Definitions

Currencies

CHF Swiss Francs
EUR Euro
GBP Great British Pound
USD United States Dollar
ZAR South African Rand

Economic Terms

CPI

The Consumer Price Index is an inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food and transportation. The CPI is published monthly, and is specific to each country. It is common practice that rental escalations, particularly for large multi-national tenants, are linked to CPI.

GDP

Gross Domestic Product is the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. GDP growth is one of the primary indicators of the health of any economy.

Investment Terms

AER

The Annual Equivalent Rate is interest that is calculated under the assumption that any interest paid is combined with the original balance and the next interest payment will be based on the higher, combined account balance. Overall, this means that interest can be compounded several times in a year depending on the number of times that interest payments are made. For example, a savings account with a nominal interest rate of 10% that pays interest quarterly would have an AER of 10.38%. The AER will typically be higher than the actual annual rate calculated without compounding.

IRR

The internal rate of return (IRR) is the discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Investors/shareholders in Louis Group property syndications subscribe for shares in an Investment Company, which is capitalised by way of loan and/or share capital. When referring to the internal rate of return, we imply the IRR of the Investment Company. This is calculated by taking the net income and any realised capital gains after deducting mortgage interest and expenses but before company taxes and shareholder loan interest (where applicable). The IRR recorded in this Report is for the period from the Investment Commencement Date to 28 February 2009. Since many factors can influence investment returns, the IRR is our estimate at the time of publishing and the reader is advised that this information may differ from realised returns at the time of sale. We do not reflect IRR in this report if the investment commencement date is on or after 28 February 2009.

TROE

Louis Group’s estimate of the Total Return on Equity will be the simple total return on the equity investment since inception and ignores any time value of money assumption.

Share Price

This is our estimate of the value of a single share in the Investment Company that owns the relevant property. This is calculated by taking into account the estimated value of the property at the reporting date and any cash distributions that may have been made since the Commencement Date.

Valuation

In this Report we need to determine the property valuation to establish IRR. Valuations in many other asset markets are easy to determine as there is a record of asset trading prices (as in the case of equities, bonds and money market instruments). In property markets, however, assets are infrequently traded, and valuations are therefore estimates based on a combination of macro and micro-economic factors. Readers are advised that valuations provided in this Report are estimates based on many variables, which are then analysed and interpreted by our team of asset managers. It is simply the nature of property markets that perspectives on value differ, and that different parties will hold a different outlook on the investment potential of a particular property, as well as broader market movements. It is likely that actual sales prices will differ from our estimates – and we hope we have erred on the conservative side.

Not Applicable

In this Report we reflect certain information as ‘Not Applicable’. The reason for this is that we are a private property syndication firm and in certain instances our shareholders require us to keep particular information confidential. Also, certain information may not be applicable for the period under review.

Property Terms

GLA

Gross Lettable Area is the area (in square metres or square feet, as the case may be) on which rental payment calculations are based. A building may, for example, have a footprint of 1,000m², but only have a GLA of 850m². Rental payments at say £20/m² would then be based on the GLA and total £17,000 per month.

Vacancies

Vacancies reported are based on the percentage of GLA unoccupied at the time of going to print.

Weighted Tenant Risk

Our internal estimate of the risk of rental defaults in each property, weighted by the percentage of space occupied by tenants in that building. A1 reflects the highest rating, with lowest risk of default, and C2 reflects the lowest rating, with highest risk of default. Tenants are therefore assigned a rating reflecting this estimate.

A1 Highest rating, lowest risk of default
A2 Good rating, low risk of default
B1 Average rating, average risk of default but no immediate concern
B2 Average rating, average risk of default with some concern
C1 Below average rating, high risk of default
C2 Lowest rating, highest risk of default