TIDMSHB
RNS Number : 3666J
Shaftesbury PLC
23 August 2021
Shaftesbury PLC
Trading update
Significant reduction in vacancy as
West End footfall and trading recover, and operating environment
improves
Shaftesbury PLC, the Real Estate Investment Trust that owns a
16-acre portfolio in the heart of London's West End, today
announces a trading update for the period 1 April 2021 to 20 August
2021.
Summary
-- West End footfall and trading recovering and operating environment improving:
- So far, weekly West End footfall has recovered to 50%-60% of
pre-pandemic levels as Londoners, domestic day trippers and
staycation visitors have returned in growing numbers.
- Return of the West End's exceptionally large office-based
working population anticipated from early autumn.
- Our hospitality and leisure occupiers continue to enjoy a
strong recovery in trading levels with visitors focussing their
attention on dining, leisure and socialising.
- Our retailers are reporting improving trade, particularly at
weekends.
-- Continuing recovery in occupier demand across all uses; significant reduction in vacancy:
- Increased occupancy across all uses:
- Available-to-let vacancy at 31 July 2021 down to 4.6%
(31.3.21: 8.4%). Encouraging pace at which space continues to go
under offer.
- Further decrease to 4.1% by 13 August 2021, reflecting
continuing leasing momentum.
- Hospitality and leisure demand improved over the period,
reflecting confidence in the long-term prospects for our West End
locations.
- Healthy occupier interest for our shops, including online
retailers looking for physical space in our areas to provide
consumer experience, interaction and engagement and further enhance
their brand identity.
- Office enquiries, viewings and lettings continue at a steady
pace as occupiers prepare for the return of their workforces and
look to improve the quality of their workspace. Assemble, our fully
fitted option, is proving particularly popular, especially with
smaller businesses.
- Marked and sustained increase in demand for our apartments
from a broad range of occupiers; rents have now stabilised.
- Letting terms are generally in line with ERVs and our
expectations, but there is a greater degree of short-term income
uncertainty in those retail leases which have a significant element
of turnover-related rent.
-- Rent collection recovering and expected to improve further
now pandemic restrictions have been relaxed:
- Amounts collected to date:
- Three months to 31 December 2020: 49% of contracted rent; 78%
of rent billed (after allowing for rent waivers granted).
- Three months to 31 March 2021: 40% of contracted rent, despite
continued trading restrictions; 77% of rent billed.
- Three months to 30 June 2021: 51% of contracted rent; 73% of
rent billed.
- July 2021: 55% of contracted rent; 62% of rent billed;
confident that further collections will be made over the coming
month.
-- Investing in our buildings:
- Continuing proactive asset management to improve our buildings
to adapt to changing occupier requirements, enhance environmental
performance and augment long-term income prospects.
- Reconfiguring some larger shops, reflecting the acceleration
of retailer demand for smaller, more affordable space to showcase
their brands.
- Further progress on 72 Broadwick Street:
- Retail and restaurant space handed over (ERV: GBP0.5m).
- Final completion anticipated early in 2022.
-- Acquisitions and disposals:
- Disposal of one non-core building in Soho for GBP5.3 million,
11% a head of valuation at 31 March 2021. Further disposals of a
limited number of buildings no longer core to our long-term
strategy being considered.
- Contracted acquisitions of two buildings, adjoining existing
ownerships in Seven Dials, for a combined GBP12.0 million (plus
purchase costs).
-- Strong financial base:
- Available liquidity at 30 June 2021: GBP330.7 million.
- GBP134.8m term loan interest cover covenant waiver extension
agreed from July 2021 to January 2022.
Brian Bickell, Chief Executive, commented:
"I'm pleased to report positive momentum in recent months, with
footfall and trading recovering, an improving operating environment
and significantly reduced vacancy across our villages. West End
footfall has, to date, recovered to 50-60% of pre-pandemic levels,
as Londoners, domestic day trippers and staycation visitors return
in growing numbers. We expect that early autumn will see a return
of the West End's exceptionally large office-based working
population, which has always been an important contributor to our
local weekday economy.
The long-term curation we bring to our central, bustling
villages, with its focus on differentiated, mid-market choices
targeted primarily at a domestic audience, continues to attract
both visitors and new occupiers. The progress we have seen towards
a return to normal patterns of activity over the period, and
improving medium-term prospects, have been catalysts for a strong
recovery in confidence and leasing activity, both for commercial
and residential accommodation across our locations.
The momentum of the last four months is providing a sound
platform for the continuing revival of the West End in the
important months ahead, leading up to Christmas and into the New
Year, and the prospects for a return to pre-pandemic patterns of
life and activity."
23 August 2021
For further information:
Shaftesbury PLC 020 7333 8118 RMS Partners 020 3735 6551
Brian Bickell, Chief Executive Simon Courtenay
Chris Ward, Finance Director
MHP Communications 020 3128 8193
Shaftesbury@mhpc.com
Oliver Hughes/Rachel Farrington
Shaftesbury PLC LEI : 213800N7LHKFNTDKAT98
Introduction
The period since 1 April 2021 has seen the phased lifting of
most of the Government's pandemic-related restrictions and
recovering footfall and trading across the West End. From 19 July
2021, hospitality and retail businesses, along with hotels,
theatres, cinemas, nightlife and visitor attractions have been able
to trade at their pre-pandemic capacity for the first time since
March 2020.
The progress we have seen towards a return to normal patterns of
activity over the period, and improving medium term prospects, have
been catalysts for a strong recovery in confidence and leasing
activity, both for commercial and residential accommodation across
our locations. The momentum of the last four months is providing a
sound platform for the continuing revival of the West End in the
important months ahead, leading up to Christmas and into the New
Year, and the prospects for a return to pre-pandemic patterns of
life and activity.
West End footfall and trading recovering and operating
environment improving
So far, West End footfall has recovered to 50%-60% of
pre-pandemic levels, as Londoners, domestic day trippers and
staycation visitors have returned in growing numbers. The long-term
curation we bring to our central, bustling locations, with its
focus on differentiated, mid-market choices targeted primarily at a
domestic audience, continues to underpin the enduring appeal of our
villages.
The West End's exceptionally large office-based working
population has always been an important contributor to our local
weekday economy. The one-month delay in the Government's advice
regarding "return to the office", finally announced in July 2021,
has held back the anticipated recovery in weekday footfall, but we
expect that early autumn will see a return of the office
workforce.
International travel continues to be affected by pandemic
control measures and UK inbound tourism has yet to see a
significant recovery. As traveller confidence returns, current
expectations are for an initial recovery in short-haul visitors
from next year, followed by long haul traffic from 2023.
Our hospitality and leisure occupiers, which represent around
40% of our current rent roll, continue to enjoy a strong recovery
in trading levels. The al fresco dining schemes implemented by
Westminster and Camden councils have played a valuable role in
re-animating streets following the protracted lockdowns, as well as
providing additional outdoor trading capacity. Although the schemes
are temporary, we already have permanent consents for an extensive
number of seats across our carefully managed, pedestrianised areas,
and the success of the al fresco schemes may enable us to increase
that capacity where local conditions allow. For all hospitality
businesses, staffing issues remain, until recently exacerbated by
periods of self-isolation following "track and trace"
notifications, which in some cases have resulted in temporary
closures.
For retail, representing circa 30% of our rent roll, trading
has, to date, shown encouraging signs of improvement albeit less
buoyant than in the hospitality sector. Although West End footfall
is growing, visitors have been focussing their attention on dining,
leisure and socialising, and weekday shopping behaviour has been
weather dependent. Many of our retailers are currently reporting
better trade, particularly at weekends, as well as improved
customer conversion rates with consumers shopping with a more
defined sense of purpose. Anecdotally, youth fashion brands in our
locations are gaining customers following the closure of shops on
Oxford Street and Regent Street.
Continuing recovery in occupier demand across all uses;
significant reduction in vacancy
The recovery in occupier demand reported in our interim results
has continued, resulting in a significant decrease in vacancy, and
the pace at which space continues to go under offer is encouraging.
At 31 July 2021, available-to-let vacancy was 4.6% of portfolio
ERV, down from 8.4% at 31 March 2021, and included a recently
completed retail unit at our 72 Broadwick Street scheme. With
leasing momentum continuing since 31 July 2021, this had decreased
to 4.1% by 13 August 2021.
Whilst letting terms are generally in line with ERVs and our
expectations, there is a greater degree of short-term income
uncertainty in those retail leases which include a significant
element of turnover-related rent.
Available-to-let vacancy at 31 July 2021
Hospitality
and leisure Retail Offices Residential Total 31.3.21
-------------------- ------------- ------- -------- ------------ ------ --------
Available
ERV (GBPm) 0.8 1.6 1.8 1.6 5.8 10.4
% of portfolio
ERV 0.6% 1.2% 1.3% 1.2% 4.3% 7.8%
-------------------- ------------- ------- -------- ------------ ------ --------
Temporary lettings
ERV (GBPm) - 0.4 - - 0.4 0.7
% of portfolio
ERV - 0.3% - - 0.3% 0.6%
-------------------- ------------- ------- -------- ------------ ------ --------
Total
ERV (GBPm) 0.8 2.0 1.8 1.6 6.2 11.1
% of portfolio
ERV 0.6% 1.5% 1.3% 1.2% 4.6% 8.4%
-------------------- ------------- ------- -------- ------------ ------ --------
Demand for hospitality and leisure space has improved since our
interim results, reflecting occupier confidence in the long-term
prospects for our West End locations. Interest is dominated by
independents and, encouragingly, some existing occupiers are
seeking additional sites with us and the best sites are attracting
multiple bids.
We have a healthy level of new retail enquiries for the small
and relatively affordable space in our streets, although,
currently, leases generally remain shorter and usually include an
element of turnover-based rent. Demand is from a broad mix of
independent brands or concepts, together with established domestic
and international retailers, who are now choosing our areas as
their base in central London, showing confidence in our curated
villages where they can trade alongside like-minded retailers. More
and more, these brands have strong social responsibility ethics,
which resonate with our target consumer. With the online market
becoming congested and more costly for retailers, we are seeing
good interest from online businesses looking for physical space in
our areas to provide consumer experience, interaction and
engagement and further enhance their brand identity.
Vacant space across our upper floors accounts for 55% of
available-to-let vacancy, despite offices and residential
representing around only 30% of our rent roll. At 31 July 2021,
available vacant space across these uses was 2.5% of portfolio ERV,
down from 5.3% at 31 March 2021 following a busy period of leasing
activity.
It is noticeable that businesses are now re-evaluating their
office space requirements, remaining keen to maintain a West End
base, planning for the return of their workforces, and looking to
improve the quality of their workspace. Assemble, our fully fitted
option, is proving particularly popular, especially with smaller
businesses, as the trend towards greater flexibility, speed of
occupation and collaboration in office working practices
accelerates. Consequently, office enquiries and viewings continue
at a steady pace. At 31 July 2021, we had 32 office suites
available across 29,000 sq. ft. (31.3.2021: 50 suites across 62,000
sq. ft.).
Over the period, there has been a marked and sustained increase
in demand for our apartments from a broad range of occupiers,
materially reducing our vacancy levels. At 31 July 2021, we had 65
available apartments, down from 123 at 31 March 2021. After a
market-wide adjustment in rental levels since the start of the
pandemic, rents have now stabilised.
Space under offer
At 31 July 2021, space under offer extended to 97,000 sq. ft.
(31.3.2021: 67,000 sq. ft.) and represented 4.9% of portfolio ERV,
up 1.4% since 31 March 2021.
Space under offer at 31 July 2021
Hospitality
and leisure Retail Offices Residential Total 31.3.21
---------------- ------------- ------- -------- ------------ ------ --------
ERV (GBPm) 2.4 1.9 1.4 0.8 6.5 4.7
% of portfolio
ERV 1.8% 1.4% 1.1% 0.6% 4.9% 3.5%
---------------- ------------- ------- -------- ------------ ------ --------
We remain confident that the locations, size and relative
affordability of our space, together with our widely recognised
strategy of supporting our occupiers, from a flexible leasing
approach to the consistent curation of our areas, will continue to
be important both to retaining current tenants as well as
attracting new businesses.
Rent collection improving
Since 1 April 2021, we have seen a gradual improvement in rent
collection rates.
Rent collection % to date
3 months 3 months 3 months
to 31 December to 31 March to 30 July
2020 2021 June 2021 2021
--------------------------------- ---------------- ------------- ----------- ------
% of contracted rent 49% 40% 51% 55%
% of rent billed (after waivers
granted to occupiers) 78% 77% 73% 62%
--------------------------------- ---------------- ------------- ----------- ------
We have now collected 45% of contracted rent for the six months
to 31 March 2021, up from 43% reported in our interim statements.
After allowing for rent waivers granted to occupiers, we have
collected 78% of amounts billed.
For the three months to 30 June 2021, which included periods of
total or partial lockdowns, to date, we have collected 51% of
contracted rent and 73% of amounts billed.
To date, we have collected 55% of July's contracted rent and 62%
of amounts billed, and we are confident that further collections
will be made over the coming month.
We expect the collection rate will improve further now that
pandemic restrictions have been relaxed, albeit, as previously
reported, it is likely that tapering occupier rental support will
continue on a case-by-case basis, reflecting improving trading
conditions but recognising the winding down of government business
support measures in the months ahead.
Investing in our buildings
We continue to improve and repurpose our buildings to adapt to
ever-changing occupier requirements, enhance environmental
performance and augment our portfolio's long-term income prospects.
The reconfiguration of some of our larger shops continues,
reflecting the acceleration of retailer demand for smaller, more
affordable space to showcase their brands. Where space is released,
we introduce alternative uses, taking advantage of recent changes
in planning regulations where possible.
72 Broadwick Street: ERV GBP5.2 million; 3.9% of ERV (31.3.2021:
4.3%)
Hospitality % of
and leisure Retail Offices Residential Total total
GBPm GBPm GBPm GBPm GBPm ERV
---------------------------- ------------- ------- -------- ------------ ------ -------
Scheme ERV at 31 March
2021 3.3 0.3 1.6 0.5 5.7 4.3%
Space completed and handed
over:
Retail(1) - (0.3) - - (0.3)
Restaurant(2) (0.2) - - - (0.2)
Space to now be let as
offices(3) (0.6) - 0.6 - -
Scheme ERV at 31 July
2021 2.5 - 2.2 0.5 5.2 3.9%
------------- ------- -------- ------------ ------ -------
Pre-let 2.5 - - - 2.5 1.9%
Available to let once
completed - - 2.2 0.5 2.7 2.0%
---------------------------- ------------- ------- -------- ------------ ------ -------
1. Let on temporary basis while development of adjoining space
continues. Now included in available-to-let vacancy
2. Now included in space under offer
3. Having secured dual use planning consents over certain parts
of the building, we have now reclassified 9,500 sq. ft. of space
from hospitality and leisure to offices.
Further progress has been made as this scheme approaches
completion. Since 1 April 2021, retail and restaurant space with an
ERV of GBP0.5 million has been handed over. The remainder of the
scheme will complete in phases over the coming months, although
with legacy pandemic issues, including labour and materials
shortages, we currently anticipate final completion will now be in
early 2022.
The hospitality and leisure space is pre-let to Equinox, an
American fitness and lifestyle brand, with handover expected in the
New Year and we already have early interest in the office
accommodation. Once complete, we will market the fifteen new
apartments for rent and are currently evaluating a furnished
offering.
Other schemes: ER V GBP6.3 million; 4.8% of ERV (31.3.2021: 4.8%
of ERV)
At 31 July 2021, other space held for, or under refurbishment
extended to 104,000 sq. ft. with an ERV of GBP6.3 million, of which
6,000 sq. ft. (ERV: GBP0.4 million) was let on a short-term basis
pending commencement of works. Schemes comprised 20,000 sq. ft. of
hospitality and leisure space, 17,000 sq. ft. of retail, 54,000 sq.
ft. of office accommodation and 19 apartments. Of the total,
hospitality and office space extending to 11,000 sq. ft. (ERV
GBP0.6 million) was under offer.
Acquisitions and disposals
As previously reported, in April 2021, we completed the disposal
of one non-core building in Soho for GBP5.3 million, 11% a head of
valuation at 31 March 2021. Further disposals of a limited number
of buildings no longer core to our long-term strategy are being
considered.
In Seven Dials, we have acquired one building and contracted to
purchase another, for a combined GBP12.0 million plus acquisition
costs. Adjoining existing ownerships, both add to this important
asset cluster and offer medium-term asset management
opportunities.
We are aware of other buildings potentially becoming available
in our areas which would add to the long-term value of our
established ownership clusters.
Strong financial base
At 30 June 2021, net debt was GBP729.1 million (31.3.21:
GBP722.6 million). Available liquidity totalled GBP330.7 million,
comprising GBP230.7 million of cash and an undrawn revolving credit
facility amounting to GBP100 million.
Since 1 April 2021, we have extended the interest cover covenant
waiver in respect of our GBP134.8 million term loan to January
2022. Our nearest term ICR waiver maturity, relating to our undrawn
GBP100 million revolving facility, is in October 2021. In the event
we require an extension to this waiver and it is either not
granted, or is subject to restrictions we find unacceptable, our
liquidity position would allow us to part cancel or terminate the
facility ahead of its contractual maturity.
N otes for editors
Shaftesbury is a Real Estate Investment Trust which invests
exclusively in the liveliest parts of London's West End. Focused on
hospitality and retail, our portfolio is clustered mainly in
Carnaby, Seven Dials and Chinatown, but also includes substantial
ownerships in East and West Covent Garden, Soho and Fitzrovia.
Extending to 16 acres, the portfolio comprises 1.1 million sq.
ft of restaurants, cafés, pubs and shops, 0.4 million sq. ft. of
offices and 0.4m sq. ft. of apartments. All our properties are
close to the main West End Underground stations, and within ten
minutes' walk of the two West End transport hubs for the Elizabeth
Line, at Tottenham Court Road and Bond Street.
In addition, we have a 50% interest in the Longmartin joint
venture, which has a long leasehold interest, extending to 1.9
acres, in St Martin's Courtyard in Covent Garden.
Our purpose
Our purpose is to curate vibrant and thriving villages in the
heart of London's West End. Our proven management strategy is to
create and foster distinctive, attractive and prosperous locations.
We have an experienced management team focused on delivering our
long-term strategic objectives, ultimately to deliver a positive,
long-lasting contribution to the West End.
Our values
The core values that are fundamental to our behaviour, decision
making and the delivery both of our purpose and strategic
objectives are: being human in how we operate, original in how we
nurture talent and think, community minded in our approach to the
West End, being responsible and long term in our approach to
everything.
Forward-looking statements
This document, the latest Annual Report and Shaftesbury's
website may contain certain "forward-looking statements" with
respect to Shaftesbury PLC (the Company) and the Group's financial
condition, results of its operations and business, and certain
plans, strategy, objectives, goals and expectations with respect to
these items and the economies and markets in which the Group
operates. Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
"anticipates", "aims", "due", "could", "may", "should", "expects",
"believes", "intends", "plans", "targets", "goal" or "estimates"
or, in each case, their negative or other variations or comparable
terminology.
Forward-looking statements are not guarantees of future
performance. By their very nature forward-looking statements are
inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. Many of these
assumptions, risks and uncertainties relate to factors that are
beyond the Group's ability to control or estimate precisely. There
are a number of such factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements.
Any forward-looking statements made by, or on behalf of,
Shaftesbury PLC speak only as of the date they are made and no
representation or warranty is given in relation to them, including
as to their completeness or accuracy or the basis on which they
were prepared. Except as required by its legal or statutory
obligations, Shaftesbury PLC does not undertake to update
forward-looking statements to reflect any changes in its
expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is
based.
Information contained in this document relating to Shaftesbury
PLC or its share price, or the yield on its shares, should not be
relied upon as an indicator of future performance. Nothing
contained in this document, the latest Annual Report or
Shaftesbury's website should be construed as a profit forecast or
an invitation to deal in the securities of the Company.
Ends
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