Former investment trust tumbles

EXCLUSIVE Property investors are braced for further bad news after Real Estate Opportunities confirmed plans to address the market after losing almost all of its worth in the past 12 months.

Real Estate Opportunities (REO) converted from an investment trust to a closed ended property investment company at the end of 2008. However, the new tax advantages that it has now been afforded and more relaxed investment parameters have failed to boost performance significantly.

It lost 88.2% of its value in the 12 months to 15 April 2009, a marginal improvement on its performance on the 2008/9 tax year when it lost 92.3%. The company remains in Morningstar's investment trust sector, despite its recent change of status as it is a closed fund listed in the UK but domiciled in the Channel Islands.

The company said that it had loans amounting to £441m maturing in 2009. The majority of loans are due towards the end of the year. The company says that it has successfully obtained lenders' approval for renewal of over 30% of the required funding as at March 2009.

While all property investments have been impacted by the adverse economic conditions and fragile commercial property market, the decline of REO may be particular cause for concern as it still has the largest fund size of all investment trusts in the Morningstar sector at £559m.

Its performance echoes the decline of the ill fated Tilney property fund, which MM exclusively revealed had been suspended last month after it lost investors 97% of the initial amount invested.

Ray Horney, chairman of Real Estate Opportunities, said that market conditions remain extremely difficult and the economic outlook remains poor. However, he said that the business will continue to be focused on prime office and retail assets in Ireland.

joe.mcgrath@ft.com