O TWELVE ESTATES LIMITED ('O Twelve' / the 'Company')

UNAUDITED HALF YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

O Twelve Estates Limited today announces results for the six months ended 30 September 2008. The Company's objective is to generate an attractive return for Shareholders through the assembly of a portfolio of investment properties in its Target Area which comprises the Thames Gateway and the adjacent areas of east London, Essex, south Hertfordshire and north Kent.

Highlights

• Property valuation of £232.9 million (31 March 2008: £249.8 million), a reduction of 7.2% compared to a fall in the IPD All Property Monthly Index of 10.0%

• Rental value increased by 1.4% on a like for like basis, vs the IPD All Property Monthly Index of -0.4%. Retail assets achieved rental growth of 3.5% compared to 0% reported by the IPD and was the best performing sector

• The portfolio's estimated rental value ('ERV') of £18.0 million per annum, shows additional potential rental income from reversions and letting vacant units of £4.1 million per annum

• 53% of income is from leases with more than five years to expiry

• Consolidated Net Asset Value of £68.0 million, or 55.55 pence per share (31 March 2008: £84.9 million, 69.32p)

Commenting on the results, Phillip Rhodes, Chairman of O Twelve, said:

'The credit crunch and the financial turmoil that continues to plague global markets has been hard hitting for many companies across all sectors, and O Twelve is no exception. However, we expect our Target Area to be more resilient to the knock-on effects of these problems due to the ongoing positive impact of the regeneration of the 2012 Olympic region. Pleasingly, we are again reporting returns in excess of the IPD monthly indices for rental value growth and capital value movement. On a day to day basis, the portfolio is being managed with a view to maximising rental income and action is being taken to reduce costs.'

David Tye of Rugby Asset Management added:

'Whilst positive absolute returns cannot be anticipated for the immediate future, the Group's portfolio has so far proved to be relatively resilient. The Target Area of east London and the Thames Gateway are responding robustly to the economic turmoil and we firmly believe the Group's portfolio will continue to benefit after 2012 from the legacy of the Olympic Games. Our focus for the immediate future is to maintain rental income and to minimise voids, capital expenditure and property outgoings'

For further information please contact:

David Tye / Andrew Wilson

Rugby Asset Management Limited

Tel: +44 20 7016 0050

Jeremy Porter / Simon Bennett / Laura Littley

Fairfax I.S. PLC

Tel: +44 20 7598 5368

Dido Laurimore / Stephanie Highett / Laurence Jones / Rachel Drysdale

Financial Dynamics

Tel: +44 20 7831 3113

CHAIRMAN'S STATEMENT

I am pleased to present the results of O Twelve Estates Limited (the 'Company') together with its subsidiaries (the 'Group') for the six months ended 30 September 2008.

Results

The Group reported a net loss for the period ended 30 September 2008 of £16.9 million (30 September 2007: loss of £10.6 million, 31 March 2008: loss of £34.1 million), representing a loss per Ordinary share of 13.77p (30 September 2007: loss of 8.69p, 31 March 2008: loss of 27.83p). The consolidated net asset value at 30 September 2008 was £68.0 million (30 September 2007: £109.0 million, 31 March 2008: £84.9 million) being 55.55p per Ordinary share (30 September 2007: 88.95p per Ordinary share, 31 March 2008: 69.32p per Ordinary share). 

At 30 September 2008 the Group's property investment portfolio was valued by CB Richard Ellis ('CBRE') at £232.9 million (30 September 2007: £267.6 million, 31 March 2008: £249.8 million). During the period, the portfolio valuation fell by 7%. This compares favourably with UK commercial properties generally which recorded capital value reductions of 10% for the same period. This outperformance, which unfortunately is only relative rather than absolute, demonstrates the underlying soundness of the Group's focus on its Target Area to the east of London which is benefitting from major regeneration initiatives and infrastructure improvements. The Olympic and Paralympic Games to be held in and around Stratford, east London, in 2012 are a major catalyst for these improvements which we believe will result in a significant structural, economic and cultural repositioning of the Target Area. Further details of the portfolio are set out in the Property Adviser's Report.  

Financing

The Group's borrowings are provided by an initial £250 million loan facility with Nationwide Building Society ('Nationwide'). Nationwide has syndicated part of the loan to two other financial institutions (collectively, the 'Lenders'). Total drawings under this facility are £170 million and the undrawn balance of the facility has now been cancelled. The loan is repayable in full in December 2014. Interest is payable at a margin of 0.65% per annum over LIBOR. Of the total amount drawn, £138 million (81%) is fixed until December 2014 at an average interest rate, including margin, of 6.1%. The balance bears interest at a floating rate. Taking three month LIBOR as at 5 December 2008 of 3.38%, the blended average rate payable on borrowings as at that date was 5.72% per annum.

The covenants under the loan facility include a loan to value ratio ('LTV') of 75% and an income cover ratio of 120%. A 'Cash Lock Up' event, which is not an event of default, occurs if LTV is between 70% and 75% or income cover is between 120% and 115%. The valuation of properties charged as security as at 30 September 2008 was £232.4 million, an LTV of 73.1%. Thus, whilst the Group is not in default under the loan facility, it is in Cash Lock Up. The effect of Cash Lock Up is that rental income in excess of financing costs is retained by the Lenders as cash collateral which may be used in partial repayment of the loan. Accordingly, the Group does not currently have access to surplus operating cash flow and must rely on other resources in order to pay overheads and other expenses. At 30 September 2008, the Group had total cash balances of £8.9 million of which £6.4 million is available to meet such expenses.  The Board is also in discussions to revise and reduce the management fees, which it hopes to conclude early in the new year. The Directors estimate that the Group can continue to operate for approximately 18 months without access to the operating cash flow.

At 27 October 2008, the most recent quarterly rollover date under the loan facility, income cover was 123.8% for the quarter and 128.8% estimated prospectively for the following year. Income cover is calculated after deducting costs of empty properties, such as rates and insurance, and certain other property outgoings. In the absence of material tenant default, the Directors expect income cover to remain above 115% for the foreseeable future.

In the current economic environment there is widespread uncertainty as to the level at which commercial property investment values will stabilise. The Board is aware that, although the loan should continue to be serviced from cash flow for the foreseeable future, there remains a probability that the LTV will at some point be over 75%. Accordingly Rugby Asset Management Limited ('RAM'), acting on behalf of the Board, has been in discussion with the Lenders about a relaxation of the LTV covenant. It has not so far been possible to agree an increase in LTV sufficient for the Directors to have reasonable assurance that a breach of covenant will not take place, given the further valuation falls anticipated for UK properties generally. In accordance with current general market practice, the Lenders are seeking very substantial additional margins and fees for agreeing changes to loan terms. The directors do not expect the Lenders to seek to test the LTV covenant prior to receiving the result of the year-end portfolio valuation as at 31 March 2009 to be carried out by CBRE. RAM continues to maintain close dialogue with Nationwide and the other Lenders with the expectation that a sustainable solution to minimise the risk of future loan covenant breaches can be agreed at that time. 

Dividend

In the current economic environment and in view of the Group's financing uncertainties, conservation of cash is paramount and the Board does not recommend payment of an interim dividend.

Outlook

The 'Credit Crunch' and the financial turmoil that continues to plague global markets has been hard hitting for many companies, across all sectors, and your Company is no exception. As noted above, the key immediate issue facing the Group is the probability that continuing falls in property values generally will lead to a breach of the existing LTV covenant under its loan facility. This is being closely monitored and the Board also continues to consider with its advisers whether asset sales or new capital raising are realistic possibilities. As yet, there is no indication of when, or at what level, property values will bottom-out and until there is some sense of stabilisation, any transaction would probably be on 'fire-sale' terms and of little benefit to shareholders.  

Whilst the current economic recession has not yet had a material visible effect on tenant demand in our portfolio it is possible that a prolonged recession would lead to falling rental values and increased voids. However, we expect our Target Area to be more resilient to these effects than the UK generally due to the ongoing positive impact of the regeneration of the 2012 Olympic region. Pleasingly, we are again reporting returns in excess of both the IPD monthly indices for rental value growth and capital value movement.  On a day to day basis, the portfolio is being managed with a view to maximising rental income and action, including a review of RAM's fees, is being taken to reduce costs. Given a degree of stability in global markets generally, your Board believes the Group's diversified portfolio, professional management and geographic focus will produce good shareholder returns.

Phillip Rhodes

Chairman

12 December 2008

PROPERTY ADVISER'S REPORT

Rugby Asset Management Limited ('RAM'), a member of the Rugby Estates Plc Group, was appointed Property Adviser to the Group on the Company's admission to AIM on 27 March 2006. Our role is to identify transactions for recommendation to, and consideration by, the Board of the Company and to negotiate on its behalf. We undertake, on a day to day basis, under delegated authority from the Board, all aspects of assembling, managing and financing the Group's property portfolio. Rugby Estates Plc Group holds a 5.46% interest in O Twelve Estates Ltd.

The decline in property capital values which began in mid 2007 has continued unabated. In the six months to September 2008 overall capital values for commercial properties fell by 10%; this reduction was attributable wholly to increased capitalisation rates with no rental growth across the market generally for the period. The difficulties in the credit markets have now spread into the real economy and, although we have not yet seen any material adverse effects, this is likely to cause a weakening of occupational demand in addition to the continuing decline in capital values. However, the Group's portfolio has performed significantly better than the market as a whole with capital values having fallen by 7% over the period. Whilst rental growth has slowed, we have not yet experienced difficulties in securing lettings and lease renewals at rental values which are at, or in excess of, those expected at the start of the year.

Rental value levels within the portfolio have been resilient, driven forward by the asset management initiatives which the Group is undertaking and the regeneration initiatives in the Target Area.  During the six months to 30 September 2008, the rental value of the portfolio increased by 1.4% on a like for like basis. Over the same period the IPD All Property Monthly Index showed -0.4% rental growth. The best performing sector within the portfolio was retail where rental growth of 3.5% was achieved compared with zero reported by IPD. 

Investment yields have continued to increase since March 2008. The equivalent yield for the portfolio has increased by 60 basis points from 6.43% to 7.03% at September 2008. The IPD All Property equivalent yield increased by 70 basis points from 6.54% to 7.24% over the same period. 

Notwithstanding current uncertainties in the real estate market and in the wider economy, we believe that the Target Area will continue to show greater resilience than many other areas of London and the UK where the backdrop of eroding values is likely to be significant.  The Target Area continues to be stimulated by the regeneration initiatives and investment, both public and private, planned, and under way, particularly for the area around Stratford in east London and for the Thames Gateway generally. In a number of cases these initiatives have resulted in rental levels in excess of valuation rental values being achieved when properties have been offered in the open market. The Olympic Games in 2012 is a major catalyst for these improvements.

Portfolio Review as at 30 September 2008

• Valuation £232.9 million
  

• 22 properties 
  

• Average lot size of £10.6 million 
  

• Contracted annual rental income of £13.9 million

• The portfolio's estimated rental value ('ERV') is £18.0 million per annum, shows additional potential rental income from reversions and letting vacant units of £4.1 million per annum
  

• 206 separately lettable units (excludes long leasehold and assured shorthold tenancies) 

• 170 units are let to 147 tenants

• 36 units are vacant and available for letting with an ERV of £2.6 million per annum

• 53% of income is from leases with more than 5 years to expiry 
  

• Weighted average unexpired lease term is 6 years

• Portfolio equivalent yield of 7%

Valuation

The external valuation of the Group's properties as at 30 September 2008 was £232.9 million. Over the period, and after taking into account capital expenditure, the reduction in value was 7.2% on a like for like basis. This compares favourably with the IPD All Property Capital Value Index, which showed a fall of 10.0% over the same period. A sector analysis is shown below.

Capital Value Movement compared to IPD Monthly Index

O Twelve

IPD

All Property

-7.2%

-10.0%

Retail

-9.2%

-10.1%

Office

-5.9%

-10.4%

Industrial

-6.5%

-9.1%

Rental Value Movement compared to IPD Monthly Index

O Twelve

IPD

All Property

1.5%

-0.4%

Retail

3.5%

0.0%

Office

-0.2%

-1.0%

Industrial

0.5%

-0.3%

Rental Value Analysis - 30 September 2008

£m

Current annualised income

13.7

Rent free periods

0.2

Available for letting

2.6

Reversions

1.5

Rental value

18.0

The reversionary potential for each sector is shown below:

ERV £m

Rent £m

Retail

6.5

5.6

Office

3.6

2.8

Industrial

7.4

4.8

Residential

0.5

0.5

Void Analysis

At 30 September 2008 the void rate in the portfolio stood at 14% by rental value. Approximately 40% of space currently vacant has been deliberately taken back in order to undertake significant refurbishments. Once lettings currently in solicitor's hands complete, the void rate will fall to 13% of rental value.  

Income Security

Given the current uncertainty in the economy and in the wider banking and financial markets, it is appropriate that we focus ever more closely on rent collection, minimising irrecoverable outgoings and monitoring security of income and tenant covenant strength. Within the portfolio approximately 53% of the contracted rent is secure for more than five years. Where leases are for less than five years, opportunities exist to refurbish or consider changes of use in order to maximise value. In our view the portfolio offers a good balance between income security and those opportunities to add value.

Income expiry profile - 30 September 2008

<5 years

47%

5-10 years

30%

>14 years

23%

Of the portfolio's 147 tenants, 20 account for 48% of the contracted rental income with the top 10 accounting for 33%. Tenants of, in our view, undoubted or of a 'national' standard account for 76% of the contracted rent, while smaller regional and local companies account for 24% of the contracted rent. A more detailed analysis is shown below:

Tenant Covenant Strength by Contracted Rent

Grade A (Very strong)

36%

Grade B (National)

40%

Grade C (Regional)

14%

Grade D (Local)

9%

Vacant Rent Guarantee

1%

Tenants in the portfolio include:

Chelmsford Star Co - Operative Society Ltd

Hitachi Kokusai Electric UK Ltd

Sainsbury Supermarkets Ltd

Target Express Parcels Ltd

Chubb Electronic Security Ltd

London Eastern Railways Ltd

Secretary of State

Telford Homes plc

Coutts Retail Communications Ltd

Mellon Bank

Smyths Toys Ltd

Toyota Tsusho Automobile London Holdings Ltd

GE Transportation Systems Ltd

Moss Bros Group Plc

Somerfield Stores Ltd

WH Smith Plc

Halfords

O2 (UK) Ltd

Staples

Wilkinson Hardware Stores Ltd

Portfolio at 30 September 2008

Property

Type

Valuation band at

30 September 2008

£ m

Gascoigne Road, Barking

Distribution warehousing

10 - 15

QED, Thurrock

Distribution warehousing

10 - 15

Western Avenue, Thurrock

Distribution warehousing

10 - 15

Bakers Court, Basildon

Industrial

0 - 5

Barratt Industrial Estate, Bow

Industrial

0 - 5

Larkfield Mill, Aylesford

Industrial

20 - 25

Mill River Trading Estate, Enfield

Industrial

5 - 10

The Interchange, Swanley

Industrial

20 - 25

Baytree Shopping Centre, Brentwood

Shopping centre

30 - 35

George Yard, Braintree

Shopping centre

20 - 25

The Mall, Dagenham

Shopping centre

10 - 15

214/216 Heathway, Dagenham

Retail

0 - 5

38-42 High Street, Brentwood

Retail

0 - 5

75 High Street, Brentwood

Retail

0 - 5

Grove Farm, Chadwell Heath

Retail park

10 - 15

Inspira House, Welwyn Garden City

Office

0 - 5

Mellon House, Brentwood

Office

5 - 10

Queensgate, Waltham Cross

Office

10 - 15

Redwing Court, Romford

Office

0 - 5

Solar House, Stratford

Office

10 - 15

34 St Thomas Road, Brentwood

Residential

0 - 5

Salway Place, Stratford

Residential

5 - 10

Sector Split by Capital Value

Industrial

41%

Offices

18%

Residential

4%

Retail

37%

Looking Forward

The Group is now well established as a major investor within its Target Area, holding a well located, diversified real estate portfolio.

The property market as a whole is experiencing falling capital values of a rapidity and extent unprecedented for at least 30 years. The UK economy generally is in recession and there appears to be little prospect of a rapid recovery. Whilst positive absolute returns cannot be anticipated for the immediate future, the Group's portfolio has so far proved to be relatively resilient. The Target Area of East London and the Thames Gateway are responding robustly to the economic turmoil. We firmly believe the Group's portfolio will continue to benefit after 2012 from the legacy of the Olympic Games. Our focus for the immediate future is to maintain rental income and to minimise voids, capital expenditure and property outgoings.

David Tye

Andrew Wilson

Rugby Asset Management Limited

12 December 2008

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the period ended 30 September 2008.  A full version of the Group's unaudited half yearly financial statements shall be available on the Group's website, www.otwelveestates.com, and distributed to shareholders in due course.

CONSOLIDATED INCOME STATEMENT

for the period from 1 April 2008 to 30 September 2008 (unaudited)

1 April 2008 to 30 September 2008 (unaudited)

1 April 2007 to 30 September 2007 (unaudited)

1 April 2007 to 31 March 2008 (audited)

£'000

£'000

£'000

Income

Rent receivable

7,042

7,500

15,363

Bank interest

253

201

379

Service charges receivable

1,824

1,091

2,435

------------

------------

-----------

Total income

9,119

8,792

18,177

------------

------------

-----------

Expenses

Administration fees

(124)

(145)

(279)

Service charges payable

(1,824)

(963)

(2,435)

Management fees

(1,266)

(1,078)

(2,446)

Interest payable and similar charges

(5,275)

(4,445)

(9,973)

Other operating expenses

(852)

(1,046)

(1,982)

------------

------------

----------

Total expenses

(9,341)

(7,677)

(17,115)

------------

------------

----------

Net (loss)/gain from operating activities

(222)

1,115

1,062

Movement in fair value of interest rate swap

1,511

(807)

(4,152)

Investment gains and losses

Movement in unrealised loss on revaluation of investment properties

(18,102)

(10,952)

(31,432)

Realised gain from sale of investment properties

-

-

599

------------

------------

----------

Total investment loss

(18,102)

(10,952)

(30,833)

------------

------------

----------

Loss before taxation 

(16,813)

(10,644)

(33,923)

Taxation

(53)

(6)

(166)

------------

------------

----------

Loss for the period/year attributable to Equity Holders

(16,866)

(10,650)

(34,089)

------------

------------

---------

Loss per Ordinary Share - basic 

(13.77)p

(8.69)p

(27.83)p

Loss per Ordinary Share - fully diluted

(13.77)p

(8.69)p

(27.83)p

Items in the above statement are derived from continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the period from 1 April 2008 to 30 September 2008 (unaudited)

Share capital

Share premium

Other reserves

Total

£'000

£'000

£'000

£'000

Balance at 1 April 2008

1,225

-

83,690

84,915

Loss for the period

-

-

(16,866)

(16,866)

Dividends paid

-

-

-

-

----------

----------

----------

----------

Balance at 30 September 2008

1,225

-

66,824

68,049

----------

----------

----------

----------

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the period from 1 April 2007 to 30 September 2007 (unaudited)

Share capital

Share premium

Other reserves

Total

£'000

£'000

£'000

£'000

Balance at 1 April 2007

1,225

115,925

3,079

120,229

Loss for the period

-

-

(10,650)

(10,650)

Dividends paid

-

-

(612)

(612)

----------

----------

----------

----------

Balance at 30 September 2007

1,225

115,925

(8,183)

108,967

----------

----------

----------

----------

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2008 (audited)

Share capital

Share premium

Other reserves

Total

£'000

£'000

£'000

£'000

Balance at 1 April 2007

1,225

115,925

3,079

120,229

Reclassification of share premium

-

(115,925)

115,925

-

Loss for the year

-

-

(34,089)

(34,089)

Dividends paid

-

-

(1,225)

(1,225)

----------

----------

----------

----------

Balance at 31 March 2008

1,225

-

83,690

84,915

----------

----------

----------

----------

CONSOLIDATED BALANCE SHEET

as at 30 September 2008 (unaudited)

30 September 2008 (unaudited)

30 September 2007 (unaudited)

31 March 2008 (audited)

£'000

£'000

£'000

Non-current assets

Investment property

232,945

267,570

249,765

-----------

-----------

-----------

Current assets

Receivables and prepayments

5,795

6,760

12,027

Cash and cash equivalents

8,928

14,510

4,826

-----------

-----------

-----------

14,723

21,270

16,853

-----------

-----------

-----------

Total assets

247,668

288,840

266,618

-----------

-----------

-----------

Current liabilities

Overdraft

-

(7,969)

-

Payables and accruals

(7,216)

(10,366)

(7,817)

-----------

-----------

-----------

(7,216)

(18,335)

(7,817)

Non-current liabilities

Bank loan

(169,657)

(160,626)

(169,629)

Fair value of interest rate swap

(2,746)

(912)

(4,257)

-------------

-------------

-------------

(172,403)

(161,538)

(173,886)

-----------

-----------

-------------

Total liabilities

(179,619)

(179,873)

(181,703)

-----------

-----------

-------------

Net assets

68,049

108,967

84,915

-----------

-----------

-------------

Capital and reserves

Called-up share capital

1,225

1,225

1,225

Share premium

-

115,925

-

Other reserves

66,824

(8,183)

83,690

-----------

-----------

------------

Total equity holders' funds

68,049

108,967

84,915

-----------

-----------

-------------

Net Asset Value per Ordinary Share - basic

55.55p

88.95p

69.32p

Net Asset Value per Ordinary Share - fully diluted

55.55p

88.95p

69.32p

CONSOLIDATED CASH FLOW STATEMENT

for the period from 1 April 2008 to 30 September 2008 (unaudited)

1 April 2008 to 30 September 2008 (unaudited)

1 April 2007 to 30 September 2007 (unaudited)

1 April 2007 to 31 March 2008 (audited)

£'000

£'000

£'000

Operating activities

Rent received

6,853

7,932

14,961

Bank interest received

250

171

568

Service charges received

1,824

1,091

2,435

Loan interest and similar charges paid

(5,234)

(3,408)

(8,707)

Management fee paid

(1,314)

(693)

(1,972)

Administration fee paid

(127)

(123)

(245)

Other expenses paid

(3,514)

(1,615)

(3,520)

VAT receipts

915

960

1,153

-----------

-----------

-------------

Net cash (outflow)/inflow from operating activities

(347)

4,315

4,673

Investing activities

Purchase of/additions to investment property

(762)

(87,592)

(94,630)

Sale of investment property

5,225

-

275

-----------

-----------

-------------

Net cash inflow/(outflow) from investing activities

4,463

(87,592)

(94,355)

Financing activities

Dividend paid on ordinary shares

-

(612)

(1,225)

Loan proceeds

-

85,000

94,000

Loan arrangement fees paid

-

-

(235)

-----------

-----------

-------------

Net cash inflow from financing activities

-

84,388

92,540

Taxation paid

(14)

-

(3,462)

-----------

-----------

-------------

Increase/(decrease) in cash and cash equivalents

4,102

1,111

(604)

-----------

-----------

-------------

Cash and cash equivalents at beginning of period/year

4,826

5,430

5,430

Increase/(decrease) in cash and cash equivalents

4,102

1,111

(604)

-----------

-----------

-------------

Cash and cash equivalents at end of period/year

8,928

6,541

4,826

-----------

-----------

-------------

Cash and cash equivalents at the end of the period/year comprise:

Cash and cash equivalents

8,928

14,510

4,826

Overdrafts

-

(7,969)

-

-----------

-----------

-------------

8,928

6,541

4,826

-----------

-----------

-------------