RTY Rutley (See LSE:DPE)

 

TIDMRTY 
 
RNS Number : 7150C 
Rutley European Property Limited 
18 November 2009 
 
 
RUTLEY EUROPEAN PROPERTY LIMITED 
INTERIM MANAGEMENT STATEMENT 
For the period 1 July 2009 to 18 November 2009 
Investment objective 
Rutley European Property Limited ('the Company') and its subsidiaries ('the 
Group') constitute a core-plus commercial real estate fund which was set up in 
2005 with a primary geographical focus on Central and Western Europe and an 
objective of generating for Shareholders a geared net internal rate of return of 
not less than 12% per annum on the issue price of its share capital from both 
capital growth and dividend income.  Prevailing economic conditions leading to 
falls in property values have continued to create uncertainty over the capital 
growth achievable from the Company's portfolio of European real estate assets. 
These economic conditions may also impact on occupation rates and rental flows 
which may cause income levels to decline. 
Company Description 
The Company was incorporated on 17 November 2005 as a closed ended, Guernsey 
registered investment company, with an independent non-executive Board of 
Directors. 
Portfolio profile and valuation 
As at 30 June 2009 the Company's property portfolio comprised 56 properties 
across Continental Europe with a value of EUR540.5 million. The June 2009 
valuations show a fall in the value of the group's property portfolio in Euro 
terms of approximately 7.6% against 31 December 2008 values, or 19.3% in 
Sterling terms over the same period following the depreciation of Sterling 
against the Euro. It is anticipated that there will be a further softening of 
values reported at the next valuation of the group's assets as at 31 December 
2009, although further significant falls in value are not expected before the 
anticipated stabilisation of values in 2010. 
 
 
Market overview and portfolio activity 
 
During the period, the portfolio has continued to benefit from its inherent 
defensive qualities: a granular tenant base, low exposure to tenants in the 
financial sector and geographical diversification. Over the period, investor 
demand for prime assets has remained, leading to the stabilisation of yields in 
a number of markets throughout Western and Central Europe. Occupier markets 
remain weak, however, with tenants continuing to negotiate incentives and 
increased flexibility on lease terms. Any meaningful recovery in values is 
unlikely until liquidity returns and the occupier markets stabilise. 
Against this backdrop, asset management initiatives remain focused on securing 
solid rental income streams for the medium term, renewing leases with existing 
tenants where possible to reduce income voids and capital expenditure. During 
the period, 14 lease transactions were completed at an annual rent in excess of 
EUR1m. Notable transactions were in: 
Germany: where the lease with Druckhaus who occupy 4,049 sq. m. in Berlin was 
extended by a further four years and 4 other lettings secured an annual income 
of EUR506k and further reduced vacancy by circa 1,200 sq. m. 
Poland: where the Cephalon lease at the Warsaw office was renewed for 5 years 
achieving an uplift in rental levels. 
The Company also completed the sale of a retail asset in Osnabruck on 8th 
October 2009 at a sale price of EUR3.9 million. The sale has helped to reduce the 
levels of debt in the Company and positively impact the portfolio's vacancy 
rate, which as at 30 September 2009, was 4.97%. 
As the occupier market continues to weaken, the Manager continues to monitor 
closely rent and service charge collection. The portfolio has a broad tenant 
base which gives the Company a level of security as the income is well 
diversified and not susceptible to a single tenant default. The top twenty 
tenants, representing 48% of the rental income, remain strong and consist of 
large global corporations, German food retailers and public sector occupiers. 
Material events and transactions 
During the period, the Board of Black Sea Global Properties Limited ('BSGP') 
announced that it owned or had received valid acceptances in respect of 
158,107,495 of the Company's shares representing approximately 75.56% of the 
existing issued redeemable preference share capital of the Company. BSGP then 
sold 4,200,000 shares at 7.25 pence per share on 10 August 2009, reducing its 
holding to 153,907,495 shares, representing approximately 73.55% of the existing 
issued redeemable preference share capital of the Company. 
Mr Obie Moore was appointed as a non-executive director of the Company on 25th 
August 2009. 
Mr David Allison resigned as a non-executive director of the Company with effect 
from 30 September 2009. 
Net Asset Value (NAV) and Share price movements 
The 30 September NAV will be available 60 days after the quarter end (i.e. by 27 
November 2009). 
 
 
The NAV as at 30 June 2009 was 23.90p. Excluding the fair value of interest rate 
swap liabilities, the NAV is 35.40p 
 
 
As at 18th November 2009, the share price was 8.5p per share. 
Dividends and Financing 
No dividend has been declared in the period. 
In light of current market conditions, the dividend policy remains under review. 
The Group's gearing ratio as at 30 June 2009 was approximately 82% (Debt/Gross 
Assets) which is within the borrowing limit of 85%, as set out in the Articles 
of Association of the Company.All external bank debt is limited recourse to the 
special purpose vehicles ( 'SPV' ) holding the relevant assets. This means 
should the lenders be entitled to enforce security where a SPV is in breach of 
its loan obligation the lenders can only seek to recover the debt from sale of 
the SPV, its assets including cash. In the case of the French and Netherlands 
assets only, the SPV's guarantee each others debt. 
The loan to value ( 'LTV') ratios on Group external bank loans of EUR405.4 million 
exceed LTV covenant ratios in 8 out of 10 SPV facilities. The number of LTV's 
exceeding covenant values has remained the same since 31 December 2008 despite 
the fact that 30 June 2009 valuations have resulted in a further fall in the 
value of the Group's property portfolio. The Company remains in discussions with 
lenders regarding LTV levels and in particular with Deutsche Pfandbriefbank 
following the bank having formally served a notice of default on the German SPVs 
(Re Mosse Zentrum, Re German Properties, Re German Small Properties and Re 
German Office) for non compliance with LTV covenants. Deutsche Pfandbriefbank 
have asked for cross collateralisation of the German SPV loan facilities to 
waive the default and the Company are currently in discussions with the bank in 
order to reach a mutually acceptable solution. 
To date, no lenders have required that any of the SPV facilities be repaid as a 
result of the LTV being in excess of the LTV covenant. 
Country Weighting 
Portfolio weighting by country 30 June 2009 
+-------------+--------+ 
| Country     | %      | 
+-------------+--------+ 
| Germany     | 63%    | 
+-------------+--------+ 
| Sweden      | 15%    | 
+-------------+--------+ 
| Poland      | 12%    | 
+-------------+--------+ 
| The         | 5%     | 
| Netherlands |        | 
+-------------+--------+ 
| Belgium     | 3%     | 
+-------------+--------+ 
| France      | 2%     | 
+-------------+--------+ 
 
 
Ten Largest Properties 
(by % of Gross Asset Value 30 June 2009) 
+----+----------+----------------------------------+------------------+----------+ 
|    | Country  |            Property              |    Location      |  % GAV   | 
+----+----------+----------------------------------+------------------+----------+ 
| 1  | Poland   |           Buma Square            |      Krakow      |  9.50    | 
+----+----------+----------------------------------+------------------+----------+ 
| 2  | Sweden   |           Karolinen 2            |    Karlstad      |  9.06    | 
+----+----------+----------------------------------+------------------+----------+ 
| 3  | Germany  |        Mosse Zentrum II          |      Berlin      |  8.02    | 
+----+----------+----------------------------------+------------------+----------+ 
| 4  | Germany  |         Mosse Zentrum I          |      Berlin      |  4.44    | 
+----+----------+----------------------------------+------------------+----------+ 
| 5  | Germany  |          Arnulfstrasse           |      Munich      |  4.02    | 
+----+----------+----------------------------------+------------------+----------+ 
| 6  | Germany  |        Schildgasse 28-30         |   Rheinfelden    |  3.76    | 
+----+----------+----------------------------------+------------------+----------+ 
| 7  | Germany  |       50 Kinkeler Strasse        |Neunkirchen/Saar  |  3.28    | 
+----+----------+----------------------------------+------------------+----------+ 
| 8  | Germany  |        5 Schwabenheimer          |    Kreuznach     |  3.24    | 
+----+----------+----------------------------------+------------------+----------+ 
| 9  | Germany  |          Frankencampus           |    Nuremberg     |  2.61    | 
+----+----------+----------------------------------+------------------+----------+ 
|10  | Belgium  |        Equinox Building          |      Wemmel      |  2.57    | 
+----+----------+----------------------------------+------------------+----------+ 
 
 
This IMS has been produced solely to provide additional information to 
shareholders as a body to meet the relevant requirements of the UK Listing 
Authority's Disclosure and Transparency Rules. It should not be relied upon by 
any other party or for any other purpose. This statement has not been audited. 
 
 
All Enquiries: 
 
 
David Pinckney, Chairman 
Rutley European Property Limited, 0207 659 7495 
 
 
Nick Burnell, Managing Partner / Marcus Davidson-Wright, Finance 
Partner 
Rutley Capital Partners LLP, 020 7861 1230 / 020 7861 1543 
 
 
Tom Durie 
Oriel Securities Limited, 020 7710 7600 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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