Interim Management Statement as at 18 May 2011
(Thomson Reuters ONE) -
Press Release
18 May 2011
Since the year end, Eurocastle Investment Limited ("Eurocastle" or the "Group")
continued to make progress toward its main objective of realising value from its
real estate holdings, while continuing to invest in the portfolio to enhance its
long term value. This interim management statement reports on the status of this
objective, as well as other recent developments.
Highlights*
* Eurocastle has completed the restructuring of its Mars Fixed 1 facility with
its lenders.
* Since the year end, the Group has signed 93 commercial leases for
approximately 84,400 square metres (sqm). Included in this amount is a
renewal of 41,300 sqm with Deutsche Bahn - the single largest lease in the
portfolio - for another 13 years at market terms.
* At end of the first quarter 2011, the level of physical portfolio occupancy
on a like-for-like basis decreased to 83.6% from 86.7% at the end of 2010.
* The Group sold 17 properties during the first quarter for total sales
proceeds of ?75.1 million.
* Unless otherwise stated, the information provided excludes the Mars
Fixed 1 portfolio, but includes 100% of the Mars Floating portfolio, in which
the Group has a 50% equity investment.
Financing and Liquidity
* The Mars Fixed 1 facility lenders have agreed to modify the terms of the
Mars Fixed 1 loan facility, which matures in July 2014, to include annual
amortisation targets expected to be met from asset sales, the deferral of a
significant part of the facility's current interest margin and new capital
from a junior lender for capital expenditure on the Mars Fixed 1 portfolio.
In addition, Eurocastle's German asset management platform will continue to
provide asset management services to the portfolio for which it will be
compensated over an anticipated minimum 3 year term. In consideration of
these terms, Eurocastle has agreed to transfer half of its remaining equity
investment in the Mars Fixed 1 Portfolio to a junior lender who will control
75% of the equity in the portfolio, leaving Eurocastle with a 25% residual
investment in the portfolio. Following the restructuring, the Group no
longer expects to consolidate the Mars Fixed 1 Portfolio and is not
projecting significant value in its residual investment in the Mars Fixed 1
Portfolio.
* As at 31 March 2010, Eurocastle had a corporate cash balance of ?4.6
million
* In respect of the Drive Junior Facility, the Group continues to expect to
finalise the second phase of a restructuring of the facility in 2011 which
the Group anticipates will allow it to receive limited cashflow from the
Drive portfolio sufficient to cover the Group's share of overheads relating
to this portfolio. It is expected that excess operating income from the
portfolio will continue to be retained within a Group subsidiary to build
capital expenditure and debt service reserves whilst the Group remains
active in asset managing this portfolio and repositioning major assets
following tenant terminations.
Real Estate
Business Review*
* The Group, including the Mars Fixed 1 portfolio, has an interest in 506
investment properties across Germany valued at approximately ?3.3 billion
based on independent valuations carried out in December 2010, equivalent to
an NOI yield of 5.7% based on the 2011 first quarter's NOI. The Group's
assets are held in 12 separate financing portfolios. They comprise a
diversified mix of office and retail properties concentrated in the five
major German markets.
First Quarter 2011 Real Estate Portfolio Composition:
NOI yield
Occupied Passing Annualised Property Average on
No. of space Occupancy rent NOI valuation(1) lease valuation
Asset properties (sqm) % ?m ?m ?m term %
-------------------------------------------------------------------------------------------
Drive 199 373,154 77.3% 54.9 46.1 868 3.7 5.3%
Bridge 6 181,313 94.5% 29.6 27.6 426 7.0 6.5%
Mars -
Floating 17 116,474 60.1% 13.1 8.9 226 3.0 3.9%
Wave 69 143,556 81.8% 16.5 13.9 214 3.8 6.5%
Turret 63 137,525 97.8% 15.1 13.8 175 4.8 7.9%
Truss 41 80,377 98.9% 8.4 7.6 98 5.6 7.8%
Mars -
Fixed 2 3 33,674 87.9% 6.3 5.2 98 3.7 5.3%
Belfry 27 52,374 98.8% 5.3 4.8 62 4.8 7.7%
Tannenberg 27 47,344 95.6% 5.1 4.5 61 6.4 7.3%
Rapid 18 38,355 100.0% 4.4 4.2 56 10.5 7.4%
Zama 8 28,779 94.5% 3.6 3.3 45 5.0 7.3%
-------------------------------------------------------------------------------------------
Total
excluding
Mars Fixed
1 478 1,232,925 83.6% 162.3 139.9 2,329 4.8 6.0%
-------------------------------------------------------------------------------------------
Mars -
Fixed 1 28 381,513 82.5% 59.4 50.0 984 6.5 5.1%
-------------------------------------------------------------------------------------------
Grand
Total 506 1,614,438 83.3% 221.7 189.9 3,313 5.2 5.7%
-------------------------------------------------------------------------------------------
(1) Property valuations are based on semi annual third party independent
valuations undertaken in December 2010.
* The Group has continued to generate cash at the holding company level that
is available for corporate purposes. However, excess cashflow from the Mars
and Drive portfolios is being retained within those portfolios, and is
therefore not distributable to Eurocastle.
* Eurocastle continues to pursue a real estate divestment programme seeking to
dispose of assets that are believed to be stable, fully valued, or non-core.
In the first quarter of 2011, 17 properties have been sold for total sales
proceeds of ?75.1 million, realising cash of ?4.4 million after repayment of
asset level financings and costs, including ?0.1 million of cash retained
within the Drive portfolio.
* Good progress continues to be made on new leasing and on renewing existing
tenants. During the first quarter of 2011, the Group signed 75 leases for
approximately 37,400 sqm, including 47 new leases for approximately 14,900
sqm and 28 lease renewals for approximately 22,500 sqm. Since the quarter
end, an additional 3,400 sqm of new leases and 43,600 sqm of renewals have
been signed. The current renewal rate for leases expiring in 2011 is at
65.6%.
* The Group continues to seek to moderate capital expenditure committed on new
leasing, focusing it on those leases and portfolios achieving the greatest
economic benefit for the Group and thus maximising cashflow available to
Eurocastle.
* As at 31 March 2011, the Group had total lettable space of 1.5 million sqm
with occupancy at 83.6%, down from 86.7% at the end of 2010 on a like-for-
like basis, mainly due to 46,100 sqm of scheduled expiries in the Drive
portfolio that resulted in a decline in occupancy of 3.1%.
* Unless otherwise stated, the information provided excludes the Mars
Fixed 1 portfolio, but includes 100% of the Mars Floating portfolio, in which
the Group has a 50% equity investment.
Market Outlook*
* The positive trend seen in the investment markets in 2010 has continued in
the first quarter of 2011. Investment volume remained at the high level of
the last quarter of 2010 with approximately ?5.8 billion invested. Foreign
property investors returned to investing in Germany, accounting for
approximately ?2.9 billion or 50% of the turnover in the first quarter of
2011.
* The major five office markets accounted for 29% of the overall investment
activity, with the highest volume in Berlin with ?450 million in the first
quarter of 2011. Investment in office assets accounted for 18% of the
overall volume, or ?1.0 billion, in the first quarter of 2011. The trend
towards larger volumes that started in the middle of 2010 has continued with
11 recorded transactions larger than ?100 million in the first quarter of
2011.
* Rental take-up figures increased slightly in major office markets by 3%
compared to the first quarter of 2010, with an office turnover of 572,800
sqm. The ongoing high demand for office space follows the favourable
development in the job market and the improved economic situation of German
companies. The continued recovery of the German economy is expected to lead
to further positive take-up volumes in office letting markets in the rest of
2011.
* Despite the positive trend, prime office vacancy rates in the five major
markets have increased from 10.5% in the first quarter of 2010 to 11.1% in
the first quarter of 2011. However, prime rents remained unchanged and are
forecast to slightly increase for the rest of 2011.
* Data and analysis for this section has been extracted from
professional market research sources
Debt Investments
* There were four upgrades and 18 downgrades in the first quarter of 2011,
compared to four upgrades and 12 downgrades in the fourth quarter of 2010.
* While the Group's debt investment business continues to generate cash, non-
compliance with various coverage and other tests within its CDO or other
financings means that excess cash generated either stays within the
portfolios or is used to amortise senior debt. The Group expects this to
continue for the foreseeable future such that it expects any returns from
its debt investment business to be likely to be driven from the return of
capital once debt has been repaid.
* As the quarter end, CDO II remained in default. The Group does not
anticipate this to have any material effect on the Group's cashflows or
return expectations from CDO II
* Total amortisation principal received in the Group's debt business during
the first quarter of 2011 was ?21.5 million. Using these proceeds, the CDOs
purchased ?24 million of investments at a discount with an average rating of
BBB; ?10 million was reinvested in AAA RMBS and ?14 million was reinvested
in BBB CMBS at current market spreads.
Forward-Looking Statements
This release contains statements that constitute forward-looking statements.
Such forward-looking statements may relate to, among other things, future
commitments to sell real estate and achievement of disposal targets,
availability of investment and divestment opportunities, methods of funding
portfolios, timing of completion of acquisitions and disposals, the operating
performance of our investments and financing needs. Forward-looking statements
are generally identifiable 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-looking statements are based on certain assumptions,
discuss future expectations, describe future plans and strategies, contain
projections of results of operations or of financial condition or state other
forward-looking information. The Group's ability to predict results or the
actual effect of future plans or strategies is limited. Although the Group
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, its actual results and performance may differ
materially from those set forth in the forward-looking statements. These
forward-looking statements are subject to risks, uncertainties and other factors
that may cause the Group's actual results in future periods to differ materially
from forecasted results or stated expectations, including the risks regarding
Eurocastle's ability to achieve its targets regarding asset disposals or
reduction in capital expenditure or that Eurocastle will be able to fund or
repay its liabilities.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Eurocastle Investment Limited via Thomson Reuters ONE
[HUG#1516713]
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Datum: 18.05.2011 - 08:00 Uhr
Sprache: Deutsch
News-ID 54764
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