Interim Results for the six months ended 30 June 2009

Real Estate Opportunities plc (‘REO’ or the ‘Company’), a property company listed in London, Dublin and The Channel Islands with an established investment and development property portfolio in Ireland and the UK, today announces its interim results for the six months ended 30 June 2009.

Chairman’s statement

Introduction
This has been an extremely difficult period for the Company. As previously highlighted, conditions in the world economy and capital markets in the past 18 months have created a very challenging operating environment for property companies such as REO. In addition, Ireland, where REO has extensive exposure, is facing the biggest contraction of any developed economy (a 13.5% fall in GDP in 2008-2010 according to the latest report from the IMF(1)) as well as severe instability in its banking sector. This combination of economic contraction and scarce credit has created an unprecedented situation in the property market leading to almost complete absence of transactions in the market in the last six months. Whilst the UK property market is undoubtedly experiencing similar problems, we believe that the Irish property market has been particularly impacted, as the market awaits the proposed creation of a National Asset Management Agency (“NAMA”) to acquire property loans from Irish lenders.

The Company welcomes the proposal for NAMA - the independent asset management agency - and its objective of maximising the value of the assets under its control over a longer term time horizon. The Company also welcomes the initiative’s objective of ensuring stability in the Irish commercial property market and the banking sector. In addition, it is expected that NAMA will have access to longer term funding than the current Irish lenders and that the injection of new liquidity to the Irish banking sector will enable the Irish economy to stabilise and in due course return to growth.

The draft NAMA legislation is expected to be passed in the autumn of 2009 and it is expected that the agency will be fully operational by the end of this year. While the process of establishing NAMA continues and uncertainty remains for both lenders and investors as details on the valuation at which the loans will transfer to NAMA have not yet been determined, the Irish property market has come to a standstill with virtually no transactional activity and a lack of clarity on values. In the first half of the year, ransactions totalling €42 million have been completed. This compares with just under €500 million for the 12 months of 2008 and €1.9 billion in 2007 (2)(4). As the market in Ireland for investment and development properties is inactive, the Directors have appointed the Investment Adviser to conduct the 30 June 2009 valuations of the REO property portfolio. I refer you to the Investment Adviser’s report, which details the valuation methodology further. The portfolio will be valued by external valuers as at 31 December 2009.

The total property portfolio value was £1,622 million (31 December 2008: £1,910 million), representing a reported decrease since year end of 15%. This reported decrease in the portfolio valuation is due to a revaluation downwards after capitalised costs of 9% on average across the portfolio since 31 December 2008, which was further impacted from the foreign exchange movement as the euro weakened against sterling in the six months to 30 June 2009. REO’s UK portfolio, which includes Battersea Power Station, saw a revaluation decline of 15%, whilst the Ireland investment and development portfolio values declined on average by 9% in the past six months.

This has resulted in a Diluted European Public Real Estate net asset value per share (“EPRA NAV per share”) of 30.9p, representing a fall of 70% from the 104.1p recorded at 31 December 2008.

Business Activity
Although we continue to be extremely cautious about the outlook for the overall property market in Ireland and the UK, the Company maintains its long-term perspective and its principal objective of outperforming the market through this current cycle.

The investment portfolio continues to perform well, especially in light of current market conditions. Average portfolio occupancy remains high at over 90%, while the average lease length is 12 years. Given the market environment, this performance is impressive and the Board is pleased with the intense asset management as a key facet of the Company’s strategy in driving cash flow, particularly in these difficult times.

With regard to the development portfolio and as previously highlighted, the Company has taken a prudent approach to timing of its development pipeline and we started this year with a much lower level of development completions due in the next two years than previously was the case while there is also appropriate flexibility on start dates. The Company continues to pursue appropriate planning permissions as well as working towards submitting planning applications in due course for various projects to position the Company for the longer term when the market stabilises and funding becomes more available. I am most pleased to report on the planning permission application for our landmark Battersea Power Station, which was submitted in July 2009. I refer you to the Investment Adviser’s report for further detail on progress on both the investment and development portfolio during the period.

Financing
All REO loans are in compliance with agreed covenants, with the exception of one bank facility of £226 million with Bank of Scotland and Bank of Ireland, where a waiver had not been received as at the reporting date. We remain confident that this waiver will be received in due course. For the purposes of our interim financial report, this loan is classified as due within one year.

As highlighted above, NAMA is expected to be fully operational by the end of the year but until then, bank finance continues to be very limited. We are continuing to work closely with our existing lending banks to renew debt facilities where necessary. The banks are responding positively to our proactive approach and have been willing to facilitate us in this regard. Extensions of facilities have been achieved albeit generally for quite short periods. Bank loans amounting to £556 million and £201 million are due for repayment by the end of 2009 and 2010 respectively. The Board’s continued priority is to safeguard the Company’s financial position and while we are concerned about the impact of this short term uncertainty on the Company’s performance, your Board and the Investment Adviser are ensuring that we continue to maintain our strong relationships with our lenders until the longer term solution in the form of NAMA regarding land and development bank loans is resolved. We continue to monitor covenant reporting requirements and as such are able to discuss any possible breaches with our lenders in advance of covenant breaches materialising. To that end, we remain confident that in the event there are breaches in the Group’s banking covenants, we can renegotiate covenants or receive waivers with our banks if required.

Once the agency is operational and liabilities are transferred to the agency in due course, NAMA will be able to buy and sell assets, manage the loans and use powers to recover debts. We remain confident that, as with our existing lenders, NAMA will also be supportive of the REO portfolio, due to the quality and location of the Group’s development sites. The Company is also actively progressing its development proposals across all sites, including applications for planning permission where appropriate, to reinforce asset values and mitigate the impacts of the general decline in property values. This will strengthen our ability to satisfy future loan to value covenants within our loan facilities, which will enable the Group to take advantage of development opportunities when a favourable market returns.

However, until the agency is operational, the short term outlook for the Company is one of caution as uncertainty regarding its debt position remains.

Going Concern
At 30 June 2009 the Group had total borrowings of £1,621 million. At that date, the Group had cash, cash equivalents and restricted cash of £61 million and a deficit on consolidated shareholders equity of £88 million.

The Group has an investment and development property portfolio valued at £1,622 million. The Company has prepared a financial plan for the period to 31 December 2010. A number of key assumptions have been made in preparing this plan, including: bank facilities that are due in 2009 and 2010 amounting to £556 million and £201 million respectively will be rolled over and renewed on broadly similar terms; if there are further declines in values which may result in breaches of loan facility covenants, it is assumed that the existing facilities will remain in place and be renewed, as is consistent with recent experience; and the Group will realise £35 million to £40 million in cash following the completion of one of a number of corporate transactions that are currently being explored. Based on these assumptions, the Board believes that there is adequate cash and cash equivalents to meet its working capital requirements until November 2010.

Board Changes
During the period, Guy Leech, Group Finance Director of Treasury Holdings resigned from the REO Board to pursue other business opportunities and we wish him well and thank him for his important contribution to the Company for the past few years. The Board is pleased to welcome Robert Tincknell, who was appointed in June, to the REO Board. Robert is currently Managing Director of Treasury Holdings UK Limited. He has worked extensively in the UK property investment and development market spanning a period of 20 years. Robert worked previously as Managing Director of the Commercial Division at The Berkeley Group plc.

Outlook
The fallout from the global economic downturn and Ireland’s own difficulties in both the economy and banking sector continue to impact the performance of the business severely, as evidenced in this set of results. Uncertainty regarding the prospects for the Irish economy and property market, in particular, remains. Although encouraging progress has been made by the Irish government in taking swift actions to restore some stability to both the country’s public finances and the banking sector, including the creation of NAMA, much work remains if the Government is to meet its target of returning to growth in 2011. In the meantime, it can be expected that property investors and tenants will continue to experience significant challenges. Although the underlying REO business continues to perform relatively well in a difficult market and the Company maintains its long term perspective, we await the final outcome of NAMA and its implications for the Company in the coming months, as until the Company reaches some certainty around future banking arrangements and its financial position, the
Board retains its cautious outlook for the rest of this financial year