Treveria plc (AIM: TRV), the German retail focused real estate investment company, has provided a trading update ahead of its results for the year ended 31 December 2008 which it intends to announce on 2 April. This announcement is intended to provide investors with an update on the Group's latest position and follows the announcement this morning that the Group's board of directors has been strengthened with the appointment of three new directors.
Property sales and purchases
The Group confirms that €76.2 million of property sales completed with cash received in the fourth quarter of 2008. A further €3.0 million of sales are expected to complete within the first quarter of 2009. Together, these transactions comprise the €79.2 million of notarised sales that were announced on 29 September 2008. Market conditions have become more difficult in the last four months with a disconnect between the level at which potential vendors are willing to sell and that which purchasers are able to structure acquisitions. There have been no further sales notarised since 29 September 2008.
There were no significant property acquisitions during the second half of 2008. In accordance with the Group's standard policies, DTZ Debenham Tie Leung is carrying out a valuation of the portfolio as at 31 December 2008 and this will be reflected in the Group's preliminary results.
As previously reported, the Group's first Deutsche/Citibank facility and its Eurohypo facility are in cash trap, whereby surplus cash from the underlying assets after the payment of interest remains within each ring-fenced facility and is not available for other Group purposes, and remain so as at 6 February 2009. The remaining three facilities are not in cash trap although loan-to-value covenants are considered likely to come under continued pressure as new valuations are obtained. The Group has been focusing on the best strategy to deal with these issues and will be considering the optimum approach in light of the additional expertise offered by the three new directors appointed last Friday.
The Group's total bank loans, before adjusting for capitalised finance charges, have been reduced to €1,732 million as at 31 December 2008 from €1,820 million as at 30 June 2008.
Partly as a result of the increased margin paid to Eurohypo during the 15 month 'hard breach' loan-to-value ratio waiver period, the current weighted average interest rate inclusive of margin is now approximately 5.1 per cent, up from around 4.9 per cent for the first half of 2008.
As at 31 December 2008, about €81 million of cash was held at parent company level by Treveria plc. The Group had overall cash balances, including amounts in blocked accounts for the payment of interest, totalling about €140 million.
During the 2008 financial year, the asset management team put in place 279 new leases and 14 lease extensions across the portfolio.
The total annualized gross rental income from the portfolio was ca. €150 million as at 31 December 2008. There have been no significant tenant failures within the portfolio since Hertie and Sinn Leffers in July/August 2008, which together accounted for 4.5% of the total portfolio by rental value. Despite the current tough market conditions we are still agreeing new lettings, but we remain cautious for the time being. We expect the reduction in economic activity in Germany to feed through to lower indexation uplifts than previously expected, with service charge recoverability likely to be lower than in prior years.
The asset management team's current priority is on maximising income within the portfolio. We believe that interest cover is of paramount importance as markets and lenders adjust to recent conditions.
The German economy has deteriorated in recent months but we continue to believe that the German retail sector should remain more resilient and less volatile than in the UK. Moreover, we believe that o