Trading Statement

    RNS Number : 8236D
  Spazio Investment NV
  19 September 2008
   
    


    19 September 2008

    SPAZIO ANNOUNCES FURTHER DETAILS OF THE PROPOSED ACCELERATION OF ITS BUSINESS PLAN AND REVISION OF ARRANGEMENTS WITH ITS EXTERNAL
MANAGER

    19 September 2008 - Spazio Investment N.V., ('Spazio' or the 'Company'), a real estate investment company focused on the Italian
industrial real estate market and owner of 100% of the units of the Fund Spazio Industriale (Spazio and the Fund together, the 'Group'),
today announces further details on the proposed acceleration of its business plan and revision of arrangements with its External Manager,
the Group Pirelli & C. Real Estate ('Pirelli RE' or the 'External Manager').

    HIGHLIGHTS

    *     Planned disposals of up to EUR450 million for three years ending 31 December 2010
    *     Disposal targets are achievable but challenging given current situation in real estate and financial markets
    *     No further acquisitions and termination of right of first refusal for new investment opportunities in the industrial sector
    *     New incentive fee arrangements for External Manager based on EUR per share cash returns to shareholders

    *     Base Incentive Fee of up to EUR16 million for EUR8 to EUR10 per share return
    *     Additional Base Incentive Fee of 10% of cash returns in excess of EUR10 per share
    *     Fixed Fees paid in years ending 31 December 2009 and 31 December 2010 to be offset against Base Incentive Fee
    *     25% upwards or downwards adjustment made to Base Incentive Fee depending on net asset value ('NAV') per share of the Company at 31
December 2010 to calculate Final Incentive Fee payable

    *     Termination arrangements for External Manager contracts revised

    *     Reduced termination payments for removal without cause;
    *     Extension of period in which External Manager cannot be removed without cause to 31 December 2010 

    *     Shareholder approval for the proposals will be sought at an EGM. Approval of each of the proposals will be interconditional on all
proposals being approved.

    BACKGROUND

    The Company has recently had extensive and constructive discussions with a number of its major shareholders, who have expressed a strong
desire for a revision of Spazio's strategy to focus on realising value from the Group's portfolio, returning cash to shareholders and
revising arrangements with the External Manager.

    In consideration of the above Spazio announced its intention to accelerate its business plan with the objectives of: 
    *     achieving an orderly disposal of certain of the Group's property assets;
    *     returning the net proceeds from these disposals to shareholders, whilst maintaining a strong balance sheet; and
    *     suspending its acquisition activities, other than in exceptional circumstances

    Given the proposed acceleration of the business plan, the Board also announced its intention to revise arrangements with the External
Manager, to align the interests of the External Manager more closely with the interests of shareholders and to incentivise the External
Manager to deliver the accelerated business plan.

    ACCELERATION OF BUSINESS PLAN

    In view of requests from shareholders and a share price trading at a significant discount to the NAV of the Company, the Board believes
that the orderly disposal of selected assets of the Group and the return to shareholders of net proceeds from these disposals represents a
significant opportunity to create shareholder value, in exploiting the discount between underlying asset valuations and the share price. The
Board will remain focused on creating value from the other assets of the Group.

    Following a review of the Group's portfolio by the External Manager at the request of the Board, the Board has identified those assets
which it believes have limited opportunity for value creation in the short to medium term. 

    The Board re-confirms its intention to dispose of up to EUR140 million of assets in the year ending 31 December 2008 (of which EUR56.7
million was achieved in H1 2008), albeit that this target has been made more difficult by recent financial markets events.

    Further sales of up to EUR310 million are targeted for the period from 1 January 2009 to 31 December 2010. Therefore, the Board intends
to make total disposals of up to EUR450 million in the three years between 1 January 2008 and 31 December 2010.

    The Board believes that the three year disposal target is achievable but challenging, given expected ongoing volatility in financial and
real estate markets. The global real estate market has been adversely impacted by the credit crisis and worsening global economic
conditions, leading to a softening in yields, the exit from real estate of a large number of investors and a significant decrease in
transaction volumes. Recent financial markets events are also expected to have an adverse effect on real estate markets in Italy and
elsewhere, particularly in the remainder of 2008. It is difficult to assess the quantum and the duration of the impact of these events at
this time.

So far, the Italian real estate market has performed relatively well compared with other European markets. In the light industrial market in
which Spazio operates, demand from occupiers has held up comparatively strongly and there has been a limited supply of quality new space. 

    The Board believes the External Manager is uniquely positioned within the Italian real estate market and is confident in the its ability
to deliver the accelerated business plan. 

    The revised incentive arrangements proposed for the External Manager have been set with reference to the three year disposal target. The
Board will keep shareholders informed on the progress made with disposals as and when appropriate. 

    REVISED ARRANGEMENTS WITH THE EXTERNAL MANAGER

    Current corporate management fee and fund management fee arrangements will remain in place as described in the Company's AIM Admission
Document of October 2006 (available at www.spazioinvestment.com). It is expected that with the disposal of assets and the return of capital,
these fees will be lower than if net proceeds from disposals were reinvested or retained. 

    Corporate management and fund management fees payable in respect of the financial years ended 31 December 2009 and 31 December 2010 are
referred to below as the 'Fixed Fees'.

    New incentive arrangements

    Existing incentive arrangements will be amended to be based on EUR per share distributions made in cash to shareholders and remaining
net asset value per share of the Company as at 31 December 2010.

    Calculation of EUR per share distribution

    For the calculations below, the EUR per share cash return ('Cash Return') will be the aggregate of each individual cash distribution per
share made in relation to the period between 1 January 2008 and 31 December 2010 (the 'Return Period'). 

    The value of each individual cash distribution per share will be calculated as the EUR value of the distribution divided by the number
of ordinary shares in issue at the time of distribution.

    Base Incentive Fee calculation

    The Base Incentive Fee will be calculated based on the size of the Cash Return. 

    The External Manager will be entitled to a Base Incentive Fee of EUR16 million if a Cash Return of EUR10 per share is made. 

    If the Cash Return exceeds EUR10 per share, the External Manager will be entitled to a Base Incentive Fee of EUR16 million, increased by
an amount equivalent to 10% of cash returned to shareholders above EUR10 per share. 

    If the Cash Return is equal to or greater than EUR8 per share but less than EUR10 per share, then the Base Incentive Fee will be
calculated as follows

    (EUR16 million - Fixed Fees) x ((Cash Return - EUR8)/2).

    If the Cash Return is less than EUR8 per share, then no incentive fee will be payable to the External Manager.

    Final Incentive Fee calculation 

    The Base Incentive Fee will be subject to two subsequent adjustments.

    If the Cash Return is equal to or exceeds EUR10 per share, the Fixed Fees will be deducted from the Base Incentive Fee to calculate an
Adjusted Incentive Fee.

    Following this deduction, the Adjusted Incentive Fee will be subject to a further adjustment either upwards or downwards to reflect the
NAV per share of the Company at the end of the Return Period. The maximum upwards or downwards percentage adjustment is capped at 25%. This
adjustment is calculated based on the following formula, 25% x (A+B-C)/(C-A), where

    A = the Cash Return 

    B = remaining NAV per share as at 31 December 2010 post cash return to shareholders

    C = NAV per share as at 1 January 2008, adjusted for the net movement in the IPD Italian Industrial Real Estate Capital Growth Index for
the period between 31 December 2007 and 31 December 2010

    This NAV per share adjustment will be used to determine the Final Incentive Fee. 

    The External Manager will put in place arrangements to allocate a proportion of the Final Incentive Fee to its management team directly
responsible for delivering the accelerated business plan.

    Revised termination arrangements

    The Fund Rules ('Rules') regulate the terms on which Pirelli RE SGR, (the 'Fund Manager') provides services to the Company and the
Corporate Management Agreement ('Agreement') regulates the terms on which Pirelli RE Netherlands BV (the 'Corporate Manager') provides
corporate and administrative services to the Company in the Netherlands. 

    It is proposed that existing termination arrangements relating to the Fund Manager and the Corporate Manager contained in the Rules and
the Agreement will be revised as follows.

    The Rules and the Agreement contain restrictions on when the appointment of the Fund Manager and Corporate Manager can be terminated.
The appointment of the Fund Manager can only be terminated after 29 December 2008 and the Corporate Manager's appointment can only be
terminated after 18 January 2009, other than for cause. In both cases the Fund Manager and Corporate Manager must be provided with 6 months
written notice of their intended removal as managers. 

    If the appointment of the Fund Manager and Corporate Manager are terminated other than for cause after these dates, the Fund Manager and
Corporate Manager are entitled to receive termination payments. These termination payments are equivalent to 24 months of the fund
management fee in the case of the Fund Manager and two times the annual corporate management fee in the case of the Corporate Manager. 

    The Board proposes that the period in which the contracts with Fund Manager or the Corporate Manager cannot be terminated other than for
cause is extended to 31 December 2010. After 31 December 2010, with six months' notice, it will be possible to terminate the contracts with
the Fund Manager and the Corporate Manager other than for cause, with the quantum of the termination payments payable reduced. The Fund
Manager would be entitled to receive a payment equal to 12 months of the fund management fee and the Corporate Manager would be entitled to
receive the annual management fee. 

    The Board believes that these revised termination arrangements provide the External Manager with additional incentive to execute the
accelerated business plan by extending the period in which their removal other than for cause is not possible but halving the termination
payment payable in circumstances where the External Manager is terminated other than for cause after 31 December 2010.

    The proposed revisions to the management arrangements constitute a related party transaction under the AIM rules.

    Termination of the Deed of Undertaking (as described in Part III of the Admission Document)

    As the Company does not intend to engage in acquisition activity for the foreseeable future, the Board has also agreed to release the
External Manager from its existing obligation to first offer relevant opportunities to the Company and should be free to pursue investment
opportunities in the Italian industrial real estate sector without first offering such investment opportunities to the Company. 

    RELEVANT APPROVALS

    The Board of Spazio will seek approval from shareholders for the proposals described above at an EGM of the Company. Approval of each of
the proposals will be interconditional on all proposals being approved. A shareholder circular in respect of the EGM is being prepared and
will be sent to shareholders in due course. It is anticipated that the EGM will take place in October 2008.

    Subsequent to approval by shareholders, the proposal will also be subject to interconditional approval by the corporate bodies of Spazio
Industriale Fund (Advisory Board of the Fund and Board of Directors of Pirelli & C. Real Estate SGR), as well as Pirelli RE Netherlands BV.
Any changes required to the Fund Rules as a consequence of the proposals will be subject to Bank of Italy approval.

    Enquiries

    Spazio Investment N.V.
    Fabrizio Lauro                  Tel: +39 02 6442 50844

    Deutsche Bank
    Nominated Advisor
    Ben Lawrence                   Tel: +44 (0)20 7545 8000

    Press Enquiries - 
    Brunswick Group LLP
    Roberta Governale             Tel: +44 (0)20 7404 5959
    Richard Jacques


    Notes to Editors 

    Spazio Investment N.V. 

    Spazio Investment N.V. is a Dutch based externally managed company focused on the Italian industrial real estate market - the second
largest in Europe.  

    It owns the largest portfolio in the sector, through Spazio Industriale, a closed end Italian real estate fund managed by Pirelli RE
SGR. With an overall OMV of approx EUR728.6m as at 31 December 2007, the portfolio included an attractive combination of:

    *     398 income-producing assets with high quality tenants; OMV of approx EUR604m

    *     2 high-profile development projects:

    *     Edificio16 - Refurbished industrial historical building located in Milan; OMV of EUR30.9m
    *     Eastgate Park - Largest integrated industrial park in North-East Italy, located in Portogruaro (Venice); OMV of EUR77.9m

    *     16 vacant assets under conversion/disposal; OMV of EUR15.8m  

    Spazio's corporate, investment, asset management and specialized real estate services are provided by Pirelli RE Group through an
experienced and dedicated management team.

    Spazio Investment started unconditional trading on the AIM market of the London Stock Exchange in October 2006.  


This information is provided by RNS
The company news service from the London Stock Exchange
 
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