Trading Update & acquisition of The Marlowes Centre
Capital & Regional plc, the UK focused specialist property REIT, today announces the acquisition of The Marlowes Shopping Centre in Hemel Hempstead and a trading update for the second half of 2015, prior to its year end results announcement on 4 March 2016.
Acquisition of The Marlowes Shopping Centre, Hemel Hempstead
On 12 January 2016 the Group exchanged contracts with Standard Life Investments for the acquisition of The Marlowes Shopping Centre, which is the main retail offer in Hemel Hempstead, for £35.5 million reflecting an initial yield of 7.0%. The acquisition will be part funded by new debt with the Royal Bank of Scotland of £17.8 million, secured on the asset, with the remainder being financed through available Group cash resources. The acquisition is expected to complete in early February 2016.
Hemel Hempstead is a strong south east commuter town located just outside of the M25, which has recently benefitted from significant investment from the local authority. The opportunity exists to reposition this asset and potentially consolidate it with other retail properties adjoining the scheme, as part of a regeneration of the wider town centre.
Like-for-like contracted rent across the Shopping Centre portfolio at 31 December 2015 rose 2.8% to £69.7 million compared to 31 December 2014. Across the portfolio there were 72 new lettings and 52 lease renewals totalling £7.9 million. Lettings and renewals were agreed at an average increase of 18.5% above ERV1. The increase over ERV was primarily driven by new lettings resulting from the conversion of less attractive or previously non-retail space into leisure.
Leisure lettings in total account for £2.2 million of the £7.9 million and include the creation of a new Travelodge at Wood Green, which will now be 78 rooms as opposed to the 35 previously reported, and the creation or extension of gyms in Blackburn, Ipswich, Luton, Maidstone and Wood Green.
Occupancy was very strong at 97.2% at 31 December 2015, an improvement of 1.1% compared to 96.1% at 31 December 2014.
After a relatively slow start retail trading activity picked up in the second half of December with our in-house 'C&R Trade Index' showing retailers' like-for-like sales increasing by 1.6% compared to the month of December 2014 and 1.7% across the whole year. Footfall was down a marginal 0.4% in 2015, but significantly outperformed the national benchmark which fell by 1.7%. Car park usage across our portfolio was up 1% year-on-year.
The importance of providing a multi-format retail offer was demonstrated by the continued expansion of Click and Collect activity via our Collect+ service which handled over 20,000 parcels during 2015 including 5,000 in December alone.
1 For lettings and renewals with a term of five years or longer and which did not include a turnover element.
The valuation of the wholly owned portfolio at 31 December 2015 was £822.7 million at a net initial yield of 5.9%, an increase of £31.7 million, or 4.0% on the valuation of £791.0 million at 30 June 2015. This has been driven primarily by an increase in valued income of £1.4 million (+2.8%) alongside yield compression on specific assets, as a result of the execution of our asset management plans. The capital expenditure spent on the wholly owned portfolio during the second half of the year was £6.9 million.
The valuation of the Kingfisher Centre, Redditch at 31 December 2015 was £164.4 million at a net initial yield of 6.25%. This represents an increase of £7.9 million (+5.0%) from 30 June 2015. The capital expenditure spent during the second half of the year was £2.3 million.
The valuation of the Buttermarket Centre, Ipswich increased by £17.2 million (+160.7%) in the second half of 2015 to £27.9 million at 31 December 2015. This reflects the rapid progress made in repositioning the centre as a mixed retail and leisure scheme. The capital expenditure spent during the second half of the year was £7.1 million.
In line with previous guidance, the Board anticipates paying a 2015 final dividend of at least 1.5p per share which will result in a total dividend for the year of at least 3.0p per share. The final dividend, and the proportion to be paid as a PID, is expected to be confirmed within the Group's year end results announcement.
The accelerating momentum in terms of letting activity and capex spend seen in the second half of 2015 confirms that we are on track to deliver the attractive returns promised as part of Capital & Regional's asset management plans.The progress we are making in the transformation of Buttermarket Ipswich to a prime leisure and retail asset also showcases the skills which we will bring to The Marlowes Shopping Centre, the acquisition of which we have announced this morning.Chief Executive
For further information:
Capital & Regional
Tel: 020 7932 8000
Hugh Scott-Barrett, Chief Executive
Charles Staveley, Group Finance Director
Tel: 020 3727 1000