Hirco, the AIM listed real estate fund floated by the Hiranandani Group has reported a net loss of £30.884 million, representing a loss per share of 40.36 pence. The company attributes the loss to the decline in the value of the underlying projects in which the company has made investments and professional fee expenses.
Hirco’s Net Asset Value (NAV), as of 31 March 2009, was £6.72 per share, down 5.7% from a NAV of £7.12 per share as of 30 September 2008. Additionally, during the period ending 31 March 2009, the company incurred one-time charges relating to professional fee expenses totalling approximately £3.739 million, equating to approximately £0.05 per share.
VALUE OF THE PROJECTS
However, the company’s per square foot pricing for its various projects have increased, it said. The per square foot value of its Chennai Residential Township has increased by Rs 7 per square foot from Rs 4,192 per square foot in December 2008 to Rs 1499 per square foot currently. For its Panvel Residential Township, the rise has been Rs 36 per square foot from Rs 4,278 in December 2008 to the current price of Rs 4,314 per square foot. Despite the increase in the per-square-foot pricing of both the projects, the volume growth has declined significantly.
Jones Lang LaSalle Meghraj (JLLM), carried out the valuation exercise for Hirco . Hirco’s initial investment in its four properties – Chennai Residential, Chennai Commercial, Panvel Commercial, and Panvel Residential – was approximately £350.8 million. Based on JLLM’s new valuation of the properties, the value of Hirco’s investment in these four properties as of 31 March 2009 was £424.6 million, representing a 21% increase from the initial acquisition cost.
PROGRESS ON PROJECTS
The slowdown in the velocity of sales declined during the first three months of the fiscal year, the challenging market environment had an effect on the company’s presales activity at their major residential projects at Chennai in southeast India and at Panvel, a suburb of Mumbai.
Adding to its woes, the uncertainty caused by the actions of Laxey Partners, the London-based hedge fund, also affected presales in this period, said the company. Laxey Partners, which holds 10.1% stake in Hirco, demanded a non-Hirnandani Chairman for Hirco. Due to the activist investor, Hirco also had to helve its plans to merge its real estate projects (township developments at Panvel near Mumbai and Chennai) and Hirco Developments, a development firm, with its investment arm Hirco. The investor strongly opposed the merger stating that it would dilute their interest and in turn effectively cede control to the Hiranandani family.
The real estate company in its interim results said that it is seeking an additional experienced director to act as a Non-executive Director.
“In spite of the numerous adversities we faced in this period, including a troubled global economy, a challenging real estate market in India and the uncertainty caused by the actions of the Laxey Partners hedge fund, we continued to make progress in the achievement of our objectives to create long-term shareholder value,” said Niranjan Hiranandani, chairman, Hirco Plc.
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