KEIF Kenmore Euro

 

TIDMKEIF 
 
RNS Number : 8029C 
Kenmore Euro Industrial Fund Ltd 
19 November 2009 
 

Kenmore European Industrial Fund ("Company"/ "Fund') 
 
 
Interim Management Statement 
and Announcement of Net Asset Value 
 
 
This interim management statement ('IMS') relates to the period from 1 July 2009 
to 30 September 2009, and contains information that covers this period, and up 
to the date of the publication of this IMS, unless otherwise specified. 
 
 
Giles Weaver, Chairman, commented: 
 
 
"During the period, the Fund realised GBP56.7 million from its active disposal 
programme and applied a total of GBP56.8 million to repay allocated debt. 
Furthermore, in October, a further GBP23.2m arising from previous sales has been 
applied against the debt. At present, this results in a gearing position 
(assuming all cash balances within the Fund are applied to drawn debt 
facilities) of 61.6%. This remains consistent with the position at 30 June 2009. 
 
 
"The ongoing leasing performance within the portfolio remained resilient with 
new and retained leases during the period equating to 4.13% of the Fund's gross 
income and tenants vacating representing 4.23%.  Over the quarter, the current 
portfolio yield has increased to 7.81%." 
 
 
Net Asset Value 
The Company's Net Asset Value ('NAV') at 30 September 2009, adjusted to add back 
deferred tax, was 79.2 pence per share. This represents an increase of 5.3% over 
the equivalent NAV at 30 June 2009. 
 
 
The table below sets out the movement in the adjusted NAV in the quarter: 
+--------------------------------------------------+------------------+ 
|                                                  |  Pence per share | 
+--------------------------------------------------+------------------+ 
| Adjusted NAV at 30 June 2009                     |            75.2p | 
+--------------------------------------------------+------------------+ 
| Movement in portfolio valuations                 |           (5.8)p | 
+--------------------------------------------------+------------------+ 
| Movement from balance of retained profits        |           (0.2)p | 
+--------------------------------------------------+------------------+ 
| Movement from mark to market of derivatives      |             1.4p | 
+--------------------------------------------------+------------------+ 
| Dividends paid                                   |           (0.8)p | 
+--------------------------------------------------+------------------+ 
| Foreign exchange movements                       |             9.8p | 
+--------------------------------------------------+------------------+ 
| Movement on deferred tax compensated for at      |           (0.4)p | 
| acquisition                                      |                  | 
+--------------------------------------------------+------------------+ 
| Adjusted NAV at 30 September 2009                |            79.2p | 
+--------------------------------------------------+------------------+ 
 
 
After deducting all deferred tax, whether recognised on the balance sheet or 
not, NAV at 30 September 2009 was 53.5 pence per share (47.2 pence at 30 June 
2009). 
 
 
Portfolio 
The value of the portfolio as at 30 September 2009 (excluding the impact of 
acquisitions, disposals and exchange rate movements) fell by 1.59% from 
GBP310,434,000 (EUR338,745,000) to GBP305,494,000 (EUR333,355,000).  Occupancy as at 
30 September 2009 decreased by 2.00% to 86.74% largely due to disposals as well 
as the vacation of 18,375 sqm by a single tenant, Encoids, at Olen, Belgium. 
Total leases signed during the period represented 1.96% of the Fund's gross 
income (14,079 sqm of total area) and total tenants vacating represented 4.23% 
of the Fund's gross income (31,727 sqm).  Tenants retained represented 2.17% of 
the Fund's gross income (14,040 sqm). The current portfolio yield is 7.81%, 
which has increased by 17 basis points in the quarter. 
 
 
As previously announced, during the period the Company sold a number of 
properties including two in Belgium for EUR7.5 million (GBP6.9 million) and 
eighteen in France for a net price EUR51.0 million (GBP46.8 million). This brings 
the total number of assets held in the Fund's portfolio as at 30 September 2009 
to 77. 
 
 
Portfolio Summary 
Geographical Analysis 
The geographic spread by value of the Fund's portfolio at 30 September 2009 is: 
+-----------------------+--------------------+ 
| France                |                34% | 
+-----------------------+--------------------+ 
| Norway                |                21% | 
+-----------------------+--------------------+ 
| Belgium               |                15% | 
+-----------------------+--------------------+ 
| Sweden                |                11% | 
+-----------------------+--------------------+ 
| Germany               |                 8% | 
+-----------------------+--------------------+ 
| Finland               |                 8% | 
+-----------------------+--------------------+ 
| The Netherlands       |                 3% | 
+-----------------------+--------------------+ 
 
 
Dividend 
The interim results were announced on 28 August 2009 together with the 
announcement of an interim dividend of 0.75p per Ordinary share to shareholders 
on the register on 11 September 2009. This was paid on 25 September 2009. 
 
 
Financing 
As at 30 September 2009, the Fund had debt levels representing gearing, on total 
property value (after applying disposal proceeds set aside for scheduled debt 
repayment), of 67.4%.  If all cash balances within the Fund were to be applied 
to reduce the drawn debt facilities it would reduce gearing to 61.6% leaving the 
Fund with 11% headroom on average LTV. The Board continues to monitor this 
whilst entering into discussions with its lenders to secure longer term 
financing solutions. Furthermore, the Company had interest rate swaps in place 
for 106% of its drawn debt, at a weighted average rate of 4.19% for a weighted 
average period of 1.9 years. 
 
 
Investment Manager 
On 12 November 2009, the Company announced that the Investment Manager's 
indirect parent company, Kenmore Investments Limited, was placed into 
administrative receivership.  Further to that announcement, the Board, with its 
advisers, continues to keep the situation with the Company's Investment Manager 
under careful review.  The receivers of Kenmore Investments Limited have 
provided assurance to the Board that the Fund is not subject to any insolvency 
proceedings under the receiver's control.  The Board will update Shareholders as 
appropriate. 
 
 
Market Review 
Improved market sentiment over the last quarter has resulted in an upturn in 
activity in the European commercial real estate investment market with 
transactions totalling EUR17.3bn, an increase of 34% on the second quarter of 
2009.  This has been driven by the major western European markets with both the 
UK and Germany reporting increases in investment of more than 50% compared to 
the second quarter of 2009 (Source: CBRE). 
 
 
This upturn in activity suggests that many investors believe that the European 
market is nearing the bottom of the cycle.  That said, whilst the investment 
market is showing signs of improvement the occupier markets are typically 
lagging this trend.  According to JLL, total take-up in the main European 
warehousing markets amounted to 4.7m sqm in the first half of 2009.  This is a 
decline of 28% compared to the previous half year and is 36% lower than the 
first half of 2008. 
 
 
The slowing of the recent trend of declining yields and the stabilisation of 
markets is most visible in the European logistics sector.  The JLL weighted 
average European prime logistics yield stood at 7.80% in Q3 2009, compared to 
8.00% in the second quarter, 7.70% in the first quarter, 7.30% in the fourth 
quarter of 2008 and 6.70% in the third quarter of 2008.  Despite this, 
investors' interest has focused on a narrow band of prime assets in core markets 
and this trend is expected to continue, with secondary assets experiencing a 
continued softening of yields in the near term.  A full recovery will depend on 
the debt markets, which remain constrained, and occupational markets, which look 
set to remain weak. 
 
 
However, the Fund's diversifying spread across a number of Western European 
economies and the recent reduction in its exposure to France, has left the Fund 
in a relatively strong position to resist further market falls.  This, as well 
as proactive asset management initiatives, will provide a strong footing in the 
current economic climate. 
 
 
 
 
-ENDS- 
 
 
 
 
For further information: 
 
 
Rob Brook, Kenmore Financial Services Limited 
Tel: +44 (0)20 7629 4480 
 
 
Stephanie Highett/Dido Laurimore/Olivia Goodall, Financial Dynamics 
Tel: +44 (0)20 7831 3113 
 
 
www.kenmoreeifund.com 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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