Syndicate updates

Augusta UK Commercial Property Fund plc

Property values have improved 5% over 2009 and exchange rates have also improved slightly which is a welcome trend for this property to carry forward through 2010. Since the end of 2008, investor share values have doubled. The tenants of both properties remain successful and high covenant businesses.

Whilst share values are still considerably behind original projections in these properties, the steady growth in share value combined with the gradual strengthening of the UK property market are encouraging for the future exit of this fund.

2nd Augusta UK Commercial Property Fund plc

It has been an improved year for the Fund with property values up by 8.6% and improved exchange terms between sterling and the euro. Both properties in the Fund are in robust operating health with rising cash flows.

The recession has taken its toll on these properties and there is significant ground still to be regained in terms of recovery of the property values and a rebalancing of the sterling-euro rate but with a planned exit of 2013, the fund has time to breathe as the UK property market recovers and begins to deliver real growth.

Third Augusta Syndicate— Germany

Both medical centres on Schönstrasse, opposite Weissensee Hospital, are fully let and performing very strongly. The share valuation is over 40% higher than the original value and is on a continued rising trend.

Discussions have been held with architects and planning departments about the feasibility of developing the Schönstrasse further. The outcome is that the maximum extension footprint that the local government will allow is too small to be economically viable, so the Directors are back to the drawing board to consider whether there are other options.

Fourth Augusta Syndicate— Germany

The Nienhagen (nr.Hannover) nursing home is performing well with tenant Kursana remaining a strong, trouble-free covenant. In the Hohenlockstedt nursing home (nr. Hamburg) we have been approached by a large multiple operator who is interested in expanding. Discussions are still in the initial stages but a possible outcome is that this operator may take over the property which would be welcomed by the Directors as there have been traditional problems with this asset in relation to rental arrears.

Share valuations have increased by 14.5% since last year and remain encouraging, given the latent potential in both sites combined with the economic recovery.

Fifth Augusta Syndicate— Germany

The two properties in this portfolio have been valued 6.3% higher than their original combined purchase prices. Their attractiveness is down to their excellent strategic locations and mix of blue chip tenants.

The FarlachCenter in Mannheim is fully occupied and performing strongly. The property managers have strengthened the lease with anchor tenant Fitness Park Pfitzenmeier who have extended to 2016.

In Ludwigsburg (nr.Stuttgart), Deutsche Bank has just taken extra office space. A nationwide bakery chain, Back Factory, has taken retail space with considerably better covenant and lease terms than the outgoing tenant. Share valuations are on a rising trend.

Sixth Augusta Syndicate—Germany

Rostock’s Kröpeliner Strasse, a very important shopping street, is well placed to take advantage of the gradual economic recovery in Germany. The three retail properties are all performing well.

In Kröpeliner Str. 10, we are in the process of replacing the anchor tenant (shoe store Schuh Bode) who are currently paying below market rent. In Kröpeliner Str. 60, we have instructed architects to draw detailed plans for converting the upper floors to residential space. This, according to our research, is the most profitable usage of these floors.

Seventh Augusta Syndicate—Germany

This office property in Munich is valued at 2% higher at 2009 year-end which places the property at 10% higher than the original purchase price.

The letting environment in Munich remains weaker than in previous years and thus we face an intense negotiation period on the lettable area in this property. Furthermore, development plans for extra office space on the site, for which we have secured permissions, are not being put into action until the letting market improves.

Augusta Promitor Syndicate Invests

Last autumn, Augusta acquired for €4.2 million an office complex located in the city of Kassel, one of the largest commercial and industrial locations in North Hessen. The investment was on behalf of the Augusta Promitor Syndicate.

The main building is a classic office building of 5 floors with a key anchor tenant, the FIDUCIA Group, one of the leading IT service providers in Germany.

The Augusta Promitor Syndicate, incorporated in June 2008, is the second income generating fund launched by Augusta which combines regular income with the opportunity for capital growth over a 5+ year investment period.

The projected return to its bond investors is 6% per annum payable for 5 years with a balloon payment of 15% at exit. There has to date already been an unusually rapid growth in share value for equity investors, achieved by the advantageous purchase price paid and the strength of the tenant lease.

Cash Faktor—€6.4m purchase in Paderborn

Cash Faktor has just purchased for its investors a €6.4 million DIY store in the Salkotten suburb of the city of Paderborn.
Built in 2008, this 6400m² store with garden centre is one of the 1000 Hagebau-branded stores in Germany. The solid covenant lease runs to 2023. The asset was acquired at a gross initial yield of 9%, generating a positive cashflow from which to comfortably manage the projected returns of 5.4% per annum to Cash Faktor investors.

Greater Paderborn is an affluent area with good demographics, strong purchasing power and a healthy balance between urban and rural zones. This makes it an ideal catchment for a DIY business. The micro-location is excellent, on the busy B1 road, adjacent to other key retailers for the area.

Cash Faktor’s investment objectives are deliverable over three phases:

1. 5.4% p.a. of the investment, paid for 7 yrs tax-neutrally, followed by:
2. 90% of the investment returned, followed by:
3. An annual dividend thereafter to all investors.

The asset lends itself excellently to deliver these objectives for Cash Faktor participants and we are delighted with the addition to the Augusta portfolio.