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Capital & Regional (CAL)

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Thursday 12 November, 2009

Capital & Regional

Interim Management Statement

RNS Number : 3753C
Capital & Regional plc
12 November 2009

12 November 2009

Capital & Regional plc

Interim Management Statement

Capital & Regional plc, the co-investing property asset manager, today presents its interim management statement for Q3 2009.


The key highlights since the announcement of our 30 June 2009 interim results are:

  • Successful completion of the £69m firm placing and open offer, resulting in the full repayment of the Group's revolving credit facility, leaving cash reserves of £12 million

  • Introduction of Parkdev as an anchor investor, providing opportunities for incremental investment in property funds and joint ventures, represented on the Board by two new non-executive directors, Louis Norval and Neno Haasbroek

  • Stabilisation of property valuations across the three UK funds, as yield compression compensates for continuing pressure on rental income

  • Exchange of contracts for the sale of the Group's wholly owned office building at 10 Lower Grosvenor Place for £10.5 million, representing an uplift of approximately £1 million to NAV

  • Completion of the Castleford and Brighton refinancings in the X-Leisure fund

  • Marketing of the Manchester Evening News Arena, in which the Group has a 30% interest

Hugh Scott-Barrett, Chief Executive, commented: 

"The completion of the capital raising has positioned Capital & Regional for growth as well as delivering increased stability to the Company's balance sheet.

Having stabilised in the third quarter of 2009, valuations in the UK fund businesses, particularly in retail warehouses, are trending higher in the fourth quarter. This reflects the strength of the investment market which is likely for the balance of this year to outweigh pressure on income.

We remain cautious about the outlook for tenant markets. Whilst the slowdown in administrations and the resilience of consumer demand are welcome developments, conditions for retailers are likely to remain challenging into next year."

In the current robust investment climate, there are increased opportunities for the funds to recycle capital from assets offering more limited asset management prospects thus helping to improve longer-term returns.  In these market conditions, we therefore intend to be disciplined in committing capital to the growing number of new investment opportunities which leverage our retail asset management capabilities."

Operating and financial review

Tenant markets

There are some signs of recovery in tenant markets, with levels of occupancy broadly stable or increasing and relatively low levels of new administrations in the quarter. However, downward pressure on passing rent has continued.

The key performance indicators on a like for like basis were as follows:

30 September 2009
30 June 2009
30 December 2008

Rent *
Rent *
Rent *
Rent *
Q3 2009 – number
Q2 2009
Q1 2009

* figures in brackets show the percentage of rent roll entering administration

Passing rent
30 September 2009
30 June 2009
30 December 2008


  • Occupancy across the three funds increased from 93.6% at 30 June 2009 to 94.2% at 30 September 2009, largely as a result of new lettings in each case.  Occupancy fell slightly in the German portfolio, but it continues to show very low vacancy rates compared to the UK funds.

  • There were relatively low levels of new administrations in the three UK funds in the quarter, with The Mall in particular seeing considerably fewer than in the first half of the year and making good progress in reletting. Of those Mall units that have gone into administration during 2009 and ceased to trade, nearly 60% have already been reoccupied.  There were no administrations in the German portfolio.

  • Passing rent, calculated for the three UK funds on a weighted average like-for-like basis, has fallen by 0.6% since 30 June 2009.  Rent reviews have been settled for new passing rent of £11.9 million in 108 units at 3.8% above ERV.  Despite challenging market conditionspassing rent of £4.1 million has been generated by new lettings and lease renewals in 67 units albeit at just over 15below ERV.  

  • Rent collection rates (adjusted for monthly payment plans and tenants in administration) continue to be strong, with 96.9% of rent being paid within 30 days of the September quarter day compared to 96.4% in June.

  Property investment markets

We announced the September fund valuations on 16 October 2009 as follows:

Value of properties
Underlying valuation change in quarter
Net initial yield
Unit value at 30 September 2009
Units owned by C&R
C&R share of fund

The percentage falls in The Mall and X-Leisure were considerably smaller than in recent quarters, which is a sign of stabilisation as shown by the movements in net initial yields underlying these valuations:

UK *
September 2009
June 2009

* weighted average. The German portfolio is not valued in Q3.

Increasing signs of transactional activity in the market suggests that this trend may continuewhich at least for the next quarter is likely to more than compensate for continuing pressure on income in tenant markets.  In the third quarter this particularly affected The Mall, where the recycling of tenants going into administration is a longer term process, as valuations fell despite a very slight hardening of yields.

The Junction saw a valuation increase of 1.2% as yields in the retail warehouse sector hardened.

Whilst The Mall and The Junction publish quarterly valuations, X-Leisure has recommenced the publication of monthly unit prices.  As shown below, the October fund valuation was slightly higher than in September, which provides further evidence of stabilisation in values.  The movement in unit price largely reflects the release of a provision for repair costs in one of the fund's properties.

Value of properties
Underlying valuation change in month
Net initial yield
Unit value at 31 October 2009

Our focus remains on creating value through asset management initiatives. Nevertheless, if the current strength in the investment market is maintained, a number of potential development opportunities in The Junction may be considered.

  Capital Raising

The Group's firm placing and open offer completed on 10 September 2009, raising £69.2 million (gross) in new equity, with the introduction of new cornerstone investors in Parkdev and their associates, who now hold 26.1% of the shares in the Company.  Louis Norval and Neno Haasbroek joined the board on 15 September 2009 as non-executive directors representing Parkdev.

The net proceeds of the Capital Raising were £62.8 million, £46.4 million of which was used to pay down the full balance outstanding on the Group's revolving credit facility.  The Group currently has cash of around £12 million and its £58 million central facility is undrawn.

Property disposals

The Group continues to look for other ways to free up capital and to this end has agreed the sale of its wholly owned offices at 10 Lower Grosvenor Place for £10.5 million. The property was shown at £10.1 million in the interim financial statements, comprising its valuation of £9.3 million at 30 June 2009 and an additional £0.8 million representing the value of the headlease that we are required to show under relevant accounting standards.  As a result, the sale is expected to result in a NAV uplift of approximately £1 million after sale expenses.  The transaction is due to complete in February 2010 and the proceeds will be partly used to pay down the outstanding debt of £7.4 million on the property, with the remainder available for future investments.

The Group has started to market the Manchester Evening News Arena with GE, its joint venture partner. The initial interest that has been shown is encouraging.

Fund refinancing

In October 2009 the X-Leisure fund's Brighton property, which had been financed through an asset securitisation maturing on 31 October 2009, was refinanced under the fund's central banking facility. Together with the separate refinancing of the banking arrangements for the Castleford property, this completes the stabilisation of the fund's financial position and gives it greater flexibility for the future

The Mall fund continues to look at a number of options in advance of the effective maturity of its bonds in 2012 which include, as previously mentioned, the use of cash which is being retained in the fund to reduce debt.

For further information:

Capital & Regional:

Hugh Scott-Barrett, Chief Executive

Tel: 020 7932 8000

Charles Staveley, Group Finance Director

Tel: 020 7932 8000


Martin Leeburn / Emma Burdett 

Tel: 020 7379 5151

  Notes to editors:

About Capital & Regional plc

Capital & Regional is the co-investing asset manager which specialises in town centre shopping centres, out of town retail parks, and urban entertainment complexes.  Capital & Regional founded The Mall and The Junction funds in conjunction with Aviva Fund Management.  It also founded the X-Leisure fund with Hermes Investment Management Limited, and has a number of other joint ventures and developments.  Its shares are quoted on the London Stock Exchange.

For further information see 

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 Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company 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 Company should not be relied upon as a guide to future performance.

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

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