Very secure earnings
in London’s West End.
The closed-end property fund EuroSelect 08 was fully placed in May 2005. The fund is invested in One Neathouse Place, an eleven-storey office building in London’s West End. The building was fully gutted between 1995 and 1997 and has won several architecture and design prizes.
The building is fully let. The anchor tenant is BHP Billiton Petroleum Great Britain Limited. Rental income from this tenant accounts for 95 % of all rental income of the fund. The rental agreement will run until 23 June 2017. A break option for the tenant was agreed effective 23 June 2012. Asset Management at the London branch of IVG was able, in close coordination with the fund management and in consultation with the Council, to persuade the tenant to waive its break option. In return, the annual rent was reduced to around GBP 5 million. As a result of this reduction, the estimated obtainable rent projected in the prospectus will be undershot by only 5.7%, with a steady earnings stream for the fund company up to 2017.
The value of the fund property rose to GBP 75 million at 31 December 2009. (2008: GBP 70.5 million). Compared with the purchase price paid by the fund company, the property posts a valuation gain of 10.61%.
Since the company earns its revenues in GBP and all important expenditures and payouts are effected in euros, expenses and payouts re subject to the foreign exchange risk. Despite a foreign exchange reserve, the payout for 2009 had to be reduced by 4% due to the negative exchange rate trend.
