Interim Management Statement

CAPITAL SHOPPING CENTRES GROUP PLC

INTERIM MANAGEMENT STATEMENT FOR THE PERIOD FROM 1 JULY 2010 TO 3 NOVEMBER 2010

Capital Shopping Centres Group PLC today announces its interim management statement for the period from 1 July 2010 to 3 November 2010.

David Fischel, Chief Executive of Capital Shopping Centres Group PLC, commented:

"CSC has made good progress since our interim results with continuing active management of our centres and the fundamentals of our business remain strong. The impact of the reduced supply of new high quality retail space is increasingly apparent in letting negotiations. Our relationship with the major retailers and our understanding of their space requirements has enabled CSC to conclude a substantial number of lettings in the period. With footfall continuing to increase on a year on year basis, we are benefiting from the trend for retailers and consumers to focus on pre-eminent destinations in which to trade and shop."

Highlights of the period

o Operational recovery continues - occupancy increased to 98.8 per cent (30 June 2010: 98.1 per cent)

o Positive letting activity - 104 lettings agreed since 30 June 2010, generating an uplift of £3.5 million in annual passing rent. The 235 new lettings in the year to date represent over 10 per cent of CSC's units

o On its first anniversary, footfall for the year at the highly successful extended St David's, Cardiff, has been estimated at 36 million. The new extension is now 83 per cent committed by area and income, up from 70 per cent and approximately 65 per cent respectively on opening day

o Organic growth - continued progress with the group's active management projects such as the leisure and catering area remodelling and anchor store strategy at Metrocentre, Gateshead

Operational recovery continues

o Occupancy of established centres has increased further to 98.8 per cent (30 June 2010 - 98.1 per cent). Tenant failures have continued to reduce (tenants occupying 6 units entered administration in the quarter, first half 2010 41 units).

o CSC has seen discernible improvement in the occupational letting market for its high quality locations, especially in demand from retailers for larger units where early signs of the impact of supply constraint are being seen. The letting market for catering units remains strong.

During the period CSC has achieved 104 new lettings for £11.8 million aggregate passing rent, an increase of £3.5 million over previous rent for those units. As at 30 September 2010 a further 182 lettings were under offer or in advanced negotiations for an aggregate £24.7 million new annual passing rent (£16.6 million previous annual passing rent).

o 44 of the 104 new lettings are long-term, generating an uplift in annual rent of £4 million to £8 million. In aggregate, these terms are at a narrowed discount to ERV of around 7 per cent

o 53 short-term leases were signed, at passing rent in aggregate in line with previous rent, with progress continuing to be made on securing improved terms on short term lettings

o Footfall has remained strong during the third quarter, up 3 per cent year-on-year for CSC's established centres.

o A year after opening, the award-winning extension to St David's, Cardiff, is 83 per cent committed in line with target. The number of stores open has more than doubled in the year to 103 including 63 retailers new to Wales and at least ten more stores are expected to open before Christmas. New brands recently committing to their first store in Wales include Clas Ohlson and Jo Malone.

o At Braehead, Glasgow, our flagship shopping centre in Scotland at the heart of CSC's major and exemplary regeneration project, CSC has significantly enhanced the tenant mix. Following Primark's successful move in July to a new 80,000 sq. ft. store in the former Sainsbury's unit, H&M are on target to open their new full line store in the vacated Primark unit by Easter 2011.

o A major value fashion anchor is close to exchange in the former Woolworth's store at Metrocentre, Gateshead, with a target opening of July 2011. Along with the opening in September of the first combined TK Maxx/Homesense store, this would enhance CSC's anchor store strategy for the centre.

o Eldon Square, Newcastle, along with its neighbouring retailers in the city centre, last week started to trade permanently extended opening hours. The initiative met with strong support from retailers both inside and outside the centre.

Organic growth

With 13 prime regional shopping centres including nine of the UK's top 30, CSC has capacity to grow organically through targeted investment in existing pre-eminent destinations. £78 million of capital projects are planned in addition to capital commitments including residual costs on projects already opened which currently stand at £106 million. The following are examples of active management projects currently underway to meet specific retailer demand:

o CSC is on target for a December 2010 handover enabling an Easter 2011 retail opening of the new Next 60,000 sq.ft. flagship store at Eldon Square, Newcastle

o Works to extend Primark's unit at Lakeside, Thurrock, to create a 100,000 sq. ft. anchor store are at the advanced fit-out stage, with the new store expected to open later this month

o Vacant possession has been secured and works commenced to create an improved catering offer on the former "fun ice" at Braehead, Glasgow

In addition, while recently announced changes by the Government have created uncertainty in the UK planning environment, progress continues to be made in advancing three major extensions under consideration at Victoria Centre, Nottingham, Lakeside, Thurrock and Braehead, Glasgow. In aggregate, these could add around 1.5 million sq. ft. of new retail space, the equivalent of a major regional shopping centre but as extensions of existing prime locations carrying a lower risk profile for CSC as a developer.

Property market background

National retail sales are up marginally year on year (BRC total non-food sales +1.4 per cent). The UK property investment market has steadied in the third quarter of 2010 after strong valuation improvements in the first half. The IPD monthly retail index showed 0.6 per cent capital growth in the quarter with CBRE reporting that shopping centres performed marginally better than the rest of the sector. CBRE reports a stable yield trend for prime shopping centres at the end of the quarter.

Financing

At 30 September 2010, CSC's net external debt stood at £2.6 billion, broadly unchanged from 30 June 2010. The £76 million outstanding principal on the 3.95 per cent convertible bonds was repaid in September 2010, reducing both gross debt and cash. 

International

CSC announced in May 2010 a transaction to restructure its US interests from direct ownership of a local operation to an indirect holding in a new joint venture with Equity One, a US retail REIT. Progress is being made in securing the necessary regulatory, banking and tax clearances and completion is expected in early 2011.

Prozone, CSC's Indian joint venture with Provogue, a leading listed Indian clothing retailer, successfully opened its first shopping centre at Aurangabad in early October. At 800,000 sq. ft., Prozone Aurangabad Mall comprises 150 retail stores, a five-screen cinema and a family entertainment centre and is well-located in one of the fastest growing and industrialising "Tier II" cities in India. It has a primary catchment of 1 million middle-to high-income consumers within a 25 minute drive and is anchored by key national retailers. CSC's interests in India, valued at £39 million at 30 September 2010, comprise a 25% interest in Prozone and a 10% interest in Provogue.

CONFERENCE CALL:

A conference call for analysts and investors will be held today at 9.00 GMT.

A copy of this announcement is available for download from our website at www.capital-shopping-centres.co.uk

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