Menu
Home
Log in / Register
 
Home arrow Business & Finance arrow Property finance
< Prev   CONTENTS   Next >

6.4.2 Financial Analysis and Key Figures

Since the proposed financing is intended to be granted to the SPV directly holding the Property with no other permitted financial indebtedness at Borrower level and without recourse to the Fund or other Sponsor managed entities, the financial analysis is focused on the cash flow projections generated by the Property. However, a brief financial analysis of the Fund is also presented, it being the obligor that indirectly controls the Borrower.

6.4.2.1 Property/Borrower cash flow projections

Figure 6.25 shows the projections under the expected scenario of operation of the existing 30,000 m2 currently fully let and completion of the 10,000 m2 extension (construction at an advanced stage with full pre-letting through binding proposals) within 12 months from signing of the facility. Projections are run on a five year timeframe matching maturity of the facility.

The main assumptions of this expected scenario are as following.

1. Current annual Gross Rental Income (GRI) generated by the lease contracts currently in place for the 30,000 m2 phase equal to €11 million in total, taking into account contractual Minimum Guaranteed Rent only and conservatively not considering any form of turnover rent generated by the Property.

2. Additional rent arising from the 10,000 m2 extension equal to €3.7 million (€366/m2/year in line with rental levels generated by existing portion) from Year 2.

3. Annual GRI increase in line with expected inflation estimated at 2.0% per annum.

4. Non-recoverable costs equal to 20% of annual GRI, including property tax, insurance premium, property management fees, ordinary maintenance.

5. Existing tenants will not exercise their respective options to break.

6. Interest rate is equal to 5.30% (5 year IRS at 130 bps plus 400 bps margin).

Under this scenario, as highlighted in Figure 6.25, ICR[1] starts at 2.35x[2] in Year 1, to be constantly above 3.15x starting from Year 2 (covenant set at min 2.0x would be therefore amply

Property cash flows analysis

FIGURE 6.25 Property cash flows analysis

met), with a comfortable Debt Yield (ratio between NOI and outstanding financial indebtedness) of 12.5% in Year 1 and above 17% starting from Year 3. Property OMV is expected to increase from current €150 million to €200 million, reflecting a gross running yield in the 7.3% range. OMV is projected flat, conservatively not considering inflation or market effect. On the basis of these assumptions, LTV starts at 50% to fall in the 37.5% range upon completion of the extension, within the financial covenant step-down mechanism in place (max 50% in Year 1, max 40% starting from Year 2). Such a step-down mechanism triggers mandatory repayments in case of reduction of OMV below certain thresholds and adequately protects the lender in bullet structures without contractual ordinary amortizations in place.

6.4.2.2 Fund financial analysis

Balance Sheet: According to the last audited balance sheet, the Fund shows total assets of €1 billion represented by Fixed Assets (90%) and Current Assets (10%). Fixed Assets (15 properties throughout Europe) are largely composed of direct real estate investments increased by 20% mainly due to acquisitions performed over the last year completing the asset allocation of the Fund.

Financial Indebtedness stands at €320 million, of which €310 million is long-term bank loans with average maturity above four years. NAV stands at €670 million. The Fund is currently 34% geared with Fund LTV target being 50%. Net Financial Position stands at €230 million representing a comfortable 26% on Real Estate Assets (direct investments plus participations plus developments). The Fund shows a balanced financial structure with a Current ratio[3] of 5.0x and is very conservatively geared with a Solvency ratio[4] of 67% as shown in Figure 6.26.

Profit & Loss: In terms of P&L, last year Gross Rental Income generated by the properties directly held by the Fund was equal to €70 million, with increase compared to the previous year's figure driven by a combination of new rental income coming from new acquisitions and from positive inflation effect on annual rental income.

The portfolio of assets is of prime quality and supported by diversified tenants that maintained strong performances. Direct Net Rental Income stands at €59 million whereas EBITDA stands at €49 million resulting in an EBITDA margin of 69% and well above interest expenses of €16 million, thus reflecting a comfortable ICR in excess of 3.1x.

Net Result for the period is €38 million, also positively affected by aggregate revaluations registered in the fair value of the portfolio (€10 million). Figure 6.27 shows the profit & loss account and the key ratios.

  • [1] Calculated as the ratio between NOI and Interests.
  • [2] “x” stands for "times", i.e. ICR equal to 2.35x means that the NOI is 2.35 times the interest amount.
  • [3] Calculated as the ratio between Current Assets (Cash, Cash equivalents, and Net Account Receivables) and Short Term Liabilities (Bank Loans with expiry <12 months and Net Account Payables). The subject ratio represents a measure of the capability of a borrower/counterparty to meet its short-term financial obligations.
  • [4] Calculated as the ratio between NAV and Total Assets, showing an immediate measure of the equity value in a real estate fund/company.
 
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >
 
Subjects
Accounting
Business & Finance
Communication
Computer Science
Economics
Education
Engineering
Environment
Geography
Health
History
Language & Literature
Law
Management
Marketing
Philosophy
Political science
Psychology
Religion
Sociology
Travel