Interim Management Statement (4599Z)

TIDMREO TIDMREOP

RNS Number : 4599Z

Real Estate Opportunities PLC

14 January 2011

REAL ESTATE OPPORTUNITIES PLC

INTERIM MANAGEMENT STATEMENT

Real Estate Opportunities plc ("REO" or "the Group"), the real estate investment and development group active in the UK and Ireland today issues its Interim Management Statement covering the period from 30 October to the date of this announcement.

Highlights:

-- Battersea Power Station Planning Application approved by Mayor of London and Wandsworth Council

-- Significant interest from prospective investors in Battersea Power Station during the global investment roadshow

-- Terms of Balance Sheet Restructuring announced on 24 December 2010

-- Memorandum of Understanding signed with NAMA on Group business plan

-- Continued strong operational performance with occupancy levels at 95% and rent weighted average lease length of 12 years

Ray Horney, Chairman of REO, said: "We are pleased with the progress we have made in recent months. The planning application for BPS is progressing well, while we are also making good progress towards balance sheet restructuring. We look forward to updating the market on further progress in due course."

Battersea Power Station: As previously announced, Wandsworth Council and the Mayor of London have both now approved the Group's planning application for the Battersea Power Station site. The application is currently being considered by the Secretary of State for Communities and Local Government, with a decision anticipated in the near future.

The approvals above represent a major step towards realising the Group's vision for the scheme, which has garnered significant support from various stakeholders including the Greater London Authority, English Heritage, the Commission for Architecture and the Built Environment (CABE) and most importantly, the local community.

It has always been the Group's development strategy to partner with a new investor, and we have already attracted significant interest from a range of prospective investors.

Construction on Phase 1 of the development is scheduled to commence in early 2012 with completion in 2016. The remaining phases, including the first ever privately funded extension to the tube network in Central London, are scheduled for completion thereafter.

Balance Sheet Restructuring: As announced on 24 December 2010, the Group's negotiations with its creditors regarding the terms of a financial restructuring are progressing well. Subject to approval from the various creditor groups, the detailed terms of the restructuring deal are as follows:

-- Battersea Power Station would be transferred by REO to a new holding company. The demerger of Battersea Power Station is intended to facilitate the successful conclusion of the Group's global third party investment road show through which it is seeking to attract a long term equity partner into the demerged vehicle.

-- The Group would effect debt for equity swaps with the holders of the 7.5% convertible unsecured loan stock ("CULS") and zero dividend preference shares ("ZDPs"). CULS holders would receive 21.2% of the equity in the new Battersea Power Station holding company and 15.9% of the enlarged equity of REO. ZDP holders would receive 12.1% of the equity in the new holding company and 9.1% of the enlarged equity of REO. In addition, CULS and ZDP holders would be issued with warrants representing 15.9% and 9.1% respectively of the initial issued share capital of the new holding company. Each warrant would entitle the holder to subscribe for one new ordinary share at an exercise price of 0.001p at any time for up to 15 years after the completion of the restructuring if the equity in the new holding company has a value in excess of GBP510 million.

-- Ordinary shareholders (including Treasury Holdings) would receive 5% of the equity in the new holding company and warrants in respect of a further 5% and would, after the issue of ordinary shares to CULS and ZDP holders, retain 75% of the enlarged equity of REO.

-- As an incentive to manage the development of Battersea Power Station, Treasury Holdings would be awarded a management fee representing 7.7% of the equity in the new holding company.

-- The remaining equity in the new holding company, amounting to approximately 54%, would be retained by REO and its subsidiaries following the equitisation of various intercompany balances owed by companies in the Battersea Power Station group.

-- REO would be released from various financial obligations relating to the Battersea Power Station group, including guarantees of senior facilities and the GBP150 million loan note issued to Oriental Property Limited.

-- If the GBP150 million loan note and accrued interest is not repaid on 31 May 2011, Oriental Property Limited would, subject to certain exceptions, have the option to convert the debt into 75% of the equity in the new Battersea Power Station holding company. Shareholders in the new holding company would have the right to acquire that interest prior to 1 June 2012 for an amount equal to the sum due to Oriental Property Limited under the loan note together with interest.

NAMA: As previously indicated, the Group submitted a comprehensive business plan in May 2010 for NAMA's review. The initial evaluation process is now complete resulting in a signed Memorandum of Understanding, the terms of which are non-binding and intended to form the basis for further negotiations. NAMA will monitor the Group's subsequent performance to ensure that it adheres to targets contained in the Memorandum of Understanding and, subject to the further negotiations referred to above, binding facility agreements will be entered into.

Property Portfolio: The portfolio was last valued in August 2010, by Treasury Holdings, in their capacity as investment advisers, at a value of EUR1,050 million.

The Group continues to place a strong emphasis on proactive management of the portfolio and tenant monitoring, resulting in stable annualised income of EUR40.2million, during a period of rental value deflation. Continuing strong operational performance is underpinned by prime office and retail locations, together with the diversity represented by high quality tenants including Vodafone, Merrill Lynch, KPMG and Marks & Spencer, which account for over 63% of the portfolio based on rental income.

Despite current market conditions, portfolio occupancy remains at 95%, with only 4% of rent roll in arrears, and a rent weighted average lease length of 12 years.

The Group's only current development project (Montevetro, Dublin 4) is due for practical completion at the end of January 2011, with strong interest from the market in the building, while a prudent approach to the timing of its remaining development pipeline continues to be adopted.

Outlook:

The Board is encouraged by the significant progress made in recent months in respect of the planning permission granted for the Battersea Power Station project and the signing of the Memorandum of Understanding with NAMA on the Group's business plan, while negotiations towards a successful restructuring of the Group's balance sheet have reached an advanced stage.

While the Group's performance continues to be adversely impacted by continuing concerns about the underlying Irish economic performance, the recent agreement between the Irish Government and the IMF/EU should assist in stabilising the banking sector, thus enhancing capital adequacy and liquidity of the banks. There are also continuing signs that the commercial property market is stabilising1.

Based on the above, in conjunction with the Group's quality portfolio and strength of senior management, the Board remains confident that the Group is positioned to benefit from predicted stability and growth in the wider Irish and UK economies.

1 CBRE, Bi-Monthly Research report, November 2010

Contacts:

Real Estate Opportunities plc

Ray Horney, Chairman

Tel: + 44 (0)1273 775 225

Matrix Corporate Capital

Paul Fincham

Tel +44 (0)20 3206 7000

Goodbody Stockbrokers Linda Hickey, Corporate Broking Tel +353 1 641 6017

Finsbury

Gordon Simpson/Ed Simpkins

Tel: +44 (0)207 251 3801