To:
Company Announcements
Date:
31 August 2016
Company: AXA
Property Trust Limited
Subject:
Net Asset Value 30 June 2016
(Unaudited)
CAPITAL REDEMPTION
- During the Financial year ending
30 June 2016 the Company returned
£16.2 million capital to Shareholders (£5.2 million on 30 July 2015 and £11.0 million on 6 January 2016) bringing the total capital
returned to Shareholders to £42.4 million.
- Under the terms of the extension of
the Company’s debt facility from 1 July
2016 to 31 December 2016, net
sales proceeds and rents from the portfolio will be used to repay
the debt in priority to shareholder distributions.
CORPORATE SUMMARY
- The Company’s unaudited Consolidated
Net Asset Value as at 30 June 2016
was £39.63 million and the NAV per share was 68.82 pence per share. This reflects an increase
of £1.08 million (1.87 pence per
share) compared to 31 March 2016 when
the Consolidated Net Asset Value was £38.55 million (66.95 pence per share);
- The Company and its subsidiaries made
a profit after tax of £2.30 million for the twelve month period
ended 30 June 2016 and £0.72 million
in the three month period ended 30 June
2016.
MANAGED WIND-DOWN STATUS
- The Company continues to progress the
managed wind-down of its portfolio with a view to realising its
investments in a manner that achieves a balance between maximising
the value from the Company's investments and making timely returns
of capital to shareholders.
- During the Year ended 30 June 2016 the Trust completed the sale of the
asset in Venray, The Netherlands
and of the asset in Fuerth, Germany.
- During the quarter ending 30 June 2016 contracts were signed for the sale
of the Dasing asset. The sale was completed post-quarter and the
net disposal proceeds received on the 25
August 2016 have been allocated to the reimbursement of the
debt.
- Of the remaining [three] assets,
during the quarter ending 30 June
2016 asset management initiatives continued on the
Rothenburg asset in order to prepare the asset for sale, and
marketing commenced post-quarter.
- The two Italian assets continued to be
marketed on an individual basis.
- Year end 2016 has been the target for
the completion of all sales, however at present it is considered
that the sales programme of the remaining assets is more likely to
complete in the first half of 2017.
PORTFOLIO UPDATE
Country Allocation at 30 June 2016
(by value)
Country
% of portfolio
Germany
53%
Italy
47%
Sector Allocation at 30 June 2016
(by value)
Sector
% of portfolio
Retail
40%
Industrial
34%
Leisure
26%
MARKET UPDATE
Eurozone – Economic environment
Eurozone real gross domestic product grew by 0.6%
Quarter-on-Quarter (QoQ) in Q1 2016, more than expected. Growth was
principally driven by unexpected improvements in private spending
and investment activity. The contribution of net exports continued
however to be negative for the third quarter in a row. Among major
Eurozone countries, Spain showed
the strongest GDP growth (+0.8% QoQ), followed by Germany (+0.7% QoQ) and France (+0.6% QoQ). Italy’s growth was
moderate, although positive and in slight acceleration (+0.3%
QoQ).
Domestic demand is expected to remain the key driver of Eurozone
growth; external demand, given recent economic difficulties faced
by emerging markets, does represent a potential drag on expansion.
Improvements in employment and earnings, as well as subdued
inflation continue supporting disposable household income and thus
private consumption. In Q2 2016 consumption is estimated to have
marginally slowed (+0.3% QoQ), as some temporary effects faded
away. Over the rest of 2016, consumption is expected to continue
its recent trend rate (+0.4% QoQ) resulting, according to Ifo,
INSEE and Istat, in an overall growth rate of 1.7%.
Eurozone growth in investment amounted to +0.8% QoQ in Q1, but
is, according to Ifo, expected to decelerate to +0.5% QoQ in Q2
2016, along with the general slowdown in economic activity.
Productive investment is likely to be supported by steady
improvements in activity and the financial situation of businesses.
Furthermore, the new ECB Corporate Sector Purchase Programme should
continue easing already favourable financing conditions.
Accordingly, investment is expected to gradually accelerate.
The result of the UK referendum has inevitably increased
uncertainty over economic growth prospects in the Eurozone: while
the short run impact on the activity of the area, via the trade
channel, should be limited until Q4 2016, the medium term effect
strongly depends upon the timing of the UK’s exit and the future
trade agreements to be negotiated between UK and the EU.
All in all, Eurozone GDP is, according to Ifo, INSEE and Istat,
expected to expand by 0.3% in Q2 2016 and by 0.4% in Q3. In Q4 the
BREXIT effects are likely to drive slowdown in momentum reducing
annual average GDP growth for the year to nearer 1.6% , slightly
weaker than growth seen in 2015 (+1.7%). Under the assumption that
oil prices remain stable at $49 per
barrel, and the Dollar/Euro exchange rate fluctuates around
1.12 USD per EUR, inflation is
expected to moderately increase during the rest of the year,
bringing the annual average to +0.3%.
The German economy had a positive start to 2016, with Q1 GDP
growth accelerating materially compared to late 2015. The
industrial sector showed strong momentum in January, a notable loss
in momentum was however visible throughout Q1 2016. The German
economy grew at a seasonally-adjusted 0.7% QoQ in Q1 2016,
accelerating from a 0.3% QoQ expansion in the previous quarter.
Growth was mainly driven by household spending with foreign trade
having a slight downward effect on growth. After a weak start to
the second quarter, German business sentiment improved, with the
Ifo Business Climate Index rising to 108.7 points in June from
107.8 points in May (seasonally adjusted). The German economy
is expected to continue rebalancing over the
coming years and both private and government consumption
should remain key drivers for growth. Rising wage costs are likely
however to place pressure on company profit margins.
The Italian economy grew by 0.3% QoQ in the three months to
March of 2016 compared to a 0.2% QoQ expansion in the previous
period. Growth was mainly driven by household expenditure and an
accumulation of inventories, counter balanced by a slump in
exports. Overall, GDP grew by 1.0% YoY in Q1 2016. The
constitutional referendum, taking place in late 2016 represents a
key risk to the economic outlook and Prime Minister Matteo Renzi has pledged to resign if he loses
the referendum. The latest polls suggest the outcome is finely
balanced and a resignation by Matteo
Renzi could, given most recent polls, potentially lead to
the Five Star Movement winning an absolute majority in subsequent
general elections. A period of uncertainty and a further delay in
the implementation of crucial reforms would most likely dampen
prospective economic growth. Furthermore, a high stock of
non-performing loans on Italian banks’ balance sheets present
further shock risks to the economy with many retail investors
exposed to these instruments believing them to be a secure as bank
deposits.
Italian Logistics Market
According to CBRE and as at Q2 2016, prime rents stand at
€52.00/sq m/year in Rome and at
50/sq m/year in Milan. RCA
reported real estate investment volumes into the industrial
[sector?] of €246m over Q2, this excluding the €535m sale
concerning 300 Enel buildings. The quarter also saw a slight
decrease in prime yields to 6.4%, both in Milan and Rome, representing a decline of 10bps QoQ in
both cases. According to CBRE, yields are now down 60bps compared
to Q2 2015 in both city markets reflecting increased demand from
international investors.
German Retail Market
The first half of 2016 saw the signing of retail lease contracts
representing over 236,500 sq m of retail space, broadly similar to
levels seen in the first half of 2015. More than two-thirds of all
rental contracts were concluded by international retailers.
According to CBRE German prime retail rents remained largely stable
over the second quarter of 2016 although Berlin recorded prime rental growth of 1.5%.
Retail real estate investment volumes amounted to approximately
€4.1bn in the first half of 2016 whilst JLL recorded prime high
street yields in the Big 7 centres at 3.70% following a further,
albeit slight, decline (by 5 basis points). Yields for shopping
centres and retail parks fell by 15 basis points respectively to
4.10% and 5.10%.
German Logistics Market
During the first six months of 2016, Germany saw a logistics and industrial take up
of on aggregate 3.3m sq m with the second quarter being the
strongest quarterly result ever recorded. Occupier and developers
are particularly active in secondary locations with nearly all of
the deals exceeding 20,000 sq m having taken place in these
locations. Overall, CBRE expects an all-time record take-up of 6.5m
sq m for 2016. Prime rents remained stable year-on-year, with the
exceptions of Munich and
Berlin where both markets recorded
significant rent increases of approximately 3.3% and 0.9%
respectively. At €2.1bn, the transaction volume for German
logistics properties over the first two quarters of 2016 has
exceeded the previous entire year's volume by 45% and recorded a
new half-year record. The lack of prime products increasingly
results in a shift of investors to a riskier set of existing
properties as well as locations outside the top investment
locations. The gross initial yield in the prime segment of the top
markets declined by 65 basis points over the last 12 months to an
average of 5.65%. Munich and
Berlin saw prime yields of 5.3%
and 5.4% respectively. Smaller cities, such as Bremen, Leipzig, Kassel and Nuremberg, saw yields
standing at 5.85%.
CONSOLIDATED PERFORMANCE SUMMARY
|
Unaudited |
Unaudited |
|
|
|
9
months ended |
12
months ended |
|
|
|
31
March 2016 |
30 June
2016 |
Quarterly Movement |
|
Pence
per share |
Pence
per
share |
Pence per share /(%) |
Net Asset Value per
share |
66.95 |
68.82 |
1.87 |
2.80% |
Share price
(mid-market) |
53.88 |
55.13 |
1.25 |
2.32% |
Share price discount
to Net Asset
Value |
19.5% |
19.9% |
0.4 percentage points |
Total Return per
Share |
Audited |
Unaudited |
|
12
months ended |
12
months ended |
|
30 June
2015 |
30 June
2016 |
Net Asset Value Total
Return |
-5.4% |
13.1% |
Share Price Total
Return |
|
|
- AXA Property
Trust |
10.5% |
29.6% |
- FTSE All Share
Index |
2.6% |
2.2% |
- FTSE Real Estate
Investment Trust Index |
19.5% |
-8.3% |
Source:
AXA Investment Managers UK Limited and Stifel Nicolaus Europe
Limited. |
Total net profit was £2.30 million (2.11
pence per share) for the twelve months to 30 June 2016, including -£1.43 million of
“revenue” loss (excluding capital items such as revaluation of
property) and £3.73 million “capital” gain, analysed as
follows:
|
Unaudited |
Unaudited |
Unaudited |
|
9
months ended |
3
months ended |
12
months ended |
|
31
March 2016 |
30
June 2016 |
30
June 2016 |
|
£million |
£million |
£million |
Net property
income |
2.27 |
(0.23) |
2.04 |
Net foreign exchange
(losses) / gains |
(0.30) |
0.10 |
(0.20) |
Investment Manager's
fees |
(0.26) |
0.04 |
(0.22) |
Other income and
expenses
|
(2.28) |
0.01 |
(2.27) |
Net finance
costs |
(0.65) |
(0.13) |
(0.78) |
Revenue
loss |
(1.23) |
(0.21) |
(1.43) |
|
|
|
|
Unrealised / gains on
revaluation of investment properties |
1.39 |
0.84 |
2.24 |
Net gain on disposal
of investment properties |
1.08 |
0.02 |
1.10 |
Net gains on
derivatives |
0.53 |
0.11 |
0.63 |
Share in losses of
Joint Venture |
(0.21) |
(0.11) |
(0.32) |
Finance costs |
(0.00) |
(0.00) |
(0.00) |
Net foreign exchange
losses |
(0.02) |
- |
(0.02) |
Deferred
tax
|
0.03 |
0.07 |
0.11 |
Capital
profit |
2.81 |
0.93 |
3.73 |
|
|
|
|
Total
profit |
1.58 |
0.72 |
2.30 |
NET ASSET VALUE
The Company’s unaudited Consolidated Net Asset Value as at
30 June 2016 was £39.63 million
(68.82 pence per share) an increase
of £1.08 million compared to Net Asset Value as at 31 March 2016 of £38.55 million.
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
paid prior to 30 June 2016.
The £1.08 million increase in Net Asset Value over the quarter
ended 30 June 2016 can be analysed as
follows:
|
Unaudited |
Unaudited |
Unaudited |
|
9
months ended |
3
months ended |
12
months ended |
|
31
March 2016 |
30 June
2016 |
30 June
2016 |
|
£million |
£million |
£million |
Opening Net Asset
Value |
49.37 |
38.55 |
49.37 |
Net
(loss) / profit after tax |
1.58 |
0.72 |
2.30 |
Unrealised movement on
derivatives |
0.57 |
0.18 |
0.75 |
Share
Redemption |
(16.19) |
0.00 |
(16.19) |
Foreign
exchange translation losses |
3.23 |
0.17 |
3.40 |
Closing Net Asset
Value |
38.55 |
39.63 |
39.63 |
On a like-for-like basis the Euro valuation of the property
portfolio decreased by 1.31% to EUR 56.30
million for the quarter. In Sterling currency terms, the
property valuation was £46.79 million (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 June 2016 was 1.20 (31 March 2016: 1.26).
SHARE PRICE AND DISCOUNT TO NET ASSET VALUE
As at close of business on 30 June
2016, the mid-market price of the Company’s shares on the
London Stock Exchange was 53.13
pence, representing a discount of 19.9% on the Company’s Net
Asset Value at 30 June 2016.
As at close of business on 30 August
2016, the mid market price of the Company’s shares was
56.12 pence, representing a discount
of 18.5% on the Company’s Net Asset Value at 30 June 2016.
FUND GEARING
|
Unaudited |
Unaudited |
|
|
31
March 2016 |
30 June
2016 |
Movement |
|
£million / % |
£million / % |
£million / % |
Property portfolio
* |
45.23 |
46.79 |
1.56
3.3% |
Borrowings |
14.24 |
14.93 |
0.69
4.6% |
Total gross
gearing |
31.5% |
31.9% |
0.4
percentage points |
Total net gearing
** |
27.2% |
26.5% |
-0.8
percentage points |
* Based on
the portfolio’s independent market valuation, including that of the
Company’s share in the Agnadello property |
|
** Net
Gearing is calculated as overall debt, net of unallocated cash held
by the Group over the portfolio at fair value |
The variation of the amount of borrowings is due to foreign
exchange impacts. No debt reimbursement or drawing occurred during
the quarter.
In view of the targeted disposal timetable for the Company’s
remaining real estate assets AXA Property Trust concluded an
extension of the Company’s loan facility until 31st
December 2016. Under the terms of the
extension disposal proceeds and net rents will be allocated to debt
reimbursement in priority to shareholder distribution.
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 unallocated cash over property
portfolio at fair value.
As the wind down progresses, the level of gearing will continue
to decrease as proceeds from sales are used to reduce debt over the
next 6 months.
LOAN FACILITIES
Gross Loan to Value
(LTV) Covenants |
Unaudited |
Unaudited |
|
|
31
March 2016 |
30 June
2016 |
Maximum |
Main loan
facility |
42.6% |
42.6% |
60.00% |
As at 30 June 2016, the
loan-to-value ratio on the main facility was 42.6% based on the
bank’s independent valuation of the property portfolio.
Interest
Cover Ratio at 30 June 2016 |
Historic |
Minimum |
Projected |
Minimum |
(Unaudited) |
(Unaudited) |
Main loan facility
covenant |
332.0% |
200.0% |
297.3% |
185.00% |
Interest Cover Ratio (ICR) is calculated as net financing
expense payable as a percentage of net rental income less movement
in arrears.
CASH POSITION AND CAPITAL EXPENDITURE
£9.44 million cash was held by the Group, including the
Company’s share of the cash in the Agnadello JV as at 30 June 2016.
The Company is currently holding £5.8 million (€7.0 million) as
reserve to cover any potential claim on Representations &
Warranties granted on assets which have previously been sold. It is
intended that a master insurance policy will be secured to cover
these potential obligations and when this is concluded these funds
will largely be available for the reimbursement of the outstanding
debt facility.
MATERIAL EVENTS
The disposal proceeds of Dasing were received on the
25th August 2016 in the
amount of €7.45 million. After disposal and ancillary expenses €6.5
million will be allocated to the loan reimbursement and other
financing costs.
Except for those noted above, the Board of the Company is not
aware of any significant event or transaction which occurred
between 30 June 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
All Enquiries:
Real Estate Adviser
AXA Real Estate Investment Managers UK Limited
Broker Services
7 Newgate Street
London EC1A 7NX
Tel: +44 (0)20 7003 2345
Email: broker.services@axa-im.com
Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Tel: +44 (0)20 7710 7600
Company Secretary
Northern Trust International Fund Administration Services
(Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
GY1 3QL
Tel: +44 (0)1481 745324