Internation bank in the heart
of London’s financial centre.
The closed-end property fund EuroSelect 12 was fully placed in December 2006. The Grade A office building 60 London Wall, constructed in 1991, is located in the City of London. The main tenant until 2016 is the international bank ING Intermediate Holdings Ltd. The company uses the building as an impressive primary location in Britain and has sublet the rented space of 5,455 sq.m. to BNP Paribas. The remaining space has been let to ten retailers whose contracts have a residual period of 1.5 to 14 years.
Assessment of the property at 31 December 2009 reflects the impact of the financial crisis on the London property market. The value of the fund property at 31 December 2009 fell to GBP 156 million (2008: GBP 160 million). The valuation loss from the time it was purchased by the fund company is currently 23.54%.
The loan-to-value ratio (ratio of total loan amount to current property value) was exceeded at the end of 2009. In intensive discussions with the financing banks, the fund management negotiated a special agreement until the end of 2010 according to which the fund company undertakes to make an unscheduled repayment of altogether GBP 7 million (approximately 8% of equity capital) and pay a risk premium of GBP 800,000. Due to the adjustment of the fixed interest rates (swap) necessary for the unscheduled repayment, additional charges will be incurred which, however, will be more than offset by the reduction of the current interest charges.
The liquidity surplus of the second half of 2009 and 2010 denominated in GBP will be used for unscheduled repayment of GBP 7 million without any exchange rate loss. The loan-to-value ratio is scheduled for review at 31 December 2010. Achievement of the agreed LTV over the course of 2011 is realistic through reduction of the outstanding loan and a simultaneously positive market trend. When the property is sold later, the shareholders can receive the liquidity used for the unscheduled payment as an additional sales price surplus.
