TIDMMAX
Max Property Group Plc
("Max" or the "Company")
Results for the six months ended 30 September 2010
Max Property Group Plc ("Max" or the "Company") is a Jersey resident real estate
investment company. Its Board, chaired by Aubrey Adams, is exclusively advised
by Prestbury Investments LLP, which is owned and managed by a team led by Nick
Leslau and Mike Brown.
The Company's strategy is to exploit cyclical weakness in the UK real estate
market through opportunistic investment and active management with a view to
realising cash returns for shareholders over an investment cycle of
approximately seven and half years from its listing in May 2009.
Highlights
* Net assets excluding minority interests of GBP264.8m at 123.7p per share*, up
4% since 31 March 2010 and up 28.7% in the 16 months since listing with
minimal net leverage
* Industrious:
* 316 lettings, sales of empty units, lease renewals and lease regearings
on c. 2m sq ft of space has reduced the vacancy rate from 21% at
purchase in October 2009 to 17% at 30 September, 2010 (like for like,
excluding units sold)
* High Wycombe industrial property sold for GBP30.5m taking total sales to
institutions since purchase to GBP70m at c. GBP15m above gross purchase
price
* Office portfolio:
* WestPoint, Manchester sold for GBP5.8m, GBP1.6m over 31 March, 2010 book
value
* five lettings reduce vacancy rate from 46% at purchase to 42% at 30
September, 2010
* active discussions ongoing over half the empty space
* 45% joint venture with Lloyds Bank to acquire four private hospitals on 25
year leases with annual upwards only RPI uplifts with a gross value on
acquisition in May 2010 of GBP31.6m
* Purchase of 14 nightclubs mainly let on long leases with initial annualised
rental income of GBP1.48m for cash consideration of GBP9.4m after the balance
sheet date
* Cash on deposit of over GBP110m providing a substantial platform for future
acquisitions
* Earnings per share** 1.9p per share (1.1p per share for the period to 31
March, 2010)
* NAV per share on an EPRA basis, excluding fair values of financial
instruments and deferred tax and including properties held for resale at fair
value
** EPS on an EPRA basis, excluding revaluation movements and profits on
investment
and trading property sales
Aubrey Adams, Chairman of Max Property Group Plc, comments:
"We executed over GBP280 million of well-timed acquisitions in our first few
months of existence during the 2009 trough in values and have followed this up
with encouraging progress through intensive asset management. Whilst the
rebound in prices generated fewer opportunities in 2010 to date the deleveraging
process to be undertaken by the banks and CMBS market is still at an early
stage. We are confident that there will be some exceptional opportunities for
Max arising from this inevitable deleveraging over the next couple of years.
Timing is everything and, as we have already demonstrated, we have to wait,
watch and strike only when the deals represent outstanding opportunities. We
have the skills, cash and ambition to do this and remain very excited about
Max's future."
16 November, 2010
ENQUIRIES:
Prestbury Investments Tel: 020 7647 7647
Nick Leslau
Mike Brown
College Hill Tel: 020 7457 2020
Gareth David
Morgan Stanley (Nominated Adviser) Tel: 020 7425 8000
Edward Knight
Forward looking statements
This document includes forward looking statements which are subject to risks and
uncertainties. You are cautioned that forward looking statements are not
guarantees of future performance and that if risks and uncertainties
materialise, or if the assumptions underlying any of these statements prove
incorrect, the actual results of operations and financial condition of the Group
may materially differ from those made in, or suggested by, the forward looking
statements. Other than in accordance with its legal or regulatory obligations,
the Company undertakes no obligation to review, update or confirm expectations
or estimates or to release publicly any revisions to any forward looking
statements to reflect events that occur or circumstances that arise after the
date of this document.
Chairman's Statement
Dear Shareholder,
I am pleased to report Max Property Group Plc's results for the six months ended
30 September, 2010.
This six month period has seen the entry into a joint venture with Lloyds Bank
to acquire a 45% interest in a portfolio of four hospitals, the disposal of
seven investment properties (principally Castle Estate, High Wycombe sold for
GBP30.5m) and one trading property, WestPoint Manchester together with continued
active portfolio management resulting in further progress in reducing the
portfolio void rates.
Results and financial position
The Group's net asset value per share (on an EPRA basis, excluding the
revaluation of interest rate derivatives and excluding minority interests) has
increased from 118.9p per share at 31 March, 2010 to 123.7p per share at 30
September, 2010, an increase of 4.0% over six months and 28.7% in the 16 months
since listing.
The increase in EPRA net asset value over the six months to 30 September, 2010
of GBP10.7m (4.8p per share) comprises:
* Net rents after financing costs of GBP7.5m (3.4p per share)
* Revaluation uplifts of GBP4.6m (2.1p per share) on the wholly owned portfolio
and GBP0.5m (0.2p per share) on the 45% joint venture interest
* Realised profits on investment and trading property sales of GBP2.0m (0.9p per
share)
* Net of tax and running costs totalling GBP3.9m (1.8p per share)
In the Investment Adviser's report on the following pages, we have summarised
progress in managing the vacancy rates of the portfolio and whilst it remains
hard work to yield results against a tough background in the property market and
the wider economy, good progress has been made in reducing the portfolio void
rates and thus maintaining income and cash flow from the portfolio. Results to
date have been ahead of our expectations at the time of the acquisition of each
portfolio.
The Group's non-recourse debt, net of secured cash, at the end of the period was
GBP100m, secured only against assets in the Industrious portfolio valued at 30
September, 2010 at GBP213m. Free cash available to the Company amounted to GBP121m.
Events since the balance sheet date
A portfolio of 14 nightclubs was acquired on 27 October, 2010 for cash
consideration of GBP9.4m. The annual rent on the portfolio is initially GBP1.5m per
annum, with 11 of the properties let and three vacant. The principal tenant,
with leases on ten of the properties, is Atmosphere Bars and Clubs Limited with
properties let for a minimum of 25 years with a 15% rental uplift in 2015 and
five-yearly open market rent reviews thereafter. The initial 15% yield should
increase to 16% on letting two vacant units where terms have been agreed since
acquisition and to over 19% after the 2015 rent review. After this acquisition
the Company has over GBP110m of cash on deposit.
This is our smallest property acquisition to date, but with the combination of
high income yield and significant capital upside we anticipate that it will make
a meaningful contribution to our overall returns.
Outlook
We executed over GBP280m of well-timed acquisitions in our first few months of
existence during the 2009 trough in values, but the window in which to buy
assets at discounted prices was shorter than either we or our peers in the
property industry anticipated. As the deleveraging process to be undertaken by
the banks and CMBS market is still at an early stage and with a very large
volume of sales still to come, our judgment is that the pricing at which
secondary assets will become available is likely to become more attractive at
some point during the next two years.
The vast majority of buyers are seeking only prime assets, but the assets
forming the bulk of the deleveraging process will not meet their requirements.
This mismatch between the demand for and supply of investment stock will, we
believe, create a second window of opportunity for us to deploy our cash on
transactions which will deliver very attractive returns.
Max's Investment Adviser has a very substantial investment in the Company
guaranteeing close alignment of interests between the manager and other
shareholders. This creates an environment where purchases should never occur
merely to show a level of manager activity but happens only when the deal and
timing is right.
Compared to the tens of billions of pounds of deleveraging to come, Max has over
GBP110m of cash to deploy and in this context needs to secure only a tiny fraction
of this stock to be fully invested in opportunities that have arisen from the
crash - the raison d'être for setting up the business. We remain confident that
the opportunities will come.
We are confident that there will be some exceptional opportunities for Max
arising from this inevitable deleveraging over the next couple of years.
Timing is everything and, as we have already demonstrated, we have to wait,
watch and strike only when the deals represent outstanding opportunities. We
have the skills, cash and ambition to do this and remain very excited about
Max's future.
Aubrey Adams
Chairman
16 November, 2010
Report from the Investment Adviser
Prestbury Investments LLP, adviser to Max Property Group Plc, is pleased to
report on the operations of the Group for the period ended 30 September, 2010.
Industrious Portfolio
* Industrial Portfolio acquisition completed October 2009 for c. GBP244m
including purchase costs reflecting GBP31psf capital value
* A receivership sale of multi-let industrial estates valued at c. GBP700m at the
peak of the market; replacement cost at acquisition estimated at GBP544m
Industrious portfolio as at 30 September, 2010
* 79 properties
* 877 tenants
* 1,042 tenancies
* 1,217 lettable units
* 6.6m sq ft
* Average unit size 5,400 sq ft
* 43% by value in the South of England
* Highly liquid: 75% of properties by number are lot sizes of GBP3m or below
* Weighted average unexpired lease term 4.0 years
The Industrious portfolio predominantly comprises smaller units that appeal to a
wide variety of users. Martlesham Heath Business Park, Ipswich (503,000 sq ft)
makes up over 10% of the portfolio by value. All other properties each make up
less than 5% of the portfolio value.
30 September Area Number of Number
2010 Capital properties of units
valuation Percentage of value psf
Region total
GBP000 % GBP sq ft
South East 51,284 24 58.17 881,585 13 247
East Anglia 25,245 12 46.37 544,374 2 149
South West 16,120 7 40.19 401,061 8 100
Midlands 38,010 18 26.60 1,429,208 18 182
North West 30,117 14 26.17 1,151,006 17 222
Yorkshire 12,335 6 39.81 309,810 11 175
North East 31,175 14 22.38 1,393,114 3 91
Scotland 11,305 5 19.64 575,529 7 51
=-------------------------------------------------------------------------------
Total 215,591 100 32.25 6,685,687 79 1,217
=-------------------------------------------------------------------------------
Activity
In Max's first year of ownership 316 lettings, sales of empty units, lease
renewals and lease regearings on nearly 2m sq ft of space have been carried out.
The GBP70m of properties sold to institutions are excluded from the analysis
below.
Vacancy progress since purchase
% of space vacant at
Number of units purchase
Area (sq ft)
=-------------------------------------------------------------------------------
Vacant at purchase, now let 115 446,690 33.7%
Vacant at purchase, sold to
owner occupiers 4 134,516 10.2%
=-------------------------------------------------------------------------------
Total 119 581,206 43.9%
Let at acquisition, now vacant (70) (342,705)
=-------------------------------------------------------------------------------
Net improvement 49 238,501
=-------------------------------------------------------------------------------
* Vacancy rate at purchase: 20.7%
* Vacancy rate at 30 September, 2010: 16.9%
* 44% of space vacant at acquisition since let or sold
* 115,000 sq ft currently under offer in new lettings
* 80,000 sq ft currently under offer to owner occupiers
* 93,000 sq ft known to be coming vacant
* c. GBP70m of sales to institutions at an average yield of c.8%, capital value
of c. GBP99 psf, vacancy rate of just 2% and c. GBP15m (over 20%) above gross
purchase price
* c. GBP4m of sales of vacant units to owner occupiers at an average margin of
65% over purchase cost
Office Portfolio
* Acquired January 2010 for c. GBP39m including purchase costs
* Reinstatement cost c. GBP180m
* 46% vacant by floor area, 70% of which was already refurbished to a high
specification at acquisition
* GBP5.9m from vendor in escrow to be drawn against outgoings on voids for three
years
* 12.7% initial yield
* GBP50psf capital value
* WestPoint, Old Trafford, Manchester sold for GBP5.8m, GBP1.6m over March 2010
book value
Office portfolio as at 30 September, 2010
* Nine properties
* Late 80s air conditioned offices
* 660,000 sq ft
* 70% South East, 25% Manchester, 5% Bristol
* Five lettings signed since purchase of c. 32,000 sq ft, 2,500 sq ft vacated
* Terms agreed on over 40,000 sq ft in eight transactions
* 150,000 sq ft of active letting discussions
* 36,000 sq ft known to be falling vacant in the next six months (known about
at the time of purchase and reflected in the purchase price)
Size Vacancy Tenants
sq ft % sq ft
=-------------------------------------------------------------------------------
Concorde, Manchester 125,000 65 81,000 Serco, Trevor Jones accountants
Broadlands, Horsham 116,000 34 40,000 Ericsson & Rockwell
subsidiaries C-Med, Fender
Centric, Milton Keynes 107,000 50 53,000 Computercenter, Getronics
Silbury Court, Milton Keynes 77,000 38 29,000 13 tenants
Solent Centre, Fareham 71,000 37 26,000 16 tenants
Overbridge Square, Newbury 66,000 25 16,000 5 tenants
New Bond House, Bristol 47,000 60 28,000 4 tenants
Rookesley, Milton Keynes 27,000 - - Workplace
Adrin Place, Farnborough 24,000 100 24,000
=-------------------------------------------------------------------------------
660,000 43 297,000
=-------------------------------------------------------------------------------
Hospitals Portfolio
* Portfolio of four freehold private hospitals in Blackburn, Liverpool, Ayr
and Stirling acquired by joint venture company in May 2010 for GBP31.6m
* Joint venture with Lloyds Banking Group where Max has 45% of the economics
and 50% of the votes (Lloyds has 50% of votes and economics)
* Non-recourse debt at 100% of purchase price
* Each hospital is let to BMI Healthcare Limited, guaranteed by General
Healthcare Group Limited (GHG) for a term of 25 years from May 2010 with a
tenant option to renew for a further 10 years on full repairing and insuring
terms with the tenant responsible for all outgoings
* Initial rent of GBP2.3m pa
* Annual, upwards only RPI-linked rent reviews throughout the term
* GHG is the UK's largest private healthcare provider with 67 hospitals and
treatment centres across the UK, and generated an EBIDTA of GBP220.6m in
2009, up from GBP203.9m in 2008
Total portfolio valuation movements in the six month period to 30 September,
2010
Uplift over 31 March 2010
valuation or acquisition
if later
IPD* over equivalent
period
=-------------------------------------------------------------------------------
Industrial 1.4% 0.9%
Offices 6.7% 2.9%
Hospitals (4 months since 3.8% n/a
acquisition)
Average 2.4% 2.4%
=-------------------------------------------------------------------------------
* Investment Property Databank monthly capital growth index for the relevant
sector
Weighted
average
Equivalent Reversionary Capital unexpired
Initial yield yield value psf lease term
yield
=-------------------------------------------------------------------------------
Industrial 10.0% 10.7% 11.4% GBP33 4.0 years
Offices 8.8% 10.6% 14.8% GBP71 3.0 years
Hospitals 6.8% 6.8% 7.2% n/a 24.7 years
Average 9.6% 10.5% 11.8% n/a 5.3 years
=-------------------------------------------------------------------------------
Nightclub Portfolio
Since the balance sheet date, a portfolio of 14 nightclubs with a total floor
area of 256,000 sq ft was acquired for cash consideration of GBP9.4m.
* Ten nightclubs are let to Atmosphere Bars and Clubs Limited on 30 year
leases from January 2010 with a tenant break in year 25. The aggregate net
rent of GBP1,407,000 rises by 15% to GBP1,618,000 in 2015 with five-yearly
upward only reviews thereafter. The freehold properties are in Bedford,
Barnsley, Leicester, Luton, Llandudno, Northampton, Portsmouth, Scunthorpe,
Wrexham and one leasehold property is in Halifax. Atmosphere Bars & Clubs
Limited is a new, debt-free company backed by Sun Capital Partners. It was
formed to acquire 31 of the best performing nightclubs out of the pre-pack
administration of the former 3D Entertainment Group.
* The Colchester site is let to Cavendish Bars Limited at GBP70,000 per annum
with a rolling mutual break on six months' notice. The property forms part
of a potential development site.
* Banbury and Maidenhead are vacant but terms have been agreed to let at an
aggregate rent of GBP101,000 pa on a 15 year term certain with three months
rent free.
* Middlesbrough is also vacant but there is interest from an owner occupier.
* The net initial yield of the portfolio is 15% rising to 16% on the letting
of Banbury and Maidenhead and rising further to 19.3% in 2015 based on the
guaranteed uplifts on the Atmosphere sites and assuming Middlesbrough is let
by that time.
Triple net asset value
The Group's 'triple net asset value' is compared to the balance sheet and EPRA
net asset values below.
Unaudited 30 Unaudited 30 Audited 31 March
September 2010 September 2009 2010
(restated)
GBPm Pence per GBPm Pence per GBPm Pence per
share share share
=-------------------------------------------------------------------------------
Published net asset
value attributable
to owners of the 264.8 120.4 227.3 103.3 256.9 116.8
Company
Adjustments:
Fair value of
trading properties 0.7 0.3 - - 1.6 0.7
in excess of book
value
Fair value movements
in financial 7.5 3.3 1.2 0.6 3.8 1.7
instruments
Deferred and current (1.2) (0.5) (0.2) (0.1) (0.8) (0.3)
tax
Fair value movements
in financial
instruments in joint 0.4 0.2 - - - -
ventures, net of tax
=-------------------------------------------------------------------------------
EPRA Net Asset Value 272.2 123.7 228.3 103.8 261.5 118.9
Less hedging fair
value adjustments (6.7) (3.0) (1.0) (0.5) (3.0) (1.4)
=-------------------------------------------------------------------------------
Triple net asset
value on an EPRA 265.5 120.7 227.3 103.3 258.5 117.5
basis
=-------------------------------------------------------------------------------
Mike Brown, Chief Executive
Prestbury Investments LLP
16 November, 2010
Group Income Statement
Unaudited 17
Unaudited six April 2009 to 30
months to 30 September 2009 Audited
September 2010 (restated) 17 April 2009
to 31 March
2010
Note GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Gross rental income 15,316 137 14,890
Proceeds from sale of 4,873 20,531 23,225
trading properties
=-------------------------------------------------------------------------------
20,189 20,668 38,115
=-------------------------------------------------------------------------------
Property outgoings (4,490) (14) (3,789)
Cost of properties (3,142) (17,453) (18,659)
sold
=-------------------------------------------------------------------------------
(7,632) (17,467) (22,448)
+------------------------------------------------------------------------------+
|Net rental income 10,826 123 11,101|
| |
|Profit on sale of 1,731 3,078 4,566|
|trading properties |
+------------------------------------------------------------------------------+
Gross profit 12,557 3,201 15,667
Administrative
expenses:
+------------------------------------------------------------------------------+
|General administrative (2,378) (1,371) (3,568)|
|expenses |
| |
|Corporate costs (404) (168) (627)|
+------------------------------------------------------------------------------+
Total administrative (2,782) (1,539) (4,195)
expenses
Investment property 4,614 95 24,752
revaluation surplus
Profit on sale of 1,247 - 1,838
investment properties
Discount on 4 - 15,490 15,490
acquisition
Share of profits of 10 469 - -
joint venture
=-------------------------------------------------------------------------------
Operating profit 16,105 17,247 53,552
Finance income 5 311 685 1,069
Finance costs 5 (5,649) (248) (3,960)
=-------------------------------------------------------------------------------
Profit before tax 10,767 17,684 50,661
Tax charge 6 (1,121) (810) (1,828)
=-------------------------------------------------------------------------------
Profit for the period 9,646 16,874 48,833
=-------------------------------------------------------------------------------
Profit for the period
attributable to:
Owners of the parent 9,548 16,874 48,334
Minority interest 7 98 - 499
=-------------------------------------------------------------------------------
9,646 16,874 48,833
=-------------------------------------------------------------------------------
Earnings per share
Basic and diluted 8 4.3p 7.7p 22.0p
=-------------------------------------------------------------------------------
All amounts relate to continuing activities.
Group Statement of Comprehensive Income
Unaudited 17 April
Unaudited six 2009 to 30
months to 30 September 2009 Audited
September 2010 (restated) 17 April 2009
to 31 March
2010
Note GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Profit for the period 9,646 16,874 48,833
Market value
adjustment of 14(b) (1,542) (1,243) (3,329)
interest rate
derivatives,
recognised directly
in equity
Amortisation of
interest rate swap, (67) - (169)
transferred to income
statement
Tax effect of
interest rate 6 321 249 700
derivative valuation
adjustment
Share of market value
adjustment of
interest rate
derivatives in joint 10 (379) - -
venture, recognised
directly in equity,
net of deferred tax
=-------------------------------------------------------------------------------
Total comprehensive
income for the 7,979 15,880 46,035
period, net of tax
=-------------------------------------------------------------------------------
Total comprehensive
income for the
period, net of tax,
attributable to:
Owners of the parent 7,881 15,880 45,536
Minority interest 98 - 499
=-------------------------------------------------------------------------------
7,979 15,880 46,035
=-------------------------------------------------------------------------------
Group Statement of Changes in Equity
Period ended 30 Stated Hedging Retained Minority
September 2010 capital reserve earnings interests Total
(unaudited)
GBP000 GBP000 GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
At 31 March 2010 211,367 (2,798) 48,334 1,499 258,402
(audited)
=-------------------------------------------------------------------------------
Profit for the - - 9,548 98 9,646
period
Market value
adjustment of - (1,609) - - (1,609)
interest rate
derivatives
Tax effect of
interest rate - 321 - - 321
derivative
valuation
adjustment
Share of joint
venture market
value adjustment - (379) - - (379)
of interest rate
derivatives, net
of deferred tax
=-------------------------------------------------------------------------------
Total - (1,667) 9,548 98 7,979
comprehensive
income for the
period, net of tax
=-------------------------------------------------------------------------------
At 30 September
2010 (unaudited) 211,367 (4,465) 57,882 1,597 266,381
=-------------------------------------------------------------------------------
Period ended 30 Stated Hedging Retained Minority
September 2009 capital reserve earnings interests Total
(restated and
unaudited)
GBP000 GBP000 GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
At incorporation - - - - -
Profit for the - - 16,874 - 16,874
period
Market value
adjustment of - (1,243) - - (1,243)
interest rate
derivatives
Tax effect of
interest rate - 249 - - 249
derivative
valuation
adjustment
=-------------------------------------------------------------------------------
Total
comprehensive - (994) 16,874 - 15,880
income for the
period, net of tax
Issue of ordinary
shares of no par 220,000 - - - 220,000
value
Share issue costs (8,623) - - - (8,623)
=-------------------------------------------------------------------------------
At 30 September
2009 (unaudited) 211,377 (994) 16,874 - 227,257
=-------------------------------------------------------------------------------
Group Balance Sheet
Unaudited 30
Unaudited 30 September 2009
September 2010 (restated)
Audited
31 March 2010
Note GBP000 GBP000 GBP000
Non-current assets:
Investment properties 9 260,557 240,335 285,358
Investment in joint 10 90 - -
venture
Deferred tax asset 6 1,158 285 700
=-------------------------------------------------------------------------------
261,805 240,620 286,058
=-------------------------------------------------------------------------------
Current assets:
Properties held for 1,982 3,280 5,252
resale
Trade and other 11 5,689 22,571 4,765
receivables
Cash deposits with
maturities of more 40,919 110,501 35,700
than three months
Cash and cash 12 83,695 67,895 66,916
equivalents
=-------------------------------------------------------------------------------
132,285 204,247 112,633
=-------------------------------------------------------------------------------
Total assets 394,090 444,867 398,691
=-------------------------------------------------------------------------------
Current liabilities:
Trade and other 13 (15,478) (213,197) (15,529)
payables
Income tax (3,086) (846) (1,828)
Interest rate swap
derivatives at market 14 (b) (1,818) (1,852) (2,308)
value
=-------------------------------------------------------------------------------
(20,382) (215,895) (19,665)
=-------------------------------------------------------------------------------
Non-current
liabilities:
Borrowings 14 ( (102,561) - (117,466)
Interest rate swap
and cap at market 14 (b) (3,051) - (1,443)
value
Obligations under (1,715) (1,715) (1,715)
finance leases
=-------------------------------------------------------------------------------
(107,327) (1,715) (120,624)
=-------------------------------------------------------------------------------
Total liabilities (127,709) (217,610) (140,289)
=-------------------------------------------------------------------------------
Net assets 266,381 227,257 258,402
=-------------------------------------------------------------------------------
Equity attributable
to owners of the
parent:
Stated capital 15 211,367 211,377 211,367
Hedging reserve (4,465) (994) (2,798)
Retained earnings 57,882 16,874 48,334
=-------------------------------------------------------------------------------
264,784 227,257 256,903
Minority interest 7 1,597 - 1,499
=-------------------------------------------------------------------------------
Total equity 266,381 227,257 258,402
=-------------------------------------------------------------------------------
Basic and diluted net
asset value per share 16 120.4p 103.3p 116.8p
(pence)
=-------------------------------------------------------------------------------
Adjusted (EPRA) net
asset value per share 16 123.7p 103.8p 118.9p
(pence)
=-------------------------------------------------------------------------------
Group Cash Flow Statement
Unaudited 17 April
Unaudited six 2009 to 30
months to 30 September 2009 Audited
September 2010 (restated) 17 April 2009 to
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Cash flows from
operating activities:
Profit before tax 10,767 17,684 50,661
Adjustments for non-
cash items:
Investment property (4,614) (95) (24,752)
revaluation surplus
Profit on sale of (1,247) - (1,838)
investment properties
Discount on acquisition - (15,490) (15,490)
Share of profits of (469) - -
joint venture
Net finance 5,338 (437) 2,891
costs/(income)
=-------------------------------------------------------------------------------
Cash flow from
operations before 9,775 1,662 11,472
changes in working
capital
Change in trade and (386) (20,958) (4,162)
other receivables
Change in trade and (206) 1,896 13,829
other payables
Change in properties 3,270 17,190 15,218
held for resale
=-------------------------------------------------------------------------------
Cash flows from 12,453 (210) 36,357
operations
=-------------------------------------------------------------------------------
Investing activities:
Cash flows related to - (33,057) (243,895)
business acquisition
Investment property (814) - (34,133)
acquisitions
Capital expenditure (2,125) - (116)
Investment property 33,211 - 16,313
sale proceeds
Cash placed on deposit (5,219) (110,501) (35,700)
Interest received 269 166 951
=-------------------------------------------------------------------------------
Cash flows from 25,322 (143,392) (296,580)
investing activities
=-------------------------------------------------------------------------------
Financing activities:
Net proceeds from share - 211,497 211,367
issue
New borrowings - - 127,709
Repayment of borrowings (15,293) - (8,515)
Interest paid (3,056) - (2,353)
Loan arrangement fees (36) - (2,069)
paid
Purchase of interest (2,611) - -
rate cap
Loan capital from - - 1,000
minority investors
=-------------------------------------------------------------------------------
Cash flows from (20,996) 211,497 327,139
financing activities
=-------------------------------------------------------------------------------
Net increase in cash
and cash equivalents 16,779 67,895 66,916
Cash and cash
equivalents at start of 66,916 - -
period
=-------------------------------------------------------------------------------
Cash and cash
equivalents at end of 83,695 67,895 66,916
period
=-------------------------------------------------------------------------------
Notes to the interim report
1. General information about the Group
Max Property Group Plc was listed on AIM and CISX on 27 May, 2009. It
is a closed-ended real estate investment company incorporated in Jersey on 17
April, 2009. This financial report includes the results and net assets
of the Company and its subsidiaries and joint venture, together referred to as
the Group.
Further general information about the Company can be found on its website:
www.maxpropertygroup.com.
2. Basis of preparation
The financial information contained in this report has been prepared in
accordance with IAS34, 'Interim Financial Reporting'.
The accounting policies adopted in this report are consistent with those
included in the annual report and accounts of the Group for the period ended 31
March, 2010 and are expected to be consistently applied in the year ending 31
March, 2011. The annual report is available from the 'Investor Centre' page of
the Company's website, www.maxpropertygroup.com, or by writing to the Company
Secretary or Investment Adviser.
In accordance with IFRS3, the results and net assets for the period ended 30
September, 2009 have been restated to reflect fair value adjustments made in
relation to the acquisition of the Industrious portfolio subsequent to that
period end and reflected in the results for the period ended 31 March, 2010.
This principally relates to trade receivables relating to the pre acquisition
period, recovered in the six months after 30 September, 2009. The effect of the
restatement is to increase net assets and profit before tax for the period by
GBP620,000 (0.3p per share).
3. Segmental information
During the period, the Group operated in and was managed as one business
segment, being property investment and trading, with all properties located in
the United Kingdom.
4. Acquisition of Industrious portfolio
Details of the costs and fair values of the assets and liabilities acquired by
the Group on the acquisition of the Industrious portfolio are as follows:
Price Fair
paid Adjustments value
GBP000 GBP000 GBP000
=-------------------------------------------------------------------
Investment properties 223,477 16,763 240,240
Properties held for resale 20,513 (43) 20,470
Trade receivables - 485 485
Obligations under finance leases - (1,715) (1,715)
=-------------------------------------------------------------------
Total 243,990 15,490 259,480
=-------------------------------------------------------------------
Cash consideration comprises:
Purchase price 232,101
Acquisition costs 11,889
=-------------------------------------------------------------------
Total acquisition cost 243,990
=-------------------------------------------------------------------
Discount on acquisition: excess of fair value over cost 15,490
=-------------------------------------------------------------------
The fair value of the net assets acquired exceeded the cost of the transaction
by GBP15,490,000 and this amount has been included as a discount on acquisition
in the income statement for the relevant period. The discount arises
principally because the Group was in a position to acquire a large portfolio
from a motivated seller whereas the valuation at fair value, as noted above,
reflects a willing buyer and willing seller and cannot take into account the
specific circumstances of the transaction.
5. Finance income and costs
Unaudited six Unaudited 17 April
months to 30 2009 to 30 Audited
September 2010 September 2009 17 April 2009 to
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Recognised in the
income statement:
Finance income
Interest on cash 311 685 1,069
deposits
=-------------------------------------------------------------------------------
Finance costs
Bank interest and 3,014 248 3,266
charges
Amortisation of loan 424 - 341
issue costs
Reduction in value of 2,187 - 422
interest rate cap
Straight line
amortisation of (67) - (169)
interest rate swap
transferred from
hedging reserve
=-------------------------------------------------------------------------------
Finance costs in
respect of bank loans 5,558 248 3,860
and interest rate
derivatives
Finance lease interest 91 - 100
=-------------------------------------------------------------------------------
Finance costs 5,649 248 3,960
=-------------------------------------------------------------------------------
Net finance costs
recognised in income 5,338 437 2,891
statement
=-------------------------------------------------------------------------------
Unaudited six Unaudited 17 April
months to 30 2009 to 30 Audited
September 2010 September 2009 17 April 2009 to
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Recognised in other
comprehensive income:
Losses recognised on
mark to market 1,542 1,243 3,329
adjustment to hedging
instruments
Transfer of 67 - 169
amortisation of
interest rate swap
=-------------------------------------------------------------------------------
Net finance costs
recognised in other 1,609 1,243 3,498
comprehensive income
=-------------------------------------------------------------------------------
Further information about the hedging instruments, including details of their
valuation at the balance sheet date, is included in note 14(b).
The average interest rate payable by the Group on bank borrowings for the period
ended 30 September, 2010, including all lender's margins but excluding amortised
finance costs, was 5.0% (31 March, 2010: 4.9%). The maximum rate payable in the
period was 6.4% (31 March, 2010: 6.7%).
5. Taxation
Unaudited six Unaudited 17 April
months to 30 2009 to 30 Audited
September 2010 September 2009 17 April 2009 to
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Tax charge for the
period recognised in
the income statement:
Current tax:
Tax on results for 1,258 846 1,828
the period
Change in deferred (137) (36) -
tax in the period
=-------------------------------------------------------------------------------
1,121 810 1,828
=-------------------------------------------------------------------------------
The tax assessed for the period varies from the standard rate of income tax in
the UK of 20%. The differences are explained below:
Unaudited 17 April
Unaudited six 2009 to 30
months to 30 September 2009 Audited
September 2010 (restated) 17 April 2009 to
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Profit before tax 10,767 17,684 50,661
=-------------------------------------------------------------------------------
Profit before tax at
the standard rate of 2,153 3,537 10,132
income tax in the UK of
20%
Adjusted for the
effects of:
Revaluation surplus not (923) (19) (4,950)
subject to tax
Discount on acquisition - (3,001) (3,001)
not subject to tax
Income and investment
property disposal (897) (148) (1,030)
profits not subject to
tax
Expenses not deductible 767 210 711
for tax
Other 21 231 (34)
=-------------------------------------------------------------------------------
1,121 810 1,828
=-------------------------------------------------------------------------------
Deferred tax asset: Unaudited six Unaudited 17 April
months to 30 2009 to 30 Audited
September 2010 September 2009 17 April 2009 to
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
At start of period 700 - -
Tax on interest rate
derivative adjustment, 321 249 700
credited to other
comprehensive income
Tax on interest rate
derivative adjustment 137 - -
credited to income
statement
Excess property
expenses credited to - 36 -
the income statement
=-------------------------------------------------------------------------------
At end of period 1,158 285 700
=-------------------------------------------------------------------------------
Tax Status of the Company and its Subsidiaries
Any Group undertakings with income are either tax resident in Jersey or are tax
transparent entities owned by Jersey resident entities. Jersey has a corporate
income tax rate of zero, so the Company and its subsidiaries are not subject to
tax on their income or gains in Jersey. The Company is not subject to UK
Corporation tax on any dividend or interest income it receives.
The Group's real estate assets are located in the United Kingdom and the net
rental income earned less deductible interest costs is subject to UK income tax,
currently at a rate applicable to Group undertakings of 20%.
5. Minority interest
GBP000
=----------------------------------------------------
At 31 March 2010 (audited) 1,499
Minority interest in results for the period 98
=----------------------------------------------------
At 30 September 2010 (unaudited) 1,597
=----------------------------------------------------
The minority interest is represented by a 16.7% investment by a third party in
three properties in Milton Keynes within the Offices portfolio.
5. Earnings per share
The calculation of earnings per share is based on 220,000,002 ordinary shares in
issue throughout each relevant period during which profits were earned and is
based on profits attributable to ordinary shareholders of the Company for the
period. There are no share options or other equity instruments in issue and
therefore no adjustments to be made for dilutive or potentially dilutive equity
arrangements.
The European Public Real Estate Association (EPRA) publishes guidelines for
calculating adjusted earnings designed to represent core operational activities.
The adjusted EPRA earnings per share calculation is as follows:
Unaudited period to
Unaudited six 30 September 2009 Audited period to
months to 30 (restated) 31 March 2010
September 2010
GBP000 Pence per GBP000 Pence per GBP000 Pence per
share share share
=-------------------------------------------------------------------------------
Basic earnings 9,548 4.3 16,874 7.7 48,334 22.0
Less:
Investment
property
revaluation (4,566) (2.1) (95) - (24,253) (11.0)
movements, net of
minority interests
Discount on - - (15,490) (7.1) (15,490) (7.1)
acquisition
Profit on sale of
investment (1,247) (0.6) - - (1,838) (0.8)
properties
Profit on sale of
trading properties (1,731) (0.8) (3,078) (1.4) (4,566) (2.1)
Market value
adjustment of
interest rate 2,034 1.0 - - 203 0.1
derivatives, net
of tax
Market value
adjustment of
interest rate
derivatives within 132 0.1 - - - -
joint ventures,
net of tax
=-------------------------------------------------------------------------------
EPRA Earnings 4,170 1.9 (1,789) (0.8) 2,390 1.1
=-------------------------------------------------------------------------------
5. Investment properties
Unaudited 30 September 2010
Long Short
Freehold Leasehold Leasehold Total
GBP000 GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
At 31 March 2010 (audited) 205,389 79,049 920 285,358
Acquisitions 851 - - 851
Additions 1,878 739 - 2,617
Drawings from escrow (721) (241) - (962)
account
Disposals (31,490) (431) - (31,921)
Revaluation movement 5,150 (286) (250) 4,614
=-------------------------------------------------------------------------------
Carrying value as at 30
September 2010 (unaudited) 181,057 78,830 670 260,557
Headlease liabilities (note - (1,715) - (1,715)
14)
Rent free periods (note 11) 633 221 - 854
=-------------------------------------------------------------------------------
Total property portfolio
valuation at 30 September 181,690 77,336 670 259,696
2010 (unaudited)
=-------------------------------------------------------------------------------
Audited 31 March 2010
Long Short
Freehold Leasehold Leasehold Total
GBP000 GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
At incorporation - - - -
Acquisition of Industrious portfolio at
fair value 169,660 69,690 890 240,240
Acquisition of Office portfolio at cost 25,195 9,609 - 34,804
Additions 101 167 - 268
Drawings from escrow account (175) (56) - (231)
Disposals (14,475) - - (14,475)
Revaluation movement 25,083 (361) 30 24,752
=-------------------------------------------------------------------------------
Carrying value as at 31 March 2010 205,389 79,049 920 285,358
Headlease liabilities (note 14) - (1,715) - (1,715)
Rent free periods (note 11) 241 66 - 307
=-------------------------------------------------------------------------------
Total property portfolio valuation at 31
March 2010 (audited) 205,630 77,400 920 283,950
=-------------------------------------------------------------------------------
The properties were valued as at 30 September, 2010 by CB Richard Ellis Limited,
Commercial Real Estate Advisers, in their capacity as external valuers. The
valuation was undertaken in accordance with the Royal Institution of Chartered
Surveyors' Appraisal and Valuation Standards on the basis of market value.
Market value represents the estimated amount for which a property would be
expected to exchange at the date of valuation between a willing buyer and a
willing seller in an arm's length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without compulsion. A
deduction is made to reflect an estimate of the acquisition costs of any
purchaser.
The Group has the benefit of an escrow account established by the seller of the
Office portfolio from which funds can be drawn to meet void costs for the period
from the portfolio acquisition in February, 2010 until 31 December, 2012. In
accordance with accounting standards, drawings from the escrow account are
treated as reductions in the cost of the assets. The escrow account was
GBP5,899,000 initially, against which GBP962,000 has been drawn in the period
( GBP231,000 in the period to 31 March, 2010) and GBP1,193,000 has been drawn
cumulatively to 30 September, 2010.
The historic cost of the Group's investment properties as at 30 September, 2010
was GBP223,413,000 (31 March, 2010 was GBP247,593,000).
5. Investment in joint venture
Unaudited six Unaudited 17 April
months to 30 2009 to 30 Audited
September 2010 September 2009 17 April 2009 to
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
At start of period - - -
Share of profit for the
period recognised in 469 - -
the income statement
Share of market value
adjustment of interest
rate derivatives, net
of deferred tax, (379) - -
recognised in the
statement of
comprehensive income
=-------------------------------------------------------------------------------
At end of period 90 - -
=-------------------------------------------------------------------------------
The investment in joint venture is represented by the Group's 45% economic
interest (with 50% voting rights) in MPG Hospital Holdings Limited, a joint
venture company incorporated in and operating in England. The joint venture
owns four private hospitals in Blackburn, Liverpool, Ayr and Stirling, all held
on long leases with annual RPI linked uplifts throughout the term on an initial
rent of GBP2.3m pa. The joint venture is funded with a non-recourse debt facility
of GBP31.5m and the properties were independently valued at GBP32.5m at 30
September, 2010.
The investment is accounted for using the equity method of accounting and the
results above are for the period from the date of acquisition, 28 May, 2010, to
30 September, 2010. The share of the joint venture's profit of GBP469,000 for the
period includes GBP536,000 representing the Group's share of the joint venture's
investment property revaluation surplus for the period after an independent open
market valuation of the portfolio as at 30 September, 2010.
5. Trade and other receivables
Unaudited 30
Unaudited 30 September 2009
September 2010 (restated) Audited
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Trade receivables 3,327 897 4,439
Less provision for (911) - (896)
doubtful debts
=-------------------------------------------------------------------------------
Trade receivables - net 2,416 897 3,543
Interest receivable 160 519 118
Rent free periods
granted to tenants 854 - 307
(note 9)
Prepayments and accrued 1,760 15 797
income
Derivative financial
instruments: due after - 609 -
one year
Other receivables 499 20,531 -
=-------------------------------------------------------------------------------
5,689 22,571 4,765
=-------------------------------------------------------------------------------
Other than the derivative financial instruments and GBP719,000 (31 March 2010:
GBP263,000) of rent free periods which are due in more than one year, all amounts
above are due within one year.
5. Cash and cash equivalents
Included within the Group's cash and cash equivalents balance as at 30
September, 2010 of GBP83,695,000 (30 September, 2009: GBP67,895,000; 31 March,
2010: GBP66,916,000) are cash deposits of GBP3,914,000 (30 September, 2009: nil; 31
March, 2010: GBP5,040,000) in accounts held as security by the provider of the
secured bank debt.
5. Trade and other payables
Unaudited 30
Unaudited 30 September 2009
September 2010 (restated)
Audited
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Trade payables 3,351 78 2,526
Amount due to vendor of
Industrious portfolio - 199,381 -
Rent received in 6,152 373 7,253
advance
Accrued acquisition - 11,552 -
costs
Other taxes and social 1,300 - 1,609
security
Other amounts payable 1,768 1,073 1,358
Accruals and deferred 2,907 740 2,783
income
=-------------------------------------------------------------------------------
15,478 213,197 15,529
=-------------------------------------------------------------------------------
All amounts above are due within one year.
5. Financial assets and liabilities
a. Non-current financial liabilities
Unaudited 30 Unaudited 30
September 2010 September 2009
Audited
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
Non-current
Bank loans (secured) 103,901 - 119,194
Unamortised finance (1,340) - (1,728)
costs
=-------------------------------------------------------------------------------
102,561 - 117,466
Interest rate swap and 3,051 - 1,443
cap at market value
Obligations under 1,715 1,715 1,715
finance leases
=-------------------------------------------------------------------------------
107,327 1,715 120,624
=-------------------------------------------------------------------------------
There was no difference between the book value and fair value of the non-current
financial liabilities shown above.
The Group has no undrawn, committed borrowing facilities at 30 September, 2010
nor at the end of any prior period.
b. Derivative financial instruments
The following derivative instruments were in place as at 30 September, 2010:
Protected Expiry Market value Market value
rate at 30 at 30 Market
September September value at
2010 2009 31 March
2010
% GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
GBP70.6m 4.0 August
amortising swap 2014 (6,048) (2,789) (4,507)
GBP56.75m cap 4.0 August
2014 259 1,546 756
GBP100m cap 3.5 March 2015
920 - -
=-------------------------------------------------------------------------------
(4,869) (1,243) (3,751)
=-------------------------------------------------------------------------------
Movements in the valuation of hedging instruments in the period are as follows:
GBP000
=-----------------------------------------------------------
At incorporation -
Charged to income statement (note 5) (422)
Charged directly to hedging reserve (3,329)
=-----------------------------------------------------------
At 31 March 2010 (audited) (3,751)
Premium paid on acquisition of interest rate cap 2,611
Charged to income statement (note 5) (2,187)
Charged directly to hedging reserve (1,542)
=-----------------------------------------------------------
At 30 September 2010 (unaudited) (4,869)
=-----------------------------------------------------------
Unaudited 30
Unaudited 30 September 2009
September 2010 (restated) Audited 31 March
2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
The liability above
is split:
within one year 1,818 1,852 2,308
in more than one 3,051 (609) 1,443
year
=-------------------------------------------------------------------------------
4,869 1,243 3,751
=-------------------------------------------------------------------------------
The derivative contracts have been valued by reference to interbank bid market
rates as at the close of business on the balance sheet date by JC Rathbone
Associates Limited. This is a 'level 2' fair value movement as defined in
IFRS7, Derivative Financial Instruments Disclosures.
These derivative valuations do not take account of any accrued benefit or
liability for the period from the last rollover date until the balance sheet
date because the accrued net cost for that period is included within the
interest accrual at the period end.
The market values of hedging instruments change constantly with interest rate
fluctuations, but the exposure of the Group to movements in interest rates is
protected by way of the hedging products listed above. The valuations above do
not necessarily reflect the cost or gain to the Group of cancelling its interest
rate protection at the relevant balance sheet date, which is generally a
marginally higher cost or smaller gain than a market valuation.
5. Stated capital
Unaudited 30 Unaudited 30
September 2010 September 2009
Audited
31 March 2010
GBP000 GBP000 GBP000
=-------------------------------------------------------------------------------
220,000,002 ordinary 220,000 220,000 220,000
shares issued at GBP1 each
Share issue costs (8,633) (8,623) (8,633)
=-------------------------------------------------------------------------------
211,367 211,377 211,367
=-------------------------------------------------------------------------------
5. Net asset value per share
Net asset value per share is calculated as the net assets of the Group
attributable to shareholders at each balance sheet date, divided by the number
of shares in issue at that date of 220,000,002.
The European Public Real Estate Association ("EPRA") has issued guidelines aimed
at providing a measure of net asset value ("NAV") on the basis of long term fair
values. The EPRA measure excludes items that it considers have no impact in the
long term, such as the fair value of derivative instruments and deferred tax
balances. The Group's EPRA NAV is calculated as follows:
Unaudited
Unaudited 30 September 2009 Audited
30 September 2010 (restated) 31 March
2010
GBP000 Pence per GBP000 Pence per GBP000 Pence
share share per
share
=-------------------------------------------------------------------------------
Net asset value
attributable to
owners of the Company 264,784 120.4 227,257 103.3 256,903 116.8
Adjustments:
Fair value of trading
properties in excess
of book value 718 0.3 - - 1,628 0.7
Fair value movements
in financial 7,480 3.3 1,243 0.6 3,751 1.7
instruments
Deferred and current (1,158) (0.5) (249) (0.1) (750) (0.3)
tax
Fair value movements
in financial
instruments in joint 379 0.2 - - - -
ventures, net of tax
=-------------------------------------------------------------------------------
EPRA Net Asset Value 272,203 123.7 228,251 103.8 261,532 118.9
=-------------------------------------------------------------------------------
5. Related party transactions and balances
Interests in shares
The interests of the Directors and their families in the share capital of the
Company are as follows:
Unaudited 30 September 2010 Unaudited 30 September 2009
Audited
31 March
2010
=-------------------------------------------------------------------------------
Aubrey Adams 100,000 100,000 100,000
Mike Brown 5,000,000 5,000,000 5,000,000
Freddie Cohen 20,000 - -
Keith Hamill 40,000 40,000 40,000
Nick Leslau 20,000,000 20,000,000 20,000,000
Alex Ohlsson 66,000 40,000 40,000
John Stephen 40,000 40,000 40,000
David Waters 25,000 25,000 25,000
=-------------------------------------------------------------------------------
The interests disclosed above include both direct and indirect interests in
shares.
Directors' fees
Directors' fees of GBP106,000 (30 September, 2009: GBP66,000, 31 March, 2010:
GBP169,000) were payable for the period ended 30 September, 2010. As at 30
September, 2010 GBP22,000 (30 September, 2009: GBP55,000; 31 March, 2010: GBP23,000)
of fees payable remained outstanding and are included within other payables
(note 13).
Management fees payable
Nick Leslau and Mike Brown hold partnership interests in, and are Chairman and
Chief Executive respectively of, Prestbury Investments LLP, which is Property
Adviser to the Group under the terms of the Investment Advisory Agreement
entered into on 21 May, 2009. Under the terms of that agreement, management
fees of GBP2,246,000 (30 September, 2009: GBP1,322,000; 31 March, 2010: GBP3,394,000)
were payable to Prestbury Investments LLP in respect of the period ended 30
September, 2010, of which GBP1,125,000 (30 September, 2009: GBP968,000; 31 March,
2010: GBP1,055,000) was payable as at the balance sheet date and is included
within trade and other payables (note 13).
In the course of its duties as Investment Adviser and in accordance with the
terms of the Investment Advisory Agreement, Prestbury Investments LLP is
entitled to recover the costs and expenses properly incurred in connection with
its duties. During the period, it has recharged at cost GBP59,000 (30 September,
2009: GBP869,000; 31 March, 2010: GBP978,000) to the Group in this respect, of which
GBP7,000 (30 September, 2009: GBP41,000; 31 March, 2010: GBP19,000) remains
outstanding and is included within other payables in the balance sheet at 30
September, 2010.
Incentive payments
Under the terms of the carried interest arrangements between the Company,
Prestbury (Scotland) Limited Partnership ("Prestbury Scotland", a partnership in
which Nick Leslau and Mike Brown have 49% and 25% interests respectively), and
OZ UK Real Estate Securities Limited ("Och-Ziff"), once the GBP211,367,000 of net
funds raised on listing have been returned to shareholders (assuming no further
share issues), then cash returns over and above that amount may ultimately be
shared as to 80% to shareholders and 20% to Prestbury Scotland and Och-Ziff,
subject to shareholders having first received the net proceeds of share issues
in cash plus an 11% per annum preferred return.
The carried interest payments are payable only on cash realisations other than
where either the Investment Advisory Agreement has been terminated (where the
net asset value of the Group is used in the calculation as if that amount had
been returned to shareholders in cash) or there has been a takeover of the
Company (in which case the offer price is used in the calculation).
No carried interest payment has yet become payable. If the net asset value of
the Group as at 30 September, 2010 is used as the basis of the calculation, this
would theoretically amount to GBP8,285,000 (30 September, 2009: GBP2,583,000; 31
March, 2010: GBP7,058,000) payable to Prestbury Scotland and GBP2,405,000 (30
September, 2009: GBP750,000; 31 March, 2010: GBP2,049,000) payable to Och-Ziff,
totalling GBP10,690,000 (30 September, 2009: GBP3,333,000; 31 March, 2010:
GBP9,107,000). The uplift in value giving rise to the theoretical carried interest
payment arises over a relatively short period of time.
Taking account of the uncertainties arising from (?) the length of the period
over which the incentive fee will be determined, and (??) the challenging future
returns required and current market index projections of general property value
growth over the medium term, the Directors have concluded that it would not be
appropriate to make a provision for the incentive fee at this early stage.
The Board will keep the position under review and will provide for a liability
for incentive payments once there is more certainty as to the likelihood of
payments being made.
5. Commitments and contingent liabilities
At 30 September, 2010 the Group had capital commitments in respect of
refurbishment works its investment portfolio amounting to GBP1,434,000 (30
September, 2009: nil; 31 March, 2010: GBP1,702,000).
5. Post balance sheet events
On 27 October, 2010 the Group acquired a portfolio of 14 nightclubs with initial
annual income of GBP1,477,000 for cash consideration of GBP9,400,000.
Glossary
+-----------------------------+------------------------------------------------+
|AIM |The Alternative Investment Market of the London|
| |Stock Exchange |
+-----------------------------+------------------------------------------------+
|CISX |The Daily Official List of the Channel Islands|
| |Stock Exchange |
+-----------------------------+------------------------------------------------+
|EPRA |European Public Real Estate Association |
+-----------------------------+------------------------------------------------+
|EPRA EPS |A measure of earnings per share designed by EPRA|
| |in an effort to present underlying earnings from|
| |core operating activities |
+-----------------------------+------------------------------------------------+
|EPRA NAV |A measure of net asset value designed by EPRA|
| |with a view to presenting net asset value|
| |excluding the effects of fluctuations in value|
| |in instruments that are held for long term|
| |benefit, net of any deferred tax |
+-----------------------------+------------------------------------------------+
|EPS |Earnings per share, calculated as the earnings|
| |for the period after tax attributable to members|
| |of the parent Company (that is, excluding any|
| |minority interests) divided by the weighted|
| |average number of shares in issue in the period |
+-----------------------------+------------------------------------------------+
|Equivalent Yield |The constant capitalisation rate which, if|
| |applied to all cash flows from an investment|
| |property, equates to the market rent |
+-----------------------------+------------------------------------------------+
|Initial Yield |Annualised net rents on investment properties as|
| |a percentage of the investment property|
| |valuation |
+-----------------------------+------------------------------------------------+
|Investment Advisory Agreement|The agreement made between the Company,|
| |Prestbury Investments LLP and Partnership|
| |Incorporations Limited under which Prestbury|
| |provides certain services to the Group |
+-----------------------------+------------------------------------------------+
|NAV |Net asset value |
+-----------------------------+------------------------------------------------+
|Prestbury, or |Prestbury Investments LLP, a partnership owned|
|Investment Adviser |by Nick Leslau (50%) and Mike Brown (25%) |
+-----------------------------+------------------------------------------------+
|Reversionary Yield |The anticipated yield which the Initial Yield|
| |will rise to once the rent reaches the ERV which|
| |is the market rental value of lettable space |
+-----------------------------+------------------------------------------------+
[HUG#1462772]
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: Max Property Group plc via Thomson Reuters ONE
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