IIF sales, leasing and capital management update

ING Industrial Fund today announced further progress on its asset divestment program with sales contracted or completed in Australia, Europe and Canada totalling A$79 million.

Industrial Sales - Australia & Europe

The Fund has contracted to sell two Australian assets for a combined total of A$23.7 million. Minto Distribution Centre, Minto NSW and Campbelltown Distribution Centre, Campbelltown NSW have been told to a private investor. The discount to book value is 14%.

The Fund has also divested its sole asset in France, Les Tulipes Distribution Centre, Gonesse, for a consideration of €18.3 million to a listed real estate development and management company based in France. The sale price represents a net discount to book value of 5%, after allowance for the deferred tax liability provided in IIF’s accounts.

The Fund is continuing with it divestment program with another 12 Australian assets currently being marketed for sale, with an estimated value of A$300 million.

Retail Sales - Canada

Following Management’s previously announced sales of C$135 million, a further five retail properties have been contracted for sale on an unconditional basis for a combined price of C$36.9 million, some 18% below book value.

The transactions are scheduled to close before the end of April 2009, providing approximately C$18.7 million or A$21 million of gross sales proceeds for IIF’s 50% interest.

These sales increase the total retail divestments to C$172 million, whilst a further seven of the remaining 11 retail properties remain under negotiation or subject to conditional contracts of sale.

Commenting on the progress to date, ING Industrial Fund Chief Executive Paul Toussaint said, “IIF continues to be successful in divesting assets amidst challenging market conditions. The asset sales in Australia increase the value of concluded transactions to A$233 million since early 2008, with IIF accounting for 13 out of 34 industrial property sales over $5 million within the eastern seaboard states.”

Asset Management & Development - Australia

IIF has recently completed a number of leasing transactions totalling approximately 42,000 square metres including the commitment of recently completed development projects in Sydney and Melbourne.

Notable transactions over the past three months include the following new leases:
• Westpark Industrial Estate, Erskine Park NSW: Reckitt Benckiser 11,197 sqm
• Interchange Park, Eastern Creek NSW: Manassen Foods 15,735 sqm
• ParkWest Industrial Estate, Ardeer VIC: Gro-Market Logistics 8,170 sqm

In addition, IIF has agreed terms for a recently completed facility of 11,000 square metres at ParkWest Industrial Estate with lease documentation expected to be executed shortly. As a result, the Fund has one remaining facility to be leased from its pipeline of completed development projects. The Fund currently has no projects under construction in Australia, and Management has previously advised that no further development is contemplated in the foreseeable future.

The Fund’s successful leasing activities over the past three months resulted in an enhanced occupancy level for the Australian portfolio of 97.5% by area, up from 95.7% in December 2008. The results were also assisted by a strong retention rate of 87%.

“The Fund’s portfolio performance in Australia remains strong despite the volatility we are experiencing in financial markets. High occupancy and retention rates result in strong and reliable cash flows which are the core of our business and will underpin portfolio performance when financial and credit markets stabilise” said Mr Toussaint.

Details for asset management and leasing results for Canada will be included in the Fund’s Quarterly
Update scheduled for early May 2009.

Capital Management initiatives

In IIF’s Unitholder Update (February 2009) Management advised that it remained in negotiations with its lending group to amend the terms of its key debt facilities with the aim of providing the Fund with additional covenant headroom and therefore greater flexibility, given current global market conditions. As part of this process the lending group has engaged Grant Thornton Services (NSW) Pty Limited to undertake a strategic review of IIF.

In December 2008, Management advised that as part of its review of Capital Management strategies, it would implement measures to reduce the volatility in the Fund’s gearing due to extreme movements in foreign exchange (FX) rates. These measures included the termination of various cross currency swaps from IIF’s Australian facility and transferring a portion of its Canadian and Euro denominated borrowings into Australian dollar borrowings. This results in the foreign currency denominations of the borrowings being proportionate to the foreign currency denominations of the underlying assets.

The Fund is well progressed in the execution of this strategy and has terminated cross currency swaps and redenominated Canadian debt to Australian debt totalling C$574 million (out of a total of target of C$818 million) at an average exchange rate of 0.8832.

Significantly, the Fund’s debt is now largely consistent across its investments in Australia, Canada and Europe and therefore the sensitivity of IIF’s gearing to FX movements has been substantially reduced. A consequence of implementing this strategy is IIF’s Net Asset Value will be more sensitive to FX movements, however it is considered that this is a more favourable position for the Fund.