Net Asset Value - September 2015

To:                   Company Announcements
Date:                26 November 2015
Company:         AXA Property Trust Limited
Subject:            Net Asset Value 30 September 2015 (Unaudited)

SUMMARY

CAPITAL REDEMPTIONS

• £5.2 million was repaid to shareholders during the quarter by way of a partial redemption of share. This partial redemption brings the total capital returned to shareholders to £13.1 million.

QUARTERLY RESULTS

• The Company’s unaudited Consolidated Net Asset Value at 30 September 2015 was £45.44 million (30 June 2015: £49.37 million)

• The unaudited Net Asset Value per share at 30 September 2015 was 59.82 pence (30 June 2015: 57.61 pence per share)

• The Company made a net loss after tax of £0.99 million in the three month period to 30 September 2015.

MANAGED WIND-DOWN STATUS

• The Company continues to progress the managed wind-down of its portfolio.

• With the exception of the asset in Rothenburg, all assets within the portfolio were on the market and were made available for sale during the quarter. At Rothenburg management initiatives are being finalised before full marketing commences.

• Rothenburg will be placed on the market once current management initiatives have been finalised.

• The sale of Furth was notarised during the quarter with completion anticipated imminently.

• The disposals of Dasing and Venray are expected to be under contract by the end of the year, while the sale of Curno and Agnadello are likely to be completed during the first half of 2016.

PORTFOLIO UPDATE

Country Allocation at 30 September 2015 (by asset value)

Country                        % of portfolio

Germany                       64%

Italy                              30%

Netherlands                   6%

Sector Allocation at 30 September 2015 (by asset value)

Sector                          % of portfolio

Retail                            55%

Industrial                       28%

Leisure                          17%

MARKET UPDATE

European overview

Economic growth in the eurozone continued its positive trend over Q2 2015, with GDP expanding by 0.4% Quarter on Quarter (“QoQ”), though growth slowed somewhat compared to Q1. This slowdown can be largely attributed to sluggish capital investment and a slight slowdown in consumer spending. The flash estimate for eurozone GDP growth for Q3 stood at 0.3% QoQ, suggesting that Q2’s trends continued into the subsequent quarter.

Following on from a weak start to the year, tenant demand across Europe rebounded in the second and third quarters of 2015, with year-to-date aggregate take-up across Europe increasing by 15% compared to the same period in 2014. The shortage of available new and refurbished space (in particular offices) on the market has supported prime headline rents so far in 2015, despite a continued focus on cost-cutting by occupiers.

European transaction volumes reached €66.1bn during the third quarter of 2015 – up from €62.6bn in Q2 2015, and higher than the €53bn achieved in the same quarter last year. Office investment accounted for €29.4bn, retail for €19.1bn and logistics and industrial for €5.7bn. All sectors recorded deal volumes more than 50% above their quarterly 10-year trends. Of the larger mainland European markets, Germany saw the largest gains with investment volumes of €14.1bn, compared to €12bn in Q2 2015 and a 65% increase compared to Q3 2014. In addition, France saw investment activity almost doubling in comparison to Q3 2014 after a succession of weak quarters.

German retail commentary

German retail sales increased by 2.8% between January and August 2015, compared to the same period in 2014.  Falling unemployment is likely to further feed through into German consumer strength. Retail letting volumes over the same period are some 11% lower compared to the first nine months of 2014, with smaller and mid-sized lettings dominating transactions. However prime high street and shopping centre rents in the major centres of Munich,  Berlin, Dusseldorf, Frankfurt and Hamburg remain stable to positive compared to 2014.

Retail transaction volumes year-to-date amount to approximately €13bn, which already significantly exceeds the respective 2014 figure of approximately €9bn. Publicly-listed property companies and REITs have been the most active investors and there is evidence that buyers are moving from prime locations to out-of-town retail warehouses and retail parks in non-core  locations. According to Jones Lang LaSalle, prime investment yields for shopping centres in the Top 7 German markets stand at 4.3%, down 20bps Year on Year (“YoY”).

Italian logistics commentary

The logistics and industrial segment in Q3 2015 saw most letting activity being concentrated in Lombardy, representing approximately 60% of total transaction volumes, followed by Emilia Romagna at 27% of overall take-up. Q3 take-up was down marginally by 1.65% on the previous quarter, with year-to-date take-up largely consistent  to that seen during the same period in 2014. The 3PL sector  accounted for 45% of quarterly take-up. Prime rents remained stable at €50/sqm/year and €52/sqm/year in Milan and Rome respectively.

Investment transactions  into the logistics sector improved, reaching a quarterly volume of €103 million, contributing to the €200m investment volume registered year-to-date.  Q3 saw another fall in prime yields, declining by 50bps to 6.5% net. This is a total movement of approximately 100bps compared to Q4 2014, largely reflecting increased demand from international investors.

Netherlands logistics commentary

The Dutch industrial market is continuing to benefit from the country’s economic recovery and  its central location along the European logistics corridor. Domestic consumption is strengthening as are exports. Demand for industrial space is strong, up 124% YoY as at the end of the second half of 2015. Take-up of pre-let space reached an all-time high in the first half of 2015, exceeding take-up of existing property for the first time, with hotspots of demand in Limburg and North-Brabant. Q3 prime rents remained stable both QoQ and YoY at €6.25/sqm/month.

Limited availability of product limits investment growth as investor demand for newly-built properties has faced a scarcity of prime assets. As at the end of June 2015, total investment volume reached €618m, down 11% compared to the same period in  2014. CBRE reports yields for Dutch prime distribution assets  at 5.85%, down 40bps YoY.

CONSOLIDATED PERFORMANCE SUMMARY

	Audited	Unaudited
	3 months ended 30 June 2015	3 months ended 30 September 2015	Quarterly Movement
	Pence per share	Pence per share	Pence per share / %
Net Asset Value per share	57.61p	59.82p	2.21 / 3.8%
Earnings per share	4.96p	-1.25p	-6.21p
Share price (mid market)	44.75p	50.00p	5.25 / 11.7%
Share price discount to Net Asset Value	22.3%	16.4%	-5.9 percentage points

Total Return per Share	Audited	Unaudited
	3 months ended 30 June 2015	3 months ended 30 September 2015
Net Asset Value Total Return	1.8%	2.6%
Share Price Total Return
- AXA Property Trust	4.5%	14.3%
- FTSE All Share Index	-3.1%	-5.7%
- FTSE Real Estate Investment Trust Index	-4.4%	5.9%
Source: Datastream; AXA Real Estate

The total net loss was £0.99 million (-1.25 pence per share) for the three months period to 30 September, analysed as follows:

	Audited	Unaudited
	3 months ended 30 June 2015	3 months ended 30 September 2015
	£million	£million
Net property income	1.17	1.05
Net foreign exchange (losses) / gains	(0.06)	(0.30)
Investment Manager's fees	(0.09)	(0.11)
Other income and expenses	0.32	(0.49)
Net finance costs	(0.26)	(0.24)
Revenue profit	1.09	(0.09)
Unrealised (losses) / gains on revaluation of investment properties	2.52	(0.60)
Net losses on disposal of investment properties	1.50	-
(loss) / Gain on disposal of shares in subsidiary	-	-
Net (Losses) / gains on derivatives	(0.11)	0.21
Share in (losses) / Profit of Joint Venture	0.05	(0.37)
Finance costs	(0.03)	-
Net foreign exchange losses	(0.06)	(0.19)
Deferred tax	(0.64)	0.05
Capital loss	3.24	(0.90)
Total (net loss) / profit	4.33	(0.99)

NET ASSET VALUE

The Company’s unaudited Consolidated Net Asset Value decreased by £3.9 million during the quarter mainly due to the capital redemption (-£5.2 million), the result of the favourable movements in the Euro/Sterling exchange rate (+£2.3 million) and the net loss for the period (-1.0 million).

	Audited	Unaudited
	3 months ended 30 June 2015	3 months ended 30 September 2015
	£million	£million
Opening Net Asset Value	47.59	49.37
Net (loss) / profit after tax	4.33	(0.99)
Unrealised movement on derivatives	(6.20)	-
Share Redemption	(1.80)	(5.20)
Foreign exchange translation losses	5.45	2.26
Closing Net Asset Value	49.37	45.44

Net Asset Value per share as at 30 September 2015 was 59.82 pence (57.61 pence as at 30 June 2015).

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 and capital redemptions paid prior to 30 September 2015.

On a like-for-like basis the Euro valuation of the property portfolio decreased by 1.15% to €94.5 million for the quarter. In Sterling currency terms, the property valuation was £69.6 million and £67.7 million in June 2015 (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 September 2015 was 1.357 (30 June 2015: 1.412).

The Company’s net property yield on current market valuation (after acquisition and operating costs) as at 30 September 2015 was 8.82% (8.71% as at 30 June 2015).

SHARE PRICE AND DISCOUNT TO NET ASSET VALUE

As at close of business on 30 September 2015, the mid-market price of the Company’s shares on the London Stock Exchange was 50.00 pence, representing a discount of 16.4% to the Net Asset Value of 59.82 pence per share.

As at close of business on 26 November 2015, the mid-market price of the Company’s shares was 49.375 pence, representing a discount of 17.5% to the Company’s Net Asset Value at 30 September 2015.

FUND GEARING

During the quarter, the main facility balance decreased from €34.5 million to €34.0 million due to the loan reimbursement following the sale of the Altenstadt-Lindheim and Kraichtal assets (due to the exchange rate changes, the facility amount in Sterling has increased from £24.44 million to £25.04 million).

	Audited	Unaudited
	30 June 2015	30 September 2015	Movement
	£million /%	£million /%	£million /%
Property portfolio *	67.69	69.60	1.91 -2.7%
Borrowings**	24.44	25.04	0.60 -2.4%
Total gross gearing	36.1%	36.0%	-1.0 percentage points
Total net gearing	30.1%	31.6%	1.5 percentage points

*Portfolio value based on the Company's independent valuation (Agnadello included)

** Amortised issue costs excluded

Fund gearing is included to provide an indication of the overall indebtedness of the Company and does not relate to any covenant terms in the Company’s loan facilities.

Gross gearing is calculated as debt over property portfolio at fair value. Net gearing is calculated as debt less cash (cash held in JV included) over property portfolio at fair value.

LOAN FACILITIES

Gross Loan to Value (LTV) Covenants	Audited	Unaudited
	30 June 2015	30 September 2015	Maximum
Main loan facility	41.0%	41.2%	60.00%

As at 30 September 2015, the loan-to-value ratio on the main loan facility was 41.2% based on the Company’s independent valuation (Agnadello excluded). The loan has an LTV covenant of 60% through to its expiry in July 2016 although is expected to be reimbursed before this date (following the final asset disposal).

Interest Cover Ratio at 30 September 2015	Historic		Projected		Net rental income headroom
	(Unaudited)	Minimum	(Unaudited)	Minimum
Main loan facility covenant	300.20%	200.00%	314.80%	185.00%	41.6%

The Interest Cover Ratio (ICR) is calculated as net financing expense payable as a percentage of net rental income and movements in rental arrears. Net rental income headroom is based on projected interest cover.

CASH POSITION

The Company and its subsidiaries held total cash of £3.02 million (including cash held in Joint Venture) at 30 September 2015. The Company returned £5.2 million to Shareholders on 30 July 2015.

MATERIAL EVENTS

Except for those noted above, the Board of the Company is not aware of any significant event or transaction occurring between 30 September 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


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Investment Manager 
AXA Investment Managers UK Limited
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Broker
Stifel Nicolaus Europe Limited
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Neil Winward / Mark Bloomfield
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Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
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Les Banques
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GY1 3QL
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