REG - Shaftesbury Capital - Trading Update

Shaftesbury CapitalAnnouncement

14/06/2023 07:00

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RNS Number : 5999C  Shaftesbury Capital PLC  14 June 2023

Press Release

Agm trading updaTe

14 June 2023

Integration progressing well and strong operational momentum

Shaftesbury Capital PLC ("Shaftesbury Capital") today publishes a trading
update ahead of the Company's Annual General Meeting to be held at 11:30am
(BST) on 15 June 2023.

Ian Hawksworth, Chief Executive, commented:

"We are pleased with the first 100 days of activity across Shaftesbury Capital
with the integration of our business and talented team progressing well. We
are encouraged by operational progress, prospects for our prime West End
portfolio and the benefits we are seeing from the combined platform.

Our portfolio has delivered a strong operating performance reflecting its
exceptional qualities and long-term resilience. Against a backdrop of
macroeconomic uncertainty, demand for space in our West End locations
continues to be strong across all uses, with 173 leasing transactions
completing in the first five months of the year, at rents on average 6 per
cent ahead of December 2022 ERV providing confidence for rental growth
prospects."

Summary

·      Strong demand across all uses; 173 leasing transactions agreed 6
per cent ahead of 31 Dec 2022 ERV ("Estimated Rental Value")

·      Encouraging trading activity for our customers, with reported
sales in aggregate 13 per cent above 2019

·      Low vacancy; 2.9 per cent of ERV available to let

·      Positive progress in introducing new brands and concepts across
the portfolio

·      Good early progress on integration with actions taken to date
expected to result in annualised cost savings of circa £7.5 million - ahead
of the phasing set out in the merger documentation

·      Approximately 5 per cent of portfolio value anticipated to be
recycled

·      Robust balance sheet with access to over £440 million of
liquidity

·      As part of operating in an environmentally sustainable manner,
focus on re-use, re-purposing and improving heritage and period properties to
enhance value and energy performance credentials

 

The merger of Capital & Counties Properties PLC and Shaftesbury PLC to
create Shaftesbury Capital PLC completed on 6 March 2023. Shaftesbury Capital
has a portfolio located in some of the most iconic and vibrant parts of
London's West End, focused primarily on Covent Garden, Carnaby, Soho and
Chinatown.

Over the five months to 31 May 2023, 173 leasing transactions with a combined
rental value of £11.4 million concluded, comprising:

·      74 commercial lettings and renewals: £7.9 million, 7 per cent
ahead of 31 Dec 2022 ERV; and

·      99 residential lettings: £3.5 million, 9 per cent above
previous passing rents.

 

 

Leasing transactions concluded during the period

 Use                          Transactions    New contracted rent (£m)     % above Dec-22 ERV
 Hospitality & leisure        16              1.5                          5
 Retail                       28              3.2                          7
 Offices                      30              3.2                          8
 Residential                  99              3.5                          4
 Total                        173             11.4                         6

 

In addition, 35 commercial rent reviews were concluded, with a rental value of
£6.4 million, 7 per cent ahead of previous passing rents.

Trading activity is strong across the portfolio, with retail, hospitality and
leisure customers reporting sales in aggregate 13 per cent above 2019 on a
like-for-like basis. Footfall trends across the West End are positive, buoyed
by increasing international tourist numbers, particularly evident through May
following the Coronation celebrations and this is anticipated to continue
through the summer.

At 31 May 2023, EPRA vacancy (including units under offer) was approximately 5
per cent of portfolio ERV; 2.1 per cent was under offer and 2.9 per cent was
available to let.

Available-to-let space

 Use                        % of portfolio ERV  ERV (£m)     Area ('000 sq. ft.)
 Hospitality & leisure      0.4                 0.9          13
 Retail                     1.3                 2.9          33
 Offices                    1.1                 2.5          36
 Residential                0.1                 0.3          4
 Total                      2.9                 6.6(1)       86

(1.        ) (Includes 18 units let on a temporary basis (ERV: £1.8
million))

At 31 May 2023, the ERV of space held for or under refurbishment in the
wholly-owned portfolio amounted to £16.0 million across 234,000 square feet,
representing 7 per cent of portfolio ERV.

Through our active approach, there has been good progress introducing new
brands and concepts across the portfolio. Signings across the retail portfolio
include luxury watch brand Tissot on James Street and contemporary fashion
brand Sessun on Floral Street, Covent Garden whilst in Carnaby, Hollister and
OG Kicks have opened on Foubert's Place. There has been a flurry of openings
including the new flagship Uniqlo store as well as Gramicci in Covent Garden
and Farah in Soho. Mejuri and Hoka will also open shortly.

The restaurant offering continues to evolve, with Story Cellar, the second
restaurant venture from two Michelin Star chef, Tom Sellers, opening in Neal's
Yard, Covent Garden and Argentinian restaurant Gaucho opening on James Street,
Covent Garden. Following the success of its 2021 opening, Imad's Syrian
Kitchen has upsized into larger space on the upper floor of Kingly Court in
Carnaby alongside the newly opened Darjeeling Express. Pan-Asian restaurant
concept, YiQ signed its debut restaurant in Chinatown.

Demand for high quality, well-fitted office space across the West End,
particularly in its more vibrant areas, remains healthy. The Carnaby and
Covent Garden development pipeline is well-positioned to capture this demand,
with its high amenity value and excellent environmental credentials. During
the period, our scheme at 36 Carnaby Street completed and is now fully pre-let
or under offer, representing £0.9 million of income, setting a rental tone of
approximately £100 per square foot.

With sustained demand for our residential portfolio, any space which becomes
available typically goes under offer within a matter of days, and we are
continuing to see improving rental levels. At 31 May 2023 there were 7 units
available to let.

Key areas of focus post-merger completion

Integration of the business is progressing well with our people working
positively together. We expect to locate in a single office in Covent Garden
over the autumn.

The key areas of focus in the period post-completion are set out below.

1.     Deliver growth in cash rents capturing the reversion between gross
income of £178 million and the valuers' ERV of £227 million and generating
sustained ERV growth, initially back to its pre-pandemic level of £258
million. Our approach, informed by a broad base of experience and deep
knowledge of the West End across a larger platform, positions the business to
deliver rental growth from its exceptional portfolio.

2.     Develop and pursue asset management initiatives, including
maximising the opportunities presented from enhanced connectivity of adjacent
portfolios and applying our consumer marketing platform across the portfolio
to enhance the footfall and sales potential of our destinations through
digital channels, events, partnerships and data. Based on our creative asset
management approach, a number of income- and value-add initiatives are already
being identified, including refurbishment opportunities and the evolution of
use, mix, category selection, brands and new concepts, alongside public realm
enhancements.

3.     Deliver recurring cost synergies with significant progress having
been made already on savings across the business, ahead of the phasing
included in the merger documentation (which set out a run rate of £12 million
within two years, of which £6 million would be achieved by the end of year
one following completion). Actions taken in the first 100 days are expected to
result in annualised cost savings of circa £7.5 million, primarily in
administration costs. Further integration activity continues as we work
towards an effective and efficient organisational structure and cost base.

4.     Maintain an active and disciplined approach to capital allocation.
With a £4.9 billion portfolio, across approximately 670 individual buildings,
there is potential to recycle capital from certain investments towards
opportunities with sustainable long-term rental growth and attractive
risk-adjusted returns. We currently anticipate capital recycling of
approximately 5 per cent of portfolio value.

5.     Maintain our strong balance sheet with a focus on resilience,
flexibility and efficiency. There is significant headroom against debt
covenants and access to significant liquidity, over £440 million as at 31 May
2023.  Priorities over the forthcoming period are to refinance medium-term
maturities, including the loan facility of £576 million which was drawn down
in full in April 2023 to fund redemption of the Chinatown and Carnaby Bonds,
and to evolve the capital structure of Shaftesbury Capital for the longer
term, taking advantage of the Group's enhanced credit profile.

At 31 May 2023, Group net debt was £1.5 billion, representing a loan-to-value
ratio of 31 per cent based on 31 December 2022 property valuations. All of the
Group's drawn debt is at fixed rates or currently has interest rate protection
in place. Interest rate collars were already in place for £200 million of
notional value through to December 2024, capped at 1.23 per cent. These have
been supplemented in April 2023 with further interest rate hedging which caps
SONIA exposure at 3.75 per cent for an additional £300 million of notional
value for 2023 and £150 million of notional value for 2024, at a total cost
of £3.4 million.

The weighted average cost of drawn debt is currently 4.1 per cent, which
reduces to an effective running cash cost of 3.6 per cent taking account of
interest earned on cash deposits and the benefit of interest rate hedging.

6.     Continue to take a responsible and forward-looking approach,
operating in an environmentally sustainable manner and supporting our local
communities. A consolidated Net Zero Carbon Pathway will be published later
this year based on our "retrofit first" approach to the management of our
buildings. Sustainable refurbishment activity continues across the portfolio
enhancing the energy performance credentials of our heritage properties. We
continue to support community-led initiatives and charities which work with
organisations active in the West End.

This announcement includes unaudited financial information in relation to the
period from 1 January 2023 to 31 May 2023. Further details will be provided
within the half-year results for the period ending 30 June 2023 which are
expected to be announced on 3 August 2023.

Enquiries:

 Shaftesbury Capital PLC                                                         +44 (0)20 3214 9150
 Ian Hawksworth           Chief Executive
 Situl Jobanputra         Chief Financial Officer
 Sarah Corbett            Director of Commercial Finance and Investor Relations

Media enquiries:

 UK: Hudson Sandler  Michael Sandler   +44 (0)20 7796 4133

 UK: RMS Partners    Simon Courtenay   +44 (0)20 3735 6551
 SA: Instinctif      Frederic Cornet   +27 (0)11 447 3030

 

About Shaftesbury Capital

Shaftesbury Capital PLC ("Shaftesbury Capital") is the leading central London
mixed-use REIT and is a constituent of the FTSE-250 Index. Our property
portfolio, valued at £4.9 billion, extends to 2.9 million square feet of
lettable space across the most vibrant areas of London's West End. With a
diverse mix of restaurants, cafés, bars, shops, residential and offices, our
destinations include the high footfall, thriving neighbourhoods of Covent
Garden, Carnaby, Soho and Chinatown, together with holdings in Fitzrovia. Our
properties are close to the main West End Underground stations and transport
hubs for the Elizabeth Line. Shaftesbury Capital shares are listed on the
London Stock Exchange and the Johannesburg Stock Exchange.
www.shaftesburycapital.com (http://www.shaftesburycapital.com)

Our purpose

Our purpose is to invest in and curate vibrant and thriving destinations in
London's West End where people work, live and visit, delivering long-term
social and economic value.

Forward-looking statements

This press release 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 the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Any
information contained in this press release on the price at which shares or
other securities in the Company 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.

 

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