Interim Management Statement

RNS Number : 6623C

F&C Commercial Property Trust Ld

17 November 2009

 



F&C Commercial Property Trust Limited

Interim Management Statement

For the Three Month Period from 1 July 2009 to 30 September 2009

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 30 September 2009
Net asset value per share *	3.4%
Ordinary Share price	13.1%
Investment Property Databank UK Monthly Index	3.3%
FTSE All-Share Index	22.4%

Capital Values	As at  30 September  2009	As at  30 June  2009	% Change
Published net asset value per share *	77.0p	75.9p	+1.4
Ordinary Share price	83.5p	75.3p	+10.9
Investment Property Databank UK Monthly Index	128.16	126.62	+1.2
FTSE All-Share Index	2634.79	2172.08	+21.3
Premium/(discount) to published net asset value *	8.4%	(0.8)%
Gearing * #	30.4%	30.7%
Net gearing * $	15.0%	12.2%

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 Third Quarter

The property market has seen a sharp turnaround with the IPD Monthly Index measuring total returns of 3.3 per cent over the quarter to 30 September 2009, of which 1.8 per cent was recorded in September alone.

Investors' sentiment towards property is far more positive: "open ended" funds are now under pressure to increase direct property allocations due to renewed fund inflows from retail investors and institutions have re-entered the market. Investors are favouring well-located assets with long secure income streams but the definition of prime is broadening due to a lack of stock, and some investors are now becoming more open to risk, looking to purchase properties on shorter leases, but only where the fundamentals of location and building quality are supportive. Capitalisation rates for all sectors have moved in at the prime end, with retail warehouses having seen the largest correction, whilst across most sub-sectors secondary yields are now stabilising. Towards the end of the period, the market started to experience competitive, aggressive bidding for the available good quality stock, with a notable increase in the strength and depth of under-bidders. Numerous properties have also been withdrawn from the market by vendors, as any pressure to sell has reversed. There have been a number of capital-raisings to take advantage of market conditions, however, investment activity remains subdued with £6.3 billion transacted in the third quarter of 2009, primarily due to lack of available stock, but transaction levels are increasing and are up from the £4 billion quarterly lows of early 2009. In the indirect sector (unlisted securities) there is now evidence of secondary trading in certain funds and of the discounts to net asset values beginning to tighten in pricing.

There are, however, reasons to be cautious. The secondary market is still relatively weak and the economic recession has hit occupier demand, rents and income streams across all sub-sectors. The lack of bank finance in the market will continue to affect activity levels from debt-backed purchasers as new bank lending to property is expected to remain constrained, whilst indebted investors may find banks less tolerant to income covenant breaches. Any tightening of monetary policy would have negative consequences for property.

The IPD UK Monthly Index recorded a capital increase of 1.2 per cent over the period. In comparison the Company's direct property portfolio increased in value by an ungeared 1.8 per cent (accounting for capital expenditure and purchase costs). The direct portfolio produced a total return of 3.6 per cent compared with the 3.3 per cent total return from the IPD Monthly Index.

The focus of activity for the Company over the period has been the acquisition of direct property. As previously announced, in July the Company completed its first purchase since its launch in March 2005: Site E4, Daventry International Rail Freight Terminal ('DIRFT') Logistics Park for £17.25 million representing a net initial yield of 9.05 per cent. Since the end of the period the Company has completed acquisitions in the industrial/logistics sector with the purchase of three separate distribution warehouses at Hams Hall National Distribution Centre, Birmingham at, in the aggregate, a total purchase price of £34.85 million and a net initial yield of 9.0 per cent.  

These acquisitions are in accordance with the Company's strategy to increase its weighting to the industrial and logistics sector which, as a result, has increased to approximately 13 per cent.

During the period the Company continued to let vacant accommodation. In Central London the second floor (1,909 sq ft) of 6/8 James Street, London W1 was let to Target Corporation at a rent of £75,405 per annum (£39.00 psf) for a term of 10 years with a break at year five. The refurbished second floor of Charles House, 5-11 Regent Street, London SW1 (4,692 sq ft) was let to Lunson Mitchenall at a commencing rent of £185,334 per annum (£39.50 psf) for a term of 10 years with a break at year six. In both lettings rent-frees and incentives commensurate with the market were granted to the tenants. At St. Christopher's Place Estate, London W1 the letting of two shops to Kookai and Adili (trading as Ascension) contracted at a combined rent of £130,000 per annum on flexible leases for terms of five years. Unit 8 at Newbury Retail Park has been the subject of asset management initiatives to split the 10,000 sq ft unit and to secure a change of use. Planning consent was granted for these initiatives and a letting contracted to Peacocks (7,825 sq ft) at a rent of £195,625 per annum (£25 psf) for a 10 year term. Heads of terms are agreed with the remaining unit (1,800 sq ft) with a well-known multiple retailer and it is expected that this letting will contract shortly.

At 30 September 2009 the void rate (excluding properties held or in the process of development) in the portfolio was 2.5 per cent, having improved from 4.0 per cent as at 30 June 2009 as a result of the key initiatives detailed above. At the end of the quarter the Company's largest void exposure was at 82 King Street, Manchester where there are currently three vacant floors. This property is currently the subject of a refurbishment of the entrance hall and common areas and, as a result of these enhancements, the property will be re-launched to the market. The Company's void rate remains significantly below the IPD average of 12 per cent (source IPD Monthly Index September 2009). The portfolio saw no significant tenant defaults over the period.  

Dividends

Monthly interim dividends for the year ending 31 December 2009, each of 0.5 pence per share, were paid on 31 July, 28 August and 25 September 2009. 

Group Reconstruction

On 5 June 2009, a prospectus and an offer document were sent to shareholders containing details of proposals to introduce a new listed holding company, now called F&C Commercial Property Trust Limited (previously called New FCPT Limited), which was incorporated for the purpose of making an offer to acquire all of the Company's issued shares. The offer became unconditional on 3 July 2009 and, on 7 July 2009, the shares of the new holding company were admitted to listing on the Official List of the UKLA and to trading on the main market of the London Stock Exchange. 

Also on 7 July 2009, the listing of the shares of the old holding company, now called FCPT Holdings Limited, on the Official Lists of the UKLA and the Channel Islands Stock Exchange, and the trading in its shares on the London Stock Exchange and the Channel Islands Stock Exchange, were suspended. The listings were cancelled on 4 August 2009. 

Under the offer, shareholders were offered one new share in the new listed holding company for each share in the old listed company. The effect of the transaction was that, during the period under review, the company now called F&C Commercial Property Trust Limited became the new holding company of the Group with the same Board of Directors.  

On 9 November 2009 the Board announced that, pursuant to the statutory compulsory acquisition procedure under Guernsey law, F&C Commercial Property Trust Limited had acquired 100 per cent of the issued share capital of FCPT Holdings Limited, and that the offer was therefore closed and was no longer capable of acceptance.  

This Interim Management Statement has been prepared incorporating comparative figures relating to FCPT Holdings Limited as at 30 June 2009.

  Board Composition and EGM

At an extraordinary general meeting of the Company held on 29 October 2009, a special resolution to approve a change to the Company's articles of incorporation to enable UK resident directors to be appointed as Chairman was approved. 

Consequently, John Stephen was appointed as Chairman of the Company with effect from 31 October 2009. The Company's previous Chairman, Peter Niven, stepped down as Chairman on 31 October 2009 and will continue as a Director. 

Also on 31 October 2009, two independent non-executive Directors, Jonathan Hooley and Chris Russell, were appointed, and Donald Adamson retired as a Director of the Company. 

Top Ten Holdings 

Property	Sector	30/09/2009 Percentage of portfolio
London W1, St Christopher's Place Estate	Retail	16.1
Newbury, Newbury Retail Park	Retail Warehouse	8.4
Solihull, Sears Retail Park	Retail Warehouse	7.0
London SW1, Cassini House, St James's Street	Offices	6.9
London SW19, Wimbledon Broadway	Retail	6.7
London SW1, 84 Eccleston Square	Offices	5.9
Uxbridge, 3 The Square, Stockley Park	Offices	5.0
Rochdale, Dane Street	Retail Warehouse	4.7
London SW1, Charles House, 5-11 Regent Street	Offices	4.1
Glasgow, Alhambra House, Wellington Street	Offices	3.9
Total		68.7

Geographical Analysis 

Location	30/09/2009 Percentage of portfolio		30/06/2009 Percentage of portfolio
London - West End	39.3		40.0
South East	30.3		31.7
North West	8.1		8.4
Midlands	9.7		7.0
Scotland	7.0		7.1
Eastern	2.6		2.7
Yorkshire and Humberside	1.4		1.5
Rest of London	1.0		1.0
Indirect	0.6		0.6
Total	100.0		100.0

  Sector Analysis 

Sector	30/09/2009 Percentage of portfolio		30/06/2009 Percentage of portfolio
Offices	44.2		45.4
Retail	27.8		28.6
Retail Warehouse	20.0		20.4
Industrial	8.0		5.6
Total	100.0		100.0

Except as disclosed above, the Board is not aware of any significant events or transactions which have occurred since 30 September 2009 and the date of publication of this statement which would have a material impact on the financial position of the Company. 

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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