New London Planning Policy strongly supports Battersea Power Station Scheme

Occupancy remains at above 90%

Weighted average lease length now stands at 12 years

Strong asset management and prime quality of the portfolio support valuations

Debt renewals being managed; expectations are that the process of transferring loans to the National Asset Management Agency (“NAMA”) will begin in the near future

Real Estate Opportunities plc (‘REO’ or the ‘Company’), the real estate investment and development group active in the UK and Ireland and listed in London, Dublin and The Channel Islands, has issued the following trading update in relation to its performance for the 20 weeks to 18 November 2009.

Ray Horney, Chairman of REO, said: “In common with other property companies, REO has endured a very difficult economic climate over the past 18 months. However there is evidence that the investment market is turning while NAMA, when the bill which has been passed by both houses of the Irish Parliament is signed into law, which is considered to be imminent, will start to bring some stability to the Irish property market during 2010. We believe that REO is well placed to take advantage of the considerable opportunities created through its development portfolio. Last month a planning application was submitted for our scheme at Battersea and, once planning consent is obtained, we expect to conclude current discussions with potential financing partners to bring the scheme to fruition.”

REO investment portfolio: continued strong performance

REO has continued to place a strong emphasis on intensive asset management and its investment portfolio has continued to perform strongly in the period, underpinned by prime office and retail locations and high quality tenants.
Annualised rent roll was €47 million in the period. Portfolio occupancy remains at over 90% and only 3% of rent roll is in arrears, which has remained stable in the last six months. The Company continues to monitor its tenants closely and to date there has been no material indications of defaults. Top blue chip tenants such as Vodafone, Merrill Lynch, KPMG and Marks & Spencer account for over 63% of the portfolio by rent. In addition, rent weighted average lease length is approximately 12 years.

Development highlights: well timed development portfolio strategy adds value

REO has limited development completions due in the next two years but as previously highlighted, the Company is continuing to proceed with planning applications for a number of development projects in order to position the Company for medium term growth.

Progress on planning applications in the period include:
Battersea Power Station: The planning application has been registered with Wandsworth Council for the £5.5 billion mixed-use redevelopment of the 40 acre Battersea Power Station site. With 8.3 million sq ft of new floorspace, the application is the largest ever to be submitted in Central London. It proposes a wide mix of uses, including 3,700 homes, 1.6 million sq ft of office floorspace and 700,000 sq ft of retail and restaurant space. For more than a year the Power Station site has seen one of the most comprehensive public consultation programmes ever for a UK property development including two public exhibitions, attracting over 15,000 members of the public and extensive pre-application consultation with Wandsworth Council, CABE, English Heritage, the GLA and many others. The registration of the Power Station planning application coincided with the publication of the Mayor of London’s draft Planning, Economic and Transport Strategies to shape London’s future. The draft replacement London Plan now formally recognises the huge potential of the Vauxhall / Nine Elms Opportunity Area and the Power Station site to deliver significant housing and commercial development. In addition, the draft Transport Strategy recognises the potential of the Northern Line Extension to support regeneration of the Opportunity Area. The Mayor has also emphasised the importance of this new transport link by excluding developments in Nine Elms from the Crossrail levy, instead diverting funds towards the Northern Line Extension.

Ballymun Shopping Centre: In September, the Company secured full planning permission for the €800 million (£700 million) regeneration of Ballymun Town Centre in north Dublin and close to Dublin’s airport. At 2.7 million sq ft Spring Cross as the development will be known, represents the largest mixed use town centre permission that has ever been granted in Ireland. The scheme includes 360 apartments, 645,000 sq ft of retail, 370,736 sq ft of offices and 118,403 sq ft of other uses including a substantial leisure and civic amenities offer with cinemas, bowling alleys, a public library and restaurants. The Spring Cross scheme is the comprehensive regeneration of the existing town centre and therefore benefits from an established location and the Company is in advanced stages of negotiations with key anchor tenants. Ballymun, located close to the M50 Dublin Ring Road, has been transformed in recent years with many new homes and the recent opening of the Republic of Ireland’s first Ikea store, a short walk from Spring Cross. The project will also benefit from direct access to the confirmed Metro North route that will link the airport with Dublin city centre.


Financing

The NAMA legislation was passed by both Houses of the Oireachteas (Irish Parliament) on 12 November 2009 and the Bill has now been sent to the President of Ireland for review before signing into law.
Until NAMA becomes operational and loans have been transferred, bank finance continues to be limited. However, we are continuing to work closely with our existing lenders to renew debt facilities with non-NAMA banks where necessary.

It is now expected that a substantial portion of the REO bank loans will be transferred to the agency in the near future and NAMA will be managing those loans thereafter.

With regard to the bank loan on Battersea, we remain inside the LTV thresholds and the loan continues to perform. With regard to the breach of the parent company NAV covenants, we are working closely with the team at Lloyd's / BoS as they consider further information on the project and finalise up to date valuations. Due to the positive planning position and strong residual value of the site caused by the large increase in development density, we remain confident this issue will be resolved in the near future.

The property portfolio was last revalued on 30 June 2009 when the Group reported an average fall of 15% in the sterling value of its investment and development portfolios in the six months from 31 December 2008.

The Company today announces it will change its accounting year end date from 31st December to 28th February. This is to coincide with the establishment of NAMA and the expected transfer of a number of REO loans. This change in year end will enable the Company to present REO’s financial position more clearly to shareholders in due course. As a result, REO will publish its financial results for the 14 months to 28th February in June 2010 and the property portfolio will next be valued by an external valuer on 28 February 2010.

Outlook

The Company has endured a very difficult economic climate in the past 18 months, but the REO Directors believe that the UK investment market is beginning to show signs of recovery, while it is hoped that NAMA will start to bring stability to the Irish property market. Until NAMA is established and REO’s loans are transferred, significant progress in restructuring the Company’s Irish related debt is unlikely. However, the Board remains confident that the Company is well positioned for the future.


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