Last checked at 17 Jun 2010 14:07
17 June 2010
Speymill Deutsche Immobilien Company plc
("SDIC" or "the Company")
Trading update
Speymill Deutsche Immobilien Company plc (AIM: SDIC), the pan-German residential property investment company listed on AIM, announces the following update on trading after a review of the results ahead of the financial year end of 30 June 2010.
The Company has seen an improvement in operating performance as occupancy levels across all packages have gradually increased and net new lettings continue to show an upward bias, demonstrating that the increased level of direct management of property units is having a positive effect on operations. The reduction of overall vacancies will continue to be a core focus of the Company as further units are brought under the direct management of GOAL service GmbH ("GOAL"), the Company's investment adviser.
The Company's portfolio was valued at €1.438bn as at 31 December 2009. Pending a full valuation by DTZ at 30 June 2010, discussions with GOAL indicate that property values remain relatively stable. It is understood that the relevant lending banks commissioned a valuation by DTZ in respect of one of the financing packages as at 31 March 2010 which indicated a marginal decrease in value, reflecting the relative stability of the portfolio.
The Company has recently completed the disposal of nine properties, one of which was disposed at a loss to valuation of €2.2m. This was deemed necessary for operational reasons and the remaining properties were sold, on average, at or above their latest valuation. The payback of the associated debt relating to the disposed properties has necessitated the unwinding of the corresponding interest rate swaps. This resulted in incurring further costs of €1.7m for the unwinding of the interest rate swaps.
Given the costs associated with the unwinding of any interest rate swaps relating to the disposal of properties it is now unlikely that further disposals will be processed in the near term, even in cases where sales prices above valuation could be achieved. Euribor rates, on which the interest rate swap unwinding costs are calculated, have deteriorated further over recent months. Any disposal would necessitate the crystallisation of interest rate swap breakage costs which would offset any gains made on the sales price.
Given the abovementioned loss on property sales, swap breakage costs, a temporary pause in the Company's disposal programme as well as the costs associated with restructuring, there is now likely to be an FFO (funds from operations) loss of approximately €5.5m for the financial year ended 30 June 2010. The Company continues to be engaged in constructive communication with its lending banks in relation to an ongoing asset sales programme to reposition the portfolio satisfactorily.
Under IFRS the revaluation of the interest rate swaps must be recorded in the profit or loss of the Company. As a result of recent interest rate drops, the accounting value of the swaps as at 30 June 2010 is expected to be negative, the exact amount dependent on the rates in place on 30 June 2010.
The Board remains confident that the German residential property market offers investors one of the most attractive investment prospects in Europe due to a lack of new developments and growing demand for affordable housing. The Company continues to implement measures to increase recovery levels for rent and service charge collection and to focus on the continued improvement in its overall occupancy levels.
For more information, please visit http://www.speymilldeutsche.com or contact:
| Speymill Property Group Limited | +44 1624 640 860 |
| (Manager) |
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| Nigel Caine |
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| Nick Harris |
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| SMP Fund Services Limited | +44 1624 682 216 |
| (Administrator) |
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| Vincent Campbell |
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| Smith & Williamson Corporate Finance Limited | +44 20 7131 4000 |
| (Nominated Adviser) |
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| Azhic Basirov |
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| Siobhan Sergeant |
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| Fairfax I.S. PLC | +44 20 7598 5368 |
| (Brokers) |
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| James King |
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| Gillian McCarthy |
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| Tavistock Communications Limited | +44 20 7920 3150 |
| (Media & Investor Relations) |
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| Jeremy Carey |
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| Simon Hudson |
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Notes to Editors:
Speymill Deutsche Immobilien Company plc is a pan-German residential property investment company, which listed on the AIM market of the London Stock Exchange in March 2006, raising £170 million. In May 2007, SDIC raised a further €250 million through a C share placing. The Euro denominated fund aims to provide investors with an attractive level of income together with the prospect for long-term capital growth.
The German residential market is viewed as attractive to investors due to a number of factors including rising German economic activity and productivity, and the availability of assets at below replacement cost. Acquired properties should, through active management, also have the potential for increased rental rates and accordingly improved capital values and increased yield.
Speymill Property Group Limited is the appointed Manager of SDIC and, in conjunction with the Investment Adviser, Goal service GmbH, it identifies acquisition opportunities for the Company, which fit within its investment criteria.