Kenmore European Industrial Fund Limited - Hemscott IR

08 Kenmore European Industrial Fund Limited Report and Accounts 2007
Investment Manager’s Review
Portfolio Overview
Belgium Finland France Germany Netherlands Norway Sweden Total
Number of Assets 9 7 64 4 4 15 7 110
Number of Tenants 72 14 315 36 4 60 44 545
Total Area (sqm) 125,316 34,138 274,803 142,790 88,875 122,532 103,060 891,514
Average Lot Size £’000 £5,353 £2,981 £2,760 £6,240 £8,556 £6,194 £4,420 £3,897
Value (per sqm) £384 £611 £643 £175 £385 £758 £300 £481
Area/Tenancy (sqm) 1,740 2,438 872 3,966 22,219 2,042 2,342 1,636
Area/Asset (sqm) 13,924 4,877 4,294 35,697 22,219 8,169 14,723 8,105
As at 31 December 2007 the total portfolio was valued at
over £428.8m compared to £287.9m at 31 December 2006.
By value the portfolio breaks down across seven countries
as follows:
France 41%
Norway 22%
Belgium 11%
Netherlands 8%
Sweden 7%
Germany 6%
Finland 5%
This shows a reduction in exposure to France by 8%
from 49% at the year start.
The portfolio comprises 110 properties, 891,513 sqm with
545 individual leases. The current portfolio rent is £30.5m
(NOI) reflecting a net yield of 7.51% with a void of 11.2% by
area and reversionary yield of 8.22%.
During the year, 87 new leases were signed or renewed
across the portfolio, representing 19.5% of gross income
and 10.5% or 93,488 sqm of total area. 38 tenants vacated
premises, representing 3.8% of gross income and 28,813
sqm. The occupancy of the whole portfolio has increased
by 1.3% to 88.7% by year end. Despite strong leasing
performance during the quarter, the new acquisitions,
purchased with 77.9% occupancy, have led to the occupancy
of the total portfolio increasing only marginally. Without these
fourth quarter acquisitions, the portfolio occupancy would
have been 89.4%.
From 31 December 2006 to 31 December 2007, a total
of 27 properties were purchased, increasing the total net
operating income of the portfolio by £8.8m, giving a net
initial yield of 7.34% and a reversionary yield of 8.56%.
Outlook
It remains difficult to predict the impact of the volatility in the
financial markets over 2008 but despite some risks to value
on the downside, the shortage of development land and
continuing high construction costs across our key markets
will help to limit falls in industrial property values. There also
remains a weight of capital seeking opportunities which,
once the markets settle, should help stabilise. Against this
background, the KEIF portfolio has a strong and stable rent
profile with potential for strong value creation through active
asset management. The Investment Manager’s local network
of offices and strong relationships with local owners and
developers will ensure that the portfolio continues to be
aggressively and pro-actively managed.
During 2008 we expect the Fund will trade out of assets
where there is either a threat to value by holding longer or
to release capital for investing in higher yielding assets with
strong income profiles. The slow but increasing trend of
European organisations moving away from being owneroccupiers
towards leasing will continue and we believe
KEIF remains well positioned to take advantage of the
opportunities this will bring.
Rob Brook
Kenmore Financial Services Limited
Investment Manager