Interim Management Statement

RNS Number : 1819M

AXA Property Trust Ld

19 May 2010

 

To:                    Company Announcements

Date:                19 May 2010

Company:         AXA Property Trust Limited

Subject:            Interim Management Statement 31 March 2010

CORPORATE SUMMARY

-     Documentation regarding the waiver of the existing Loan to Value breach of the loan facility with Credit Agricole has now been agreed.  Main terms of the waiver are included in the statement;

-     With the waiver finalised, discussions are now re-focussed on refinancing as soon as possible, with the main activity revolving around the current negative mark to market value of the long term forward rate hedging agreements.;

-     Net asset value rises by 3.1% for the quarter to end March 2010;

-     The third cash covered interim dividend of 0.75p due for payment on 28 May 2010;

-     Asset management initiative continues in Fuerth, Germany as planned and lettings and lease renewals continue at Dasing, Koethen and Bernau;

-     The investment manager is undertaking a strategic review of the portfolio allocation, with a particular focus on the significant exposure to Germany.

CONSOLIDATED PERFORMANCE SUMMARY (UNAUDITED)

	Unaudited	Unaudited
	6 months ended	9 months ended
	31 December 2009	31 March 2010	Quarterly Movement
	Pence per share	Pence per share	Pence per share /(%)
Net Asset Value per share	76.13	78.49	+2.36 (+3.1%)
Earnings per share	-10.65	-8.77	1.88
Dividend declared in the  period	1.50	2.25	0.75
Share price (mid market)	53.0	50.5	-2.5 (-4.72%)
Share price discount to Net Asset Value	30.4%	35.7%	+5.3 percentage pts

Total return	Unaudited	Unaudited
	6 months ended	9 months ended
	31 December 2009	31 March 2010
Net Asset Value Total Return	-7.0%	-3.3%
Share price Total Return
- AXA Property Trust	34.7%	30.1%
- FTSE All Share Index	29.1%	37.4%
- FTSE Real Estate Investment Trust Index*	36.3%	35.3%

*FTSE Real Estate Index is not available

Source: Datastream; AXA Real Estate

Total net profit was £1.88 million (1.88 pence per share) for the three months to 31 March 2010, including £0.84 million of "revenue" profit (excluding capital items such as revaluation of property) and £1.04 million "capital" profit analysed as follows:

	Unaudited	Unaudited	Unaudited
	6 months ended	9 months ended	3 months ended
	31 December 2009	31 March 2010	31 March 2010
	£million	£million	£million
Net property income	5.94	8.83	2.89
Investment Manager's fees	-0.64	-1.01	-0.37
Other income and expenses	-1.58	-2.03	-0.45
Net finance costs	-2.02	-2.97	-0.95
Current tax	-0.19	-0.47	-0.28
Revenue profit	1.51	2.35	0.84
Unrealised losses on revaluation of property	-7.70	-7.76	-0.06
Unrealised gain on revaluation of Porto Kali investment (loan receivable)	0.86	0.86	0.00
Unrealised (losses)/gains on derivatives (hedging interest rate and foreign exchange exposures)	-5.38	-3.94	1.44
Other income and expenses	0.01	0.01	0.00
Deferred tax	0.05	-0.29	-0.34
Capital (loss)/profit	-12.16	-11.12	1.04
Total net (loss)/profit	-10.65	-8.77	1.88

The Company's net property yield on current market valuation (after acquisition and operating costs) as at 31 March 2010 was 7.52% (7.50% as at 31 December 2009).

NET ASSET VALUE

The unaudited Company's Consolidated Net Asset Value per share of AXA Property Trust Limited (the "Company") as at 31 March 2010 was 78.49 pence (76.13 pence as at 31 December 2009).

The Net Asset Value attributable to the Ordinary Shares is calculated under International Financial Reporting Standards. It includes all current year income and is calculated after the deduction of dividends paid prior to 31 March 2010, but does not include provision for the quarterly interim dividend of 0.75 pence per share announced on 5 May 2010 and to be paid 28 May 2010.

The £2.36 million increase in Net Asset Value over the quarter ended 31 March 2010 can be analysed as follows:

	Unaudited	Unaudited
	9 months	3 months
	£million	£million
Opening Net Asset Value	1 July 2009	1 January 2010
	83.46	76.13
Net (loss)/profit	-8.77	1.88
Unrealised gains on derivatives	1.59	0.87
Dividends paid	-2.25	-0.75
Foreign exchange translation gains	4.46	0.36
Closing Net Asset Value 31 March 2010	78.49	78.49

During the quarter the Sterling valuation of the property portfolio increased by £0.56 million (0.4%) to £146.25 million. Excluding foreign exchange translation movements the portfolio valuation declined by £0.06 million (0.04%).

SHARE PRICE AND DISCOUNT TO NET ASSET VALUE

As at close of business on 31 March 2010, the mid market price of the Company's shares on the London Stock Exchange was 50.5 pence, representing a discount of 35.7% on the Company's Net Asset Value at 31 March 2010.

As at close of business on 18 May 2010, the mid market price of the Company's shares was 49.25 pence, representing a discount of 37.3% on the Company's Net Asset Value at 31 March 2010.

DIVIDENDS

The third interim dividend of 0.75 pence per share in respect of the year ending 30 June 2010 was declared on 5 May 2010, with an ex-dividend date of 12 May 2010, record date of 14 May 2010 and payment date of 28 May 2010. The cumulative interim dividends of £2.25 million declared in respect of the 9 months period ended 31 March 2010 were 104% covered by "revenue" profits and 141% covered by operating cash flow (excluding capital expenditure and foreign exchange).

STRATEGY AND MARKET

Country Allocation at 31 March 2010

Country                                     % of portfolio

Germany                                   59%

Netherlands                              20%

Italy                                           17%

Belgium                                     4%

Sector Allocation 31 March 2010

Sector                                       % of portfolio

Retail                                        58%

Industrial                                  18%

Office                                       15%

Leisure                                     9%

AXA Real Estate, the Company's Real Estate Adviser, believes that pricing in the Continental European real estate market has now reached a trough in many territories. While there remains downward pressure on rents in occupational markets, this has now largely been incorporated into market pricing.

In this environment, the Real Estate Adviser and AXA Investment Managers UK Limited (the Company's Investment Manager) continue to maintain their focus on rental income as a first priority.

The portfolio's income stream is well secured against strong tenant covenants and benefits from a low vacancy rate. The portfolio tenant base is weighted towards the defensive food retail sector and enjoys a weighted average lease length of 5.5 years. This figure is set to increase over 2010 as letting projects currently underway come to fruition.

FUND GEARING

	Unaudited	Unaudited
	31 December 2009	31 March 2010	Movement
	£million /%	£million /%	£million /%
Property portfolio	145.69	146.25	0.6 (0.4%)
Borrowings	77.87	78.20	0.33 (0.42%)
Total gross gearing excluding Porto Kali	53.4%	53.5%	0.1 percentage pts
Total net gearing excluding Porto Kali	41.3%	41.4%	0.1 percentage pts
Total gross gearing including Porto Kali	56.6%	56.6%	0.0 percentage pts

Fund gearing increased by 0.1 percentage points over the quarter to 53.5% as at 31 March 2010.

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 over property portfolio at fair value.

LOAN FACILITIES

Gross Loan to Value Covenants	Unaudited	Unaudited
	31 December 2009	31 March 2010	Maximum
Main loan facility	52.86%	53.1%	50.0%
Joint venture Property Trust Agnadello S.r.l.	59.6%	57.1%	65.0%
Consortium investment Porto Kali	74.32%	74.6%	80.0%

	Unaudited	Unaudited	Unaudited	Unaudited
Interest Cover Ratio at 31 March 2010	Historic	Minimum	Projected	Gross rental income headroom
Main loan facility covenant	318.0%	250.0%	743.8%	66.4%
Joint venture Property Trust Agnadello S.r.l.	301.7%	125.0%	392.8%	68.2%
Consortium investment Porto Kali	213.0%	120.0%	242.0%	37.7%

Interest Cover Ratio (ICR) is calculated as net financing expense payable as a percentage of gross rental income less movement in arrears. (In the case of Property Trust Agnadello, ICR is calculated as net financing expense payable as a percentage of net rental income less movement in arrears). Gross rental income headroom is based on projected interest cover.

MAIN LOAN FACILITY

Following the lapse of the of the Loan to Value ("LTV") waiver announced in the most recent Net Asset Value RNS (dated 9 February 2010), in May 2010 the Investment Manager has finalised terms for a waiver of the prevailing LTV breach with Credit Agricole Corporate & Investment Bank on the Company's £70.11 million (€78.6 million) long term debt facility.

The key terms of the waiver are as follows: 

a)   No paydown required to cure the existing LTV breach;

b)   LTV covenant increased from 50% to 55% until expiry of the loan facility on 3 April 2011;

c)   No further quarterly LTV testing until 30 November 2010;

d)   Security over the assets via mortgages (and other securities) to be given in favour of the lenders and;

e)   Increase in interest margin by 55 basis points based on the current market rate (from 0.85% to 1.40%).

The Board and the Investment Manager continue to seek the best refinancing terms for the Fund going forward. Negotiations with the lenders (Credit Agricole and Landesbank Berlin) on the refinancing, although protracted, have so far been positive and both parties are in the process of evaluating solutions. Having finalised the waiver the Investment Manager will now step up negotiations with the lenders in respect of a full refinancing of the loan facility. The board continue to review and monitor progress on the planned refinancing closely.

The Company and its subsidiaries held total cash of £17.56 million (€19.68 million) at 31 March 2010. £11.6 million (€13.0 million) cash is held on short term deposit to be realised as required for the capital expenditure programme and other cash requirements including £4.30 million (€4.8 million, previously budgeted at €5.3 million) committed for the development of the Company's retail asset in Fuerth, Germany which was announced in December 2009 (RNS dated 15 December 2009) and a further £1.50 million (€1.70 million) allocated but uncommitted to potential projects at Dasing, Koethen and Bernau.

The Company's loans with Credit Agricole are fully hedged at an average rate of 5.21% via interest rate swaps until July 2010 and then by interest rate caps at a strike rate of 4.50% until April 2011 when the loan facility expires.

OUTLOOK

As continental Europe emerges from recession the Investment Manager is undertaking a strategic review of portfolio allocation, with a focus on the significant exposure to Germany. The defensive retail properties held by the Company in Germany proved to be relatively resilient in terms of both value and income security during the recession. Looking forward the Investment Manager believes this sector continues to deserve a significant allocation, but also recognises that attractive opportunities now exist in other European territories. In particular opportunities are being examined in the industrial and office sectors in both France and Spain. In 2010 the Investment Manager aims to make selected disposals from the German portfolio. Disposal decisions will be based both on future return prospects, and the opportunity to maximise value creation following the successful completion of an asset management initiative.

AXA Real Estate continues to progress management projects across the portfolio. Construction at Fuerth is due to commence shortly following successful signing of a lease with the major supermarket anchor tenant and is due for delivery in January 2011. Further lettings and lease renewals are being negotiated with tenants at Fuerth as well as Dasing, Koethen and Bernau. Once finalised over the coming months, these lettings are expected to have a positive impact on total rental income, as well as significantly increasing the portfolio's weighted average lease length.

MATERIAL EVENTS

Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 31 December 2009 and the date of the publication of this Statement which would have a material impact on the financial position of the Company.

Company website:

http://www.axapropertytrust.com

All Enquiries:

Investment Manager 

AXA Investment Managers UK Limited

Neil Winward
8th Floor
155 Bishopsgate
London
EC2M 3XJ

Tel: [phone]
Email: [e-mail]

Sponsor and Broker

Oriel Securities Limited

Tom Durie

Tel: [phone]

Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

GY1 3QL

Tel: [phone]

Fax: [phone]

 

END

 

 

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