Half year trading update
Capital & Regional plc, the UK focused specialist property REIT, today announces a trading update for the first half of 2016, prior to its half year results announcement which will follow on 18 August 2016.
Operating performance (wholly owned portfolio unless stated)
- Contracted rent was £63.6 million as at 30 June 2016, up 9.5% from £58.1 million as at 31 December 2015, primarily due to the acquisition of The Marlowes, Hemel Hempstead.
- Like-for-like contracted rent increased by £1.8 million, or 3.2% from 30 June 2015 and £0.7 million or 1.2% from 31 December 20151.
- There has been a high level of leasing activity in the first half of 2016 with 27 new lettings and 11 lease renewals totalling £3.0 million, at a combined 0.7% premium to ERV2.
- Following the result of the UK Referendum on EU membership, positive leasing momentum has continued across the whole portfolio with 12 new leases or renewals having been agreed or having progressed to being in solicitors' hands since 24 June 2016.
- Terms have been agreed with new retail and leisure operators for two of the three BHS units in the wholly owned portfolio contingent on the space being handed back by the administrator. Alternative offers are being assessed for the third unit.
- Occupancy remained strong at 30 June 2016 with The Mall portfolio at 96.5% (96.4% at 30 June 2015). The Marlowes Hemel Hempstead was 92.0% occupied at 30 June 2016.
- Footfall has been robust and has followed an improving trend in the period, outperforming the national benchmark by 1.4%.
- The valuation of The Mall portfolio as at 30 June 2016 was £827.6 million at a net initial yield of 5.94%. This is an increase of £4.9 million compared to the 31 December 2015 valuation of £822.7 million which represented a net initial yield of 5.89%. Allowing for capital expenditure of £13.5 million the net revaluation deficit in the period was £8.6 million, due primarily to the 1% increase in Stamp Duty Land Tax (SDLT) without which the net valuation would have been broadly in line with December 2015.
- The Marlowes Centre, Hemel Hempstead valuation as at 30 June 2016 was £54.5 million, an increase of £0.7 million from the acquisition price of £53.8 million and representing a net initial yield of 6.99%. Acquisition costs were £2.9 million and capital expenditure of £0.1 million has been incurred since acquisition.
- The valuation of the Kingfisher Centre, Redditch as at 30 June 2016 was £163.5 million at a net initial yield of 6.24%. This represents a decrease of £0.9 million from 31 December 2015 due to the impact of the SDLT increase. Capital expenditure on this asset in the period was £0.1 million.
- The valuation of the Buttermarket Centre, Ipswich increased by £16.3 million in the first half of the year to £44.3 million as at 30 June 2016. Capital expenditure in the period was £9.1 million.
- Altogether the net movements in valuations and purchaser's costs outlined above, including the 1% increase in SDLT, would have the impact of decreasing the Group's Basic NAV by £7.5 million or 1.1 pence per share from the 30 December 2015 NAV which was£503.2 million or 72 pence per share.
Hugh Scott-Barrett, Chief Executive, commented:
"Our operational performance has been strong in the first half of the year with a significant volume of new lettings highlighting the demand for good quality space at affordable rents in town centre locations. Although occupier markets may be sensitive to any changes in consumer spending which might arise against an uncertain backdrop, our footfall has remained resilient and the continuing momentum in letting activity since the result of the Referendum is encouraging.
"As we move into the second half of the year, we are intensifying our focus on the recycling of capital, through which we believe we can crystallise attractive returns and take advantage of any increase in accretive investment opportunities."
1 The £0.7 million increase from 31 December 2015 was net of £0.3 million of rent reduction resulting from the BHS CVA process
2 For lettings and renewals (excluding development deals) with a term of five years or longer and which did not include a turnover element