Interim Management Statement

RNS Number : 8286E

Capital & Regional plc

16 May 2013

 



16 May 2013

Capital & Regional plc

(the "Company" or the "Group")

Interim Management Statement

For the period from 31 December 2012 to 15 May 2013

ASSET MANAGEMENT DRIVES SOLID OPERATIONAL PERFORMANCE AND

CONTINUED PROGRESS WITH THE GROUP'S STRATEGIC OBJECTIVES

Capital & Regional plc, the specialist retail property company, today announces its interim management statement for the period from 31 December 2012 to 15 May 2013.

Highlights

·     Solid operational performance in the UK Shopping Centre portfolio:

·     Occupancy up 0.9% year on year to 94.6%

·     Footfall has outperformed the national index by 1.3% in the year to date

·     Stable rental income across the Group's UK and German assets since 31 December 2012

·     Ongoing progress with active asset management initiatives:

·     14 new lettings secured, including two significant leases to TK Maxx and All Star Lanes now open at Great Northern unlocking the centre's potential

·     Eight lease renewals agreed and 31 rent reviews completed

·     Planning approval granted for The Hub leisure concept at Redditch and three out of four restaurant units already under offer, with Nando's as the anchor tenant; 16,000 sq ft gym under offer to Pure Gym

·     Planning consent granted for the £8 million reconfiguration of Waterside Lincoln; lettings agreed with Next, H&M and New Look who will anchor the centre and help to create the city's premier fashion destination

·     Successful programme of non-core asset disposals continues with sale of Hemel Hempstead at an advanced stage

·     Group's continued deleveraging achieved with a £17.4 reduction of Mall debt and proceeds of £30.6 million from the sale of X-Leisure.

Hugh Scott-Barrett, Chief Executive, commented:

"We have continued to apply the asset management expertise of our in-house teams to our portfolio, which has again led to a solid performance from our UK assets in the year to date, as demonstrated by the fact that our footfall outperformed national benchmarks, and by the year-on-year improvement in occupancy.  In addition, we increased the momentum of our leisure and fashion asset management initiatives during the first quarter, which will underpin the potential for future income and capital growth in our portfolio.

"We continue to make good progress in our plans to de-gear the Mall and dispose of non-core assets and expect to make further announcements by the time of our half year results."

Operating performance

New lettings, renewals and rent reviews

	3 months to March 2013
Number of new lettings	14
Rent from new lettings (£m)	1.2
Comparison to ERV (%)1	(1.8)
Renewals settled	8
Revised rent (£m)	0.5
Comparison to ERV (%)	(3.4)
Rent reviews settled	31
Revised passing rent (£m)	1.7
Uplift to previous rent (%)	-
Comparison to ERV (%)	9.4

¹ For lettings which did not include a turnover rent

The lettings shortfall against ERV reflects lettings involving the amalgamation of units where it has been difficult to maintain occupancy at full rent. Nevertheless, such initiatives are value accretive and are expected to result in higher rental growth. For example, at Camberley, TK Maxx has taken a newly created 22,000 sq ft store, which combined three smaller units to provide high quality space that meets retailers' current requirements.

At Wood Green, TK Maxx has extended into the former Peacocks store taking an additional 11,000 sq ft of space, to increase its store to a total of 45,000 sq ft.

In Blackburn, Debenhams has extended its store by 6,500 sq ft to a full range 95,000 sq ft store and Card Factory has taken a 2,700 sq ft unit.

Since 30 April 2013 there has been a further 10 year letting to Schuh at Blackburn.

Footfall

The UK Shopping Centre footfall has outperformed the benchmark footfall index by 1.3% year to date. Shopper numbers have declined by 3.1% over the first four months of the year compared to a decline of 4.4% in the benchmark index, which reflects the trend reported by retailers across the UK as a result of poor weather and continued economic headwinds at the start of the year. Our investments in centres' websites, technology and Wi-Fi continue to support footfall at our centres.

Occupancy levels

	31 March 2013	31 March 2012	31 December 2012
Occupancy (like for like)	%	%	%
UK Shopping Centres	94.6	93.7	96.7

The UK Shopping Centres occupancy rate of 94.6% at 31 March 2012 has increased 0.9% year on year. The fall since the year end reflects the impact of tenant failures and units closed by administrators, which reduced occupancy by 1.0%. There has also been the normal anticipated seasonal reduction in temporary lettings since the year end.

These robust levels of occupancy have been achieved despite 9% of passing rent being affected by administrations during the last 15 months.

Administrations

Reflecting overall trends across the UK, there were 16 administrations in the Group's UK portfolio during the first quarter of 2013. 12 of these, with a passing rent of £1.2 million involved HMV, Jessops and Republic.

UK Shopping Centres		3 months ended 31 March 2013	Year ended 30 December 2012
Administrations (units)		16	69
Passing rent (£m)		1.4	5.8

Our asset management teams have focused on re-letting the units impacted by administration. The HMV in Wood Green has been let to Morrisons at the same rent. The Jessops at Redditch has re-opened following the sale of the business by the administrator. One further unit has been re-let and four others continue to trade. Of the nine closed units, solicitors have been instructed on one and a further three form part active asset management initiatives. The remainder are being marketed and are already receiving good interest from retailers attracted by our centres' dominant positions in their local communities.

There have been seven retail insolvencies in the UK Shopping Centre business to date during Q2 with passing rent of £0.3 million. As at 30 April 2013 there were eight units trading in administration with passing rent of £0.7 million (0.8% of passing rent).

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

Rental income

Passing rent (like for like)	March 2013	March 2012	December 2012
	£m	£m	£m
UK Shopping Centres	81.3	82.4	82.3
Leisure	7.0	6.7	6.6
Total UK	88.3	89.1	88.9
	€m	€m	€m
Germany	31.8	32.0	31.8

The UK Shopping Centre business has seen only a small reduction in passing rent since December owing to the insolvencies that occurred during the first quarter and a seasonal reduction in income from temporary tenants.

Contracted rent in UK shopping centres, however, is stable year on year at around £85.5 million.

The increase in Leisure reflects the letting to All Star Lanes at Great Northern.

Asset management and development

At the Waterside Centre in Lincoln, planning permission has been received for the reconfiguration of the scheme to increase the lettable space by over 15%. We have agreements with Next and New Look in agreed form and an agreement with H&M is in advanced legals. Together these lettings account for 52,000 sq ft of space and represent a key step towards making the centre Lincoln's fashion destination of choice. A further 8,000 sq ft unit is under offer to Internacionale. Construction work is scheduled to start on site in the third quarter with a phased handover to tenants between September 2013 and July 2014.

In Redditch, planning permission has been granted for the change of use for the former TJ Hughes unit adjacent to the cinema into four restaurant units and a gym. Offers have been received from three operators for these units including Nando's who will anchor the restaurant quarter. On the lower floor of the same unit, terms have been agreed with Pure Gym for a 15 year lease. The centre's online presence has been improved with the launch of the Kingfisher website.

In Germany, Real have extended their lease at Bruhl by five years to 2019.

At Great Northern, All Star Lanes opened in March providing another attraction to this location.  As a result a further letting has been made to Almost Famous Burgers on a 10 year term. We are currently negotiating leases with a restaurant and with a night club operator which has sites across the north of England to take space in the scheme.

Disposals

We continue to make good progress with our plans to de-gear the Mall and dispose of non-core assets in the UK and Germany. During the period, the Group disposed of its interest in FIX for £465,000, as well as a parcel of ancillary land for £480,000, after disposal costs. We are currently progressing discussions surrounding a number of potential transactions and expect to be in a position to provide a further update in this regard around the time of our half year results.

Finance

Fund property valuations

On 15 April 2013, we announced the first quarter valuation for The Mall had decreased by 1.6%, driven by a fall in income largely resulting from tenant administrations.

Purchase of Mall units

On 4 January 2013, the Group purchased 1.6 million units in The Mall Fund at £0.25 per unit compared to a unit value of £0.39 per unit at 31 December 2012. The total consideration was £0.4 million, increasing the Group's holding in The Mall Fund from 20.15% to 20.33%.

Cash and debt

As at 31 March 2013, the Group had cash of £31.1 million and there were no drawings outstanding on the Group's revolving credit facility.

Debt outstanding in the Mall was £547 million at 30 April 2013 at an LTV of 65.3%. We expect to reduce this through disposals during the course of the year and, at a level of around £400 million in the current banking environment, we are confident this can be refinanced.

The net debt to value in the Mall at 31 March 2013 was 54.9%.

Good progress is being made on the German debt refinancing which is due by the end of this year.

- ENDS -

For further information:

Capital & Regional:
Hugh Scott-Barrett, Chief Executive	Tel:  [phone]
Charles Staveley, Group Finance Director	Tel:  [phone]
FTI Consulting	Tel: [phone]
Stephanie Highett Richard Sunderland Will Henderson Aleka Bhutiani

 

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 20.3% 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 has a number of other joint ventures and wholly-owned properties.

For further information, please 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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