Eurocastle Posts Deep Q1 Loss

Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.

GUERNSEY-Eurocastle Investment, the German commercial real estate group controlled by New York’s Fortress Investments private equity firm and based on this English Channel island, posted a net loss after tax of €162 million in the first quarter, narrower than the €264 million in 4Q08 but much wider than an €84-million loss in Q1 2008. It also announced an issue of €130 million in perpetual convertible bonds, paying interest of 20%.

The losses primarily relate to non-cash valuation adjustments to the portfolio of some €130 million. Funds from operations reached €12.3 million or €0.20 per share for the three months ended 31 March, down from €22.6 million or €0.35 per share for Q1 2008 but better than the fourth quarter performance. Eurocastle owns some €6.0 billion in total assets, of which €4.0 billion in property and €1.7 billion in debt investments. However, it is carrying debt of €5.2 billion, giving net assets of around €654m. It said NAV per share at end-March was €10.60, comprising €1.07 for the debt investment business and €11.67 for the commercial property portfolio. This was well below total €13.35 at the end of December. Adjusted for the refinancing of the Mars portfolio, completed on 27 May the NAV per share as end-March should be €8.45 per share. Real estate NAV per share of €9.52 after the Mars Portfolio refinancing, reflected an NOI yield of 5.8%.