FINANCIAL RESULTS FOR THE HALF YEAR AND QUARTER ENDED 30 JUNE 2009
(Thomson Reuters ONE) - Eurocastle Investment Limited today announced its financial resultsfor the half year and quarter ended 30 June 2009. The Company and itssubsidiaries ("the Group") has Euro denominated shares which arecurrently listed on Euronext Amsterdam, under the symbol "ECT" and onthe Frankfurt Stock Exchange, under the symbol "EUI1". Eurocastle ismanaged by an affiliate of Fortress Investment Group LLC. For moreinformation regarding Eurocastle and to be added to our emaildistribution list, please visit www.eurocastleinv.com. HighlightsFinancial * Normalised FFO* was ?8.7 million or ?0.14 per share for the quarter ended 30 June 2009 and ?21.7 million or ?0.36 per share for the half year ended 30 June 2009, compared with ?21.5 million or ?0.34 per share and ?43.4 million or ?0.68 per share for the quarter and half year ended 30 June 2008, respectively. * Fully diluted NAV per share of ?2.14 as at 30 June 2009 comprising of (?0.12) for the debt investment business and ?2.26 for the commercial property portfolio (31 December 2008: ?13.35 comprising ?0.27 for the debt investment business and ?13.62 for the commercial property portfolio). The fully diluted NAV, adjusted for the full impact of the refinancing of the Mars portfolio (which was completed on 27 May 2009) is ?1.79 per share. * Real estate NAV of ?595 million and NAV per fully diluted share of ?1.91 adjusted for the full impact of the Mars Portfolio refinancing, reflecting a NOI yield on valuation of 5.9%. * Net loss after tax was ?85.1 million for the quarter ended 30 June 2009 and ?247.6 million for the half year ended 30 June 2009, compared with a loss of ?31.6 million and ?115.7 million for the quarter ended and half year ended 30 June 2008. The losses primarily relate to non-cash valuation adjustments to our portfolio.Business Review * Sold three properties during the second quarter of 2009, for total sales proceeds of ?5.2 million, compared to carrying value of ?4.6 million. For the first half of 2009, sold 11 properties for sales proceeds of ?105.3 million, compared to carrying value of ?108.7 million. * During the second quarter 2009 the Group signed 71 commercial leases for approximately 39,000 square metres, including new leases for approximately 20,000 square metres. For the first six months of 2009, the Group signed 152 commercial leases for approximately 70,000 square metres, including new leases for approximately 41,000 square metres. * Total lettable space was 2.1 million square metres at 30 June 2009 with occupancy of 85.8% as compared to occupancy of 85.7% at 31 March 2009 on a like for like basis. Lettable space excluding the Mars portfolio was 1.4 million square metres at 30 June 2009 with occupancy of 91.4%, slightly higher than 91.2% as at 31 March 2009. Mars portfolio lettable space had 720 thousand square metres at 30 June 2009 with occupancy of 75.2%, unchanged on the quarter.* Normalised FFO (Funds from Operations) is a non-IFRS financialmeasure used to provide investors with information regarding the trueunderlying performance of the Group and its ability to service debtand make capital expenditure. This measure excludes realised losses,sales related costs (including realised swap losses), impairmentlosses, foreign exchange movements, and accounting adjustmentsrelated to the Mars refinancing.Financing and Liquidity * As at 30 June 2009, the Company had a corporate cash balance of ?8.6 million. * The Company raised ?75 million in perpetual subordinated convertible securities at the end of June 2009. The net proceeds of ?73.8 million were used to pay down the Corporate Loan from ?115 million to ?35 million. The terms of the perpetual subordinated convertible securities are contained in the Note 17 to the Interim Consolidated Financial Statements. * As at 30 June 2009 the Group has two material short to medium term recourse obligations totalling ?65 million comprised as follows: * A ?35 million corporate loan facility maturing on 30 June 2011 with scheduled amortisations of ?15 million by 31 December 2010 and ?20 million by 30 June 2011, and * A guarantee obligation limited to ?30 million in respect of an acquisition facility which matures on 30 September 2009. The Company is in discussions with the lender of this facility over a potential restructuring. * The Group repurchased ?121.2 million of senior liabilities in CDO V with restricted cash within the CDO at an average price of 56.9, realising a net book gain of ?51.1 million.Conference CallManagement will conduct a conference call today, 13 August 2009, toreview the Group's financial results for the half year and quarterended 30 June 2009. The conference call is scheduled for 1:00 P.M.London time (8:00 A.M. New York time). All interested parties arewelcome to participate on the live call. You can access theconference call by dialling +1-877-717-3044 (from within the U.S.) or+1-706-679-1521 (from outside of the U.S.) ten minutes prior to thescheduled start of the call; please reference "Eurocastle SecondQuarter Earnings Call."A webcast of the conference call will be available to the public on alisten-only basis at www.eurocastleinv.com. Please allow extra timeprior to the call to visit the site and download the necessarysoftware required to listen to the internet broadcast. A replay ofthe webcast will be available for three months following the call.For those who are not available to listen to the live call, a replaywill be available until 11:59 P.M. New York time on Thursday, 20August 2009 by dialing +1-800-642-1687 (from within the U.S.) or+1-706-645-9291 (from outside of the U.S.); please reference accesscode "24181665."Forward-Looking StatementsThis release contains statements that constitute forward-lookingstatements. Such forward-looking statements relate to, among otherthings, future commitments to acquire real estate and achievement ofacquisition targets, availability of attractive investmentopportunities, methods of funding portfolios, timing of completion ofacquisitions, the operating performance of our investments andfinancing needs. Forward-looking statements are generallyidentifiable by use of forward-looking terminology such as "may","will", "should", "potential", "intend", "expect", "endeavour","seek", "anticipate", "estimate", "overestimate", "underestimate","believe", "could", "project", "predict", "continue", "plan","forecast" or other similar words or expressions. Forward-lookingstatements are based on certain assumptions, discuss futureexpectations, describe future plans and strategies, containprojections of results of operations or of financial condition orstate other forward-looking information. Our ability to predictresults or the actual effect of future plans or strategies islimited. Although we believe that the expectations reflected in suchforward-looking statements are based on reasonable assumptions, ouractual results and performance may differ materially from those setforth in the forward-looking statements. These forward-lookingstatements are subject to risks, uncertainties and other factors thatmay cause our actual results in future periods to differ materiallyfrom forecasted results or stated expectations, including the riskthat Eurocastle will be able to achieve its targets regarding assetdisposals or reduction in capital expenditure or that Eurocastle willbe able to fund its direct recourse liabilities. Key Financial InformationIncome StatementData in ?'000, except Six months Six months Three months Three monthsper share data ended ended ended ended(Unaudited) 30 June 2009 30 June 2008 30 June 2009 30 June 2008Interest income 41,543 76,473 16,752 38,427Rental income 125,989 149,422 62,755 74,426(Decrease) infair value ofinvestmentproperties (203,026) (164,281) (72,655) (64,445)Impairment losses (113,434) - (73,594) -Interest expense (114,443) (142,255) (57,241) (66,834)Service chargesand propertyoperatingexpenses (44,431) (42,905) (21,968) (22,086)Other operatingexpenses (20,299) (23,833) (9,512) (15,116)Net (loss) beforetaxation (253,077) (118,407) (87,824) (32,958)Net (loss) aftertaxation (247,552) (115,706) (85,095) (31,574)Funds fromoperations("FFO") (52,695) 55,111 (16,971) 32,464Normalised fundsfrom operations 21,653 43,440 8,659 21,533(Loss) perweighted averagebasic share (4.08) (1.81) (1.40) (0.49)(Loss) perweighted averagediluted share (3.59) (1.81) (1.10) (0.49)FFO per weightedaverage basicshare (0.87) 0.86 (0.28) 0.51FFO per weightedaverage dilutedshare (0.76) 0.86 (0.22) 0.51Normalised FFOper weightedaverage basicshare 0.36 0.68 0.14 0.34Normalised FFOper weightedaverage dilutedshare 0.31 0.68 0.11 0.34Weighted averagenumber ofordinary shares,outstanding,basic 60,731,845 63,927,634 60,732,042 63,927,634Dilutive effectof ordinary shareoptions andconvertiblebonds* 8,287,293 124,744 16,483,516 -Weighted averagenumber ofordinary sharesoutstanding,diluted 69,019,138 64,052,378 77,215,558 63,927,634Ordinary sharesoutstanding 60,735,646 63,927,643 60,735,646 63,927,634Fully dilutedordinary sharesoutstanding* 310,735,646 63,927,643 310,735,646 63,927,634* For the quarter and half-year ended 30 June 2009, fully dilutedordinary shares represent the impact of converting ?75,000,000 ofconvertible bonds at ?0.30 per share. The weighted average dilutiveeffect at the quarter and half year ended 30 June 2009 comprises atime weighting of the impact of fully converting the bonds againstthe relative periods from 25 June 2009, the date of issue of thebonds.Summarised Balance Sheet 30 June 2009(in ?'000, except per share data) (Unaudited) 31 December 2008Cash and cash equivalents 105,329 119,869Investment property (includingproperties held for sale) 3,922,084 4,230,111Debt investments 1,634,206 1,733,942Other assets 115,401 164,387Total assets 5,777,020 6,248,309Interest bearing debt financing (4,993,817) (5,300,880)Other liabilities (119,295) (136,377)Total liabilities (5,113,112) (5,437,257)Net assets 663,908 811,052Net assets per fully diluted share 2.14 13.35 Three Three months months Six months Six months ended endedFFO Reconciliation ended ended 30 June 30 June ?'000 (Unaudited) 30 June 2009 30 June 2008 2009 2008Reconciliation of FFO tonet loss after taxationNet (loss) / profit aftertaxation (247,552) (115,706) (85,095) (31,574)Decrease / (increase) infair value of investmentproperties 203,026 164,281 72,655 64,445Decrease / (increase) infair value of interestrate swaps 764 1,216 (1,760) (8,842)Unrealised movements oncurrency swaps (net oftranslation (gains) /losses on related assets) (705) (230) (769) 1,214Realised (loss) on saleof investment properties (2,351) 8,960 1,014 8,960Deferred tax (benefit) /charge on investmentproperties (5,877) (3,410) (3,016) (1,739)Funds from operations(FFO) (52,695) 55,111 (16,971) 32,464Net realised losses /(gains) on investmentproperty sales aftersales costs and closureof swaps 5,351 (10,537) (63) (10,537)(Gains) / losses onforeign currencycontracts, translationand swaps (1,388) 553 (3,063) 184Impairment losses 113,434 - 73,594 -Realised loss on sale ofAvailable for Salesecurities 3,744 269 1,347 269Amortisation of cost ofMars Refinancing 2,834 - 2,834 -Interest rate swapadjustments 1,520 (1,956) 2,128 (847)Gain on repurchase ofdebt in CDO V (51,147) - (51,147) -Normalised FFO 21,653 43,440 8,659 21,533 Financial ReviewFunds from operations (FFO)FFO and Normalised FFO are appropriate measures of underlyingoperating performance of companies primarily involved in real estateas it provides investors with information regarding the Group'sability to service debt and make capital expenditure.The table below shows the summarised financial data of the Group'sbusiness segments with the unallocated amounts per Note 22 allocatedbetween the segments on the basis disclosed below the table. Thesegmental analysis prepared according to IFRS has been disclosed inNote 22.Income statement data Debt Investment TotalQuarter ended 30 June 2009 investments properties Eurocastle(Unaudited) ?'000 ?'000 ?'000Revenue 16,616 75,138 91,754Other operating gains / (losses) 51,147 (72,242) (21,095)Impairment losses (73,594) - (73,594)Interest expense (11,300) (45,941) (57,241)Service charge and propertyoperating expenses - (21,968) (21,968)Other operating income / (expenses)(including foreign currencygains/(losses))[1] 2,554 (8,234) (5,680)Operating (loss) before taxation (14,577) (73,247) (87,824)Taxation credit/(expense) - 2,729 2,729Net (loss) (14,577) (70,518) (85,095)Decrease / (increase) in fairvalues (769) 70,895 70,126Realised gains on sale - 1,014 1,014Deferred tax - (3,016) (3,016)Funds from operations (15,346) (1,625) (16,971)Net realised gain on investmentproperty sales after sales costsand closure of swaps - (63) (63)(Gains) on foreign currencycontracts, translation and swaps (3,063) - (3,063)Impairment losses 73,594 - 73,594Realised loss on sale of availablefor sale securities - 1,347 1,347Amortisation of cost of Marsrefinancing[2] - 2,834 2,834Interest rate swap adjustments - 2,128 2,128Gain on repurchase of debt in CDO V (51,147) - (51,147)Normalised funds from operations[3] 4,038 4,621 8,659Funds from operations per ordinaryshare[4] ? (0.25) (0.03) (0.28)Normalised funds from operationsper ordinary share ? 0.07 0.07 0.14[1] Unallocated other operating expenses of ?6.2 million have beenallocated between the segments based on each segment's share ofinvested equity. Amounts allocated were; debt investments: ?0.8million and investment properties: ?5.4 million.[2] See the Balance Sheet Review for an explanation of the accountingfor the Mars refinancing.[3] Normalised funds from operations exclude realised losses, salesrelated costs (including realised swap losses), impairment losses,foreign exchange movements, and accounting adjustments related to theMars refinancing.[4] Normalised FFO per share and FFO per share are calculated on theweighted average number of shares at 30 June 2009. Three Six months Six months Three months months?'000 ended 30 June ended 30 ended 30 June ended 30(Unaudited) 2009 June 2008 2009 June 2008Funds from (52,695)operations 55,111 (16,971) 32,464FFO per ordinary (0.87)share 0.86 (0.28) 0.51FFO for the second quarter 2009 was a loss of ?17.0 million andincluded impairments of ?73.6 million (second quarter 2008: nil).FFO for the first half of 2009 decreased by ?107.8 million againstthe first half of 2008 mainly due to: * impairment of debt investments of ?113.4 million * rental and service charge income was lower by ?27.9 million due to expiry of guarantee in Q208 and investment property disposals * lower interest income of ?34.9 million due to lower interest rates * realised gain on sale of investment properties in H108 ?9.0 million compared to ?2.3 million realised loss in H109 resulting in a net movement of ?11.3 million * higher losses on sale of debt investments of ?3.5 million * higher service charge and property expenses of ?1.5 millionOffset by: * gain on the repurchase of CDO financing of ?51.1 million * lower interest expense of ?27.8 million due to lower interest rates * foreign exchange movements of ?1.9 million * lower operating expenses of ?3.9 millionThe decrease in FFO for the second quarter 2009 by ?49.4 millionagainst the second quarter 2008 is due mainly to: * no impairment losses recognised in the second quarter of 2008 compared to second quarter of 2009 of ?73.6 million * lower interest income of ?21.7 million due to lower interest rates * rental and service charge income was lower in Q209 by ?14.9 million due to expiry of guarantee in Q208 and investment property disposals * higher losses on sale of debt investments of ?1.1 million * lower gain on sale of investment properties of ?7.9 millionOffset by: * gains on the repurchase of CDO financing of ?51.1 million in Q209 * lower interest expense of ?9.6 million due to lower interest rates * lower other operating expenses of ?5.9 million * foreign exchange movements of ?3.2 millionOperating IncomeThe Group's operating income consists of rental and service chargeincome from German commercial property, interest income from debtinvestments, gains/losses on sale of available for sale assets,impairment losses on securities and fair value movements oninvestment properties and interest rate swaps.Operating income, excluding fair value movements is shown in thetable below:Operating income Three(excluding fair value Six months Six months months Three monthsmovements) ended 30 ended 30 ended 30 ended 30?'000 (Unaudited) June 2009 June 2008 June 2009 June 2008Interest income 41,543 76,473 16,752 38,427Rental income 125,989 149,422 62,755 74,426Service charge income 26,292 30,780 12,247 15,495Total 193,824 256,675 91,754 128,348The decrease in interest income for the six and three months ended 30June 2009 compared with the six and three months ended 30 June 2008was principally due to lower interest rates.The decrease in rental income compared to the six and three monthsended 30 June 2008 reflects the sale of real estate assets and theexpiry of rental guarantees in the second quarter 2008.Service charge income represents the service costs that have beencharged to the tenants and includes common area maintenance,insurance, utilities costs and property taxes and a service chargeguarantee on the Mars portfolio. Lower service charge income in thesix months and quarter ended 30 June 2009 compared to the sameperiods ended 30 June 2008, mainly reflects the sale of real estateassets and the expiry of service charge guarantees in the secondquarter of 2008. Three ThreeFair value movements / Six months Six months months monthsimpairment losses ended 30 ended 30 ended 30 ended 30?'000 (Unaudited) June 2009 June 2008 June 2009 June 2008(Decrease) in fair value ofinvestment properties (203,026) (164,281) (72,655) (64,445)(Loss) on sale of assetback securities,available-for-sale (3,744) (269) (1,347) (269)(Decrease) / increase infair value of interest rateswaps (764) (1,216) 1,760 8,842Gain on repurchase of debtfinancing 51,147 - 51,147 -Impairment losses (113,434) - (73,594) -Total (269,821) (165,766) (94,689) (55,872)The Group's investment properties are revalued for the purposes ofthe Group's financial statements on a quarterly basis by externalvaluers. The main factors the valuers consider when determining afair valuation are the following: passing rent, void periods, yield,relettability and marketability of properties. Valuations continue toreflect current uncertainties in the German real estate marketrelated to a weak economic environment.The Group sold 5 assets in the six months and 2 assets in the quarterended 30 June 2009 out of the Drive Liquidity fund for total proceedsof ?9.2 million and ?2.7 million respectively. The sales generatedrealised losses on sale of ?3.7 million and ?1.3 million in the sixmonths and second quarter ended 30 June 2009, respectively. Therewere no asset sales out of the Drive Liquidity fund for the sameperiods ended 30 June 2008, while there was a loss of ?0.3 million onsale of debt investments.The increase in the fair value of interest rate swaps for the threemonths ended 30 June 2008 and 30 June 2009 is due to increases inforward interest rates in the relative second quarters of 2008 and2009. The decrease in the fair value of interest rate swaps in thesix months ended 30 June 2009 and six months ended 30 June 2008 isdue to fall in interest rates, where the Group remained a net fixedinterest rate payer.The Group repurchased debt issued by CDO V and realised a gain onrepurchase of ?51.1 million in the second quarter ended 30 June 2009and consequently in the first half of 2009. No debt was repurchasedin the same periods in 2008.During the six months and quarter ended 30 June 2009, the Group hasrecognised ?113.4 million and ?73.6 million of impairment losseswithin the debt investment portfolio for 20 and 17 assets,respectively. There were no impairments in the three months and sixmonths ended 30 June 2008.Operating ExpensesThe Group's operating expenses consist of interest expenses, servicecharge expenses, property operating expenses and other operatingexpenses as shown in the table below: Three Three Six months Six months months months ended 30 ended 30 ended 30 ended 30 June June June June?'000 (Unaudited) 2009 2008 2009 2008Interest expense 114,443 142,255 57,241 66,834Losses / (gains) on foreigncurrency contracts,translation and swaps (2,093) 323 (3,832) 1,398Service charge expenses 26,292 30,780 12,247 15,495Property operating expenses 18,139 12,125 9,721 6,591Other operating expenses 20,299 23,833 9,512 15,116Total operating expenses 177,080 209,316 84,889 105,434Operating income (excludingfair value movements andimpairment losses) 193,824 256,675 91,754 128,348A significant proportion of the Group's operating expenses representinterest expense (65% and 67% for the six and three months ended 30June 2009, 68% and 63% for the six and three months ended 30 June2008). The decrease from 2008 was due to lower interest rates in Q22009 and repayment of debt through commercial property sales.The Group's property operating expenses include common areamaintenance, insurance, utilities costs and property taxes thatcannot be recovered from tenants or that relate to vacant space. Theincrease as compared to the three months and six months ended 30 June2008 was predominantly due to an increase in non recoverable expensesrelating to prior period settlements and the increase inamortisations of tenant incentives and leasing commissions. Tenantincentives and leasing commissions increased throughout 2008 due tothe letting of vacant space.The Group's other operating expenses include Management Fees paid tothe Manager of ?5.4 million and ?10.7 million for the three and sixmonths ended 30 June 2009; Management Fees paid to the Manager forthe three months and six months ended 2008 was ?5.5 million and ?10.9million respectively. Other operating expenses decreased by ?5.6million and ?3.5 for the three months and six months ended 30 June2009 when compared to the same period in 2008, due mainly to highertransaction costs incurred relating to the sale of properties in thesecond quarter of 2008.Corporation TaxThe Group's corporation tax is shown in the table below: Three Six months Six months Three months months ended 30 ended 30 ended 30 ended 30 June June June June?'000 (Unaudited) 2009 2008 2009 2008Current tax charge 352 709 287 355Deferred taxcredit (5,877) (3,410) (3,016) (1,739)Total tax credit (5,525) (2,701) (2,729) (1,384)The deferred tax represents temporary timing differences between thefair value and the German tax book value of all investmentproperties, except those within the Drive portfolio (which are exemptfrom corporation tax on all income generated and revaluation gains).The Group has structured its investments in a tax efficient mannerbut changes in tax legislation or management non-compliance withcertain tax principles in relevant jurisdictions (including Guernsey,Luxembourg, Ireland, United Kingdom and Germany) could affect theGroup's effective rate of taxation.Balance Sheet ReviewThe segmental analysis prepared according to IFRS has been disclosedin Note 22. The table below shows the summarised financial data ofthe Group's business segments on a pro-forma basis with theunallocated amounts per Note 22 allocated between the segments on thebasis disclosed in the table below.Balance sheet data Debt Investment TotalAs at 30 June 2009 investments properties Eurocastle(Unaudited) ?'000 ?'000 ?'000Investments 1,631,431 3,924,859 5,556,290Other assets[1] 77,188 143,542 220,730Total assets 1,708,619 4,068,401 5,777,020Interest-bearing debtfinancing[3] (1,741,213) (3,252,604) (4,993,817)Other liabilities[2] (4,354) (107,499) (111,853)Total liabilities (1,745,567) (3,360,103) (5,105,670)Segment net (liabilities)/assets (36,948) 708,298 671,350Tax liability - (7,442) (7,442)Minority interest (2) (4) (6)Net (liabilities) / assets (36,950) 700,852 663,902Net assets / (liabilities) perfully diluted share ? (0.12) 2.26 2.14Adjusted NAV for 50% Marstransfer[4] - (106,308) (106,308)Adjusted net assets /(liabilities) after transfer (36,950) 594,544 557,594Adjusted net assets /(liabilities) per fully dilutedshare after transfer (0.12) 1.91 1.79[1] Unallocated other assets of ?11.9 million have been allocatedbetween the segments based on each segment's share of investedequity. Amounts allocated were; debt investments: ?1.5 million andinvestment properties: ?10.4 million.[2] Unallocated other liabilities of ?5.0 million have been allocatedbetween debt investment and investment property segments based oneach segment's share of invested equity. Amounts allocated were:debt investments: ?0.6 million and investment properties: ?4.4million.[3] Included in the interest-bearing debt financing is the corporateloan balance of ?34.6 million, split between the debt investments:?4.3 million and investment properties: ?30.3 million.[4] Represents the economic (non-IFRS) impact of transferring 50% ofthe Group's equity in the Mars portfolios to the lender as part ofthe Mars Floating refinancing (see Financing Review for a fullerexplanation of the Mars refinancing).The debt investment securities portfolio is predominantly financed tomaturity with long-term collateralised debt obligations ("CDOs") thatare not callable as a result of changes in value and are non-recourseto the Group. While the assets in the CDOs are consolidated in thefinancial statements for IFRS purposes, the Group's exposure tolosses is limited to its initial investment in each CDO. The 30 June2009 IFRS net asset value reflects approximately ?118.8 million ofunrealised losses in assets within the Group's CDOs that exceeds itsinvestment in the CDOs and, therefore, could not be realised in cashterms by the Group.Accounting for the Mars RefinancingThe Group's equity transfer to the Mars lender in respect of the MarsFloating portfolio refinancing settled on 27 May 2009, and comprisedof the transfer of 50% of the loan notes and shareholder loans heldby Eurocastle Investment Limited in the total Mars portfolio financedby the lender.Eurocastle Investment Limited's investment in the loan notes andshareholder loans, and the corresponding liabilities in the MarsPortfolio, are recorded at amortised cost.The liabilities within the Mars Portfolio have been re-measuredagainst cash flows available from the Mars investment properties, andthis has resulted in a reduction in their amortised cost.Consequently, the Mars portfolio has recorded a transfer of reducedliabilities to the lender, which is shown as an external liability tothe Group within Note 13 to the Interim Consolidated FinancialStatements.Eurocastle Investment Limited's transfer of its interest in theseinvestments to the lender on behalf of its Mars subsidiaries isconsidered to be a cost of refinancing in Mars, and is thereforeamortised over the life of the new loan facility. See Note 13.2 inthe Interim Consolidated Financial Statements.The Adjusted NAV for the 50% transfer is a non-IFRS adjustment thatreflects the economic substance of the transaction. The economicbenefit pertaining to 50% of the NAV of Mars portfolios has beentransferred to the lender, and the Group no longer benefits fromthis. This 50% of NAV is hence excluded from total Group NAV.Total AssetsTotal assets as at 30 June 2009 amounted to ?5.8 billion,representing a 8% decrease from ?6.2 billion as at 31 December 2008.This primarily reflects the reduction in value of the commercialproperty portfolio of ?308.0 million, comprising the sale of 11assets with a fair value of ?105.3 million and a reduction in fairvalue of ?202.7 million. In addition debt investments declined ?99.7million, mainly due to impairments of ?113.4 million offset byforeign exchange movements.Real Estate InvestmentsAs at 30 June 2009, the Group's real estate portfolio comprised ?3.9billion of commercial property investments compared with ?4.0 billionas at 31 March 2009, on a like-for-like basis. This mainly representsa decrease of 1.8% in the fair value of investment properties on the31 March 2009 values.Debt InvestmentsFollowing the amendments to IAS 39 and IFRS 7, "Reclassification ofFinancial Assets", the Group reclassified all available for salesecurities within CDO II, CDO III and CDO V to loans and receivableswith effect from 1 July 2008 at fair value at that date.The change in the value of the reclassified securities during the sixmonths ended 30 June 2009, had they been held as available for sale,would have been a ?170.7 million unrealised loss.Financing ActivitiesThe Group's financing position as at 31 July 2009 was as follows:Maturities and AmortizationPortfolio 2015(?million) 2009 2010 2011 2012 2013 2014 + TOTALNon - RecourseMars - fixed - - - - - 966.4 - 966.4Mars - floating* 34.6 50.0 75.0 75.0 - - - 234.6Mars - fixed 2 - - - - 80.0 - - 80.0Drive - - - - 939.7 - - 939.7Bridge - - - - - 372.1 - 372.1Wave - - - - - 202.6 - 202.6Turret - - - - - - 147.6 147.6Truss - - - 0.2 0.9 0.9 83.4 85.4Belfry - - - - - - 56.2 56.2Superstella - - - - - - 54.5 54.5Tannenberg - - - - - 53.0 - 53.0Zama - - - - - 39.9 - 39.9Bastion - - - 26.5 - - 26.5Real EstateTotal 34.6 50.0 75.0 101.7 1,020.6 1,634.9 341.7 3,258.5CDO II - - - - - - 310.9 310.9CDO III - - - - - - 698.5 698.5Duncannon - - - - - - 571.7 571.7CDO IV 63.6 - - - - - - 63.6EFL 68.0 - - - - - - 68.0Debt Total 131.6 0.0 0.0 0.0 0.0 0.0 1,581.1 1,712.7TotalNon-Recourse 166.2 50.0 75.0 101.7 1,020.6 1,634.9 1,922.8 4,971.2RecourseEFL 30.0 - - - - - - 30.0Corporate Loan - 15.0 20.0 - - - - 35.0Total Recourse 30.0 15.0 20.0 0.0 0.0 0.0 0.0 65.0GRAND TOTAL 196.2 65.0 95.0 101.7 1,020.6 1,634.9 1,922.8 5,036.2* This facility contains an interest top-up guarantee of up to amaximum of ?10 million from Eurocastle in the event that there isinsufficient net operating cashflow from the Mars Floating portfolioto meet current interest.Real Estate Portfolio FinancingThe Group continues to finance its core real estate portfolio withfixed rate term loans, which, during the period of ownership, hassubstantially eliminated its exposure to increased interest rates.This is consistent with the objective of locking in the spreadbetween the yield on its investments and the cost of financing thoseinvestments.Debt Investment Portfolio FinancingThe Group has no mark-to-market or full recourse exposure on its debtportfolio. As at 31 July 2009, out of total financing facilities of?1.7 billion, the Group has financing totalling ?161.6 millionmaturing within the year. One facility for ?63.6 million, relating toCDO IV, is non recourse and matures in December 2009. The secondfacility (the EFL facility) is for ?98 million and matures inSeptember 2009. This facility has limited recourse of ?30 million.At 30 June 2009, approximately 89.0% of the debt investment portfoliobenefits from financing maturing beyond the maturity date of itsassets.A significant portion of the Group's debt investments are financedwith non-recourse collateralised debt obligations, known as CDOs. Asa necessary consequence of the existence of certain covenants, wherecompliance is a function of the default rate and external creditratings of the underlying investments, there is currently a materialrisk that, in the event of a breach of those covenants, that asubstantial proportion of the net cash flows attributable to the debtbusiness could be mandatorily applied to the repayments of the debtfunding those underlying investments. The Directors consider thatthere are material risks to the cash flows from the Group's debtinvestment operations. In particular, as noted in the 2008 AnnualReport, CDO II, III and V remain out of compliance in respect ofcertain tests where compliance is, among other things, a function ofthe default rate and external credit ratings of the underlyinginvestments. As a result, on the last interest payment date, most ofthe projected cashflow attributable to the Group's investments in itsdebt business was mandatorily diverted to amortise more senior debt.Ongoing failure of various tests will continue to lead to asubstantial proportion of the net cash flows attributable to the debtbusiness being mandatorily applied to the repayments of debt fundingthose underlying investments. Furthermore there are additionalcovenants, also where compliance is a function of the default rateand credit ratings of the underlying investments, which if breachedwould constitute an event of default under the terms of thoseborrowings and as such give a right of acceleration to the respectivelenders. The underlying investments in the CDOs are continuing togenerate cash flows. However, in the current environment, where thefrequency and more importantly severity of negative ratings actionshas increased significantly, the risk of these tests being breachedhas increased.Short Term FinancingThe Group raised ?75 million in Perpetual Subordinated ConvertibleSecurities (Convertible Bonds) at the end of June 2009. The mainterms of these are set out in Note 17 to the Consolidated InterimFinancial Statements herein. The net proceeds of issue which amountedto ?73.8 million were used to pay down the Corporate Loan facility to?35 million. This facility, as noted in the 2008 Annual report andthe First Quarter 2009 Group Financial Results, matures on 30 June2011. The facility's planned semi-annual amortisation requirements atthe end of December 2009 and June 2010 have been met. The nextscheduled amortisation of ?15 million is at the end of December 2010.However, the Group is targeting to repay the facility within thefirst half of 2010, through a combination of proceeds from assetsales and cashflows from operations, but there can be no assurancethat this target will be achieved.The Company has granted a guarantee in respect of an acquisition loanmade available to EFL which matures on 30 September 2009. Thisguarantee is limited to ?30 million. Negotiations in respect of asettlement are currently in progress with the lender but there can beno assurance that this guarantee will have its term extended. If theguarantee is called, this will trigger a default of the Company'sCorporate Loan Facility.The Mars Floating Facility of ?236 million was refinanced in February2009. The amended Facility matures on 31 December 2012 and hasscheduled amortisation payments of ?36 million, ?50 million, and ?75million at the end of 2009, 2010, and 2011, respectively. Inconsideration of the extension of this facility, the Group has agreedto transfer to the Mars Floating Facility lender half of its equityinvestment in the combined Mars portfolios as at 31 January 2009.Additional details on the Corporate Loan Facility and Mars FloatingFacility, together with the Directors' assessment of the Group'sability to continue as a going concern, have not changed since thepublication of the 2008 Annual Report and are set out in Note 3 ofthe Notes to the Consolidated Financial Statements therein.Cashflows at the Holding Company levelThe ability of Eurocastle Investment Limited ("EIL") to service thecorporate loan, pay interest on the Convertible Bond and satisfyother corporate costs and guarantees is dependent on the cashflowsfrom its subsidiary companies. The cashflows from the Mars portfoliosand the Debt investment portfolios are currently being retainedwithin these portfolios, either to repay senior debt or to reinvest,and are therefore not available for distribution to EIL.Set out in the table below is a pro-forma illustration of amountspotentially available from the core portfolios to be distributed toEIL in 2009 based on in-place cashflows from the commercial propertyportfolios excluding Mars, as at the end of Q2 2009: Portfolio Performance Illustration - Q2 2009 Portfolio Results Annualized* Total Group Mars portfolio[1] Core portfolios (?'million) (?'million) (?'million)Real estate NOI 229.9 70.7 159.2Capitalexpenditure (20.5) (8.5) (12.0)Interestexpense[2] (145.5) (56.7) (88.8)Corporateoverhead[3] (37.6) - (37.6)Net Cashflow[4] 26.3 5.5 20.8[1] The Mars Portfolio does not generate cash flows for distributionto EIL[2] The cash amount of interest paid is calculated by multiplying theweighted average funding cash coupon by the current face amount on anActual/360 basis[3] The Corporate G&A is based on other operating expenses for Q22009 on an annualized basis, excluding (a) sales related costs (b) depreciation and amortization (c) operating expenses borne directly out of cashflows from thedebt investment business, but including (d) professional fees and general expenses related to thenon-Mars real estate business included in property operating expenses[4] No debt investment cash flows have been assumed* The cashflows shown are not an indication of expected futurecashflows and assume no change in portfolio occupancy, rental income,operating costs, capital expenditure and management cost. Business ReviewCommercial Property PortfolioAs at 30 June 2009, Eurocastle owned a ?3.9 billion portfolio ofcommercial property investments. At quarter end, the investmentproperty portfolio comprised 564 properties with approximately 2.1million square meters (sqm) of lettable space. The portfolio had atotal occupancy of 85.8%, and a weighted average remaining lease termof 5.6 years. The Group derives 60% of its rental income from thefive major German markets. At the end of the second quarter, theGroup's investment property portfolio generated an average NOI* yieldof 5.9%.Investment properties excluding the Mars portfolio had lettable spaceof 1.4 million square metres with occupancy of 91.4% at 30 June 2009,slightly higher than 91.2% as at 31 March 2009. These generated anaverage NOI yield of 6.5%. Mars portfolio investment properties hadlettable space of 720 thousand square metres at 30 June 2009 withoccupancy of 75.2%, the same as at 31 March 2009. The Mars portfoliogenerated an average NOI yield of 4.7%.During the second quarter of 2009, the Group has signed 71 commercialleases for approximately 39,000 sqm, of which new leases accountedfor approximately 20,000 sqm. The level of physical portfoliooccupancy, on a like for like basis, increased to 85.8% as comparedto 85.7% in the previous quarter. Since quarter end, approximately7,300 sqm of new leases and 10,000 sqm of renewals have beencompleted, with a further 6,300 sqm of new leases and 9,700 sqm ofrenewals currently under negotiation.The Group has completed the sale of 3 properties for total salesproceeds of ?5.2 million, realising cash of ?3.7 million, net of alltransaction costs during the second quarter. Subsequent to quarterend, the Group has sold one further property for total sale proceedsof ?2.2 million, and has entered into binding agreements to sell sixproperties for estimated total proceeds of ?4 million.* Net Operating Income (NOI) represents gross rental income less netservice charge expenses and property operating expenses on anannualised basis, excluding the investment properties held for sale.As at 30 June 2009, the Group had signed 24 new leases forapproximately ?1.7 million of rental income per annum onapproximately 14,800 sqm of vacant space, which will become effectiveduring the third quarter 2009 or later. These leases have not beenincluded in the following tables.Rental DataBy Use Passing rent* Lettable ?'million (sqm) Occupancy AnnualUse % % ? per sqm/monthOffice 1,168,237 80.7% 143.7 56.6% 12.7Retail 456,280 98.3% 54.6 21.5% 10.1Bank Hall 106,342 98.0% 16.8 6.6% 13.4Other 356,264 83.0% 39.0 15.3% 11.0Totalportfolio 2,087,123 85.8% 254.1 100% 11.8By Location Passing rent* Lettable Occupancy ?'million ? perLocation (sqm) % Annual % sqm/monthFrankfurt 545,388 85.2% 88.4 34.8% 15.9Munich 204,008 70.6% 24.6 9.7% 14.2Hamburg 91,299 88.4% 12.1 4.8% 12.5Berlin 90,765 82.4% 9.5 3.7% 10.5Düsseldorf 107,928 95.6% 18.7 7.3% 15.1Subtotal - top 5markets 1,039,388 83.4% 153.3 60.3% 14.7Remaining West 831,066 89.8% 83.9 33.0% 9.4Remaining East 216,669 81.8% 16.9 6.7% 8.0Total portfolio 2,087,123 85.8% 254.1 100% 11.8By Portfolio Passing rent* Lettable Occupancy ?'million ? perPortfolio (sqm) % Annual % sqm/monthMars- fixed 1 462,341 82.1% 60.7 23.9% 13.3Mars- fixed 2 36,936 88.8% 6.3 2.5% 16.0Mars- floating 220,942 58.6% 15.0 5.9% 9.7Drive 553,849 88.1% 79.0 31.1% 13.5Bridge 192,003 94.1% 29.7 11.7% 13.7Wave 199,655 83.1% 19.0 7.5% 9.6Zama 30,557 88.4% 3.3 1.3% 10.3Turret 140,633 99.4% 14.9 5.9% 8.9Truss 81,280 99.6% 8.5 3.3% 8.7Belfry 55,889 99.4% 5.4 2.1% 8.2Rapid 37,612 100.0% 4.4 1.7% 9.7Tannenberg 49,498 95.8% 5.2 2.0% 9.1Bastion 25,928 100.0% 2.7 1.1% 8.8Totalportfolio 2,087,123 85.8% 254.1 100% 11.8* Passing rent is defined as the contractual annual gross rentalincome at the period end, excluding the net effects of straightlining for lease incentives.Lease Expiry DataBy Use Average Passing rent*Use lease term 2009 2010 2011 2012 2013 2014-2018 2019+ Years ?m ?m ?m ?m ?m ?m ?mOffice 4.3 2.1 15.5 40.4 16.5 7.4 52.0 9.9Retail 7.4 0.4 2.1 3.4 4.2 4.8 22.5 17.2Bank Hall 4.9 - 0.1 2.4 2.4 0.2 10.4 1.3Other 8.1 0.3 5.8 6.0 4.0 0.9 10.1 11.8Total portfolio 5.6 2.8 23.5 52.2 27.1 13.3 95.0 40.2Percentage of 1.1% 9.3% 20.5% 10.7% 5.2% 37.4% 15.8%portfolioBy Location Average Passing rent*Location lease term 2009 2010 2011 2012 2013 2014-2018 2019+ Years ?m ?m ?m ?m ?m ?m ?mFrankfurt 4.9 0.8 6.9 27.5 9.6 2.8 33.3 7.5Munich 7.1 0.1 2.9 8.3 2.3 2.2 3.3 5.5Hamburg 3.9 0.5 1.9 2.9 1.7 0.7 3.2 1.2Berlin 3.9 0.2 1.6 1.8 1.1 1.2 2.5 1.0Düsseldorf 7.6 - 2.5 2.7 3.0 0.2 1.1 9.1Subtotal - top 5markets 5.4 1.6 15.8 43.2 17.7 7.1 43.4 24.3Remaining West 5.9 1.1 6.1 7.7 8.5 3.9 41.8 14.9Remaining East 5.0 0.1 1.6 1.3 0.9 2.3 9.8 1.0Total portfolio 5.6 2.8 23.5 52.2 27.1 13.3 95.0 40.2By Portfolio Average Passing rent*Portfolio lease term 2009 2010 2011 2012 2013 2014-2018 2019+ Years ?m ?m ?m ?m ?m ?m ?mMars- fixed 1 6.4 0.5 9.7 12.6 11.3 4.6 6.7 15.2Mars- fixed 2 4.3 0.2 0.8 0.6 1.7 0.2 2.6 0.2Mars- floating 3.2 0.6 4.1 3.3 1.5 1.0 4.0 0.5Drive 4.7 0.5 4.3 26.3 5.6 1.9 31.5 8.9Bridge 5.4 0.5 1.3 6.0 4.5 1.0 14.8 1.5Wave 4.8 0.2 1.6 1.4 0.4 0.7 14.4 0.4Zama 6.3 0.1 0.3 0.1 0.1 0.1 2.7 -Turret 6.2 0.1 0.4 0.9 0.5 2.3 8.7 2.1Truss 6.6 - 0.5 0.4 0.7 0.7 4.6 1.6Belfry 6.4 0.1 0.1 0.5 0.3 0.7 2.7 1.1Rapid 12.3 - - - - - 0.1 4.2Tannenberg 8.0 - 0.4 0.1 0.5 0.1 2.1 1.9Bastion 11.2 - - - - - 0.1 2.6Total portfolio 5.6 2.8 23.5 52.2 27.1 13.3 95.0 40.2* Passing rent is defined as the contractual annual gross rental atthe period end, excluding the net effects of straight lining leaseincentives.Valuation DataBy Location NOI Net yield NOI yield Number of Lettable Property Property % of operating on onMarkets properties Occupancy space valuation cost Portfolio income cost valuation % (sqm) ?m* ?m** ?m ?m*** % %Top 5marketsFrankfurt 48 85.2% 545,388 1,444 1,728 37.4% 81.0 4.7% 5.6%Munich 16 70.6% 204,008 445 586 12.8% 22.4 3.8% 5.0%Hamburg 13 88.4% 91,299 205 248 5.4% 9.6 3.9% 4.7%Berlin 10 82.4% 90,765 160 177 3.9% 8.7 4.9% 5.4%Düsseldorf 7 95.6% 107,928 317 357 7.8% 18.0 5.0% 5.7%Subtotal -top 5markets 94 83.4% 1,039,388 2,571 3,096 67.3% 139.7 4.5% 5.4%RemainingWest 368 89.8% 831,066 1,155 1,285 28.0% 75.1 5.8% 6.5%RemainingEast 102 81.8% 216,669 203 215 4.7% 15.2 7.1% 7.5%Totalportfolio 564 85.8% 2,087,123 3,929 4,596 100% 230.0 5.0% 5.9%By Portfolio NOI Net yield NOI yield Number of Lettable Property Property % of operating on onPortfolio properties Occupancy space valuation cost Portfolio income cost valuation % (sqm) ?m* ?m** ?m ?m*** % %Mars- fixed 1 28 82.1% 462,341 1,060 1,365 29.7% 53.5 3.9% 5.0%Mars- fixed 2 3 88.8% 36,936 105 129 2.7% 5.3 4.1% 5.0%Mars- floating 21 58.6% 220,942 339 414 9.0% 11.9 2.9% 3.5%Drive 230 88.1% 553,849 1,163 1,342 29.2% 72.3 5.4% 6.2%Bridge 6 94.1% 192,003 461 508 11.1% 28.7 5.6% 6.2%Wave 78 83.1% 199,655 256 238 5.2% 17.0 7.1% 6.6%Zama 8 88.4% 30,557 47 54 1.2% 3.5 6.5% 7.4%Turret 63 99.4% 140,633 179 197 4.3% 13.8 7.0% 7.7%Truss 41 99.6% 81,280 100 106 2.3% 7.8 7.4% 7.8%Belfry 28 99.4% 55,889 65 69 1.5% 5.0 7.2% 7.7%Rapid 18 100.0% 37,612 56 68 1.5% 4.1 6.0% 7.2%Tannenberg 27 95.8% 49,498 63 71 1.5% 4.6 6.5% 7.3%Bastion 13 100.0% 25,928 35 35 0.8% 2.5 7.1% 7.1%Totalportfolio 564 85.8% 2,087,123 3,929 4,596 100% 230.0 5.0% 5.9%* The above valuation does not include ?18.1 million relating to headleases.** Includes leasing commissions and tenant incentives disclosedseparately in other assets.*** Net operating income is after deducting ?6.2 million of freerent. It excludes the amortisation of tenant incentives and leasingcommissions, the fund costs related to the Drive portfolio and otherreal estate related general expenses included within propertyoperating expenses in the consolidated income statement. It is shownhere as the annualised amount at the period end.Like for like* occupancy analysisBy UseUse 30 June 2009 31 March 2009 Occupancy Occupancy Passing Occupancy Occupancy Passing (sqm) % rent** (sqm) % rent** ?m ?mOffice 942,516 80.7% 143.7 940,801 80.6% 143.1Retail 448,442 98.3% 54.6 449,595 98.6% 54.7Bank Hall 104,256 98.0% 16.8 103,396 98.0% 16.8Other 295,525 83.0% 39.0 295,370 82.5% 39.1Totalportfolio 1,790,739 85.8% 254.1 1,789,162 85.7% 253.7By LocationLocation 30 June 2009 31 March 2009 Occupancy Occupancy Passing Occupancy Occupancy Passing (sqm) % rent** (sqm) % rent** ?m ?mFrankfurt 464,400 85.2% 88.4 464,119 85.1% 88.1Munich 144,071 70.6% 24.6 144,596 70.9% 24.7Hamburg 80,678 88.4% 12.1 83,610 91.6% 12.6Berlin 74,825 82.4% 9.5 74,429 82.0% 9.4Düsseldorf 103,134 95.6% 18.7 103,021 95.5% 18.6Subtotal -top 5 markets 867,108 83.4% 153.3 869,775 84.3% 153.4RemainingWest 746,330 89.8% 83.9 742,036 89.3% 83.4RemainingEast 177,301 81.8% 16.9 177,351 81.9% 16.9Totalportfolio 1,790,739 85.8% 254.1 1,789,162 85.7% 253.7By PortfolioPortfolio 30 June 2009 31 March 2009 Occupancy Occupancy Passing Occupancy Occupancy Passing (sqm) % rent** (sqm) % rent** ?m ?mMars- fixed 1 379,655 82.1% 60.7 383,258 82.9% 61.3Mars- fixed 2 32,817 88.8% 6.3 32,626 88.3% 6.3Mars- floating 129,412 58.6% 15.0 126,024 57.0% 14.6Drive 488,009 88.1% 79.0 486,658 87.9% 78.6Bridge 180,641 94.1% 29.7 179,838 93.7% 29.5Wave 165,957 83.1% 19.0 167,288 83.8% 19.1Zama 27,016 88.4% 3.3 26,288 86.0% 3.2Turret 139,749 99.4% 14.9 139,699 99.3% 14.9Truss 80,957 99.6% 8.5 80,957 99.6% 8.5Belfry 55,563 99.4% 5.4 55,563 99.4% 5.4Rapid 37,612 100.0% 4.4 37,612 100.0% 4.4Tannenberg 47,423 95.8% 5.2 47,423 95.8% 5.2Bastion 25,928 100.0% 2.7 25,928 100.0% 2.7Totalportfolio 1,790,739 85.8% 254.1 1,789,162 85.7% 253.7* Like for like represents common properties that are held at the endof both reporting periods.** Passing rent excludes the impact of the rental guarantee.Top 5 Tenants Business Passing rent % of total SquareTenant name sector ?'000 portfolio metersCommerzbank Banking 67,998 26.8% 397,265Deutsche Bank Banking 15,056 5.9% 120,196Edeka Retail 12,695 5.0% 120,944Starman Hotels Hotel 9,513 3.7% 40,988Deutsche Bahn Railway 8,797 3.5% 50,479Total portfolio 114,059 44.9% 729,872Debt Investment PortfolioOverview of the Debt Investment Portfolio 30 June 2009 (Unaudited) 31 December 2008Carrying value of total debtinvestments (excluding restricted cash)(?'000) 1,629,597 1,586,895Implied discount margin (above Euribor)at carrying value 7.70% 6.17%Amortised cost of total debtinvestments (excluding restricted cash)(?'000) 1,674,974 1,620,505Weighted average asset margin (aboveEuribor) 1.79% 1.81%Weighted average liability spread 0.60% 0.58%Weighted average net spread 1.19% 1.23%Weighted average credit rating BB+ BB+Percentage investment grade of debtinvestment portfolio 49% 55%Number of securities and loans 192 187Eurocastle's ?1.6 billion investment portfolio (excluding restrictedcash) consists primarily of commercial real estate backed andresidential real estate backed debt. The following describes theinvestment portfolio as at 30 June 2009:Asset/liability structure for debt investment portfolio30 June 2009 Cash in(Unaudited) Assets hand LiabilitiesFunding Average Average Drawn Facility Average Legal M-T-Mstructure Nominal life rating Nominal amount amount life maturity provisions*** ?'000 ?'000 ?'000 ?'000 ?'000EurocastleCDO II PLC 352,432 3.0 BB+ 465 311,012 311,012 6.0 Dec 2060 NoEurocastleCDO III PLC 737,753 3.5 BBB 1,369 698,402 698,402 6.0 Dec 2060 NoEurocastleCDO IV PLC 98,606 3.0 BBB+ - 66,259 66,259 0.4 Dec 2009 NoDuncannonCRE CDO VPLC** 740,095 3.1 B+ - 571,559 571,559 5.5 Jun 2047 NoEurocastleFundingLimited(unlevered)* 7,730 2.4 CCC- - - - - - -EurocastleFundingLimited(financed) 120,594 2.6 BB- - 100,079 100,079 0.3 Sep 2009 NoTotal 2,057,210 3.2 BB+ 1,834 1,747,311 1,747,311 5.3 - -* The legal maturity of Eurocastle Funding Limited's liabilities isbased on the weighted average maturity of all its liabilities.** Includes current face amount of Balance Guaranteed Swap Asset of?63.3 million on the nominal value of non Euro assets.*** This states whether there are any of mark-to market covenants inthe financing structures.Debt Investment Portfolio Composition (30 June 2009)(Unaudited)Asset class Nominal Total debt portfolio ?'000 %Commercial real estate backed 1,574,360 79.0%Residential real estate backed 349,266 17.5%Other 70,250 3.5% 1,993,876 100.0%Commercial Real Estate Backed DebtAt 30 June 2009, the Group owned ?1.6 billion face amount ofcommercial assets (Commercial mortgage backed securities ("CMBS"),Mezzanine Loans, B-Notes, Whole Business Securitisations ("WBS"), NPLSecuritisations and Real Estate Loans and SME CLOs. During thequarter ended 30 June 2009, the Group had purchases of ?74 million,no sales and had principal repayments of ?24 million. From a cashflow perspective the Group's ?890 million CMBS portfolio continues toperform in line with expectations notwithstanding the highly stressedcredit environment. Only 0.79% of the underlying loans are delinquentor in payment default, and 7.03% of loans in breach of covenants. Todate only one security having a par outstanding amount of ?2.3million has defaulted on an interest payment, which was due to thebankruptcy of Lehman Brothers. In addition, of its Mezzanine Loans,B-Notes and Real Estate Loans, the Group had 3.7% of loans in eitherpayment default or interest diversion and 8.98% in breach of a loancovenant at the end of the period. The Group had no CMBS securitiesupgraded and 23 CMBS downgrades totalling ?156 million during thequarter. Total Average debt Average credit AverageAsset class Nominal book rating* spread* LTV ?'000 % Bps %CMBS 890,173 44.7% BBB 2,608 61.0%Commercial real estate loans 509,308 25.5% B- 2,545 81.9%NPL securitisation 9,210 0.5% A+ 1,498 18.7%SME CLO 95,470 4.8% BB 4,457 0.0%Whole business securitisation 70,199 3.5% BB+ 2,095 56.1% 1,574,360 79.0% BB 2,670 63.6%* Average Ratings are calculated by reference to the lowest ratingcurrently assigned to each loan or security b
Datum: 13.08.2009 - 13:21 Uhr
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