sits rather than a sale of the property itself, and
therefore does not include any deduction for Stamp Duty Land
Tax.
As at 30 September 2011, OPPUT's net debt is GBP431.34 million,
resulting in a net loan to value of 87% compared to the net loan to
value covenant of 82.14%. The property continues to be well let and
is compliant with its interest cover ratio covenants. The negative
mark-to-market value of the interest rate swap, which is matched to
the loan maturity in July 2013, fell by GBP1.8 million to -GBP33.2
million over the quarter.
Based on the above figures, the management accounts of
Plantation Place at 30 September 2011 show the Company's interest
in OPPUT to be in the region of GBP8 million.
However, the Company continues to hold its interest at GBPnil
because the Directors consider it appropriate to reduce the above
property valuation by Stamp Duty Land Tax as there is no certainty
that a realisation of the Company's investment will be by way of a
sale of OPPUT. In addition, the Directors have assessed other
purchasers' costs to be above the amounts included in the
independent valuation. Finally, the treatment reflects the
uncertainty associated with the continuing loan to value breach. On
this basis the Company's share of net assets of OPPUT would be
negligible.
Outlook
The Company's strategic objectives are still focused on
improving the Company's income and fundamentals to enable investors
to benefit from an improved rating which is sustainable and based
upon a sound foundation. We will therefore continue to invest in
properties with attractive income yields or with the potential for
strong rental growth. Progress has been made over the period to
increase dividend cover whilst also limiting any increase in
leverage.
However, we remain cautious about the market outlook as the
modest recovery in prime property since July 2009 has slowed, with
limited prospects for rental growth across many parts of the UK
commercial property market. The current sentiment towards the real
estate sector remains fragile and the recent turbulence in debt
markets has brought leverage back into focus and investors' desire
for this to be reduced. Although we do not expect a material
deterioration in capital values due to the attractive income return
offered by the UK's commercial property sector, we will remain
focused on controlling both leverage and costs.
The team has worked relentlessly against the background of
material uncertainty around the manager and the Company's own
future. Now that these uncertainties have been resolved, we look
forward to carrying out a seamless transition to Schroder Property
Investment Management, integrating the current team within the
considerable strength of Schroders.
Duncan Owen
Chief Executive, Invista Real Estate Investment Management
18 November 2011
Statement of the Directors' Responsibility in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
Director
18 November 2011
Condensed Statement of Comprehensive Income
for the period from 1 April 2011 to 30 September 2011
Six months Six months Year to
to to
30/09/2011 30/09/2010 31/03/2011
Notes GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
----------------------------------------- ------ ------------ ------------ -----------
Rental income 11,865 11,108 23,752
Other income 1,323 289 1,384
Property operating expenses (1,161) (1,258) (2,335)
----------------------------------------- ------ ------------ ------------ -----------
Net rental and related income 12,027 10,139 22,801
----------------------------------------- ------ ------------ ------------ -----------
(Loss)/profit on disposal of
investment property (333) 43 43
----------------------------------------- ------ ------------ ------------ -----------
Net valuation (loss)/gain on
investment property (1,564) 1,840 2,516
----------------------------------------- ------ ------------ ------------ -----------
Expenses
Investment management fee (1,761) (1,658) (3,430)
Valuers' and other professional
fees (624) (566) (1,068)
Administrators and accounting
fee (185) (185) (370)
Auditor's remuneration (77) (75) (149)
Directors' fees (100) (85) (200)
Other expenses 3 (633) (453) (825)
----------------------------------------- ------ ------------ ------------ -----------
Total expenses (3,380) (3,022) (6,042)
----------------------------------------- ------ ------------ ------------ -----------
Net operating profit before
net finance costs 6,750 9,000 19,318
Interest receivable 95 - 32
Finance costs payable (5,410) (5,528) (11,144)
----------------------------------------- ------ ------------ ------------ -----------
Net finance costs (5,315) (5,528) (11,112)
----------------------------------------- ------ ------------ ------------ -----------
Share of profit in associates
and joint ventures 181 643 1,013
Profit before tax 1,616 4,115 9,219
----------------------------------------- ------ ------------ ------------ -----------
Taxation 3 (546) (710) (795)
----------------------------------------- ------ ------------ ------------ -----------
Profit for the period/year attributable
to the equity holders of the
parent 1,070 3,405 8,424
Other comprehensive (loss)/income:
Movement on swaps (7,446) (6,199) 3,158
----------------------------------------- ------ ------------ ------------ -----------
Total comprehensive (loss)/profit
for the period/year attributable
to the equity holders of the
parent (6,376) (2,794) 11,582
Basic and diluted earnings per
share 4 0.3p 1.0p 2.5p
All items in the above statement are derived from continuing
operations.
The accompanying notes 1 to 10 form an integral part of the
interim report. Condensed Balance Sheet
as at 30 September 2011
30/09/2011 30/09/2010 31/03/2011
Notes GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
----------------------------------- ------ ------------ ------------ -----------
Investment in associates and
joint ventures 7 2,892 2,484 2,711
Loans to associates and joint
ventures 7 1,191 961 1,191
------------ ------------ -----------
Total investment and loans
in associates and joint ventures 4,083 3,445 3,902
Investment property 6 324,540 315,414 325,295
Non-current assets 328,623 318,859 329,197
----------------------------------- ------ ------------ ------------ -----------
Trade and other receivables 10,445 9,624 10,941
Cash and cash equivalents 52,314 69,755 56,724
----------------------------------- ------ ------------ ------------ -----------
Current assets 62,759 79,379 67,665
----------------------------------- ------ ------------ ------------ -----------
Total assets 391,382 398,238 396,862
----------------------------------- ------ ------------ ------------ -----------
Issued capital and reserves 168,385 172,913 181,025
----------------------------------- ------ ------------ ------------ -----------
Equity 168,385 172,913 181,025
----------------------------------- ------ ------------ ------------ -----------
Interest-bearing loans and
borrowings 8 182,949 182,331 182,639
Interest rate swap 30,635 32,546 23,189
----------------------------------- ------ ------------ ------------ -----------
Non-current liabilities 213,584 214,877 205,828
----------------------------------- ------ ------------ ------------ -----------
Trade and other payables 8,846 8,469 9,636
Taxation payable 567 1,979 373
----------------------------------- ------ ------------ ------------ -----------
Current liabilities 9,413 10,448 10,009
----------------------------------- ------ ------------ ------------ -----------
Total liabilities 222,997 225,325 215,836
----------------------------------- ------ ------------ ------------ -----------
Total equity and liabilities 391,382 398,238 396,862
----------------------------------- ------ ------------ ------------ -----------
Net Asset Value per Ordinary
Share 9 47.3p 48.6p 50.9p
----------------------------------- ------ ------------ ------------ -----------
The financial statements were approved at a meeting of the Board
of Directors held on 18 November 2011 and signed on its behalf
by:
Harry Dick-Cleland, Director
The accompanying notes 1 to 10 form an integral part of the
interim report.
Condensed Statement of Changes in Equity
For the period from 1 April Share Hedge Revenue
2010 to 30 September 2010 (unaudited) Notes premium reserve reserve Total
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------ --------- --------- --------- ---------
Balance as at 31 March 2010 98,356 (26,347) 97,444 169,453
Profit for the period - - 3,405 3,405
Loss on cash flow hedge - (6,199) - (6,199)
New equity issuance 11,949 - - 11,949
Dividends paid 4 - - (5,695) (5,695)
Balance as at 30 September
2010 110,305 (32,546) 95,154 172,913
---------------------------------------- ------ --------- --------- --------- ---------
For the year ended 31 March
2011 (audited) and For the
period from 1 April 2011 to
30 September 2011 (unaudited)
Share Hedge Revenue
Notes premium reserve reserve Total
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------ --------- --------- --------- ---------
Balance as at 31 March 2010 98,356 (26,347) 97,444 169,453
Profit for the year - - 8,424 8,424
Gain on cash flow hedge - 3,158 - 3,158
New equity issuance 11,949 - - 11,949
Dividends paid 4 - - (11,959) (11,959)
---------------------------------------- ------ --------- --------- --------- ---------
Balance as at 31 March 2011 110,305 (23,189) 93,909 181,025
Profit for the period - - 1,070 1,070
Loss on cash flow hedge - (7,446) - (7,446)
Dividends paid 4 - - (6,264) (6,264)
---------------------------------------- ------ --------- --------- --------- ---------
Balance as at 30 September
2011 110,305 (30,635) 88,715 168,385
---------------------------------------- ------ --------- --------- --------- ---------
The accompanying notes 1 to 10 form an integral part of the
interim report
Condensed Statement of Cash Flows
for the period from 1 April 2011 to 30 September 2011
Six months Six months Year to
to to
30/09/2011 30/09/2010 31/03/2011
Notes GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
----------------------------------- ------ ------------ ------------ -----------
Operating activities
Profit for the period/year 1,070 3,405 8,424
Adjustments for:
Loss/(profit) on disposal
of investment property 333 (43) (43)
Net valuation loss/(gain)
on investment property 1,564 (1,840) (2,516)
Share of profit in associates
and joint ventures (181) (643) (1,013)
Net finance cost 5,315 5,531 11,112
Taxation 546 710 795
----------------------------------- ------ -----------
Operating profit before changes
in working
capital and provisions 8,647 7,120 16,759
Decrease/ (increase) in trade
and other receivables 495 5,697 4,381
(Decrease)/increase in trade
and other payables (769) 19 1,036
----------------------------------- ------ ------------ ------------ -----------
Cash generated from operations 8,373 12,836 22,176
Finance costs paid (5,129) (5,189) (10,421)
Interest received 95 11 32
Tax paid (352) (38) (1,729)
------------------------------------------- ------------ -----------
Cash flows from operating
activities 2,987 7,620 10,058
----------------------------------- ------ ------------ ------------ -----------
Investing Activities
Proceeds from sale of investment 5,303 - -
property
Acquisition of investment
property (5,869) (2,822) (18,250)
Additions to investment property (567) (10,751) (4,528)
Cash flows from investing
activities (1,133) (13,573) (22,778)
----------------------------------- ------ ------------ ------------ -----------
Financing Activities
New shares issued - 11,949 11,949
Dividends paid 4 (6,264) (5,695) (11,959)
----------------------------------- ------ ------------ ------------ -----------
Cash flows from financing
activities (6,264) 6,254 (10)
----------------------------------- ------ ------------ ------------ -----------
Net (decrease)/increase in
cash and cash equivalents
for the period/year (4,410) 301 12,730
Opening cash and cash equivalents 56,724 69,454 69,454
----------------------------------- ------ ------------ ------------ -----------
Closing cash and cash equivalents 52,314 69,755 56,724
----------------------------------- ------ ------------ ------------ -----------
The accompanying notes 1 to 10 form an integral part of the
interim report
Notes to the Interim Report
1. Significant accounting policies
Invista Foundation Property Trust Limited ("the Company") is a
closed-ended investment company incorporated in Guernsey. The
condensed financial statements of the Company for the period ended
30 September 2011 comprise the Company, its subsidiaries and its
interests in associates and joint ventures (together referred to as
the 'Group').
Statement of compliance
The condensed interim financial statements have been prepared in
accordance with the Disclosure and Transparency Rules of the United
Kingdom Financial Services Authority and International Financial
Reporting Standards ('IFRS') IAS 34 Interim Financial Reporting.
They do not include all of the information required for the full
annual financial statements, and should be read in conjunction with
the consolidated financial statements of the Group as at and for
the year ended 31 March 2011. The financial statements have been
prepared on the basis of the accounting policies set out in the
Group's annual financial statements for the year ended 31 March
2011. The Group's annual financial statements refer to new
Standards and Interpretations none of which had a material impact
on the financial statements.
2. Material agreements
Invista Real Estate Investment Management Limited (Invista) is
the Investment Manager to the Company.
The Investment Manager is entitled to a base fee and a
performance fee together with reasonable expenses incurred by it in
the performance of its duties. The base fee is payable monthly in
arrears and will be equal to one twelfth of:
-- 2% of NAV up to GBP150 million, plus
-- 1.75% of NAV between GBP150 million and GBP200 million, plus
-- 1.5% of NAV over GBP200 million
This NAV based fee will be subject to a floor of GBP229,000 per
month. In the event that this floor is breached, the fee will then
revert to being calculated on the previous basis of 0.95% per annum
of GAV, until NAV recovers to a point where the monthly NAV based
fee would once again exceed GBP229,000. The combined new base fee
and any performance fee based on the current arrangement cannot
exceed 5% of the Company's total NAV during any financial year
ending 31 March.
In addition, and subject to the conditions below, the Investment
Manager is entitled to an annual performance fee where the NAV
total return per ordinary share during the relevant financial
period exceeds an annual rate of 10 percentage (the 'performance
hurdle'). Where the performance hurdle is met, a performance fee
will be payable in an amount equal to 15 percentage of any
aggregate total return over and above the performance hurdle. A
performance fee will only be payable where: (i) in respect of the
relevant financial period, the total return of the underlying
assets meets or exceeds the Investment Property Database ('IPD')
Monthly Index balanced funds benchmark on a like for like basis;
and (ii) the annualised total return over the period from admission
of the Company's Ordinary Shares to the end of the relevant
financial period is equal to or greater than 10 percentage per
annum.
The Investment Management Agreement may be terminated by either
the Company or the Investment Manager on not less than 12 months
notice in writing. On 21 March 2011, the Company gave notice to the
Investment Manager of the termination of its investment management
agreement, to take effect on 21 March 2012. On 31 October 2011 the
Company appointed Schroder Property Investment Management Limited
to manage the Company's portfolio.
2. Material agreements continued
The Board appointed Invista Real Estate Investment Management
Limited as the Accounting Agent to the Company from 1 April 2007.
The Accounting Agent is entitled to a fee equal to 5 basis points
of Net Asset Value subject to a minimum annual fee of GBP250,000.
On 8 April 2011, the Company gave notice to the Accounting Agent of
the termination of its accounting agent agreement to take effect on
21 March 2012. The role of Accounting Agent will be undertaken by
Schroder Property Investment Management Limited as part of the
Investment Management Agreement.
The Board appointed Northern Trust International Fund
Administration Services (Guernsey) Limited as the Administrator to
the Company with effect from 25 July 2007. The Administrator is
entitled to an annual fee equal to GBP120,000.
3. Statement of Comprehensive Income
Included within Other expenses are exceptional expenses
totalling GBP374,000 in relation to the merger proposal indicated
by Picton Property Income Limited.
The taxation of GBP546,000 includes an amount of GBP350,000
which relates to prior periods.
4. Basic and Diluted Earning/(Loss) per Share
The basic and diluted earnings per share for the Group is based
on the net profitfor the period of GBP1,070,000, (March 2011:
GBP8,424,000) (September 2010: GBP3,405,000) and the weighted
average number of Ordinary Shares in issue during the period of
355,921,281 (March 2011: 344,230,398) (September 2010:
332,603,400).
5. Dividends paid
01/04/2011
Number of to
In respect of Ordinary Rate 30/09/2011
Shares (pence) GBP000
------------------------------------- --------------- -------- -----------
Quarter 31 March 2011 dividend paid
27 May 2011 355.92 million 0.8800 3,132
Quarter 30 June 2011 dividend paid
19 August 2011 355.92 million 0.8800 3,132
------------------------------------- --------------- -------- -----------
1.7600 6,264
------------------------------------- --------------- -------- -----------
01/04/2010
Number of to
In respect of Ordinary Rate 30/09/2010
Shares (pence) GBP000
------------------------------------- ---------------- -------- -----------
Quarter 31 March 2010 dividend paid
19 May 2010 323.59 million 0.8800 2,847
Quarter 30 June 2010 dividend paid
20 August 2010 323.59 million 0.8800 2,848
------------------------------------- ---------------- -------- -----------
1.7600 5,695
------------------------------------- ---------------- -------- -----------
01/04/2010
Number of to
In respect of Ordinary Rate 31/03/2011
Shares (pence) GBP000
------------------------------------- ---------------- -------- -----------
Quarter 31 March 2010 dividend paid
19 May 2010 323.59 million 0.8800 2,847
Quarter 30 June 2010 dividend paid
20 August 2010 323.59 million 0.8800 2,848
Quarter 30 September 2010 dividend
paid 19 November 2010 355.92 million 0.8800 3,132
Quarter 31 December 2010 dividend
paid 19 February 2011 355.92 million 0.8800 3,132
------------------------------------- ---------------- -------- -----------
3.5200 11,959
------------------------------------- ---------------- -------- -----------
A dividend for the quarter ended 30 September 2011 of 0.88p
(GBP3,132,107) was declared on 24 October 2011 and will be paid on
25 November 2011.
6. Investment property
For the period 1 April 2010 to 30 September 2010 (unaudited)
Leasehold Freehold Total
GBP000 GBP000 GBP000
-------------------------------------------- ---------- --------- --------
Amounts recognised as investment property
at 31 March 2010 47,074 252,901 299,975
Additions (14) 13,612 13,598
Net valuation gains on investment property 786 1,055 1,841
Amounts recognised as investment property
at 30 September 2010 47,846 267,568 315,414
-------------------------------------------- ---------- --------- --------
For the year 1 April 2010 to 31 March 2011 (audited)
Leasehold Freehold Total
--------------------------------------------
GBP000 GBP000 GBP000
-------------------------------------------- ---------- --------- --------
Amounts recognised as investment property
at 31 March 2010 47,074 252,901 299,975
Additions 17 22,787 22,804
Net valuation gains on investment property 889 1,627 2,516
Amounts recognised as investment property
at 31 March 2011 47,980 277,315 325,295
-------------------------------------------- ---------- --------- --------
For the period 1 April 2011 to 30 September 2011 (unaudited)
Leasehold Freehold Total
--------------------------------------------
GBP000 GBP000 GBP000
-------------------------------------------- ---------- --------- --------
Amounts recognised as investment property
at 31 March 2011 47,980 277,315 325,295
Additions - 6,444 6,444
Disposals - (5,635) (5,635)
Net valuation gains on investment property 3 (1,567) (1,564)
Amounts recognised as investment property
at 30 September 2011 47,983 276,557 324,540
-------------------------------------------- ---------- --------- --------
Fair value of investment property as determined by the valuers
excluding lease incentives totals GBP331,545,000 (March 2011:
GBP331,415,000).
7. Investment in associates and joint ventures
For the year 1 April 2010 to 31 March 2011 (audited)
GBP000
----------------------------------------------------- -------
Opening balance as at 1 April 2010 2,802
Additions 87
Share of profits in year 1,013
Amounts recognised as associates and joint ventures
at 31 March 2011 3,902
----------------------------------------------------- -------
For the period 1 April 2011 to 30 September 2011 (unaudited)
GBP000
----------------------------------------------------- -------
Opening balance as at 1 April 2011 3,902
Share of profits in period 181
Loans to associates and joint ventures* -
----------------------------------------------------- -------
Amounts recognised as associates and joint ventures
at 30 September 2011 4,083
----------------------------------------------------- -------
* Total loans to associates and joint ventures as at 30
September 2011 was GBP1,191,000 (31 March 2011 GBP1,191,000 )
The Directors continue to hold Plantation Place at GBPnil.
8. Interest-bearing loans and borrowings
In March 2005 the Group entered into a GBP152.5 million loan
repayable in July 2014 with a securitisation vehicle, along with a
facility of GBP150 million of reserve notes. The Group has as at 30
September 2011 GBP173.5 million drawn under these two
facilities.
At the same time as entering into these two facilities, the
Group entered into a liquidity facility with Lloyds TSB Bank plc
(Lloyds) as the Liquidity Facility Provider for GBP11.2 million,
the intention of the facility was to provide funding for liquidity
shortfalls. One of the criteria of the liquidity facility was that
the Liquidity Facility Provider should have a credit rating of at
least AA- (long term) by Fitch or A-1 (short term) by S&P.
Recently Lloyds has been downgraded to A-1 (short term) by S&P.
A consequence of this downgrade is the Group being required to
drawdown the GBP11.2 million and place it in a block bank account.
The drawdown can be repaid when Lloyds rating returns to at least
the level set out in the agreement or the terms of the liquidity
facility agreement are altered. The level of the drawdown reduces
pro rata once the loan is less than GBP204 million.
9. NAV per Ordinary Share
The NAV per Ordinary Share is based on the net assets of
GBP168,385,000 (March 2011: GBP181,025,000) (September 2010:
GBP172,913,000) and 355,921,281 (March 2011: 355,921,281)
(September 2010: 355,921,281 Ordinary Shares in issue at the
Balance Sheet date.
10. Post balance sheet events
Since the end of the period the Group has acquired an office
building in West Bromwich let to BT at a price of GBP14.9
million.
On 31 October 2011, the Company appointed a new investment
manager, Schroder Property Investment Management Limited, as
disclosed in note 2.
Independent Review Report to Invista Foundation Property Trust
Limited ('the Company')
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2011 which comprises the Condensed
Statement of Comprehensive Income, Condensed Balance Sheet,
Condensed Statement of Changes in Equity, Condensed Statement of
Cash Flows and the related explanatory notes. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the United Kingdom's Financial Services Authority ("the UK
FSA"). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report
and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company for our review work, for this report, or for the
conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRS as adopted by the EU.
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
IAS 34 "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2011 is not prepared, in all material respects, in
accordance with IAS 34 and the DTR of the UK FSA.
Ewan McGill
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Registered Auditors
Guernsey
18 November 2011
Corporate information
Auditor
Registered Address KPMG Channel Islands Limited
Trafalgar Court 20 New Street
Les Banques St Peter Port
St Peter Port Guernsey GY1 4AN
Guernsey GY1 3QL
Property Valuers
Directors Knight Frank LLP
Andrew Sykes (Chairman) 20 Hanover Square
Keith Goulborn London W1S 1HZ
John Frederiksen
Harry Dick-Cleland Channel Islands Sponsor
David Warr Ozannes Securities Limited
Peter Atkinson 1 Le Marchant Street
(All Non-Executive Directors) St. Peter Port
Guernsey GY1 4HP
Investment Manager and Accounting
Agent
Invista Real Estate Investment Management
Limited
107 Cheapside UK Sponsor and Broker
London JPMorgan Cazenove Limited
EC2V 6DN 20 Moorgate
London EC2R 6DA
The Manager's Investment Committee
Duncan Owen (Chairman) Numis Securities Limited
Chris Ludlam 10 Paternoster Square
Nick Montgomery London EC4M 7LT
Andrew Mac Donald
Tax Advisers
Secretary and Administrator Deloitte & Touche LLP
Northern Trust International Fund 180 Strand
Administration Services (Guernsey) London WC2R 1BL
Limited
Trafalgar Court Receiving Agent and UK
Les Banques Transfer/Paying Agent
St Peter Port Computershare Investor
Guernsey GY1 3QL Services PLC
The Pavilions
Bridgewater Road
Bristol BS99 1XZ
Solicitors to the Company
as to English Law: as to Guernsey Law:
Herbert Smith Mourant Ozannes
Exchange House 1 Le Marchant Street
Primrose Street St Peter Port
London EC2A 2HS Guernsey GY1 4HP
ISA/PEP status
The Company's shares are eligible
for Individual Savings Accounts (ISAs)
and PEP transfers and can continue
to be held in existing PEPs
This information is provided by RNS
The company news service from the London Stock Exchange
END
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