Invista Share Discussion Threads

[skyship] 25/11/2011 11:13

The sector being hit by refinancing fears amid the global bank deleveraging. Shouldn't be a concern here however - see below - so might we see a double bottom for these at c33p; at which level the yield (assuming n/c to the qtly 0.88p dividend) would be 10.66%.

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Financing

The Company has a single on-balance sheet loan facility of GBP173.5 million that matures in July 2014. As at 30 September 2011, allowing for transactions since the period end, the Company's on-balance sheet loan to value ratio, net of cash, is 42.3% against a net loan to value ratio covenant of 60%. Following the acquisition of West Bromwich the Group has total cash of GBP25.1 million, excluding the liquidity facility, of which GBP15 million is outside the security pool charged to the Group's lenders. The Company continues to have significant headroom on its Interest Cover Ratio of 226% compared with the covenant of 150%, calculated on a simplified basis of rental income as a proportion of interest cost.

Recent problems in the Eurozone have heightened concerns over the willingness of the banking sector to provide finance for real estate. The Manager and the Board will be considering the optimum refinancing strategy well in advance of the loan maturity in July 2014.

[horndean eagle] 21/11/2011 12:48

Today's results give the clearest indication that Plantation place sale is nearing completion. Sunday Times ran a piece in September suggesting a deal was finally going to proceed. Not a huge amount has changed in market conditions since then so I would guess they would most likely be the suitor. 8m would be a nice windfall for IFD

[kramch] 21/11/2011 10:03

H1, the article discusses the meltdown of the property fund managers not the property market. Sure there has to be unloading of assets by the banks but smart funds with cash will pick up bargains, like TEIF did recently.

K.

[simon gordon] 21/11/2011 08:48

Link to FT FM article:

[hieronymous1] 21/11/2011 08:44

There is a big piece on the front of today's FT Fund Management on the coming melt down of European real estate and the demise of a great many management groups. Ours seems likely to survive. IMHO. From what I gather the hold up in OPPUT is due to an unwillingness by some investors to crystallise losses. Crystallisation would put their businesses and the directors of those businesses out of business. So we are waiting for the banks to call in the receivers and write down their losses. Which will presumably make Invista's share of OPPUT worth £8m and not £0.

Am I right? Any thoughts on a timetable?

[skyship] 21/11/2011 08:03

Lots of interest in today's Interims - see Header.

This piece c. half way down:

Joint ventures:

............

Plantation Place, London EC3 - 28.2%

On a like for like basis, the independent valuation of One Plantation Place Unit Trust's ('OPPUT') underlying property, increased over the period by GBP17.6 million, or 3.7%, to GBP495.6 million, an uplift of GBP17.6 million or 3.7%, reflecting a net initial yield of 5.5%. The increase in value followed a further improvement in prime City of London property values and successful asset management activity, notably achieving positive retail rent review settlements. This independent valuation continues to be prepared on the assumption of a disposal of the unit trust in which the property sits rather than a sale of the property itself, and therefore does not include any deduction for Stamp Duty Land Tax.

As at 30 September 2011, OPPUT's net debt is GBP431.34 million, resulting in a net loan to value of 87% compared to the net loan to value covenant of 82.14%. The property continues to be well let and is compliant with its interest cover ratio covenants. The negative mark-to-market value of the interest rate swap, which is matched to the loan maturity in July 2013, fell by GBP1.8 million to -GBP33.2 million over the quarter.

Based on the above figures, the management accounts of Plantation Place at 30 September 2011 show the Company's interest in OPPUT to be in the region of GBP8 million.

However, the Company continues to hold its interest at GBPnil because the Directors consider it appropriate to reduce the above property valuation by Stamp Duty Land Tax as there is no certainty that a realisation of the Company's investment will be by way of a sale of OPPUT. In addition, the Directors have assessed other purchasers' costs to be above the amounts included in the independent valuation. Finally, the treatment reflects the uncertainty associated with the continuing loan to value breach. On this basis the Company's share of net assets of OPPUT would be negligible.

[alanji] 31/10/2011 10:44

the Board of IFPT and its advisers have engaged in open and extensive discussions with Picton and its advisers. In addition, an extremely thorough due diligence process was undertaken by both companies.

What a waste of money by both. As Skyship pointed out from the start this was never going to go ahead - not least because there were too many vested interests in it not proceeding.

[cwa1] 31/10/2011 08:51

Oh well....

On 19 August 2011 the Company announced a possible offer for Invista Foundation Property Trust Limited ("Invista Foundation") under Rule 2.4 of The City Code on Takeovers and Mergers (the "Code"). Since that time, the Company has been engaged in extensive negotiations with Invista Foundation regarding an offer proposal Picton made to the Invista Foundation board. Picton has now decided to withdraw that offer proposal.

Picton has not been able to agree a proposal with the board of Invista Foundation that the Invista Foundation board was willing to recommend to Invista Foundation shareholders. In view of the inability to secure a recommendation of the proposed merger, and in accordance with Rule 2.8 of the Code, the Board of Picton has decided to withdraw its offer proposal and will not be making an offer for Invista Foundation.

Picton has invested significant time and resources into assessing a potential merger of the two businesses as it continues to believe that the strategic rationale and benefits of a combined group are compelling, a view endorsed by several key Invista Foundation shareholders.

Picton will continue to focus on its strategy, including internalisation and its refinancing initiatives, which the Board of Picton is confident will deliver significant value to Picton shareholders.

[cwa1] 31/10/2011 08:25

Still a bit of wriggle room:

The IMA will not be subject to a notice period or termination fee in the event that a merger with Picton Property Income Limited ("Picton") proceeds (see below).

But certainly looks less likely that they would have gone ahead with this today if they knew or felt reasonably certain that a reasonable offer was on its way....

[skyship] 31/10/2011 08:14

It was dead in the water from the outset - a distraction for both companies. IFD saves £1.8m/annum from the Investment Manager switch. Same management team under the Schroders flag rather than the Invista flag. Just goes to show what a rip-off the Invista Management contract was!

[asmodeus] 31/10/2011 08:03

"The deadline by which Picton must either announce a firm intention to make an offer for the Company including the terms of that offer in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies, is 5.00 p.m. today, 31 October 2011."

[envirovision] 31/10/2011 07:56

Sounds like the PCTN merger is off then.

[skyship] 28/10/2011 16:08

LG - Bizarre to think that, is spite of all that has happened, the FTSE100 is down just 5%YTD - see the FTSE100 ETF - "ISF":

[lord gnome] 28/10/2011 08:25

Only -4% Skyship? Luxury!

[skyship] 28/10/2011 08:00

Hi Hy...

Yes, happier, who wouldn't be?

But I played October really poorly - took the hit on the downside, panicked and sold c25%, then didn't participate on the upside as my portfolio is configured in a relatively risk-free fashion. Now down 4%YTD and floundering!

Still, -4% this year isn't too bad I suppose.

Have you taken advantage of the oversold PCTN? Take a look at the thread, especially Simon's very helpful posts on the Fairfax comment post this week's IMS. 9.9% yield @ 41p.

Also TEIF are perhaps right to buy again - they too have drifted down too far on very low volume. 35.25p versus an EPRA NAV of c.84p!! Should rally as we hear news of their Scandinavian disposals.

[cwa1] 28/10/2011 07:40

Leaving things fairly late aren't they. Decision, one way or the other by Monday.....

[hybrasil] 27/10/2011 17:55

happy skyship?

[skyship] 25/10/2011 16:41

Positively perky - 36.5p-37.0p at the close

[skyship] 25/10/2011 10:09

Dave - thnx for that - a very useful synopsis

Alan - knew the NAV & Divi IMS was due from correspondence with the Chairman

[davebowler] 25/10/2011 09:29

Real Estate
Invista Foundation Property Trust (IFD / HOLD) – September NAV.

n IFD reports an adjusted NAV per share of 55.9p as at Sep'11 reflecting a decrease of 1.9% in the 3 months since Jun'11. The NAV decrease is a result of the uncovered dividend and a £0.8m (-0.2%) decrease in the valuation of the like for like portfolio.

n The property portfolio was valued at £331.55m at Sep'11 and produces a rent roll of £22.35m which equates to a net initial yield of 6.4% (6.52% at Mar'11). A further £2.8m will be added to the rent roll from asset management initiatives (expiry of rent free periods, fixed uplifts etc) by Sep'14 which will raise the net initial yield to 7.2%.

n New lettings generating an additional £472k in rent were completed in the quarter. The void rate on the portfolio has decreased to 12.06% (12.85% at Jun'11). 1.96ppts of this is under offer to new tenants.

n The pre-let development funding of the BT building is expected to complete shortly at a price of £14.9m (7.6% NIY). The property is let to BT on a 15 year lease with no breaks for £1.2m p.a. (subject to fixed uplifts of 3% p.a.). The property has been valued at £18.9m by the company's valuers and will add £3.1m (after acquisition costs) to IFD's NAV on completion.

n JVs - £60k was added back to NAV from JVs during the period (all from Merchant Property Unit Trust). It is interesting to note the value of IFD's holding in One Plantation Place Unit Trust (OPPUT) continues to recover (£8m at Sep'11 vs. £4m at Mar'11). The investment continues to be held at nil value due to the ongoing LTV breach (87% LTV vs. covenant of 82.14%) on the securitised debt facility associated with the property.

n Net LTV was 40.3% at Sep'11 (39% at Mar'11) against a LTV covenant of 60% and the interest cover ratio is 226% against a covenant of 150%.

n The dividend has been maintained at 0.88p per quarter (9.8% yield).
Liberum View

n IFD trades at 36p reflecting a discount of 36% to the Sep'11 NAV. The current dividend offers an attractive yield of 9.8% although the low dividend cover continues to over hang the shares (we estimate c. 56% dividend cover in the year to Mar'12). We expect the dividend cover to increase to c. 80% in the year to Mar'13 as a result of acquisitions and asset management initiatives. We do not expect the dividend cover improvement to be a short term catalyst for a share re-rating – Remain HOLD.

n We note the potential NAV uplift from JVs particularly Plantation Place. IFD's adjusted NAV of 55.9p only excludes the mark to market adjustments of swaps held on balance sheet. If we exclude the swap liabilities on JVs and include IFD's share of OPPUT the potential NAV uplift could be £18m or 5p per share. The vast majority of this relates to Plantation Place which clearly carries a greater risk of realisation given the current covenant breach.

n We await further details regarding the proposed merger between Picton Property Income Ltd and IFD. PCTN has until 31 October to announce a firm intention to make an offer.

[lord gnome] 25/10/2011 08:54

This is starting to look seriously good value over the medium term. NAV excluding interest rate swaps is 56p, giving a discount to NAV of 35% (with the share price at 36p).
On dividend cover, we are currently at 53%. Bt will add 12%. The Schroders fees savings will add a further 14%+ and I calculate that the £2.8 million to be generated by Asset Management will add another 22% by September 2014. I make that a total of 101%+ and full dividend cover. Only three years to wait then ;-) Anyone care to challenge my figures?
10% yield and 35% discount to NAV anyone?

[skyship] 25/10/2011 08:04

NAV temporary fall mainly down to interest rate swap costs. Dividend held. Nice value uplift at West Brom...

[cwa1] 25/10/2011 07:38

IMS, NAV and dividend:-