4th Nov 2009 07:00
4 NOVEMBER 2009
LIBERTY INTERNATIONAL PLC
INTERIM MANAGEMENT STATEMENT
FOR THE PERIOD FROM 1 JULY 2009 TO 4 NOVEMBER 2009
Highlights of the period:
Capital Shopping Centres' occupancy improved since 30 June 2009 from 98.3 per cent to 98.9 per cent
Excluding tenants in administration occupancy increased from 96.3 per cent to 97.6 per cent
Opened major new extension of St David's, Cardiff on 22 October, increasing the centre size to 1.4 million sq.ft. - 70 per cent committed by area, 65 per cent by income
Concluded £290 million debt facility secured on St David's, Cardiff (Liberty International share 50 per cent)
Collaboration agreement signed with adjoining landowners for Earls Court Regeneration Area
£274 million net equity raised through placing of 56.1 million new shares at £5.00 per share
Net external debt of £3.1 billion after £274 million capital raise with pro forma debt to assets 51 per cent
Enquiries
Liberty International PLC
|
David Fischel, |
Chief Executive |
+44 (0)20 7960 1207 |
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Ian Durant, |
Finance Director |
+44 (0)20 7960 1210 |
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Kate Bowyer, |
Investor Relations |
+44 (0)20 7960 1250 |
Public Relations
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UK: Michael Sandler, |
Hudson Sandler |
+44 (0)20 7796 4133 |
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SA: Nick Williams, |
College Hill |
+27 (0)11 447 3030 |
Conference call
A conference call for analysts is being held today at 9.00am GMT with a replay facility available for 7 days. A copy of this Interim Management Statement is available for download from our website at www.liberty-international.co.uk.
This announcement includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Liberty International PLC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this announcement on the price at which shares or other securities in Liberty International PLC have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.
Group overview
Since Liberty International released its 2009 interim statement on 31 July 2009, several indicators have confirmed the improving conditions in the property investment and debt markets in which the group operates.
Shareholders were advised in February this year that the group would not be undertaking a quarterly valuation of investment properties at 30 September 2009. However, in terms of market benchmarks, the IPD UK all property monthly index for the three months ended 30 September 2009 has shown capital growth of 1.2 per cent (1.8 per cent for the IPD UK monthly retail index), with a notable firming of valuation yields offsetting the pressure on rental values.
The new £290 million debt facility concluded by the St. David's Partnership, the 50:50 joint venture with Land Securities PLC, has demonstrated that bank financing is becoming more readily available for prime assets. The possible return of a more active market for listed property debt securities has been foreshadowed by a number of transactions in recent months.
The retail tenant market remains challenging but activity levels have improved and retailer failures slowed down markedly in the third quarter.
The equity capital raise by way of a placing of 56.1 million new shares (9.9 per cent of the group's then issued share capital) at £5.00 per share completed on 5 October raising £274 million net of expenses. This additional capital enables the group to resume investment in its prime UK regional shopping centres and Central London assets after having halted in the last quarter of 2008 all uncommitted capital expenditure, given the exceptional financial market turbulence at that time.
Capital Shopping Centres
Operations
Occupancy at Capital Shopping Centres' (CSC's) centres has remained high at 98.9 per cent, 97.6 per cent excluding tenants in administration (30 June 2009 - 98.3 per cent and 96.3 per cent, 31 December 2008 - 98.7 per cent and 93.6 per cent respectively). After a period of exceptionally high failure levels, the number of tenants going into administration slowed significantly in the quarter, affecting 20 units and £3 million of rental income (first six months of 2009 125 units and £19.3 million of rental income). Whilst further failures may well emerge in the next few months, the number of tenants showing signs of distress is lower than last winter's exceptional level.
CSC has achieved over 50 re-lettings this quarter of which around half are short term under five years. Although overall at a significant discount to previous rental levels the short term lettings have been important in limiting void costs including empty rates. Demand continues from both UK retailers and overseas entrants to the UK market, particularly for larger, well-configured space.
Footfall continues to show a year-on-year increase of over 3 per cent for CSC's established centres.
Excluding tenants in administration and formal payment plans, 98 per cent of the September quarter rent was collected within 28 days of the quarter date, broadly equivalent to the collection rate at the June quarter date.
Developments & active management projects
The major new extension to St. David's, Cardiff, anchored by the largest John Lewis store outside London and their first in Wales, opened on 22 October after three years in construction, unveiling over 50 new shops, of which around half are retailers new to Wales. A further 30 stores are set to open before Christmas with additional openings in the New Year. The proportion of the extension let or in solicitors' hands has now reached 70 per cent by area and 65 per cent by income with active negotiations in respect of a number of other units. The response of both retailers and shoppers to this major enhancement of Cardiff's retail offer has been very positive.
Letting and construction activity is continuing at the major new mall, St Andrew's Way, Eldon Square, Newcastle due to open in February 2010 and now 88 per cent let by area and 92 per cent by income. The leisure and catering upgrade in the Yellow and Blue Quadrants of MetroCentre, Gateshead continues and is now 82 per cent let by area and 73 per cent by income, with the cinema and family entertainment area due to open in December 2009.
Approximately half of the £274 million proceeds of the October placing have been earmarked to fund identified active management initiatives across many of CSC's centres, such as continued improvement of catering facilities to extend dwell times and trading hours, expansion of retail units into redundant service areas and remodelling of space to create well-configured, large units for flagship, full concept stores.
Capital & Counties
The Covent Garden estate is trading encouragingly, effectively fully let at 99 per cent, with Q3 2009 footfall ahead of Q3 2008. Capital & Counties intends to continue to invest in the estate with individual projects falling into three broad types. First, tactical infill acquisitions are identified to consolidate holdings and improve north - south linkages. Second, refurbishment and remodelling of some existing holdings is planned. Third, the group intends to continue to be pro-active in improving overall tenant mix.
At Earls Court, Capital & Counties has signed a tripartite collaboration agreement with Transport for London and the London Borough of Hammersmith & Fulham. It is intended that this agreement will be replaced by a formal joint venture in due course. The parties have agreed to work together to submit a planning application for the comprehensive redevelopment of their interests, which form the Earls Court Regeneration Area. The operational exhibition business continues to perform soundly with forward bookings for 2010 at satisfactory levels.
Consistent with its approach of recycling capital from mature assets, the Great Capital Partnership ("GCP"), the joint venture with Great Portland Estates PLC, has sold Spirella House, Oxford Circus, London for £23 million, 12.5 per cent above book value at June 2009. Further, GCP has re-geared a number of leases with The Crown Estate in Piccadilly and Jermyn Street, London, including extending the lease term on average from 69 years to 125 years, improving the potential for comprehensive redevelopment in due course.
Financing
On 30 September 2009 the group's net external debt was £3.3 billion, with cash of £547 million. The pro forma impact of the £274 million capital raising which completed on 5 October is to reduce net external debt to £3.1 billion and improve the debt to assets ratio to 51 per cent (30 June 2009 - 56 per cent).
The St David's Partnership has entered into a £290 million, five year limited recourse debt facility secured on St David's, Cardiff. The proceeds can be drawn down in stages in line with progress on letting of the extension. £74 million has been drawn by the Partnership to date based on income from the original centre.
Of the £103 million capital expenditure anticipated for the second half of 2009, around £50 million has been spent in the third quarter, principally at Cardiff. UK commitments at the end of September 2009 amounted to £160 million.
The group remains in compliance with all financial debt covenants. There have been no further compliance-related debt repayments other than the £36 million anticipated in the Interim Report. Given more stable market conditions, the group is re-assessing the level of cash liquidity required for potential covenant issues. Options for most efficiently reducing the group's asset-specific debt are being considered, with a view to reducing the earnings drag from the current significant cash balances. The first such action was completed on 30 October 2009 when a net prepayment of £59 million of the debt secured on Lakeside, Thurrock was made, leaving a refinancing requirement of £546 million by July 2011. We are already engaged in positive discussions with a number of lenders regarding this refinancing.
Prospects
Notwithstanding the welcome signs of improvement in the property and debt markets and greater activity in tenant markets, short term pressure on the group's earnings continues, as previously indicated, from the low returns on temporary cash holdings and the lower income attributable to short-term re-lettings following the last year's tenant failures.
Liberty International is now well placed to take the business forward organically at a time of little new supply of high quality regional shopping centre space, with the group's prime destinations continuing to outperform inferior locations. Following the October capital raising, the group now has further financial resources to enable it to continue to invest in its existing prime assets to take advantage of their scale and quality.
---ENDS---
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