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RNS Number : 7830Q
ING UK Real Estate Income Trust Ltd
17 April 2009

ING UK Real Estate Income Trust Limited 

1April 2009



ING UK Real Estate Income Trust Limited

(the "Company" and, together with its subsidiaries, the "Group")

17 April 2009

Trading update and Net Asset Value as at 31 March 2009

The UK commercial real estate sector has continued to suffer against the backdrop of major upheaval in world financial markets and a deteriorating UK and global economic climate. The IPD Monthly Index showed a capital decline of 8.9 per cent. over the quarter to 31 March 2009. This brings the decline in the Index to 41.4 per cent. since the market peak in June 2007, with a consequential impact on the Group's portfolio and net asset value ("NAV").

The unaudited NAV per share of the Company as at 31 March 2009 was £173.1 million, representing approximately 52 pence per share, a decrease of approximately 18 per cent. from the NAV at 31 December 2008.

Securitised Loan Facility Covenant Update

In light of the market background and despite continued disposals and the reduction of the Group's overall net debt, the loan-to-value ("LTV") ratio for the purposes of the Group's securitised loan facility (the "Facility") is 53.4 per cent. - in excess of the 50 per cent. LTV ratio permitted under the LTV covenant in the Facility (the "LTV Covenant"). The Group has 30 days from the date the LTV Covenant was tested to remedy any breach of the LTV Covenant before the breach results in the occurrence of an event of default under the Facility. 

If, after 30 days, this breach remains unremedied, an event of default will occur under the Facility. This will result in, inter alia, restrictions immediately being imposed on the Group's ability to utilise the cash balances held within the Facility structure from which the Company makes dividend payments and finances some of its ordinary activities. 

A breach of the LTV Covenant may be remedied, inter alia, through asset sales and/or retention of cash within the Facility structure to reduce the net debt outstanding under the Facility for LTV Covenant testing purposes. The Group has recently announced a number of disposals of which £8.6 million of property sales are due for completion during April 2009, after the LTV Covenant testing date. Following receipt of the proceeds from these sales, the Group's LTV Covenant is expected to reduce to approximately 52.4 per cent.

The Group's investment manager continues to seek to make further asset sales and several properties are currently under offer. Taken together with the Group's cash balances outside of the Facility structure, should completion of approximately £9 million of such sales occur before 17 May 2009, the expiry of the 30 day remedy period, the breach of the LTV Covenant would be remedied and no event of default would occur.

The Board and its advisers have sought to address the risk of a breach of the LTV Covenant since the early part of this year with asset sales and a proposed re-structuring of certain of the Facility covenants. A separate announcement was released today regarding the convening of a meeting of noteholders on 13 May 2009 to consider, and if thought fit, approve the amendment of certain Facility covenants. If the amendments are approved by noteholders the LTV Covenant breach will be remedied.

The Group's rental income remains strong with an interest cover ratio of 2.6 times, significantly in excess of the current interest cover ratio of 1.5 times (and the proposed ratio of 1.75 times) required under the Facility. 


The Board will consider the next quarterly dividend after the conclusion of the noteholder meeting. However, shareholders should be aware that whilst the Group remains in breach of the Facility's LTV Covenant or utilises cash resources held outside the Facility structure to remedy the LTV Covenant breach, the Board does not expect to pay dividends to shareholders.

NAV as at 31 March 2009

The NAV attributable to the shares is calculated under International Financial Reporting Standards ("IFRS") and reflects a decrease of approximately 12 pence per share, or 18 per cent., since the previous quarter end. It includes a downwards adjustment in respect of the mark-to-market value of the interest rate swaps of £2.7m. Excluding asset sales, there has been a £33.2 million reduction in the value of the underlying property portfolio, representing a 7.8 percent decline over the period.

This NAV incorporates the external portfolio valuation as at 31 March 2009. It includes income for the current quarter and is calculated after the deduction of dividends paid prior to 31 March 2009.

The unaudited NAV is as follows:

31 March 



31 December



30 September



30 June



Investment properties





Other assets





Other liabilities














Market value of interest rate swaps





Net Asset Value





The movements in the NAV can be summarised as follows:



Per share




NAV at 31 December 2008



Losses in property values (realised

and unrealised )




Decrease in swap value




Net income for the period (after





NAV at 31 March 2009




The property portfolio will next be valued by an external valuer during June 2009 and the NAV per share as at 30 June 2009 will be issued in July 2009.

The Company is preparing its Annual Report to 31 December 2008 and this will be issued to shareholders by 30 April 2009. The figures in the tables above, as at 31 December 2008, remain subject to audit.

Trading update and outlook

During the quarter ended 31 March 2009, the global and UK economy continued to show signs of further deterioration and the Bank of England continued to lower interest rates as the UK economy contracted. Against this backdrop, the Group's assets were subject to further negative revaluation movements.

The sector movements and current sector weightings are detailed below:


Capital Valuation Movement (%)

Weighting 31 March 2008 (%)




Offices - Central/Greater London



Offices - Rest of UK









Retail Warehouse






The Group's rental income remains strong. The Group maintains a healthy rent collection record and as of 17 April 2009, approximately 95 percent of the Group's rental income due on the March quarter date had been received.  A further 2.4% of rent is attributable to tenants in administration where future rent collection is, at present, uncertain. The Group continues to monitor rent collection and maintains an active dialogue with tenants to seek to minimise the impact of defaults on the Group's cashflow.

From an income perspective, the Group's underlying cash flow remains robust and benefits from a diversified portfolio, which has an occupancy rate of approximately 91 percent. and over 250 tenants. The top 20 tenants represent less than 46 percent of the Group's net rental income.

Proposed Securitised Loan Facility Restructuring 

The Company also announced today that, following the cancellation by the trustee of the noteholder meeting due to be held on 18 March 2009, and subsequent to discussions with noteholders, a further meeting of the noteholders is expected to be convened for 13 May 2009 to consider and approve proposed amendments to the Facility. 

The revised proposals are broadly similar to the proposals which were to be put to noteholders on 18 March 2009. The principal proposed amendments are a relaxation of the LTV Covenant from 50 per cent. to 60 per cent. and a tightening of the interest cover ratio from 1.5 times to 1.75 times coupled with the early repayment of up to £35 million of the principal amount outstanding of the £225 million outstanding under the Facility. It is intended that an offer to purchase at least £15 million of the principal amount outstanding will be made in July 2009. The Group currently has the cash resources to make this first payment. The revised proposals are not expected to affect the "AAA" ratings affirmations issued previously by both Standard & Poor's and Fitch.

Further details of these revised proposals are contained in the announcement released today.

The Company expects to provide a further update to shareholders following the noteholder meeting.

In addition to the proposed re-structuring of the Facility and an ongoing programme of asset sales, the Board and its advisers are continuing to seek other alternatives to strengthen further the Company's balance sheet. 

For further information:

ING Real Estate Investment Management (UK) Limited

Michael Morris, 020 7767 5648,

Helen Stott, 020 7767 5648,


The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port



Tel: 01481 745814

Fax: 01481 745085


This information is provided by RNS
The company news service from the London Stock Exchange

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