Capital & Regional this morning revealed a 21% plunge in net asset value in 2007 and warned of warned of further valuation falls.
The co-investing fund manager, also said that, while its three largest funds had stayed comfortably within loan to value covenants in 2007, valuation falls in 2008 would mean that loan to value covenants agreed with investors would come under pressure.
The company revealed a poor set of results that were in line with market expectations, which highlighted the problems faced by the company in 2007 and led to chief executive Martin Barber leaving the company yesterday.
Missing benchmarks
Diluted net asset value fell 21% to £10.04 a share, and assets under management fell 6% to £6.1bn, following a 10% overall fall in the value of the UK portfolio.
The Mall shopping centre fund beat its Benchmark return, but the Junction retail park and X-Leisure funds did not.
The property management business made a £34m loss, largely due to the £53m ‘clawback’ of performance fees, calculated on a rolling 3-year basis, which the company was forced to pay back to investors because it had underperformed in 2007.
A further £19m will be repaid in December 2008, with £40m more possibly to be repaid depending on 2008 performance.
Finance director William Sunnucks said that each of the three main funds had its own loan-to-value covenant, which had been comfortably met in 2007.
Comfortable covenants
‘More significant than the bank covenants however, is the desire of the institutional investors who invest in our funds to limit leverage to 60% loan-to-value in the case of the Mall and Junction funds and 70% in the case of X-Leisure,’ Sunnucks said.
‘Further decreases in asset values will put pressure on these covenants. The funds have a number of options including realisation of assets to ensure they remain within the agreed covenants.’
Sunnucks stressed that income-to-interest covenants were also being comfortably met.
