Interim Management Statement

RNS Number : 8885R

Capital & Regional plc

11 November 2011

 



11 November 2011

Capital & Regional plc

Interim Management Statement

For the period from 30 June 2011 to 10 November 2011

Capital & Regional plc, the specialist retail property company today announces its interim management statement for the period from 30 June 2011 to 10 November 2011.

Highlights

The key events during the period were:

·     Continued momentum on new lettings, lease renewals and rent reviews across all three UK funds at or above ERV resulting in a year on year increase in occupancy of 0.8%.

·     Mall footfall has increased quarter on quarter in 2011 and for the year to date has outperformed the national index by 3.1% demonstrating the well positioned nature of the portfolio.

·     Encouraging progress on asset management initiatives in particular at Thurrock, Oldbury and Hemel Hempstead.

·     Strategic disposals strengthening the quality of the portfolio and facilitating debt repayment in The Mall of £104.0 million.

·     The Junction made a capital distributionof £48.5 million, of which the Group's share was £6.5 million, and a debt repayment of £39.6 million following the disposal of Maidstone.

Hugh Scott-Barrett, Chief Executive, commented:

"Capital & Regional's strong operating performance reflects the impact of the actions taken in the last 18 months.  Property valuations have been broadly stable across the businesses.  Occupancy has improved and footfall in the shopping centres is up.  Fund disposals in the quarter have helped de-gear the balance sheet and recycle cash back to the group.  I believe that C&R is therefore not only well placed to deal with challenging market conditions but also has the opportunity to exploit a number of accretive asset management opportunities within the existing portfolio."

Operating performance

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

New lettings, renewals and rent reviews

There has been further progress on new lettings, lease renewals and rent reviews across the three UK funds during the third quarter of 2011. Against a background of challenging conditions in the retail sector we are continuing to advance negotiations with a number of retailers for new space. However, new lettings are taking longer to complete in the current environment.

·      New lettings were completed in 31 units for headline rent of £3.7 million at 4.8% above ERV;

·      Lease renewals were agreed in 19 units for contracted rent of £0.9 million at ERV. Of these, 11 units contained turnover rent top ups; and

·      Rent reviews were settled in 29 units for new passing rent of £4.5 million, with an uplift to the previous passing rent of 4.5%.

Significant new lettings during the third quarter of 2011 were made in The Mall to Jimmy Spice Restaurants in Luton and Sports Direct at Sutton Coldfield and Maidstone.

In X- Leisure lettings were made to Mitchells and Butler, Grosvenor Casinos and TGI Fridays at Leeds, Wilmslow and Castleford respectively.

The Junction completed lettings to The Range and Subway at Bristol and Petstop at Telford.

In Germany 3 new lettings were made for €0.1 million.

Since 30 September 2011, there have been a further 5 new lettings in The Mall for contracted rent of £0.5 million all at or above ERV. These include lettings to Barclays at Sutton Coldfield and Clarks in Blackburn. There has also been a significant lease extension with Iceland at Uxbridge. The Junction has had 1 new letting for contracted rent of £0.2 million which was above ERV.

Occupancy levels

Occupancy (like for like)	September 2011	June 2011	September  2010
The Mall	95.8%	95.3%	95.2%
The Junction	94.7%	93.6%	95.7%
X-Leisure	95.9%	95.0%	94.6%
UK funds	95.7%	95.0%	94.9%
Germany	94.3%	95.7%	96.7%

The Mall occupancy rate of 95.8% at 30 September 2011 has improved by 0.5% over the quarter.

The Junction's occupancy rate of 94.7% at 30 September 2011 has improved by 1.1% compared to 30 June 2011 following lettings to Subway at Bristol and Petstop at Telford. The Junction currently holds a development void of 1.4% which is included in the number above.

Occupancy in the German portfolio was 94.3% at 30 September 2011 due to two lease expiries in Hamburg. Terms have been agreed for a new letting of one of these at an increased rent to commence in 2012 following refurbishment.

Administrations

	The Mall	The Junction	X-Leisure	UK
Administrations (units)
6 months to 30 June 2011	27	2	5	34
3 months to 30 September 2011	13	1	1	15
Period to 30 September 2011	40	3	6	49
Administrations for the 3 months to 30 September 2011
Passing rent (£m)	0.5	0.1	0.1	0.7
Still trading (units)	9	-	-	9
Passing rent still trading (£m)	0.3	-	-	0.3

There were 15 administrations in the three UK funds during the third quarter of 2011 with a passing rent of £0.7 million of which £0.3 million (43%) is still being received.

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

Cash collection

Rent collection rates in the UK funds (adjusted for tenants in administration) continue to be strong, with 97.9% of rent being paid within 30 days of the due date the same as at June 2011.

Footfall

The Mall's footfall has outperformed the national footfall index, with an increase of 2.3% in shopper numbers over the first 10 months of the year compared to a decline of 0.8% in the national index, demonstrating the well positioned nature of the portfolio. Footfall in the third quarter 2011 was 2.3% higher than the same quarter in 2010 and 5.1% greater than the second quarter in 2011.

Rental income

(a) Passing rent

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

Passing rent (like for like)	September 2011	June 2011	December 2010
	£m	£m	£m
The Mall	75.9	76.6	77.1
The Junction	16.8	17.0	17.1
X-Leisure	40.8	40.9	40.7
UK funds	133.5	134.5	134.9
	€m	€m	€m
Germany	43.9	43.9	43.6

The decrease in The Mall's passing rent of £0.7 million is principally due to the TJ Hughes administration in Maidstone which was closed during the quarter and the vacation following expiry of the Disney Store lease in Luton. The fall in The Junction's passing rent of £0.2 million was due to the re-gear of the Furniture Village lease at Thurrock where a rent free period was granted.

The decrease in X-Leisure's passing rent of £0.1 million reflects two lease surrenders for a premium of £0.2 million. The units concerned have been re-let but are still in rent free. The immediate impact of these surrenders has been offset by uplifts of £0.1 million from rent reviews completed during the quarter.

(b) Contracted rent

The Mall had a further £5.5 million of contracted rent at 30 September 2011 which is not included in the passing rent figures above.

The Junction had a further £1.6 million of contracted rent and X-Leisure had an additional £0.9 million contracted rent at 30 September 2011.

During October 2011 new lettings in the three UK funds increased contracted rent by a further £0.9 million.

Asset management and development

C&R is highly selective in terms of acquisitions and will only pursue opportunities which deliver attractive risk adjusted returns without stretching the balance sheet. Capital for new asset management initiatives will be recycled from within existing businesses into projects which will deliver value using our in-depth knowledge of retailer requirements in specific locations. As referred to in the interim report there are a number of ongoing development opportunities which are updated below.

At Thurrock planning permission has been granted subject to a s106 agreement for the redevelopment of the former cinema and, subject to finalising agreements with tenants, building work is expected to commence in early 2012.

At Hemel Hempstead, plans are currently well advanced for a comprehensive redevelopment and re-branding of the scheme with the swimming complex and Luminar nightclubs being replaced by family orientated branded restaurants. A planning application is being submitted to the local authority following positive pre-application discussions. Overall the reconfiguration project is expected to be accretive but there will be a temporary reduction in property valuation of approximately £1.7 million.

At Oldbury a variation to the existing planning consent has been submitted and is expected to be determined at the end of November 2011.

At Great Northern terms have been agreed and we are now in legals with a bowling operator on the ground floor and negotiations are at an advanced stage with a restaurant group on the first floor for the space which was to be occupied by Luminar.

At The Waterside Lincoln Top Shop has fully refitted their store and, in addition terms have been agreed with two fashion retailers, and terms have been agreed for a letting to an Apple franchise at the entrance to the scheme which is expected to be open for Christmas.

The Mall is preparing a planning application for the centre extension at Walthamstow in response to continued encouragement from the local authority and positive demand from retailers.

Finance

Fund and property valuations

On 12 October 2011 we announced the third quarter UK fund property valuations. The Mall valuation decreased 1.3% principally as a result of the TJ Hughes administration referred to earlier. The Junction showed a marginal decline of 0.3% and X-Leisure increased by 0.9%. Further details are contained in the fund valuation announcement made on 12 October 2011.

The X-Leisure fund, which carries out monthly valuations, reported a property valuation as at 31 October 2011 of £555.6 million at a net initial yield of 6.6%. This is down 0.2% from the September valuation.

Purchase of Mall units

On 11 October 2011, the group purchased 6.1 million units in The Mall Fund at £0.33 per unit compared to a unit value of £0.43 per unit at 30 September 2011. The total consideration was £2.0 million and this increased the holding in The Mall Fund to 17.4%.

Property disposals

There have been the following property disposals since 30 June 2011:

·     The Junction sold the South Aylesford Retail Park in Maidstone in August 2011 for £70.6 million at a net initial yield of 5.87%

·     The Mall sold The Alhambra Centre Barnsley and The Cleveland Centre Middlesbrough in September 2011 for £108.1 million at a  net initial yield of 8.6%

Financing

The Mall repaid debt of £104.0 million with the proceeds from the sales of Barnsley and Middlesbrough and its operating surplus, leaving outstanding debt of £662.3 million at 31 October 2011.

The Junction repaid debt of £39.6 million with the proceeds from the sale of Maidstone, leaving outstanding debt of £163.7 million at 31 October 2011 and made a capital distribution of £48.5 million in November 2011 of which the group share was £6.5 million

There has been no drawdown on the £58.0 million central credit facility.

- 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]
Richard Farnsworth	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 and The Junction funds in conjunction with Aviva Investors. Capital & Regional acts as Property and Asset Manager for the Mall and Junction funds and holds 17.4% and 13.4% respectively of these funds.

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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