Interim Management Statement

RNS Number : 7167Q

Capital & Regional plc

09 November 2012

 



9 November 2012

Capital & Regional plc

Interim Management Statement

For the period from 30 June 2012 to 8 November 2012

Capital & Regional plc, the specialist retail property company today announces its interim management statement for the period from 30 June 2012 to 8 November 2012.

Highlights

The key events during the period were:

·    Acceleration of strategic focus on UK Shopping Centres through the sale of The Junction realising £14.1million.

·    Occupancy improving over the quarter with valuations and passing rent broadly stable

·    Group debt position strengthened by the signing of a new £25m central facility to 2016 and extension of the Great Northern facility by one year to October 2014

·    Net debt to value in The Mall now 55% following £80.1 million debt repayment from sale of Norwich

·    Debenhams extending and refitting their store in Blackburn

·    Mall footfall has outperformed the national index by 3.8% year to date demonstrating the well positioned nature of the portfolio.

Hugh Scott-Barrett, Chief Executive, commented:

"The sale of The Junction is an important step in accelerating Capital & Regional's focus on our core UK shopping centre business.  Following on from eight earlier property sales which were sold for £478 million, 2.3% ahead of prevailing valuation, we have generated an annualised return of 21% since the restructuring in 2009.

Our core business has continued to perform well.  The slight uplift in valued income reflects continued progress in the re-letting of space vacated by retailer administrations in the first half of the year.  The pipeline of demand for space continues to provide a cushion against further retailer failures.

I expect that there will be opportunities to release more capital from non-core activities in the next three to six months."

Operating performance

The third quarter performance continued to demonstrate the overall affordability and well positioned nature of our property portfolio in the UK.

New lettings, renewals and rent reviews

UK Shopping Centres

There has been a good volume of new lettings, lease renewals and rent reviews across the UK Shopping Centre Business during the third quarter of 2012. In a challenging retail environment we are continuing to negotiate with a number of retailers for new space although deals are taking longer to complete.

	6 months to 30 June 2012	3 months to 30 September 2012	9 months to 30 September 2012
Number of new lettings1	29	15	44
Headline rent (£m)	2.1	0.6	2.7
Comparison to ERV (%)	(1.5)	8.9	0.5
Number of lease renewals	10	10	20
Revised rent (£m)	1.0	0.5	1.5
Comparison to ERV (%)	0.2	1.7	0.8
Number of rent reviews settled	37	83	120
Revised passing rent (£m)	2.3	4.6	6.9
Uplift to previous rent (%)	3.2	0.2	1.2
Comparison to ERV (%)	7.0	0.0	2.4

^{1 Lettings with an element of turnover rent have been excluded as has the re-letting of the TJ Hughes space in Maidstone to Beale's on a flexible basis}

In addition to the lettings shown above there were six lettings in Q3 (YTD: 12) with a base rent of £0.3 million (YTD: £1.0 million) which included an element of turnover rent targeted to top up the base rent to ERV.

In the shopping centre portfolio significant new lettings were made to The Entertainer at Redditch, Deichmann at Walthamstow and Vodafone at Luton. In Camberley Trespass has taken a unit. Whilst at Lincoln, O2 and Vision Express have signed new 10 year leases. Cloud Networks, a wi-fi provider has signed an agreement to provide free wi-fi access across the portfolio providing a new income stream and an additional service to our customers.

Renewals have completed with Aldo at Wood Green, Superdrug in Blackburn and Model Zone at Maidstone.

Since 30 September 2012 Debenhams have signed up to a 4,000 sq ft extension of their space at Blackburn and will be refitting their entire store. An Apple franchise has taken a unit at Sutton Coldfield.

UK Leisure

In the UK Leisure Business four new lettings were completed during the quarter with passing rent of £0.4 million, at 3.7% above ERV. A further four new lettings were concluded with base rent of £0.1 million with additional turnover rent targeted to achieve ERV. The most notable letting during the quarter was of the nightclub at Xscape Milton Keynes to Wonderworld.

At the Great Northern Warehouse, the All Star Lanes agreement for lease is now unconditional and they are fitting out the unit to commence trading in early in 2013. The entrance to the casino at this property has been reconfigured to improve the operating ambience.

Footfall

The Mall's footfall has outperformed the benchmark footfall index by 3.8% year to date. The Mall's footfall has declined by 0.9% in shopper numbers over the first ten months of the year compared to a decline of 4.7% in the benchmark index, demonstrating the strength of the portfolio.

Occupancy levels

Occupancy (like for like)	September 2012	June 2012	September  2011
UK Shopping Centres	95.0%	94.6%	94.9%
Leisure	96.0%	95.9%	95.5%
UK businesses	95.3%	94.9%	95.1%
Germany1	98.7%	98.7%	98.6%

 ¹ Excludes portfolio 4

The UK Shopping Centres occupancy rate of 95.0% at 30 September 2012 has improved by 0.4% over the quarter reflecting the positive progress made on lettings and renewals.

Administrations

	UK Shopping Centres	Leisure	UK
Administrations (units)
6 months to 30 June 2012	49	3	52
3 months to 30 September 2012	9	1	10
Period to 30 September 2012	58	4	62
Administrations (Passing rent)	£m	£m	£m
6 months to 30 June 2012	4.8	0.4	5.2
3 months to 30 September 2012	0.3	-	0.3
9 months to 30 September 2012	5.1	0.4	5.5

There were 10 administrations in the UK during the third quarter of 2012 with a passing rent of £0.3 million. At 30 September 2012 there were eight tenants in administration with passing rent of £0.5 million who were still trading from their units.

There were no administrations in the German portfolio during the third quarter.

There have been five retail insolvencies in the UK Shopping Centre Business during October 2012 with passing rent of £0.4 million. There has been no impact arising from the administration of Comet.

Cash collection

Rent collection rates in UK shopping centres (adjusted for tenants in administration) continue to be strong, with 97.0% of rent and service charge being paid within 14 days of the due date compared to 96.0% as at June 2012.

Rental income

Passing rent remained broadly stable across the UK funds and in the German portfolio during the third quarter.

Passing rent (like for like)	September 2012	June 2012	September 2011
	£m	£m	£m
UK Shopping Centres	81.6	81.6	82.1
Leisure	51.0	51.3	51.2
Total UK	132.6	132.9	133.3
	€m	€m	€m
Germany1	32.1	32.4	32.5

¹ Excludes portfolio 4

Passing rent in all segments was largely unchanged over the quarter. The UK Shopping Centre business has seen a reduction in passing rent year on year owing to the insolvencies that occurred during the first half of 2012.

Asset management and development

Progress continues to be made in advancing asset management initiatives across the portfolio.

At Hemel Hempstead work on pre-letting the development is progressing and 51% of the scheme by rental value (64% by area) is in solicitors' hands.

At Lincoln terms have been agreed with the two major retailers for the reconfiguration of this scheme and the legal documentation with these retailers is being finalised.

In the Mall the development proposals at Camberley have been gaining momentum. We have appointed Centros to work alongside us and with the Council to provide further impetus to this opportunity.

Finance

Fund and property valuations

On 19 October 2012, we announced the third quarter valuations for The Mall and X-Leisure funds. The Mall valuation decreased 1.1% driven primarily by outward yield shift of 9 bps. As with recent valuations schemes in London are showing strength while those outside of London have been less resilient.

The value of the X-Leisure fund properties increased by 0.6% during the quarter.

Further details are contained in the fund valuation announcement made on 19 October 2012.

Disposals

On 19 October 2012 the Group sold its 13.43% interest in The Junction for expected proceeds of £14.1 million including performance fees. This represents a return of 21.0% since the fund restructure in 2009. The proceeds have been used to reduce borrowings and the disposal is not expected to have a material impact upon recurring profitability. Further details can be found in the announcement made on 19 October 2012.

The Mall sold The Castle Mall, Norwich in July 2012 for £77.3 million at a net initial yield of 7.8%. The Mall used the proceeds and its operating surplus to repay debt of £80.1 million in July, leaving outstanding debt of £570.9 million at 30 September 2012. Net debt to property value is now 55% in The Mall.

Following the All Star Lanes letting the Group has commenced marketing the Great Northern Warehouse.

Financing

On 31 August the Group signed a new revolving credit facility for £25 million, a reduction from £58 million and with the maturity extended to July 2016 from September 2013. These changes better reflect the Group's working capital requirements and reduce the cost of the undrawn facility. At the same time the Group extended the maturity of the loan on Great Northern Warehouse by one year to October 2014.

Debt repayments were made using the Group's central facility in respect of the Hemel Hempstead and Great Northern Warehouse properties totalling £8.1 million. Following the disposal of the Group's interest in The Junction £12.8 million of the central facility has been repaid with £2 million remaining drawndown.

- ENDS -

For further information:

Capital & Regional:
Hugh Scott-Barrett, Chief Executive	Tel:  [phone]
Charles Staveley, Group Finance Director	Tel:  [phone]
Maitland:
Martin Leeburn	Tel:  [phone]
Daniel Yea	Tel:  [phone]

Notes to editors:

About Capital & Regional plc

Capital & Regional is a specialist property company with a track record of developing asset management opportunities in town centre shopping centres and out of town retail parks.

Capital & Regional founded The Mall in conjunction with Aviva Investors. Capital & Regional acts as Property and Asset Manager for the Mall and holds 20.1 % of this fund.

Capital & Regional & AREA Property Partners each hold a 50% interest in a German retail property portfolio which is managed by Garigal Asset Management GmbH, in which Capital & Regional holds a 30% interest. 

Capital & Regional also has an 11.9% stake in the X-Leisure fund, which is managed by X-Leisure Limited in which Capital & Regional holds a 50% interest.

Capital & Regional has a number of other joint ventures and wholly-owned properties.

For further information see www.capreg.com

Forward Looking Statements

This document contains certain statements that are neither reported financial results nor other historical information.  These statements are forward-looking in nature and are subject to risks and uncertainties.  Actual future results may differ materially from those expressed in or implied by these statements.  Many of these risks and uncertainties relate to factors that are beyond Capital & Regional's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Group's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis.  Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this document.  Capital & Regional does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document.  Information contained in this document relating to the Group should not be relied upon as a guide to future performance.

 

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