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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Max Prop | LSE:MAX | London | Ordinary Share | JE00B3CX6J86 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 168.75 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
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TIDMMAX
Max Property
Results for the year ended 31 March 2013
Highlights
31 March 31 March Change in Change in
2013 2012 12 months 46 months
since last year since listing
Net assets GBP294.1m GBP285.9m up 2.9% up 39%
EPRA net assets per 136.5p 133.4p up 2.3% up 42%
share (1)
EPRA earnings per 6.3p 6.4p down 1.6%
share (2)
-- EPRA NAV per share up 2.3% to 136.5p per share in the year to 31 March
2013 and up 42% since listing in May 2009
-- Valuations flat over the last six months and down by 1% during the year;
portfolio net initial yield 7.7% and equivalent yield 8.8%
-- Purchase of High Holborn Estate in November 2012 for cash consideration
of GBP45.3 million plus costs (c. GBP320 psf)
-- London net asset value weighting now 49%
-- Development commenced on 140,000 sq ft Commodity Quay at St Katharine
Docks, for completion in Spring 2014
-- Industrious vacancy rate reduced to 12.2% of ERV compared to 15.2% at 31
March 2012
-- 12 sales in the year totalling GBP9.6 million at a 31% profit over
acquisition cost and 31% over valuation
-- 140 new lettings with a net rent roll of GBP4.0 million (Max share GBP3.2
million)
-- Industrious debt maturity extended by two years: all on balance sheet
facilities now mature in 2016 in line with other loans and anticipated
liquidation
-- Net loan to value ratio at 31% (32% including Hospitals joint venture)
and gearing ratio3 46% (51% including Hospitals)
-- EPRA EPS 6.3p (2012: 6.4p): Commodity Quay refurbishment has reduced EPS
by 0.5p per share
-- Uncommitted cash of c. GBP42 million
(1) excluding fair values of financial instruments and
deferred tax and including trading properties at fair value
(2) excluding property revaluation movements, profits or
losses on sales of properties, fair value movements on financial
instruments and deferred tax
(3) gearing ratio is calculated as net debt divided by
equity attributable to shareholders
Aubrey Adams, Chairman of Max Property Group Plc, said:
"Max Property has had another good year of operational performance. The
outlook for the property market in general is now improving after a year
of values outside London continuing to drift downwards. Our portfolio is
dominated by interesting assets in and around Central London and high
yielding industrial property, and I believe this will serve shareholders
well for the remainder of Max's life up to the liquidation anticipated
in 2016."
23 May 2013
ENQUIRIES:
Prestbury Investments Tel: 020 7647 7647
Mike Brown
Sandy Gumm
College Hill Tel: 020 7457 2020
Mike Davies
Helen Tarbet
Oriel Securities (Nominated Advisor and Broker) Tel: 020 7710 7600
Mark Young
Gareth Price
Notes to Editors
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 a half years from its
listing in May 2009.
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 differ materially 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,
Max is run to produce attractive returns for shareholders over the
period from its listing in May 2009 until 2016, when it is anticipated
that the business will be wound up and cash returned to shareholders.
We are pleased to report our progress to date against this objective,
for the period to 31 March 2013.
Results and financial position
EPRA net asset value per share at 136.5p increased by 2.3% over the year
to 31 March 2013, and has increased by 42% in just under four years
since listing. Having raised GBP211 million of net cash on listing, the
Group has generated GBP89 million of net assets growth, 61% realised in
cash terms. This performance reflects the net results of rental
surpluses from the predominantly high yielding portfolio, together with
realised surpluses on selective asset sales and unrealised valuation
movements.
The growth in net asset value per share of 3.1p in the year breaks down
to contributions from rental surpluses of 10.5p and surpluses on
property sales of 0.4p totalling 10.9p of results before interest, tax
and revaluations, net of 5.7p of net finance costs, 1.9p of falls in
property valuations and Max's 0.2p share of net loss from the Hospitals
joint venture.
As we highlighted last year, we were anticipating a decline in EPRA
earnings in the 2013 financial year as a result of the reduced
contribution from St Katharine Docks as Commodity Quay became vacant
ahead of its comprehensive refurbishment, necessitating the loss of some
GBP1 million (approximately 0.5p per share) of rent from that property.
Against that background, there has been a marginal decline in EPRA
earnings per share in the year from 6.4p to 6.3p per share. The loss of
rent at Commodity Quay has been offset by improved occupancy rates in
the Industrious portfolio and also by the contribution from the High
Holborn Estate, purchased for cash in November 2012.
Uncommitted cash at 31 March 2013 is GBP42 million, which is stated
after an allowance for the costs of rolling refurbishment of High
Holborn and the Group's share of the costs of the Commodity Quay and
other refurbishment projects at St Katharine Docks. This cash reserve
does not take account of the significant cash flow from operations and
cash surpluses from investment property sales, which will add to the
available fire power for further acquisitions.
Our original intention was to have completed the investment phase of the
Group's lifecycle by mid 2014, and that remains the case. It has been
ironic that in the last few years, despite such challenging economic
conditions, opportunities to find suitable investments have been
relatively limited, both through lack of liquidity and fierce
competition from 'forced buyers' - buyers which have raised capital and
need to deploy or lose it. We continue to evaluate acquisition
opportunities with a view to deploying the remaining surplus cash.
As we have noted in previous reports, Max's strategy is to invest
shareholders' funds to produce attractive returns over the Group's
lifecycle, therefore cash has been deployed in the Group's investment
activities rather than paid out in the form of shareholder returns. The
Board will continue to assess the appropriateness of paying dividends or
making capital returns with a view to commencing returns of cash to
shareholders, depending on circumstances and at the appropriate time.
With an eye to the future, we have included within the resolutions to be
tabled at the Annual General Meeting a resolution to grant the Board
powers to buy in shares on certain terms. While there is no intention
to buy in shares at the current time, this may be a suitable mechanism
for shareholder returns in future, therefore we are seeking shareholder
authority at this stage.
The Group's net assets are now balanced broadly between central London
offices (41% of net asset value) with interesting opportunities to
exploit; the high yielding, well spread Industrious portfolio (33% of
net asset value); and the London Pubs portfolio (8% of net asset value)
with the balance of the Group's net assets predominantly in cash.
Continued investment in the major refurbishment projects and active
asset management should continue to drive performance towards the
ultimate objective of attractive cash returns for shareholders over the
next few years.
Outlook
The outlook for property values is considerably better than a year ago.
Rising yields have been the main driver for capital value falls, but as
we have bid for properties in recent months we have seen plenty of
evidence of yields stabilising. Cautious investors who have held cash
to protect themselves against the economic uncertainty have been
punished with a negative real return whilst the major stock markets
around the world have rallied strongly, typically 20-50%, over the last
year and rising to multi-year or in some cases all time highs.
Meanwhile government and corporate bonds continue to offer yields at or
close to historic lows in the main economies in the world. The search
for yield has driven US-rated junk bonds to below 5% with yields on the
lowest rated CCC bonds falling from over 10% to under 7% in the last
year. In this context it makes little sense for property yields to
continue to rise when real estate already offers such a high comparative
yield premium to other asset classes.
Central London property has been untroubled by the general property
market setback, seeing a continuation of strong overseas investor
interest and healthy occupational demand. This does not seem to be
changing for now. The challenge here has simply been to secure
interesting deals that can capture future growth without gifting this
performance to the vendor by overpaying when there is such keen
competition. Regarding the rest of the market, its turning point has
rested on when the huge gap between property yields in the provinces and
London would eventually provide sufficient temptation to lure investors
back. Two major obstacles stood in the way - weak occupational markets
and an almost complete absence of debt. Whilst neither of these
impediments has been removed completely there are definite signs of
progress. The anaemic economic recovery has continued to hold back
occupational demand but nonetheless Max has managed to continue to
reduce its provincial vacancy rates. Credit conditions have also
improved with more banks willing to offer loans on secondary property
albeit limited to well capitalised sponsors with access to good
management of assets. With 70% of Central London sales going to
overseas purchasers last year, domestic institutions are being priced
out of the London market. Alternative assets offering long indexed
income streams in sectors such as healthcare, leisure and education have
been a beneficiary of the switch in institutional investment, but there
are now signs of selective interest in industrial and office property,
particularly in the South East and major provincial cities.
Stock picking is pivotal in the provincial property markets. Not all
assets will remain income producing and those capable of being relet may
require considerable capital expenditure to generate net income lower
than in the past. We are eschewing assets facing structural headwinds -
secondary retail and any office location with imbedded oversupply or
vulnerable to Government cutbacks. Industrial property is much more
defensive in comparison. When we bought Industrious in October 2009 we
inherited 1.3 million sq ft of vacant space yet 90% of this has been
subsequently let or sold to owner occupiers without significant capital
expenditure. If the search for yield finally rotates into the secondary
property market - and it is noteworthy that there are very few high
yielding sectors left around the world that remain untouched by the
impact of QE - we believe that industrials will be the main beneficiary.
Certainly buyers in a position to source debt and select the stock
capable of generating sustainable cash flows should be well rewarded
over the next few years.
We are pleased to have achieved the position where Max's portfolio is
dominated by interesting London assets and high yielding industrial
assets. I believe that this will serve shareholders well for the
remainder of Max's life up to the liquidation anticipated in 2016.
Aubrey Adams
Chairman
23 May 2013
Report from the Property Advisor, Prestbury Investments LLP
Prestbury Investments LLP exclusively advises Max Property Group Plc and
is pleased to report on the operations of the Group.
The portfolio
The portfolio combines exciting added value opportunities in London with
a high yielding predominantly industrial portfolio spread throughout the
UK, with small lot sizes and a broad spread of tenants.
Portfolio valuation movements
Change Change
over over Change
one six over ERV
year months cost compared to 31 March 2012
St Katharine Docks (60% owned) 1.8% 1.6% 4.9% 5.3%
High Holborn Estate n/a n/a (0.1)% n/a
London Pubs 7.5% 4.4% 19.1% 0.4%
Industrious (3.5)% (1.4)% 5.7% (5.6)%
Provincial Offices (including Milton Keynes assets
83.3% owned) (5.2)% (0.8)% 41.2% (2.9)%
Hospitals (45% owned) (4.9)% (5.3)% 4.8% 3.8%
Nightclubs (0.7)% (1.2)% (9.0)% (4.0)%
(1.0)% (0.1)% 8.2% (2.1)%
Portfolio valuation yields at 31 March 2013
Net initial Equivalent Reversionary Capital Weighted average unexpired
yield yield yield value psf lease term
St Katharine
Docks 5.2% 6.6% 9.3% GBP357 5.7 years
High Holborn
Estate 3.2% 6.7% 8.3% GBP323 1.4 years
London Pubs 5.7% 7.4% 5.7% GBP392 32.9 years
Industrious 10.3% 10.6% 11.3% GBP31 3.8 years
Provincial
Offices 8.8% 10.2% 12.7% GBP69 3.5 years
Hospitals 7.4% 7.4% 7.8% n/a 22.1 years
Nightclubs 15.7% 17.7% 13.6% GBP33 21.8 years
7.7% 8.8% 9.8% 7.3 years
Portfolio breakdown at 31 March 2013
Gross value Proportion EPRA
(Max share) of EPRA NAV * Proportion vacancy
GBP000 portfolio GBP000 of EPRA NAV rate (+)
St Katharine
Docks 109,992 24% 68,208 23% 8.8%
High Holborn
Estate 47,700 10% 53,807 18% 22.1%
Central
London
offices 157,692 34% 122,015 41% 12.9%
London Pubs 45,385 10% 24,524 8% 0.0%
Industrious 190,015 42% 99,434 33% 12.2%
Provincial
Offices 41,929 9% 12,943 4% 26.8%
Hospitals 14,783 3% 1,061 1% 0.0%
Nightclubs 7,575 2% 7,574 3% 7.5%
Cash n/a n/a 32,731 10% n/a
457,379 100% 300,282 100% 13.0%
* including cash balances allocated for major refurbishment programmes
(+) excluding assets not available for letting
Industrious (42% of gross assets, 33% of EPRA NAV)
A portfolio of multi-let industrial estates bought out of receivership
in October 2009 for GBP244.0 million (GBP31 psf capital value).
Activity
-- Vacancy rate by area reduced to 13.2% from 20.7% at acquisition and 15.1%
in April 2012
-- EPRA vacancy rate reduced to 12.2% from 15.2% in March 2012. An
increasing amount of voids is in lower value space
-- Vacancy rate has fallen in every reporting period since acquisition with
over 900 lettings and lease renewals over 4.2 million sq ft
-- 90% of the space vacant on acquisition has since been let or sold
-- Of the 805,000 sq ft of space currently vacant 152,000 sq ft (19%) is
under offer
-- 117,000 sq ft is thought to be coming vacant up to the end of 2013
-- Ten sales in the year totalling GBP7.4 million at an average 5.7% net
initial yield and GBP1.9 million (36%) profit over purchase price
-- Total sales since acquisition of GBP92.5 million at an average 7.7% net
initial yield and GBP21.2 million (31%) profit over purchase price
Current portfolio
-- 71 properties
-- 863 tenancies
-- 6.1 million sq ft
-- Average unit size: 5,800 sq ft
-- 47% by value in the South East of England
-- Highly liquid: 77% of properties by number are lot sizes of GBP3 million
or below
-- Weighted average unexpired lease term: 3.8 years
-- GBP21.2 million rent roll
-- Average contracted rent: GBP4.04 psf
The Industrious portfolio predominantly comprises smaller units that
appeal to a wide variety of users and provide a range of exit options,
from disposals of individual units to a whole portfolio sale.
Martlesham Heath Business Park, Ipswich (504,000 sq ft) makes up over
10% of the portfolio by value and no other property makes up more than
6.5%.
31 March 2013 Capital
valuation Percentage value psf Area Number of Number of
Region GBP000 of total GBP ('000 sq ft) properties units
South
East 88,740 47% 51 1,730 21 428
Northern
regions 64,445 34% 24 2,657 27 419
Midlands 26,815 14% 23 1,162 16 139
South
West 5,160 3% 37 141 3 27
Scotland 4,855 2% 12 404 4 32
Total 190,015 100% 31 6,094 71 1,045
St Katharine Docks (24% of gross assets, 23% of EPRA NAV)
St Katharine Docks was acquired in a 60% joint venture in August 2011
for GBP164.5 million (GBP330 psf capital value). Situated on the Thames
adjacent to Tower Bridge and the Tower of London, it enjoys unparalleled
views and includes central London's only marina. The investment
comprises 450,000 sq ft of offices, predominantly in three buildings,
with 50,000 sq ft of waterside restaurants, bars and shops and the ten
acre, 160 berth marina. The strategy is to create a premium office
destination through repositioning the estate, attracting footloose
central London occupiers to a beautiful location.
Phase 1:
Refurbishment of International House entrance hall and nearly 40,000 sq
ft of offices. Refurbishments are now complete and offices are let:
30,000 sq ft to IT training business QA at GBP37.50 psf and 8,000 sq ft
to web content management company Sitecore at GBP39 psf, compared to
average passing rent on acquisition of c. GBP30 psf in the property.
Phase 2:
Ongoing rationalisation of smaller suites at International House to
increase the net lettable area and introduce complementary uses at
ground floor level. This involves the refurbishment of 30,000 sq ft of
offices, half of which is under offer, and the creation of a 3,200 sq ft
restaurant unit (pre-let to Côte Restaurant) and a 3,250 sq ft
retail unit (pre-let subject to planning consent).
Phase 3:
A GBP21 million comprehensive refurbishment of Commodity Quay. Planning
consent has been obtained and development commenced, with completion
planned for Spring 2014. The office net lettable area will be increased
by 10% to 110,000 sq ft on the upper floors, with a 10,000 sq ft
restaurant and 20,000 sq ft of leisure uses proposed for the ground
floor and basement.
Current estate
-- 515,000 sq ft, of which 152,000 sq ft is under development
-- Weighted average unexpired lease term: 5.7 years
-- GBP8.8 million rent roll
-- Average contracted rent: GBP29.93 psf
-- EPRA vacancy rate: 8.8%
-- Vacancy rate including Commodity Quay (undergoing refurbishment): 36.3%
of ERV
Area (sq ft) in
Area (sq ft) refurbishment EPRA vacancy rate
International House 215,000 12,000 11.3%
Commodity Quay 140,000 140,000 n/a
Devon House 90,000 - -
Ivory House and other 70,000 - 12.3%
515,000 152,000 8.8%
High Holborn Estate (10% of gross assets, 18% of EPRA NAV)
A freehold island site of just under one acre with frontages to High
Holborn and Bedford Row, acquired in November 2012 for GBP47.7 million
including costs (c. GBP320 psf capital value).
Nine buildings provide nearly 150,000 sq ft of unrefurbished space let
to 50 tenants at low rental levels averaging just GBP15 psf at
acquisition on short term leases. The low rental levels reflected the
tenants' lack of security of tenure resulting from the former landlord's
development break clauses.
The strategy is to upgrade the common parts, refurbish empty office
suites, improve the tenant mix and increase passing rents and average
lease lengths. A centrally heated suite was pre-let shortly after
acquisition at GBP27.50 psf ahead of the common parts refurbishment and
rents of over GBP30 psf will be targeted for comfort cooled suites. The
current Midtown office vacancy rate is 4.1% and 63% of the take-up in
Midtown in the first quarter of 2013 was in our target market of 1,000
to 3,000 sq ft suites.
A number of the smaller buildings fronting Bedford Row and Hand Court
totalling 31,000 sq ft have potential for change of use to residential.
The retail units fronting High Holborn (11,000 sq ft) have scope to be
consolidated into larger units that enjoy stronger demand from higher
quality operators.
Area Total area
(sq ft) (sq ft) Asset plan
High Holborn House 87,000 Rolling refurbishment
Comprehensive
Caroline House 19,000 refurbishment
Brownlow House 10,000 Rolling refurbishment
Properties fronting High Holborn 116,000
Six properties fronting Potential change of use to
Bedford Row and Hand Court 31,000 residential
147,000
The current rent roll is GBP1.8 million and the EPRA vacancy rate is
22.1%.
London Pubs (10% of gross assets, 8% of EPRA NAV)
29 freehold pubs with a total floor area of 150,000 sq ft, situated in
high value residential areas in London, were acquired in January 2011
for GBP44.4 million (GBP300 psf capital value). The pubs are located in
Marylebone, Notting Hill, Chelsea, Clerkenwell, Spitalfields, Southwark,
Camden, Highgate, Islington, Barnes, Sheen, Chiswick, Battersea, Clapham,
Balham, Tooting and Fulham.
At acquisition the net initial yield on the portfolio was 6.7%, which
has subsequently risen to 7.2% on cost due to increases in rent roll.
The independently assessed vacant possession value of the portfolio at
the time of acquisition, subject to existing use as pubs, was
approximately the same as the purchase price, and many of the properties
are considered by the management team to have a higher alternative value
for residential use in the event that they fell vacant and planning
consent were secured.
Two of the pubs, in Chelsea and Balham, were sold in 2011 for a total of
GBP6.4 million at net initial yields of 4.5% and 5.5% respectively,
producing an aggregate profit of 21% over cost. During the year, the
Notting Hill pub has unconditionally exchanged for sale, with completion
due in November 2013, at a price of GBP1.5 million, reflecting a net
initial yield of 4.4% and representing a profit of 37% over cost. Since
the year end, two further pubs in Islington and Whitechapel have
unconditionally exchanged for sale, with completion due in June 2013 at
a price of GBP5.3 million reflecting a net initial yield of 4.9% and
representing a profit of 42% over cost. Following these sales, the
average lot size is GBP1.7 million at the most recent valuation.
The pubs are let on 35 year full repairing and insuring leases to
Enterprise Inns Plc commencing in January 2011 at market rents well
covered by trading profits and initially totalling GBP3.0 million per
annum, with minimum 3% per annum and maximum 4% per annum RPI-linked
uplifts occurring annually for the first five years and every five years
thereafter. After all of the disposals mentioned above, the passing
rent will be GBP2.5 million per annum.
Provincial Offices (9% of gross assets, 4% of EPRA NAV)
A portfolio of predominantly late 1980s air conditioned offices,
purchased in February 2010 for GBP39.0 million (GBP50 psf capital value)
from a property fund seeking liquidity to meet redemptions.
Activity
-- Vacancy rate by area reduced to 26% from 48% at acquisition and 28% in
April 2012)
-- GBP32.0 million raised in May 2012 on a non-recourse financing of five
properties with 18% vacancy rate
-- Two properties sold since acquisition for GBP6.7 million at 43% over
purchase price
-- Remaining uncharged assets are valued at GBP10.3 million (GBP47 psf) and
have a 42% vacancy rate. 96% of that vacant space is refurbished
Current portfolio
-- Nine properties (eight freeholds; one 102 year peppercorn leasehold)
-- 62% by value in the South East, 31% in Manchester, 7% in Bristol
-- 639,000 sq ft
-- Average lot size: GBP4.9 million
-- GBP4.3 million rent roll
-- Average contracted rent: GBP10.47 psf
Nightclubs (2% of gross assets, 3% of EPRA NAV)
The Nightclubs portfolio was acquired in October 2010 for GBP9.8 million
in a deal struck with a lender seeking an exit for a larger portfolio.
At the time of acquisition, three of the 14 clubs were vacant and the
net initial yield on acquisition was 14.9%. Two properties were sold in
2010 and 2011, and a third at Portsmouth was sold in the year for GBP0.7
million, which was in line with previous book value. Net income since
acquisition, including sale proceeds, is GBP4.5 million, representing
46% of the original purchase price.
Nine of the nightclubs are let to Atmosphere Bars and Clubs Limited on
30 year full repairing and insuring leases from January 2010 with a
tenant break option at year 25. Since the balance sheet date,
Administrators have been appointed to Atmosphere but have yet to make
clear their intentions for the properties. The valuation at 31 March
2013 of the assets affected was GBP6.8 million and the current gross
rental income is GBP1.1 million. Of the total, one asset valued at
GBP1.0 million and with GBP0.15 million of rent is fully sublet and so
should not be affected by the Administration.
Hospitals (3% of gross assets, 1% of EPRA NAV)
Four freehold private hospitals in Blackburn, Liverpool, Ayr and
Stirling were acquired in a joint venture with Lloyds Banking Group in
May 2010. Max invested a nominal sum in the joint venture to acquire a
45% interest and Lloyds injected the assets with associated debt
funding.
The joint venture paid GBP31.6 million for the portfolio, fully debt
financed on a non-recourse basis by Lloyds. Each hospital is let on
full repairing and insuring terms to BMI Healthcare Limited, guaranteed
by General Healthcare Group Limited, for a term of 25 years from May
2010 with a tenant option to renew for a further ten years. The initial
rent was GBP2.3 million per annum with annual, upwards only uncapped
RPI-linked rent reviews throughout the term. During the year, the
second rent review resulted in a rental uplift of 3.0% to GBP2.6 million
per annum. The third review is due in June 2013.
In May 2013 Lloyds disposed of its interest in the joint venture and the
debt to a joint venture between Texas Pacific Group and Goldman Sachs.
Financial review
Balance sheet
Max remains focussed on creating growth in net asset value per share,
the ultimate aim of the Board being to return cash to investors after
realising value over the investment cycle. The Group's progress is
measured principally through its growth in EPRA NAV per share (excluding
interests attributable to third party equity providers and stripping out
the impact of hedging revaluations) over the period since listing. In
just under four years from listing to 31 March 2013, Max has generated a
42% increase in EPRA NAV per share which is an increase of 40.4 pence
per share.
The increase in EPRA net asset value over the year ended 31 March 2013
and since listing comprises:
NAV growth in year NAV growth since listing
GBPm Pence per share GBPm Pence per share
Net rental income 33.0 15.0 96.1 43.8
Rent smoothing
adjustments* (3.9) (1.8) (8.7) (4.0)
Net rent excluding future
rental uplifts 29.1 13.2 87.4 39.8
Running costs (6.1) (2.7) (21.8) (10.0)
Net finance costs (12.5) (5.7) (30.6) (13.9)
Surpluses on property
sales 0.9 0.4 23.6 10.7
Tax - - (4.5) (2.1)
Realised profit 11.4 5.2 54.1 24.5
Share of Hospitals joint
venture (0.5) (0.2) 1.0 0.6
Property revaluation (4.2) (1.9) 33.8 15.3
EPRA NAV uplift 6.7 3.1 88.9 40.4
* Accounting standards require lease incentives and fixed or
guaranteed rental uplifts to be spread evenly over the term of the
lease. The amounts described above as 'rent smoothing adjustments'
represent the effect of spreading uplifts and incentives and relate
principally to the leases on the London Pubs portfolio where there are
3% per annum minimum uplifts throughout the 35 year lease term.
Given the Group's strategy of returning cash to shareholders over the
investment cycle, we focus in these reports not only on NAV growth, but
on the extent to which that growth is realised. By 'realised', we refer
to returns that are substantially cash returns, as opposed to valuation
movements. We split out the elements considered realised and unrealised
in the table above, and note that, for the period since listing, the
realised NAV movements account for 61% of NAV growth.
The GBP1.0 million carrying value of the Hospitals joint venture at 31
March 2013 is stated after losses on hedging valuations and deferred tax
of GBP0.1 million. These amounts are ignored in calculating the Group's
EPRA NAV therefore the joint venture's contribution to EPRA NAV growth,
including fee income, is a loss of GBP0.1 million in the year and a gain
of GBP1.4 million since acquisition.
EPRA triple net asset value is the net asset value after deducting
certain adjustments for the mark to market costs of debt and hedging
instruments, and after deducting any inherent tax liabilities not
provided for in the financial statements. As a Jersey resident group
there is no tax liability on investment property sales other than those
held in UK corporate structures. The Hospitals portfolio is the only
portfolio held that way, therefore the only relevant tax adjustment is
the Group's 45% share of the inherent tax in the joint venture.
The Group's EPRA triple net asset value is shown below.
31 March 31 March
2013 2012
Pence Pence
per per
GBPm share GBPm share
EPRA NAV 300.3 136.5 293.5 133.4
Fair value of hedging instruments, net of deferred
tax (6.2) (2.8) (6.5) (2.9)
Fair value of fixed rate debt (0.6) (0.3) - -
Deferred tax on trading property valuation surplus - - (0.2) (0.1)
Share of inherent capital gains tax in Hospitals joint
venture - - (0.1) (0.1)
EPRA triple net asset value 293.5 133.4 286.7 130.3
The accounting policies applied in arriving at the net assets are stated
in note 2 to the financial statements, which highlights the key
judgement areas in preparing these results. The more material areas
include the property and derivatives valuations, where independent open
market valuations are obtained. There have been no changes in
accounting policies since listing.
Income statement
While accounting standards require that the income statement includes
100% of all rents, running costs and interest, only reversing the
amounts attributable to our joint venture partners as a single line
described as "non-controlling interests", we show below the income
statement excluding from each line item the elements not attributable to
Max shareholders.
Year ended 31 March 2013 Year ended 31 March 2012
Profits net of joint
venture partners' Pence Pence
interests GBPm per share GBPm per share
Net rental income 33.0 15.0 29.9 13.6
Loss on sale of
trading properties - - (0.3) (0.1)
Gross profit 33.0 15.0 29.6 13.5
Administrative
expenses (6.1) (2.7) (6.1) (2.8)
Investment property
revaluation (7.1) (3.3) (7.3) (3.3)
Profit on sale of
investment
properties 0.9 0.4 0.4 0.2
Other income 0.1 - 0.1 -
Operating profit 20.8 9.4 16.7 7.6
Share of (loss)/profit
of joint venture (0.4) (0.2) 0.4 0.2
Net finance costs (12.0) (5.4) (9.4) (4.3)
Profit before tax 8.4 3.8 7.7 3.5
Tax charge (0.1) - (0.9) (0.4)
Profit for the year 8.3 3.8 6.8 3.1
Movements in the property revaluations shown in the income statement are
described in the portfolio section of this report. The other key
elements of the income statement are described below.
Net income from property activities
Rental surpluses and surpluses on sales have, in the period from listing
to 31 March 2013, contributed 50.5p of the net 40.4p per share growth in
that period, covering all running costs, interest and tax approximately
twice.
Year ended 31 Period since
March 2013 listing
Pence Pence
Property rent and disposal surpluses GBPm per share GBPm per share
Gross rent 40.5 18.4 124.2 56.5
Direct property costs (7.5) (3.4) (28.1) (12.7)
Rental surplus 33.0 15.0 96.1 43.8
Proceeds from sale of trading properties - - 28.8 13.1
Cost of trading properties sold - - (22.8) (10.4)
Result from trading property sales - - 6.0 2.7
Proceeds from sale of investment properties 8.3 3.8 78.0 35.5
Cost of investment properties sold (7.4) (3.4) (60.4) (27.5)
Profit on sale of investment properties 0.9 0.4 17.6 8.0
Property surplus reported in the income statement 33.9 15.4 119.7 54.5
Rent smoothing adjustments classified within revaluation
movements (3.9) (1.8) (8.7) (4.0)
Realised property surpluses attributable to shareholders 30.0 13.6 111.0 50.5
Provisions for rent, service charge and other billed amounts considered
irrecoverable from tenants amounted to GBP0.2 million in the year
compared to GBP0.8 million in the year to 31 March 2012. Rental bad
debts were 0.4% of the rent billed compared to 1.3% in the year to 31
March 2012.
The Group's largest rent is payable by Enterprise Inns Plc with GBP2.8
million passing rent per annum, c. 7% of the total passing rent as at 31
March 2013. Enterprise Inns is the UK's largest tenanted pub company,
owning approximately 6,000 pubs which it values at GBP4.2 billion. In
its most recent interim results announcement in May 2013 it reported
EBITDA of GBP153 million and profit before tax of GBP55 million for the
six months ended 31 March 2013 before exceptional items. We consider
Enterprise Inns to be a sufficiently strong covenant to comfortably
service their lease liabilities which relate to a profitable part of
their portfolio in desirable locations, but it is still worth noting
that the acquisition cost of the London Pubs portfolio was substantially
underpinned by its vacant possession value.
All other tenants each account for less than 5% of total passing rent,
and all but ten of those also represent less than 1% of total passing
rent. This, together with the fact that the portfolio comprises over
1,000 tenants, provides a low concentration of tenant risk.
Running costs
As an externally managed business, the majority of the Group's overhead
is borne by the Property Advisor, so as a result the Group's running
costs principally comprise the management fee which amounted to GBP5.8
million in the year (2012: GBP5.4 million). Of that total, GBP0.7
million (2012: GBP0.4 million) was borne by the non-controlling
interests therefore Max investors' share of the manager's fee is GBP5.1
million (2012: GBP5.0 million).
The other principal component of the total GBP6.1 million (2012: GBP6.1
million) running costs attributable to shareholders is GBP0.8 million
(2012: GBP0.8 million) of corporate costs, which are the costs
necessarily incurred as a result of the Company being listed, such as
stock exchange fees and Non-Executive Directors' fees. Other than the
Prestbury fee, which is linked to movements in the value of
shareholders' equity, costs attributable to Max shareholders have
remained relatively stable since the prior year.
Financing
The financing strategy laid down by the Board is to use non-recourse
leverage with a view to enhancing equity returns while maintaining
prudent levels of interest cover and protecting shareholders' funds.
The Board's intention is to ensure that:
-- interest rate risk is hedged such that the maximum interest cost on any
loan is fixed or capped over the term of the loan;
-- maturity profiles are managed to reduce refinancing risk; and
-- interest cover is considered having regard to both upside and downside
scenarios.
This approach has been consistently applied in the period since listing.
Of the seven portfolios owned by the Group at the balance sheet date,
five - the Industrious, St Katharine Docks, Provincial Offices,
Hospitals and London Pubs portfolios - are partly debt financed.
GBP66.1 million of property assets and GBP38.6 million of cash at 31
March 2013 is uncharged and therefore beyond the reach of any lender.
All facilities are financed on a strictly non-recourse basis and with no
cross default provisions between subgroups.
The Provincial Offices facility is fixed rate debt. On the remaining
floating rate facilities, interest rate risk is managed through a
combination of interest rate caps and swaps, with 99% to 100% of the
loan hedged in each of the debt facilities for no longer than the term
of the relevant loan.
The Group's share of gross and net debt for the directly owned
portfolios is as follows:
Industrious St Katharine Docks Provincial Offices London Pubs Unsecured assets Total
GBPm GBPm GBPm GBPm GBPm GBPm
Gross
debt 92.5 52.0 31.4 22.0 - 197.9
Secured
cash (6.2) (11.0) (1.7) (0.9) - (19.8)
Free cash (1.2) (1.7) - (0.2) (38.6) (41.7)
Net debt 85.1 39.3 29.7 20.9 (38.6) 136.4
Property
value at
31 March
2013 188.2 110.0 32.9 46.9 66.1 444.1
Gross LTV 49.1% 47.3% 95.4% 46.9% 44.6%
Net LTV 45.2% 35.7% * 90.3% 44.6% 30.7%
Maturity August August September 2016 January
date 2016 2016 2016
* St Katharine Docks secured cash includes cash set aside to fund
the major capital expenditure programme. Assuming that the cash is set
aside to complete the capital projects and not to reduce debt, net LTV
is 43.9% or 40.5% if capex is completed and valued at cost.
The debt facilities include financial and other covenants, and all
covenants have been complied with at all times throughout the year. The
key covenants in each facility are loan to value and interest cover
tests. These are monitored throughout the year by the management team
and the Board and there have been no defaults or potential defaults in
any facility.
As at the most recent test dates at the end of April 2013, the
valuations would need to fall by 11% before a loan to value covenant
breach would occur on the Industrious portfolio, by 32% to breach the
covenant on St Katharine Docks, and by 33% to breach the covenant on the
London Pubs. There is no LTV covenant on the Provincial Offices debt.
Interest cover is tested on the basis of projections of rent (taking
into account only contracted rent), property running and void costs, and
interest costs. The risk on the net rental line is managed through
active asset management and strong credit control, and the risk on the
interest line by interest rate hedging in order to fix or cap the
maximum level of interest cost payable. When most recently tested in
April 2013 there was 32% headroom on the Industrious interest cover test,
32% on St Katharine Docks, and 20% on the London Pubs. There is no
interest cover threshold on the Provincial Offices loan, though the
Group's ability to withdraw cash from the relevant subgroup is
restricted if net rental income falls below GBP3.4 million per annum.
It is currently GBP3.6 million per annum.
Medium term interest rates remain at historically low levels, meaning
that the strategy of managing a portion of the interest rate risk by way
of interest rate caps has proved useful in enabling Max to take
advantage of these low rates while still capping the potential rates
payable at an affordable level in the event that rates rise. The
potential maximum rates payable and the average rates payable during the
2013 financial year for each on balance sheet facility are:
Average Maximum
Hedging method rate paid rate payable
Industrious Swap & cap 5.3% 6.4%
St Katharine Docks Swap 4.6% 4.6%
Provincial Offices Fixed rate 9.0% 9.0%
London Pubs Cap 3.1% 5.9%
Weighted average 5.3% 6.0%
The Hospitals portfolio is held in a joint venture where Max has a 45%
economic interest. The non-recourse debt is held within the joint
venture company where Max's capital at risk in that transaction is
limited to the equity in the joint venture which at 31 March 2013 was
GBP1.0 million. The risk of interest rate movements is managed by an
interest rate swap which hedges 99% of the debt for the term of the loan
and fixes the total cost at 5.5% per annum. Max's share of the
Hospitals joint venture gross debt is GBP12.9 million, net debt GBP12.5
million and property value GBP14.8 million. As at the most recent test
date at the end of April 2013, the valuation would need to fall by 16%
to breach the LTV covenant and rent to fall by 15% to breach the ICR
covenant on this debt. The loan matures in May 2015.
The Group's gearing ratio (net debt to equity) at 31 March 2013 is 46.4%
excluding the Hospitals joint venture and 50.6% including the joint
venture. The Group has unsecured cash and property assets amounting to
GBP104.7 million at their 31 March 2013 valuations.
During the year, the term of the Industrious loan and the associated
hedging was extended by two years to August 2016 to bring its maturity
date into line with other facilities and the expected life of the
Company. The weighted average term to maturity of the Group's debt is
3.3 years with the first debt maturity being the London Pubs facility in
January 2016.
Tax
UK income tax is payable at 20% of net rental surpluses after deduction
of costs (principally financing costs and costs of holding vacant
property) and deductions for capital allowances. No tax is payable in
Jersey on the interest or dividend income of Jersey incorporated and tax
resident companies nor on investment property capital gains. The tax
charge for the period represents an effective underlying tax rate of
6.0% (2012: 7.4%) on profits excluding property revaluations, derivative
revaluations and joint venture contribution.
Cash flow
The movements in cash over the year and in the period since listing may
be summarised as:
Cash flows in year ended
31 March 2013 Cash flows in 46 months since listing
GBPm GBPm
Cash from
operations 22.1 102.4
Property
acquisitions
net of debt
finance (12.2) (238.4)
Net cash from
investment
and trading
property
sales 1.2 36.5
Net interest
payable (12.2) (26.9)
Capital
expenditure (11.2) (17.5)
Benefit of
Provincial
Offices
escrow
account 0.1 5.5
Purchase of
interest
rate cap - (2.6)
Net funds
raised on
listing - 211.4
Cash flow in
the period (12.2) 70.4
Cash at the
start of the
period 82.6 -
Cash at the
end of the
period 70.4 70.4
Group Max share
GBPm GBPm
Free cash 43.2 41.7
Cash secured under banking facilities 27.2 19.8
Cash at the end of the period 70.4 61.5
The most significant capital project is the refurbishment of Commodity
Quay at St Katharine Docks, where the 140,000 sq ft building has been
stripped out and is undergoing a major internal refurbishment and
reglazing. The works are expected to complete in Spring 2014. As at
the balance sheet date Max's share of the remaining anticipated capital
expenditure for that project through to its completion is GBP10.2
million.
Refurbishment plans for the High Holborn Estate are still being refined
but the capital expenditure is expected to be in the order of GBP5
million over the next two to three years on a rolling refurbishment
programme, improving common parts and refurbishing office space.
Capital expenditure requirements in the rest of the portfolio are
relatively modest and expected to remain broadly in line with levels of
past expenditure. Excluding the major projects, routine capital
expenditure has averaged around GBP3.1 million over the last three
years.
Mike Brown
Chief Executive
Prestbury Investments LLP
23 May 2013
Group Income Statement
Year to Year to
31 March 31 March
2013 2012
Note GBP000 GBP000
Gross rental income 45,093 42,235
Proceeds from sales of trading property - 750
45,093 42,985
Property outgoings 10 (8,977) (9,793)
Cost of sales of trading property - (1,031)
(8,977) (10,824)
Net rental income 36,116 32,442
Loss on sale of trading property - (281)
Gross profit 36,116 32,161
Administrative expenses:
General administrative expenses (6,170) (5,819)
Corporate costs (757) (755)
Total administrative expenses (6,927) (6,574)
Investment property revaluation 10 (6,356) (5,016)
Profit on sale of investment properties 947 355
Other income 108 106
Operating profit 4 23,888 21,032
Share of (loss)/profit of joint venture 11 (443) 373
Finance income 6 215 365
Finance costs 6 (14,224) (10,837)
Profit before tax 9,436 10,933
Tax charge 7 (67) (881)
Profit for the year 9,369 10,052
Profit for the year attributable to:
Owners of the parent 8,269 6,829
Non-controlling interests 8 1,100 3,223
9,369 10,052
Earnings per share Pence per Pence per
share share
Basic and diluted 9 3.8p 3.1p
All amounts relate to continuing activities.
Group Statement of Comprehensive Income
Year to Year to
31 March 31 March
2013 2012
Note GBP000 GBP000
Profit for the year 9,369 10,052
Market value adjustment of interest rate derivatives
in effective hedges 15b (119) (3,794)
Amortisation of interest rate derivatives, transferred
to income statement (284) (258)
Tax effect of interest rate derivative market value
adjustment 7 79 805
Share of market value adjustment of interest rate
derivatives in effective hedges in joint venture,
net of deferred tax 11 159 (178)
Total comprehensive income for the year, net of tax 9,204 6,627
Total comprehensive income for the year, net of tax,
attributable to:
Owners of the parent 8,172 4,429
Non-controlling interests 8 1,032 2,198
9,204 6,627
Group Statement of Changes in Equity
Equity attributable
to owners
of the
Stated capital Hedging reserve Retained earnings parent Non-controlling interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 March 2012 211,367 (4,752) 79,304 285,919 39,346 325,265
Profit for the year - - 8,269 8,269 1,100 9,369
Market value adjustment of interest rate derivatives - (296) - (296) (107) (403)
Tax effect of interest rate derivative market value
adjustment - 40 - 40 39 79
Share of market value adjustment of interest rate
derivatives in joint venture, net of deferred tax - 159 - 159 - 159
Total comprehensive income for the year, net of tax - (97) 8,269 8,172 1,032 9,204
Equity contribution from non-controlling investor - - - - 5,800 5,800
Distributions paid to non-controlling investors - - - - (15) (15)
At 31 March 2013 211,367 (4,849) 87,573 294,091 46,163 340,254
Equity attributable
to owners
of the
Stated capital Hedging reserve Retained earnings parent Non-controlling interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 March 2011 211,367 (2,352) 72,475 281,490 1,735 283,225
Profit for the year - - 6,829 6,829 3,223 10,052
Market value adjustment of interest rate derivatives - (2,793) - (2,793) (1,259) (4,052)
Tax effect of interest rate derivative market value
adjustment - 571 - 571 234 805
Share of market value adjustment of interest rate
derivatives in joint venture, net of deferred tax - (178) - (178) - (178)
Total comprehensive income for the year, net of tax - (2,400) 6,829 4,429 2,198 6,627
Equity contribution from non-controlling investor - - - - 35,440 35,440
Distributions paid to non-controlling investors - - - - (27) (27)
At 31 March 2012 211,367 (4,752) 79,304 285,919 39,346 325,265
Group Balance Sheet
31 March 31 March
2013 2012
Note GBP000 GBP000
Non-current assets:
Investment properties 10 509,864 464,125
Investment in joint venture 11 971 1,255
Interest rate derivatives at market value 15b 1,425 900
Deferred tax asset 7 881 1,102
513,141 467,382
Current assets:
Trading property - 864
Trade and other receivables 12 17,512 11,258
Cash and cash equivalents 13 70,386 82,631
87,898 94,753
Total assets 601,039 562,135
Current liabilities:
Trade and other payables 14 (20,705) (19,089)
Tax payable (280) (1,106)
Interest rate derivatives at market value 15b (2,384) (2,578)
(23,369) (22,773)
Non-current liabilities:
Borrowings 15a (229,000) (206,983)
Interest rate derivatives at market value 15b (6,764) (5,462)
Obligations under finance leases 16 (1,652) (1,652)
(237,416) (214,097)
Total liabilities (260,785) (236,870)
Net assets 340,254 325,265
Equity attributable to owners of the parent:
Stated capital 17 211,367 211,367
Hedging reserve (4,849) (4,752)
Retained earnings 87,573 79,304
294,091 285,919
Non-controlling interests 8 46,163 39,346
Total equity 340,254 325,265
Pence per Pence per
share share
Basic and diluted NAV per share 19 133.7p 130.0p
EPRA NAV per share 19 136.5p 133.4p
Group Cash Flow Statement
Year to Year to
31 March 31 March
2013 2012
Note GBP000 GBP000
Cash flows from operating activities:
Profit before tax 9,436 10,933
Adjustments for non-cash items:
Investment property revaluation 10 6,356 5,016
Profit on sale of investment properties (947) (355)
Share of loss/(profit) of joint venture 11 443 (373)
Net finance costs 6 14,009 10,472
Cash flows from operating activities before changes
in working capital 29,297 25,693
Change in trade and other receivables (6,035) 4,484
Change in trade and other payables (233) 3,388
Change in trading properties - 1,229
Tax paid (898) (1,449)
Cash flows from operating activities 22,131 33,345
Investing activities:
Investment property acquisitions (47,488) (164,173)
Capital expenditure on investment properties (11,165) (2,912)
Recoveries from escrow account 41 2,709
Proceeds from sales of investment properties 8,251 11,953
Cash received from short-term deposit - 6,695
Interest received 215 416
Cash flows from investing activities (50,146) (145,312)
Financing activities:
Loans drawn down 32,000 86,652
Loan arrangement fees paid (2,540) (1,559)
Loans repaid (7,102) (5,207)
Interest paid (12,373) (8,335)
Distributions to non-controlling investors 8 (15) (27)
Capital contribution from non-controlling investors 8 5,800 35,440
Cash flows from financing activities 15,770 106,964
Net decrease in cash and cash equivalents (12,245) (5,003)
Cash and cash equivalents at the start of the year 82,631 87,634
Cash and cash equivalents at the end of the year 70,386 82,631
Notes to the preliminary announcement
The financial information contained within this announcement is
extracted from the Company's Annual Report and Financial Statements for
the year ended 31 March 2013 which has been prepared in accordance with
International Financial Reporting Standards and upon which an
unqualified audit report has been given.
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,
with a registered office at 26 New Street, St Helier, Jersey, JE2 3RA.
The nature of the Group's operations and its principal activities are
set out in the Chairman's Statement and the Report from the Property
Advisor.
The financial information set out in this report covers the year to 31
March 2013 with comparative amounts relating to the year to 31 March
2012.
This financial report includes the results and net assets of the Company
and its subsidiaries, together referred to as the Group, along with the
Group's interest in the results and net assets of its joint venture.
Further general information about the Group can be found on its website,
www.maxpropertygroup.com.
2. Accounting policies
a) Statement of compliance
The consolidated financial statements have been prepared in accordance
with the International Financial Reporting Standards ('IFRS') adopted
for use in the European Union and therefore comply with Article 4 of the
EU IAS Regulation.
b) Basis of preparation
The Group and Company financial statements are presented in pounds
sterling.
The Board has, at the time of preparing the financial statements, a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future and therefore continue to adopt the going concern basis of
accounting in preparing the financial statements.
i) Estimates and judgements
The financial statements are prepared on the historical cost basis
except that investment properties and derivative financial instruments
are stated at fair value. The accounting policies have been applied
consistently in all material respects.
The preparation of financial statements requires the Board to make
judgements, estimates and assumptions that may affect the application of
accounting policies and the reported amounts of assets and liabilities
as at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Any estimates and
assumptions are based on experience and any other factors that are
believed to be relevant under the circumstances and which the Board
considers reasonable. Actual outcomes may differ from these estimates.
Any revisions to accounting estimates will be recognised in the period
in which the estimate is revised if the revision affects only that
period. If the revision affects both current and future periods, the
change will be recognised over those periods.
Certain accounting policies which have a significant bearing on the
reported financial condition and results of the Group require subjective
or complex judgements. The principal such areas of judgement are:
-- property valuation, where the opinion of independent, external valuers is
obtained every six months;
-- the value of derivative financial instruments used to hedge interest rate
exposures, where the valuations adopted are independently assessed every
six months on the basis of market rates as at the balance sheet date;
and
-- the likelihood of payments being made or received under the Group's
carried interest arrangements, where the position is monitored by the
Board through consideration of relevant external data.
The Group's accounting policies for these matters where outcomes are
more reliant on judgement, together with other policies material to the
Group, are set out below.
ii) Adoption of new and revised standards
No new standards or interpretations issued by the International
Accounting Standards Board ('IASB') or the IFRS Interpretations
Committee ('IFRIC') have led to any material changes in the Group's
accounting policies or disclosures during the year.
iii) Standards and interpretations in issue not yet adopted
The IASB and IFRIC have issued or amended the following standards and
interpretations that are mandatory for later accounting periods, and
which are relevant to the Group and have not been adopted early. These
are:
Effective date
(periods commencing)
IFRS 9 Financial instruments 1 January 2015
IFRS 10/IAS 27 Consolidated financial statements 1 January 2014
IFRS 11/IAS 28 Joint arrangements 1 January 2014
IFRS 12 Disclosures of interests in other 1 January 2014
entities
IFRS 13 Fair value measurement 1 January 2014
The Directors do not anticipate that the adoption of these standards and
interpretations will have a material impact on the Group's financial
statements in the period of initial application, other than on
presentation and disclosure.
The Group has provided certain information required by IFRS 12 in
relation to its St Katharine Docks subsidiaries in note 8 as the
Directors consider this to be meaningful to users of the financial
statements.
The IASB has also issued or revised IFRS 1, IFRS 7, IAS 1, IAS 19, IAS
32 and IFRIC 20 but these changes either have no impact or are not
expected to have a material effect on the operations of the Group.
c) Basis of consolidation
i) Subsidiaries
The consolidated financial statements include the financial statements
of subsidiaries, prepared to 31 March each year under the same
accounting policies as the Group as a whole, using the acquisition
method. All intra-group balances, income and expenses are eliminated on
consolidation.
Subsidiaries are those entities controlled by the Group. When the Group
has the power to govern the financial and operating policies of an
entity to gain benefits from its activities, it has control within the
meaning of this policy.
Non-controlling interests represent the portion of profits or losses and
net assets not held by the Group. They are included in full in the
relevant income statement, statement of comprehensive income and balance
sheet captions, then presented separately in the income statement and
statement of comprehensive income, and within equity in the consolidated
balance sheet, to clarify the relevant share of earnings and net assets
attributable to shareholders and non-controlling interests respectively.
ii) Business combinations
Under the acquisition method, an acquisition is recognised at the
aggregate of the consideration transferred, measured at acquisition date
fair value and the amount of any non-controlling interest in the
acquiree. Acquisition costs incurred prior to the revision of IFRS 3
were included as part of the cost of the acquisition; acquisition costs
incurred since the revision of IFRS 3 in the year ended 31 March 2011
are expensed. In the consolidated balance sheet, the identifiable net
assets, liabilities and contingent liabilities of any target entity are
also recognised initially at fair value as at the acquisition date. The
results of subsidiaries are included in the consolidated financial
statements from the date control commences until the date that it
ceases.
Where properties are acquired through corporate acquisitions and there
are no significant assets or liabilities other than those directly
relating to property, an acquisition is treated as an asset acquisition
and fair value accounting at the date of acquisition will not apply. In
other cases, the acquisition method will be used.
iii) Joint ventures
A joint venture is an entity over which the Group has joint control,
established by contractual agreement. Joint ventures are accounted for
under the equity method, whereby the consolidated financial statements
incorporate the Group's share of net assets and results. The results
are after tax and include revaluation movements on investment properties
and interest rate derivatives. The results of joint ventures are
included on the basis of accounting policies consistent with those of
the Group.
Joint ventures are reviewed to determine whether any impairment loss
should be recognised at the end of the reporting period.
iv) Goodwill and discounts on acquisition
In the event that there is an excess of the purchase price of any
business acquired over the fair value of the business acquired - that is,
its identifiable assets, liabilities and contingent liabilities
purchased and any resulting deferred tax thereon - the excess is
recognised as goodwill.
Any goodwill is recognised as an asset and will be reviewed by the Board
for impairment at least annually. Any impairment is recognised
immediately in the income statement and will not be subsequently
reversed. A discount on acquisition arises where there is an excess of
the fair value of the business acquired over the purchase price. Any
discount arising is credited to the income statement in the period of
acquisition.
d) Property portfolio
i) Investment properties
Investment properties are properties owned or held leasehold by the
Group which are held for capital appreciation, rental income or both.
They are initially recorded at cost (or fair value where acquired as
part of a business combination) and subsequently valued at each balance
sheet date at fair market value on an open market basis as determined by
professionally qualified independent external valuers.
Gains or losses arising from changes in the fair value of investment
properties are recognised in the income statement in the period in which
they arise.
Depreciation is not provided in respect of investment properties.
Acquisitions and disposals of investment properties are recognised on
unconditional exchange of contracts where it is reasonable to assume at
the balance sheet date that completion of the acquisition or disposal
will occur. Gains on disposal are determined as the difference between
net disposal proceeds and the carrying value of the asset in the
previous audited balance sheet adjusted for any subsequent capital
expenditure or capital receipts.
ii) Trading properties
Trading properties are initially recognised at cost and subsequently at
the lower of cost and net realisable value.
iii) Occupational leases
The Board exercises judgement in considering the potential transfer of
the risks and rewards of ownership in accordance with IAS 17 for all
properties leased to tenants and determines whether such leases are
operating leases. A lease is classified as a finance lease if
substantially all of the risks and rewards of ownership transfer to the
lessee. If the Group substantially retains those risks, a lease is
classified as an operating lease.
iv) Headleases
Where an investment property is held under a headlease, the headlease is
initially recognised as an asset at cost plus the present value of
minimum ground rent payments. The corresponding rental liability to the
head leaseholder is included in the balance sheet as a finance lease
obligation.
v) Net rental income
Revenue comprises rental income exclusive of VAT. Rental income is
recognised in the income statement on an accruals basis. Contingent
income, such as rent reviews and indexation are recorded in the income
statement in the periods in which they are earned. Specifically:
-- rent reviews are recognised when formally agreed;
-- any rental income from fixed and minimum guaranteed rent reviews is
recognised on a straight-line basis over the shorter of the term to lease
expiry or to the first tenant break option;
-- rent free periods, other lease incentives and any costs associated with
entering into occupational leases are allocated evenly over the period
from the date of lease commencement to the first break option or, in the
unusual event that the probability that the break option will be
exercised is considered sufficiently low, over the lease term; and
-- in the event that any premium is received on a lease surrender, the
profit, net of any payments for dilapidations and non-recoverable
outgoings, is reflected in the income statement in the period in which
the surrender becomes legally binding.
Where this income or these costs are recognised in advance of the
related cash flows, an adjustment is made to ensure that the carrying
value of the relevant property including accrued rent does not exceed
the external valuation.
Property operating costs, including any property operating expenditure
not recovered from tenants, for example through service charges, are
expensed through the income statement on an accruals basis.
e) Financial assets and liabilities
Financial assets and liabilities are recognised when the relevant group
entity becomes a party to the contractual terms of the instrument.
Unless otherwise indicated, the carrying amounts of financial assets and
liabilities are a reasonable estimate of their fair values.
i) Trade and other receivables
Trade and other receivables are recognised initially at their fair value
and subsequently at their amortised cost. If there is objective
evidence that the recoverability of the asset is at risk, appropriate
allowances for any estimated irrecoverable amounts are recognised in the
income statement.
ii) Trade and other payables
Trade and other payables are recognised initially at their fair value
and subsequently at their amortised cost.
iii) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call
with banks and financial institutions and other short-term highly-liquid
investments with original maturities of three months or less.
iv) Other financial assets
Other financial assets comprise deposits held with banks and other
financial institutions where the original term to maturity was more than
three months.
v) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
vi) Borrowings and finance charges
Borrowings are initially recognised at their fair value, net of any
transaction costs directly attributable to their issue. Subsequently,
loans are carried at their amortised carrying value using the 'effective
interest method', which spreads the interest expense over the period to
maturity at a constant rate on the balance of the liability carried in
the balance sheet for the relevant period.
vii) Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to
cash flow interest rate risks. Derivatives are initially recognised at
fair value on the date on which the derivative contract is entered into
and are subsequently measured at fair value.
Derivatives are classified either as derivatives in effective hedges or
held for trading. It is anticipated that, generally, hedging
arrangements will be 'highly effective' within the meaning of IAS 39 and
that the criteria necessary for applying hedge accounting will be met.
Hedges are assessed on an ongoing basis to ensure they continue to be
effective.
The gain or loss on the revaluation of the portion of an instrument that
qualifies as an effective hedge of cash flow interest rate risk is
recognised directly in other comprehensive income. The gain or loss on
the revaluation of derivative financial instruments which are classified
as held for trading because they are not effective hedges is recognised
in the income statement.
Only the intrinsic value of a cap is designated as a hedging instrument,
with changes in the time value taken directly to the income statement.
f) Provisions
A provision is recognised when a legal or constructive obligation exists
as a result of an event that has occurred prior to the balance sheet
date and where it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions will be measured at
the Directors' best estimate of the expenditure required to settle that
obligation as at the balance sheet date, and will be discounted to
present value if the effect is material.
g) Distributions
Distributions relating to equity shares are recognised when they become
legally payable.
h) Management fees and incentive arrangement payments
Management fees and incentive arrangement payments are recognised in the
income statement in the period to which they relate. Incentive fees
earned that are more likely than not to become payable will be provided
for in the financial statements and balances will be discounted to
reflect the deferred payment.
i) Tax
Tax is included in the income statement except to the extent that it
relates to income or expense items recognised directly in equity, in
which case the related tax will be recognised in equity.
Current tax is the expected tax payable on taxable income for the
reporting period, using tax rates enacted or substantively enacted at
the balance sheet date, together with any adjustment in respect of
previous periods. Deferred tax is provided using the balance sheet
liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes.
The tax effect of the following differences is not provided for:
-- the initial recognition of goodwill;
-- goodwill for which amortisation is not tax deductible;
-- the initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
-- investments in subsidiaries, associates and jointly controlled entities
where the Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse in the
foreseeable future.
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the
asset can be utilised.
3. Operating segments
IFRS 8 requires operating segments to be identified on the basis of
internal reports about components of the Group that are reviewed by the
chief operating decision maker to make decisions about resources to be
allocated between segments and assess their performance. The Group's
chief operating decision maker is considered to be the Board.
The Group owns a number of property portfolios. Although these are
described individually elsewhere in this Annual Report, they are not
separately managed and the Board receives quarterly management accounts
prepared on a basis which aggregates the performance of all the
portfolios and focuses on total returns on shareholders' equity. The
Board has therefore concluded that in the period from incorporation to
31 March 2013 the Group has operated in and was managed as one business
segment, being property investment. All revenue arises from the Group's
property activities, with all properties located in the United Kingdom.
No single tenant represented 10% or more of the Group's revenues in
either the current or the prior year.
4. Operating profit
Operating profit is stated after charging:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Directors' fees 228 228
Auditors' remuneration for the audit of the Group
and Company financial statements 117 125
The auditors received no payments in either the current or the prior
year in relation to non-audit services.
The Group had no employees in either the current or the prior year.
Directors' fees payable in the year were as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Aubrey Adams 70 70
Mike Brown - -
Freddie Cohen 30 30
Keith Hamill 30 30
Nick Leslau - -
Alex Ohlsson 38 38
John Stephen 30 30
David Waters 30 30
Total charged to the income statement 228 228
5. Operating leases
As a commercial property investor, the Group enters into operating
leases on its real estate assets. Leases are for fixed terms, typically
between five and 15 years but potentially up to 35 years depending on
the type of property. They include terms that reflect market conditions
at the time of letting including landlord and/or tenant break options
before expiry and periodic rent reviews, the vast majority of which are
upwards only open market reviews.
Future minimum rents receivable under non-cancellable operating leases
are set out in the table below, calculated on the assumption that any
tenant with a break option does exercise that option.
31 March 31 March
2013 2012
GBP000 GBP000
Minimum rents receivable:
within one year 35,974 34,884
in two to five years 96,064 99,354
in more than five years 204,050 214,758
336,088 348,996
6. Finance income and costs
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Recognised in the income statement:
Finance income
Interest on cash deposits 215 365
Finance costs
Interest on secured debt (12,269) (8,757)
Amortisation of loan issue costs (1,096) (739)
Other finance costs (493) (145)
Market value adjustment of interest rate derivatives
in ineffective hedges (note 15b) (464) (1,267)
Amortisation of interest rate derivatives, transferred
from the hedging reserve 284 258
Finance lease interest (186) (187)
Total finance costs (14,224) (10,837)
Net finance costs recognised in the income statement (14,009) (10,472)
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Recognised in other comprehensive income:
Market value adjustment of interest rate derivatives
in effective hedges (note 15b) (119) (3,794)
Amortisation of interest rate derivatives, transferred
to the income statement (284) (258)
Net finance costs recognised in other comprehensive
income (403) (4,052)
Net finance costs analysed by the categories of financial asset and
liability shown in note 15c are as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Loans and receivables 215 365
Financial assets held for trading (88) (880)
Derivatives in effective hedges (92) (129)
Financial liabilities measured at amortised cost (14,044) (9,828)
Net finance costs recognised in the income statement (14,009) (10,472)
Further information about the hedging instruments, including details of
their valuation at the balance sheet date, is included in note 15b.
The Group's sensitivity to changes in interest rates, calculated on the
basis of a 1% increase in LIBOR such that LIBOR is not more than 3.0%,
was as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Effect on profit before tax (142) 148
Effect on other comprehensive income 184 331
Effect on equity 42 479
Figures will differ once LIBOR exceeds 3.0% as that is the lowest strike
rate of the interest rate caps held by the Group. Any increase in LIBOR
above 3.5% will have no effect on financing costs, as the maximum
average rate payable of 6.0% will have been reached.
The average interest rate payable by the Group on its secured loans for
the year, including all lender's margins but excluding amortised finance
costs, was 5.3% (2012: 4.8%). The maximum rate payable in the year, had
market rates exceeded the various fixed and capped rates protected by
hedging transactions, would have been 6.0% (2012: 5.8%).
7. Taxation
The tax charge for the year recognised in the income statement was as
follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Current tax charge - current year 987 814
Current tax credit - adjustments in respect of prior
years (1,220) (274)
Deferred tax charge 300 341
67 881
The tax charge for the year varies from the standard rate of income tax
in the UK of 20%. The differences are explained below:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Profit before tax 9,436 10,933
Profit before tax at the standard rate of income tax
in the UK of 20% 1,887 2,187
Adjustments in respect of prior years (1,220) (274)
Adjusted for the effects of:
Revaluations not subject to tax 1,271 1,003
Income and property disposal profits not subject to
tax (2,730) (2,860)
Share of (loss)/profit of joint venture shown after
tax 89 (75)
Expenses not deductible for tax 610 893
Tax losses not yet utilised 160 6
Other items - 1
67 881
The movement on the deferred tax asset was as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
At the start of the year 1,102 639
Tax on recognition of fixed and minimum guaranteed
rent reviews, charged to the income statement (314) (352)
Tax on market value adjustment of interest rate derivatives,
credited to the income statement 14 10
Tax on market value adjustment of interest rate derivatives,
credited to other comprehensive income 79 805
At the end of the year 881 1,102
Tax status of the Company and its subsidiaries
Any Group undertakings earning 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 in Jersey on their income or gains.
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 costs including void property
costs and interest, is subject to UK income tax currently at a rate
applicable to Group undertakings of 20%. The joint venture investment
is held in two UK companies which were subject to UK corporation tax on
profits at 24% for the year (2012: 26%).
8. Non-controlling interests
The non-controlling interests represent a 16.7% investment by a third
party in four properties in Milton Keynes within the Provincial Offices
portfolio and a 40% investment by another third party in St Katharine
Docks.
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
At the start of the year 39,346 1,735
Capital invested by third party in St Katharine Docks 5,800 35,440
Share of profit for the year 1,100 3,223
Share of other comprehensive income for the year (68) (1,025)
Dividends paid to non-controlling interests (15) (27)
At the end of the year 46,163 39,346
The non-controlling investor in St Katharine Docks holds a 40% interest
in subsidiary undertakings MPG St Katharine GP Limited, MPG St Katharine
Limited Partnership and SKD Marina Limited. The principal place of
business of these entities, which between them own the real estate and
marina investments at St Katharine Docks, is the United Kingdom. As St
Katharine Docks is such a material investment, we include below
summarised financial information in relation to that investment.
Comparative figures relate to the period from 8 August 2011, which was
the date of completion of the acquisition.
Year to 31 March 2013 Period to 31 March 2012
Investment in Max Non-controlling interest's Max Non-controlling interest's
St Katharine 60% share 40% share Total 60% share 40% share Total
Docks GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At the start
of the
period 56,132 37,422 93,554 - - -
Equity and
loan capital
injected 8,700 5,800 14,500 53,160 35,440 88,600
Share of
profit
recognised in
the income
statement 1,860 1,240 3,100 4,483 2,989 7,472
Share of other
comprehensive
income (128) (86) (214) (1,511) (1,007) (2,518)
At the end of
the period 66,564 44,376 110,940 56,132 37,422 93,554
31 March 2013 31 March 2012
Max Non-controlling interest's Max Non-controlling interest's
60% share 40% share Total 60% share 40% share Total
Investment in St Katharine Docks - balance sheet GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Investment properties 109,217 72,811 182,028 102,190 68,126 170,316
Cash and cash equivalents 1,819 1,212 3,031 2,275 1,516 3,791
Cash and cash equivalents held as security for bank
debt 11,041 7,361 18,402 8,085 5,390 13,475
Other current assets 198 132 330 524 352 876
Current liabilities (2,623) (1,749) (4,372) (3,793) (2,529) (6,322)
Secured non-recourse bank debt (51,992) (34,661) (86,653) (51,992) (34,661) (86,653)
Other non-current liabilities (1,096) (730) (1,826) (1,157) (772) (1,929)
Net assets 66,564 44,376 110,940 56,132 37,422 93,554
Year to 31 March 2013 Period to 31 March 2012
Investment in
St Katharine Max Non-controlling interest's Max Non-controlling interest's
Docks - income 60% share 40% share Total 60% share 40% share Total
statement GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Rental income 6,633 4,422 11,055 5,486 3,658 9,144
Property
outgoings (2,041) (1,360) (3,401) (1,794) (1,196) (2,990)
Administrative
expenses (1,174) (785) (1,959) (661) (440) (1,101)
Net finance
costs (2,618) (1,745) (4,363) (1,709) (1,140) (2,849)
Investment
property
revaluation 1,256 838 2,094 3,077 2,051 5,128
Market value
adjustment of
interest rate
derivatives (192) (128) (320) 132 88 220
Tax charge (4) (2) (6) (48) (32) (80)
Profit for the
period 1,860 1,240 3,100 4,483 2,989 7,472
Year to 31 March 2013 Period to 31 March 2012
Max Non-controlling interest's Max Non-controlling interest's
Investment in St Katharine Docks - 60% share 40% share Total 60% share 40% share Total
other comprehensive income GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Market value adjustment of interest rate derivatives (160) (107) (267) (1,888) (1,259) (3,147)
Tax effect of interest rate derivative market value
adjustment 32 21 53 377 252 629
Other comprehensive income for the period (128) (86) (214) (1,511) (1,007) (2,518)
9. Earnings per share
Earnings per share is calculated as profits attributable to shareholders
of the Company for each year divided by 220,000,002 shares in issue.
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, with all figures shown net of any
non-controlling interests:
Year to 31 March Year to 31 March
2013 2012
Pence Pence
GBP000 per share GBP000 per share
Basic earnings attributable to shareholders 8,269 3.8 6,829 3.1
Adjusted for:
Investment property revaluation 7,085 3.2 7,230 3.3
Profit on sale of investment properties (947) (0.5) (355) (0.2)
Market value adjustment of interest rate derivatives,
net of tax (464) (0.2) 15 -
Market value adjustment of interest rate derivatives
within joint venture, net of tax (11) - 32 -
Loss on sale of trading property - - 281 0.2
Property acquisition costs recognised in the income
statement - - 51 -
EPRA earnings 13,932 6.3 14,083 6.4
10. Investment properties
Long Short
Freehold leasehold leasehold Total
GBP000 GBP000 GBP000 GBP000
Carrying value at 31 March 2011 236,762 78,171 1,170 316,103
Acquisition of St Katharine Docks 162,216 2,272 - 164,488
SDLT recovery on London Pubs
portfolio (301) - - (301)
Capital expenditure net of
dilapidation receipts 1,944 932 50 2,926
Recoveries from escrow account (2,581) (128) - (2,709)
Disposals (10,766) (600) - (11,366)
Revaluation movement (545) (4,379) (92) (5,016)
Carrying value as at 31 March 2012 386,729 76,268 1,128 464,125
Acquisition of High Holborn Estate 47,724 - - 47,724
Transfer from trading property 864 - - 864
SDLT recovery on Provincial
Offices portfolio (200) (36) - (236)
Capital expenditure net of
dilapidation receipts 11,113 (78) 57 11,092
Recoveries from escrow account (41) - - (41)
Disposals (6,424) (884) - (7,308)
Revaluation movement (3,316) (2,891) (149) (6,356)
Carrying value as at 31 March 2013 436,449 72,379 1,036 509,864
The following table reconciles the carrying values of the investment
properties to their independent valuation:
Long Short
Freehold leasehold leasehold Total
GBP000 GBP000 GBP000 GBP000
Carrying value as at 31 March 2012 386,729 76,268 1,128 464,125
Headlease liabilities (note 16) - (1,634) (18) (1,652)
Rent free periods and fixed or guaranteed rent reviews
(note 12) 3,908 596 67 4,571
Capitalised letting fees (note 12) 333 225 13 571
Portfolio valuation as at 31 March 2012 390,970 75,455 1,190 467,615
Carrying value as at 31 March 2013 436,449 72,379 1,036 509,864
Headlease liabilities (note 16) - (1,634) (18) (1,652)
Rent free periods and fixed or guaranteed rent reviews
(note 12) 7,162 1,169 76 8,407
Capitalised letting fees (note 12) 934 266 6 1,206
Portfolio valuation as at 31 March 2013 444,545 72,180 1,100 517,825
Revaluation movements comprise:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Property revaluation (1,974) (1,440)
Movement in rent free periods, fixed or guaranteed
rent reviews and capitalised letting fees (4,382) (3,576)
Investment property revaluation in the income statement (6,356) (5,016)
Investment property revaluation attributable to non-controlling
interests (729) (2,214)
Investment property revaluation attributable to owners
of the parent (7,085) (7,230)
The properties were valued as at 31 March 2013 by CBRE Limited,
Commercial Real Estate Advisors, in their capacity as external valuers.
The valuation was prepared on a fixed fee basis, independent of the
portfolio value. The valuation was undertaken in accordance with the
RICS Valuation - Professional Standards (2012) on the basis of Market
Value, supported by reference to market evidence of transaction prices
for similar properties. Market Value represents the estimated amount
for which a property should exchange on 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.
The historic cost of the Group's investment properties as at 31 March
2013 was GBP480.3 million (2012: GBP428.2 million). During the year,
the Group's sole remaining trading property was reclassified as an
investment property.
Property outgoings were split as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Property outgoings arising from investment properties
that generated rental income in the year 8,317 9,608
Property outgoings arising from investment properties
that did not generate rental income in the year 660 185
Total property outgoings 8,977 9,793
11. Investment in joint venture
The joint venture investment represents the Group's 45% economic
interest (50% voting interest) in MPG Hospital Holdings Limited, a
company incorporated in England & Wales and operating in the United
Kingdom. The movement in the investment in joint venture during the
year was as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
At the start of the year 1,255 1,060
Share of (loss)/profit recognised in the income
statement (443) 373
Share of other comprehensive income 159 (178)
At the end of the year 971 1,255
The net assets and results of the joint venture for the year were as
follows:
31 March 31 March
2013 2012
GBP000 GBP000
Investment properties 32,850 34,560
Other non-current assets 1,350 1,037
Cash and cash equivalents 121 258
Cash and cash equivalents held as security for bank
debt 642 623
Net current liabilities (1,553) (1,672)
Secured non-recourse bank debt (30,272) (30,893)
Other non-current liabilities (981) (1,126)
Net assets 2,157 2,787
Group share of net assets 971 1,255
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Rental income 2,550 2,493
Property outgoings (6) (6)
Administrative and other expenses (166) (181)
Net finance costs (1,764) (1,793)
Investment property revaluation (1,710) 460
Market value adjustment of interest rate derivatives 16 (43)
Tax credit / (charge) 95 (101)
(Loss)/profit for the year (985) 829
Group share of (loss)/profit for the year (443) 373
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
Market value adjustment of interest rate derivatives 470 (541)
Tax effect of interest rate derivative market value
adjustment (116) 145
Other comprehensive income for the year 354 (396)
Group share of other comprehensive income for the
year 159 (178)
The joint venture owns four private hospitals in Blackburn, Liverpool,
Ayr and Stirling, all held on long leases with annual upward only
RPI-linked uplifts throughout the term, with an aggregate current rent
of GBP2.6 million (2012: GBP2.5 million) per annum. Throughout the
period of ownership, the joint venture has been funded with non-recourse
debt, which at 31 March 2013 totalled GBP30.3 million (2012: GBP30.9
million).
The properties were independently valued at GBP32.9 million (2012:
GBP34.6 million) by CBRE Limited, Commercial Real Estate Advisors, in
their capacity as external valuers. The valuation was prepared on a
fixed fee basis, independent of the portfolio value. The valuation was
undertaken in accordance with the RICS Valuation - Professional
Standards (2012) on the basis of Market Value, supported by reference to
market evidence of transaction prices for similar properties.
Administrative expenses include GBP0.1 million (2012: GBP0.1 million) of
management fees paid to the Property Advisor, which results in a
corresponding reduction of fees paid to the Property Advisor by the
Group under the Investment Advisory Agreement.
The Group has no capital commitments or contingent liabilities in
relation to the joint venture, and the joint venture itself has no
capital commitments or contingent liabilities.
12. Trade and other receivables
31 March 31 March
2013 2012
GBP000 GBP000
Net trade receivables 3,328 3,244
Investment property disposal proceeds receivable 1,763 1,847
VAT receivable 408 -
Tax recoverable 305 -
Interest receivable 1 1
Rent free periods and fixed or guaranteed rent reviews
- investment properties 8,407 4,571
Rent free periods and fixed or guaranteed rent reviews
- trading property - 88
Capitalised letting fees - investment properties 1,206 571
Capitalised letting fees - trading property - 26
Prepayments and accrued income 1,713 885
Other receivables 381 25
17,512 11,258
GBP0.8 million (2012: GBP1.0 million) of rent free periods and fixed or
guaranteed rent reviews are due within one year, with the remainder due
in more than one year. GBP0.3 million (2012: GBP0.1 million) of
capitalised letting fees are due within one year, with the remainder due
in more than one year.
The Group's net trade receivables comprise amounts payable by tenants of
the Group's investment properties. The ageing of net trade receivables
was as follows:
31 March 31 March
2013 2012
GBP000 GBP000
Less than 30 days 2,540 2,713
30 to 60 days 180 21
60 to 120 days 407 193
Over 120 days 201 317
3,328 3,244
The Group holds collateral of GBP2.7 million (2012: GBP2.4 million) in
the form of rent deposits received from tenants. The average age of net
trade receivables is 16 days (2012: 11 days).
The movement in the provision for doubtful debts was as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
At the start of the year 1,123 986
Amounts written off as uncollectable (723) (976)
Amounts recovered (518) (548)
New amounts provided for 734 1,661
At the end of the year 616 1,123
13. Cash and cash equivalents
31 March 31 March
2013 2012
GBP000 GBP000
Cash and cash equivalents 43,201 63,977
Cash and cash equivalents secured under lending facilities 27,186 18,654
70,386 82,631
GBP9.0 million (2012: GBP7.4 million) of the Group's cash and cash
equivalents balance is attributable to non-controlling interests.
14. Trade and other payables
31 March 31 March
2013 2012
GBP000 GBP000
Trade payables 3,575 2,437
Rent received in advance 9,029 8,728
Other taxes and social security 1,917 1,783
Other amounts payable 1,926 2,689
Accruals and deferred income 4,258 3,452
20,705 19,089
All amounts above are due within one year and none incur interest.
15. Financial assets and liabilities
a) Non-current financial liabilities
31 March 31 March
2013 2012
GBP000 GBP000
Secured loans 233,104 209,504
Unamortised finance costs (4,104) (2,521)
229,000 206,983
Obligations under finance leases (note 16) 1,652 1,652
Interest rate derivatives at market value 6,764 5,462
237,416 214,097
There is no difference between the book value and fair value of the
non-current financial liabilities shown above, with the exception of one
fixed rate secured loan which had a book value of GBP32.0 million (2012:
GBPnil) and a fair value of GBP32.6 million (2012: GBPnil).
The Group's principal borrowing arrangements are as follows:
St Katharine Provincial
Industrious Docks Offices London Pubs
Longbow
Investment
Hypothekenbank Frankfurt AG/ Hypothekenbank No.2 Hypothekenbank
Lender Abbey National Treasury Services Plc Frankfurt AG Sàrl Frankfurt AG
Recourse
beyond
ring-fenced
subgroup None None None None
Drawdown May/June
date October 2009 August 2011 2012 January 2011
Initial GBP86.7 GBP32.0 GBP25.5
drawdown GBP127.7 million million million million
Balance at
31 March GBP86.7 GBP32.0 GBP22.0
2013 GBP92.5 million million million million
Value of
secured
properties
at 31 March GBP183.3 GBP33.6 GBP46.9
2013 GBP188.2 million million million million
Gross LTV
ratio at 31
March 2013 49.1% 47.3% 95.4% 46.9%
Net LTV
ratio at 31
March 2013 45.2% 35.7% 90.3% 44.6%
Current Interest only Interest only Interest Interest only
repayment only
terms
Repayment August 2016 August 2016 September January 2016
date 2016
The terms of the loans may, in the event of a covenant default, restrict
the ability of certain subsidiaries to transfer funds outside the
relevant security group. There have been no defaults or other breaches
of financial covenants under any of the loans during the current or the
prior year, or in the period since the balance sheet date.
The Group had no undrawn committed borrowing facilities at 31 March 2013
or 31 March 2012.
b) Derivative financial instruments
The following derivative financial instruments were in place as at each
balance sheet date:
Principal amount Fair value
31 March 31 March 31 March 31 March
2013 2012 2013 2012
Expiry GBP000 GBP000 GBP000 GBP000
2.6% swap August 2016 63,755 - (4,259) -
3% cap August 2016 32,843 - 43 -
4% swap August 2014 - 64,242 - (4,359)
4% cap August 2014 56,750 56,750 - 22
2.3% amortising swap August 2016 86,000 86,000 (4,889) (3,681)
2.3% receivers swaption August 2016 86,000 86,000 1,376 754
3.5% cap March 2015 25,500 25,500 2 32
3.5% cap held for future
transactions March 2015 74,500 74,500 4 92
(7,723) (7,140)
The interest rate protection relates in the main to specific ring-fenced
financing structures as follows:
-- a 2.6% interest rate swap and 3% interest rate cap hedge the interest
rate liabilities on the Industrious portfolio loan, maturing in August
2016;
-- a further 4% interest rate cap provides additional hedging headroom on
the Industrious portfolio loan, maturing in August 2014;
-- a cap at 3.5% hedges the interest rate liabilities on the London Pubs
portfolio loan, maturing in March 2015; and
-- a 2.3% interest rate swap and swaption hedge the interest rate
liabilities on the St Katharine Docks loan, maturing in August 2016.
In addition, a Group company holds the benefit of a 3.5% cap on GBP74.5
million notional principal, maturing in March 2015, for potential use in
financing future acquisitions. Accounting standards require this to be
classified as 'held for trading' in note 15c below.
The profiles of the notional swapped and capped amounts have been
estimated to match the expected loan profiles reasonably closely. Since
the loan profiles cannot be predicted with certainty, the swap and cap
profiles are monitored regularly and adjusted as necessary.
Movements in the valuation of derivative financial instruments in the
year were as follows:
Year to Year to
31 March 31 March
2013 2012
GBP000 GBP000
At the start of the year (7,140) (2,079)
Charged to the income statement (note 6) (464) (1,267)
Charged directly to the hedging reserve (note 6) (119) (3,794)
At the end of the year (7,723) (7,140)
Derivative financial instruments are categorised as follows:
31 March 31 March
2013 2012
GBP000 GBP000
Financial assets
within one year - -
in more than one year 1,425 900
Financial liabilities
within one year (2,384) (2,578)
in more than one year (6,764) (5,462)
(7,723) (7,140)
The derivative contracts have been valued by reference to interbank bid
market rates as at the close of business on 28 March 2013 by JC Rathbone
Associates Limited, and include the full LIBOR basis spread. All
derivative financial instruments are classified as 'level 2' as defined
in IFRS 7 as their fair value measurements are those derived from inputs
other than quoted prices in active markets for identical assets and
liabilities, but that are observable either directly or indirectly.
The market values of hedging instruments change constantly with interest
rate fluctuations, but the cash flow exposure of the Group to movements
in interest rates is protected by way of its effective hedges. These
valuation movements do not necessarily reflect the cost or gain to the
Group of cancelling its interest rate protection, which is generally a
marginally higher cost or smaller gain than a market valuation.
c) Categories of financial instruments
31 March 31 March
2013 2012
GBP000 GBP000
Financial assets
Loans and receivables:
Cash and cash equivalents (note 13) 70,386 82,631
Trade receivables (note 12) 3,328 3,244
Investment property disposal proceeds receivable (note
12) 1,763 1,847
Interest receivable (note 12) 1 1
Financial assets held for trading:
Interest rate cap (note 15b) 4 92
Derivatives in effective hedges:
Interest rate cap and swaption 1,421 808
76,903 88,623
Financial liabilities
Financial liabilities at amortised cost:
Trade payables (note 14) (3,575) (2,437)
Accrued interest (2,497) (1,781)
Borrowings (note 15a) (229,000) (206,983)
Obligations under finance leases (note 16) (1,652) (1,652)
Derivatives in effective hedges:
Interest rate swaps and caps (9,148) (8,040)
(245,872) (220,893)
All financial assets and liabilities are measured at amortised cost
except for derivative financial instruments which are measured at fair
value.
d) Financial risk management
Through the Group's operations and use of debt financing it is exposed
to certain risks. The Group's financial risk management objectives are
to minimise the effect of these risks by using derivative financial
instruments, particularly to manage exposure to fluctuations in interest
rates. Such instruments are not employed for speculative purposes. The
use of any derivatives is approved by the Board, which provides
guidelines on acceptable levels of interest rate risk, credit risk and
liquidity risk.
The exposure to each risk considered potentially material to the Group,
how it arises and the policy for managing it is summarised below.
i) Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty
fails to meet its contractual obligations. The relevant counterparties
are in the main tenants in respect of amounts receivable under operating
leases and banks acting either as hedging counterparties or as
recipients of the Group's cash deposits.
The Group places cash deposits for a range of maturities with a panel of
reputable Board approved institutions. As at the year end, there were
ten (2012: eleven) approved banks on the panel and deposits are spread
across the banks according to guidelines that are regularly reassessed
by the Board, and across maturities that are considered appropriate to
the Group's needs. The credit ratings of the institutions are monitored
by the Board at least quarterly with changes made as necessary to manage
risk. The Board weighs up counterparty risk and maturity profiles,
having regard to credit ratings and other financial information, and
aims to avoid inappropriate concentration of risk.
Rigorous credit control procedures are applied to facilitate the
recovery of trade receivables. Recovery details and statistics are
benchmarked in Board reports to identify any ongoing trends or problems.
The credit risk of trade receivables is assessed on a case by case basis
and where the likelihood of recovery is considered low, provisions are
made.
The credit risk relating to counterparties transacting with the Group
for property acquisitions and disposals is managed through appropriate
due diligence and contractual protection in the relevant agreements.
ii) Liquidity risk
Liquidity risk arises from the Group's management of working capital and
the finance charges and principal repayments on its debt instruments.
It is the risk that the Group will encounter difficulty in meeting its
financial obligations as they fall due.
Before entering into any debt instrument, the Board assesses the
resources that are expected to be available to the Group to meet the
liabilities when they fall due. These assessments are made on the basis
of both conservative and 'downside' scenarios. The Group prepares
budgets and working capital forecasts which are reviewed by the Board at
least quarterly to assess ongoing cash requirements and compliance with
loan covenants. The Board also keeps under review the maturity profile
of the Group's cash deposits in order to have reasonable assurance that
cash will be available for the settlement of liabilities when they fall
due and entering into future transactions as required.
The following table shows the maturity analysis for financial assets and
liabilities and, where applicable, their effective interest rates. The
table has been drawn up based on the undiscounted cash flows of
financial liabilities, including future interest payments, based on the
earliest date on which the Group can be required to pay.
Effective Less than More than
31 March interest one year Between one and two years Between two and five years five years Total
2013 rate GBP000 GBP000 GBP000 GBP000 GBP000
Financial
assets
Trade
receivables 3,328 - - - 3,328
Investment
property
disposal
proceeds
receivable 1,763 - - - 1,763
Interest
receivable 1 - - - 1
Cash and
cash
equivalents 0.2% 70,386 - - - 70,386
Derivative
financial
instruments - 5 1,420 - 1,425
75,478 5 1,420 - 76,903
Financial
liabilities
Trade
payables (3,575) - - - (3,575)
Accrued
interest (2,497) - - - (2,497)
Borrowings 5.3% (9,578) (9,661) (247,738) - (266,977)
Derivative
financial
instruments (2,384) (2,836) (3,928) - (9,148)
Obligations
under
finance
leases (187) (187) (561) (16,080) (17,015)
(18,221) (12,684) (252,227) (16,080) (299,212)
Effective Less than More than
31 March interest one year Between one and two years Between two and five years five years Total
2012 rate GBP000 GBP000 GBP000 GBP000 GBP000
Financial
assets
Trade
receivables 3,244 - - - 3,244
Investment
property
disposal
proceeds
receivable 1,847 - - - 1,847
Interest
receivable 1 - - - 1
Cash and
cash
equivalents 0.4% 82,631 - - - 82,631
Derivative
financial
instruments - 16 884 - 900
87,723 16 884 - 88,623
Financial
liabilities
Trade
payables (2,437) - - - (2,437)
Accrued
interest (1,781) - - - (1,781)
Borrowings 4.8% (1,609) (1,789) (213,326) - (216,724)
Derivative
financial
instruments (2,578) (2,964) (2,498) - (8,040)
Obligations
under
finance
leases (187) (187) (561) (16,267) (17,202)
(8,592) (4,940) (216,385) (16,267) (246,184)
iii) Market risk - interest rate risk
Market risk arises from the Group's use of debt financing. It is the
risk that the future cash flows of a financial instrument will fluctuate
because of changes in interest rates.
The Group is exposed to cash flow interest rate risk from its variable
rate borrowings. The Group uses interest rate hedging products such as
swaps and caps in order to mitigate this risk.
The Group's outstanding derivative financial instruments are described
in note 15b and the Group's sensitivity to changes in interest rates is
disclosed in note 6.
iv) Capital risk management
The Group's capital comprises equity attributable to shareholders of the
Company (stated capital, retained earnings and the hedging reserve) and
debt, which includes the borrowings disclosed in note 15a and cash and
cash equivalents. The Group's primary objective when monitoring capital
is to safeguard the entity's ability to continue as a going concern,
while ensuring that it remains within its banking covenants so as to
safeguard secured assets and avoid financial penalties. Borrowings are
secured on specific property portfolios and are non-recourse to the
Group as a whole.
In order to maintain or adjust the capital structure, the Group keeps
under review the amount of any dividends or capital returns to be paid
to shareholders, and monitors the extent to which the issue of new
shares or the realisation of assets may be required.
The Group is not subject to any externally imposed capital requirements.
Details of the significant accounting policies adopted, including the
criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument are disclosed
in the accounting policies in note 2.
16. Obligations under finance leases
Finance lease obligations in respect of fixed rents payable on long
leasehold properties are as follows:
31 March 31 March
2013 2012
GBP000 GBP000
Minimum lease payments
Less than one year 187 187
Between one and two years 187 187
Between two and five years 561 561
More than five years 16,080 16,267
17,015 17,202
Less future finance charges (15,363) (15,550)
Present value of lease obligations 1,652 1,652
The earliest expiry date of any of the lease obligations is in more than
five years, as at both 31 March 2013 and 31 March 2012.
17. Stated capital
The Company has an unlimited authorised share capital of no par value.
The issued and fully paid up share capital comprises:
31 March 31 March
2013 2012
Number Number
Ordinary shares of no par value issued at GBP1 each 220,000,002 220,000,002
The stated capital reserve is made up as follows:
31 March 31 March
2013 2012
GBP000 GBP000
Issued and fully paid up ordinary shares 220,000 220,000
Share issue costs (8,633) (8,633)
211,367 211,367
18. Reserves
The nature and purpose of each reserve within equity is as follows:
Stated capital represents the excess of cash received from the issue
of shares issued over their nominal value (which is zero), net of issue
costs.
Hedging reserve represents gains and losses arising on the effective
portion of hedging instruments carried at fair value, net of any
deferred tax.
Retained earnings represents the cumulative profits and losses
recognised in the Group statement of comprehensive income.
19. 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.
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') 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 are considered to 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, with all figures shown net of any
non-controlling interests:
31 March 2013 31 March 2012
Pence Pence
GBP000 per share GBP000 per share
Basic NAV 294,091 133.7 285,919 130.0
Adjustments:
Fair value of financial instruments 7,366 3.4 7,542 3.4
Deferred tax (1,265) (0.6) (1,219) (0.6)
Fair value of financial instruments in joint venture,
net of deferred tax 90 - 252 0.1
Share of inherent capital gains tax in joint venture - - 88 0.1
Fair value of trading property in excess of book value - - 961 0.4
EPRA NAV 300,282 136.5 293,543 133.4
20. Related party transactions and balances
Directors' fees
Directors' fees of GBP0.2 million (2012: GBP0.2 million) were payable
for the year, as disclosed in note 4. As at 31 March 2013 GBP19,000
(2012: GBP28,000) of these fees remained outstanding and are included
within other amounts payable (note 14).
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 Advisor 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 GBP5.1 million (2012: GBP5.0 million) were
payable to Prestbury Investments LLP in respect of the year, of which
GBPnil (2012: GBPnil) was outstanding as at the balance sheet date.
GBP0.1 million (2012: GBP0.1 million) of this fee has been offset by the
Property Advisor in recognition of the fact that the Property Advisor
directly receives a management fee of the same amount from the Hospitals
joint venture as described in note 11, in relation to the services
provided which are sub-contracted by the Company. This amount is
included in other income in the income statement.
In the course of its duties as Property Advisor and in accordance with
the terms of the Investment Advisory Agreement, Prestbury is entitled to
recover the costs and expenses properly incurred in connection with its
duties. During the year, Prestbury has recharged at cost GBP31,000
(2012: GBP50,000) to the Group in this respect, of which GBPnil (2012:
GBPnil) remains outstanding at 31 March 2013.
Incentive fees payable
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 in relation to its business regarding the Group),
and OZ UK Real Estate Securities Limited ('OZ'), once the GBP211.4
million 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 80% to shareholders and
20% to Prestbury Scotland and OZ, 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. Taking account of
the uncertainties arising from the length of the period over which the
incentive fee will be determined, the challenging future returns
required and current market index projections of property value growth
over the medium term, the Board has concluded that it continues to be
inappropriate to make a provision for the incentive fee at this stage.
The Board keeps this position under review and, in accordance with the
requirements of the relevant accounting standard, IAS 37, will provide
for a liability for incentive payments if it is considered more likely
than not that payments will be made.
Incentive fees receivable
Once the investors in the St Katharine Docks joint venture have received
cash returns equal to their participations in St Katharine Docks
(currently totalling GBP103.1 million) plus an 11% per annum preferred
return, any cash returns over and above that amount will be shared 80%
to the Group and 20% to the non-controlling interests. Taking into
account current valuation levels and the uncertainty over the ultimate
net disposal value of the joint venture, no account has yet been taken
of potential incentive fees arising from this arrangement.
Subsidiary entities
The Group financial statements include the financial statements of Max
Property Group Plc and the subsidiary and joint venture entities shown
below. Max Property Group Plc is the ultimate controlling party of its
subsidiaries.
Country of incorporation Nature of business
Wholly owned
Max Property GP Jersey General partner
Limited(1)
Max Property LP Jersey Limited partner
Limited(1)
Max Property LP(2) Jersey Intermediate holding
entity
MPG Opco Limited Jersey Intermediate holding
company
MPG Finco Limited England & Wales Group finance
MPG Hedging Limited Jersey Treasury operations
Max Investor Limited Jersey Intermediate holding
company
Max Industrial Limited Jersey Intermediate holding
company
Max Industrial 2 Limited Jersey Property trading
Max Industrial Limited Jersey Limited partner
Partner Limited
Max Industrial GP Limited England & Wales General partner
Max Industrial Nominee England & Wales Nominee company
Limited
Max Industrial LP England & Wales Property investment
Max Office Properties Jersey Intermediate holding
Limited company
Max Office Limited Jersey Intermediate holding
company
Max Office Investor Jersey Intermediate holding
Limited company
Max Office Finance Jersey Property trading
Limited
Max Office Limited Jersey Limited partner
Partner Limited
Max Office GP Limited England & Wales General partner
Max Office Nominee England & Wales Nominee company
Limited
Max Office LP England & Wales Property investment
Provincial Offices LLP England & Wales Property investment
Max Bars Limited Partner Jersey Limited partner
Limited
Max Bars GP Limited England & Wales General partner
Max Bars Nominee Limited England & Wales Nominee company
Max Bars LP England & Wales Property investment
MPG Pubs Holdings Limited Jersey Intermediate holding
company
MPG Pubs Finance Limited Jersey Group finance
MPG Pubs Limited Partner Jersey Limited partner
Limited
MPG Pubs GP Limited England & Wales General partner
MPG Pubs Nominee Limited England & Wales Nominee company
MPG Pubs LP England & Wales Property investment
MPG St Katharine Limited Jersey Intermediate holding
company
MPG St Katharine Finance Jersey Group finance
Limited
MPG St Katharine Limited Jersey Limited partner
Partner Limited
MPG St Katharine Nominee England & Wales Nominee company
1 Limited
MPG St Katharine Nominee England & Wales Nominee company
2 Limited
MPG Holborn Limited Jersey Intermediate holding
company
MPG Holborn LP Limited Jersey Limited partner
MPG Holborn GP Limited England & Wales General partner
MPG Holborn Nominee England & Wales Nominee company
Limited
MPG Holborn LP England & Wales Property investment
Max Property Group England & Wales Dormant
Limited
Max Property 1 Limited England & Wales Dormant
Max Property 2 Limited England & Wales Dormant
83.3% owned
Max Office 2 LLP England & Wales Property investment
Silbury Court LLP England & Wales Property investment
60% owned
MPG St Katharine LP England & Wales Property investment
SKIL 3 Limited England & Wales Nominee company
SKIL 4 Limited England & Wales Nominee company
St Katharine's Estate England & Wales Estate management
Management Company
Limited
SKD Marina Limited England & Wales Operator of marina
45% owned
MPG Hospital Holdings England & Wales Intermediate holding
Limited(3) company
MPG Hospital Properties England & Wales Property investment
Limited(3)
1. Max Property GP Limited and Max Property LP Limited are directly owned by
Max Property Group Plc. All other entities are indirectly owned.
2. Prestbury (Scotland) LP and OZ UK Real Estate Securities Limited have
partnership interests in Max Property LP which entitle them to share in
any incentives that may become payable, as more fully described above
under the heading 'incentive fees payable'.
3. Treated as joint ventures because the Group has 50% of the voting
rights.
21. Commitments and contingent liabilities
31 March 31 March
2013 2012
GBP000 GBP000
Capital commitments - Max share 11,316 2,537
Capital commitments -non-controlling interests' share 7,309 948
18,625 3,485
Capital commitments are in respect of refurbishment works on investment
properties.
22. Events after the balance sheet date
On 4 April 2013, the sale of two industrial units at Boundary Business
Centre, Woking completed for cash consideration of GBP0.4 million. The
entire proceeds were subsequently used to repay part of the loan secured
on the Industrious portfolio. Unconditional contracts for sale had been
exchanged prior to the balance sheet date and the sale proceeds were
included in trade and other receivables and the loan repayment in trade
and other payables at the balance sheet date. Since that date, the sale
of a further industrial unit has completed for total cash consideration
of GBP0.1 million which was used to repay part of the loan secured on
the Industrious portfolio.
On 30 April 2013, the Group exchanged contracts for the sale of two
London Pubs, The Famous Cock in Islington and The Golden Heart in
Whitechapel. Completion is due to occur on 24 June 2013 for cash
consideration of GBP5.3 million, which is a profit of GBP0.7 million or
0.3p per share over the 31 March 2013 book value. GBP2.2 million of the
proceeds will be used to repay part of the loan secured on the London
Pubs portfolio and the remainder will be added to the Group's cash
reserves.
On 14 May 2013, Administrators were appointed to the principal tenant of
the Nightclubs portfolio, Atmosphere Bars and Clubs Limited. The
Administrators have yet to make clear their intentions for the Group's
properties occupied by Atmosphere. The valuation at 31 March 2013 of
the assets affected was GBP6.8 million and the gross rental income at
that date is GBP1.1 million. Of the total, one asset valued at GBP1.0
million with GBP0.2 million of rent is fully sublet and so should not be
affected by the administration
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 to
present underlying earnings from core operating activities
EPRA NAV A measure of net asset value designed by EPRA to present
net asset value excluding the effects of fluctuations
in value of instruments that are held for long-term
benefit, net of deferred tax
EPRA vacancy rate ERV of vacant space divided by ERV of the whole portfolio,
excluding in each case any property under development
EPS Earnings per share, calculated as the earnings for
the year after tax attributable to members of the
parent Company (that is, excluding any non-controlling
interests) divided by the weighted average number
of shares in issue in the year
Equivalent Yield The constant capitalisation rate which, if applied
to all cash flows from an investment property, results
in the market value
ERV Estimated rental value: the open market rental value
expected to be achievable at the date of valuation
Initial Yield Annualised net rents on investment properties as a
percentage of the investment property valuation
Investment The agreement made between the Company, Prestbury
Advisory Investments LLP and Gallium Fund Solutions Limited
Agreement under which Prestbury provides certain services to
the Group
LTV The outstanding amount of a loan as a percentage of
property value. Gross LTV is the calculation for the
gross loan amount and net LTV offsets cash balances
against the loan amount
NAV Net asset value
Property Advisor Prestbury Investments LLP
or Prestbury
psf Per square foot
Reversionary The anticipated yield to which the Initial Yield will
Yield rise once the rent reaches the ERV
sq ft Square feet
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
HUG#1703911
http://www.maxpropertygroup.com/
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