Company Background
On 14 February 2008 the Royal Court of Jersey granted approval for a Scheme of Arrangement (described in a circular to the shareholders of Real Estate Opportunities Limited (‘REO’ or ‘the Group’) dated 18 December 2007). The Scheme involved the Zero Dividend Preference Shares (“ZDP Shares”), part of the share capital of REO being cancelled and, in exchange, New ZDP Shares were issued on a one for one basis by REO Securities Limited (‘the Company’), a newly incorporated subsidiary of REO. Implementation of the Scheme will allow the new ZDP Shares to be repaid by way of winding up of REO Securities Limited on 31 May 2011 rather than the winding up or reconstruction of REO itself.

Admission of the 57,755,782 New ZDP Shares of REO Securities Limited to the Official List of the UK Listing Authority took place on 18 February 2008, with dealings therein on the London Stock Exchange commencing on the same day.

Going Concern
The Company’s major asset is a receivable from its parent, Real Estate Opportunities Limited, a company incorporated in Jersey. REO Securities’ ability to continue in business and satisfy its future obligations to the holders of the ZDP’s is dependent on Real Estate Opportunities Limited. To that end, Real Estate Opportunities Limited and REO Securities Limited have entered into an arrangement pursuant to an Undertaking Agreement whereby the net assets of Real Estate Opportunities Limited will effectively be made available to meet the repayment entitlement of the ZDP Shares on the Repayment Date, 31 May 2011.

At 31 December 2008 REO had total borrowings of £1.711 billion.  At that date, REO also had cash, cash equivalents and restricted cash of £94 million and consolidated shareholders equity of £150 million. REO has an investment and development property portfolio valued at £1.9 billion at 31 December 2008.

REO’s future operating performance will be affected by general economic, financial and business conditions, many of which are beyond REO’s control. REO’s bank borrowings are mainly provided by financial institutions operating in Ireland and the United Kingdom. These financial institutions currently face financial difficulty and in many cases are being supported by the Government.  Significant deterioration in the economic environment in Ireland and the United Kingdom could have a material adverse impact on the value of REO’s property portfolio, REO’s shareholders equity and as a consequence on REO’s ability to obtain longer term debt or equity financing required to meet REO’s longer term financing and liquidity requirements beyond 2010.

REO has prepared a financial plan for the period to 31 December 2010. The key assumptions made in preparing these forecasts include:

• Bank loans falling due for repayment in 2009 and 2010 of £441 million and £197 million respectively will be rolled over and renewed on broadly similar terms by REO’s bankers.
• In the event that there is further decline in property values which would reduce the REO’s Net Asset Value and results in breaches of REO’s banking covenants, it is assumed that the existing bank facilitates will remain in place and be renewed in such an environment, consistent with REO’s recent experience.
• REO will realise £15 - £20 million in cash from the completion of one of a number of transactions that are currently being explored.
• No property acquisitions or disposals are assumed to occur during the period. 

Based on these forecasts and the key assumptions noted above the Directors of REO believe that REO has sufficient cash, cash equivalents and investments to meet REO’s liquidity requirements for at least the next twelve months. 

The Directors of the Company have concluded that the above factors represent material uncertainties. Failure to deliver on the forecast assumptions may cast significant doubt on the ability of the Company to continue as a going concern and it may therefore be unable to realise its asset and discharge its future obligations to the holders of the ZDP’s in the normal course of business. Nevertheless, having discussed the basis of preparation and the assumptions underlying REO’s cashflow projections together with assessing the current status of negotiations with REO’s current lenders, and assuming the rollover and renewal of expiring facilities and required further waivers are put in place within the required timescales, the Directors of the Company have a reasonable expectation that the Company will be able to meet its liabilities as they fall due for the foreseeable future.  It is on this basis that the Directors consider it appropriate to prepare the financial statements on a going concern basis.  These financial statements do not include any adjustment that would result from the going concern basis of preparation being inappropriate.

Real Estate Opportunities Limited
Shareholders’ attention is drawn to the publication of the preliminary results for Real Estate Opportunities Limited issued on the 26th of March 2009 for reference.

Approval of Preliminary Announcement
The financial information contained in this preliminary announcement are not the statutory financial statements of the Company, drawn up in accordance with the Companies (Jersey) Law 1991 (as amended). The directors approved the preliminary announcement in respect of the financial year ended 31 December 2008 on 25 March 2009.

We understand that our auditors, KPMG, will be drawing attention as an emphasis of matter, without qualifying their report with regards to the disclosures in note 2 (a)

Ray Horney
Chairman

26 March 2009

Click here to download the Preliminary Announcement as a PDF