| Fri 20 Apr 2007, 8:09 | | LBT - Liberty International Plc - AGM Statement an |
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LBT
LILII
LBT - Liberty International Plc - AGM Statement and Trading Update
LIBERTY INTERNATIONAL PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: LBT
Issuer Code: LILII
20 April 2007
LIBERTY INTERNATIONAL PLC
ANNUAL GENERAL MEETING STATEMENT AND TRADING UPDATE
The following is the text of the statement and trading update at today`s Annual
General Meeting.
Enquiries:
Liberty International PLC:
Sir Robert Finch Chairman +44 (0)20 7960 1273
David Fischel Chief Executive +44 (0)20 7960 1207
Public relations:
UK: Michael Sandler, Hudson Sandler +44 (0)20 7796 4133
SA: Matthew Gregorowski,
College Hill Associates +44 (0)20 7457 2020
Nicholas Williams,
College Hill Associates +27 (0)11 447 3030
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.
ANNUAL GENERAL MEETING STATEMENT AND TRADING UPDATE
Corporate activity in 2007
Liberty International has had an exceptionally busy first three months since
becoming a UK Real Estate Investment Trust ("REIT") on 1 January 2007.
With the benefit of increased asset management flexibility from REIT status, we
have recorded three significant corporate transactions in the first quarter of
2007:
Strategic partnership with GIC Real Estate realising GBP426 million
Our wholly owned subsidiary, Capital Shopping Centres ("CSC"), has entered into
an agreement with GIC Real Estate ("GIC RE") for GIC RE to acquire a 40 per cent
share of CSC`s interest in the MetroCentre, Gateshead for a gross consideration
of GBP426 million. We are delighted to welcome GIC RE, the real estate
investment arm of the Government of Singapore Investment Corporation and one of
the world`s leading global real estate investors, as a strategic long-term
partner in this flagship asset. CSC will continue to manage the MetroCentre.
The transaction releases capital to enable Liberty International to continue to
expand its overall business which includes a GBP1 billion development programme.
Formation of GBP460 million Central London joint venture with Great Portland
Estates
Our wholly owned subsidiary, Capital & Counties, has announced the formation of
The Great Capital Partnership, a 50:50 joint venture with Great Portland Estates
plc ("GPE"), to own, manage and develop a number of Central London properties
and to broaden both parties` exposure in Central London. The Great Capital
Partnership will have a starting value of around GBP460 million, with Capital &
Counties contributing GBP299 million of investment properties and GPE
contributing GBP162 million. GPE will therefore make a balancing payment of
GBP68 million in cash to Capital & Counties. GPE will be responsible for asset
management of the partnership properties. We are delighted to have created this
relationship with GPE which will enable us to increase our involvement in London
in partnership with a first class team.
GBP127 million acquisition of Royal Opera House retail units in Covent Garden
Capital & Counties has acquired the retail element of the Royal Opera House
block in London`s Covent Garden for GBP127.5 million increasing the aggregate
value of our interests in Covent Garden, which are wholly-owned and directly
managed, to over GBP620 million. This purchase is of strategic importance to
our long-term plans for Covent Garden. The retail units in the Royal Opera
House block are amongst the most prime in Covent Garden and the acquisition
expands our ownership to encompass the northern side of the Market and James
Street which serves as the "front door" to the Covent Garden Market itself.
The net proceeds of these transactions, combined with the GBP335 million of
equity capital raised by way of share placing in November 2006, represent a
substantial strengthening of the group`s financial position in the last six
months. Liberty International`s financial ratios, which included a debt to
assets ratio of 36 per cent at 31 December 2006, are robust and we are well
placed to continue with the measured expansion of our business which has
aggregate investment properties exceeding GBP8 billion.
Long-term financing
Liberty International has always adopted a prudent approach to financing and the
weighted average maturity of the group`s aggregate debt of GBP3.1 billion at 31
December 2006 was eight years.
The group`s policy is to eliminate substantially all exposure to short and
medium term interest rate fluctuations in order to reduce the variability of
cash flows. Over the next ten years, substantially all interest payments,
including those in respect of debt which is expected to arise as a result of
committed capital expenditure, are at fixed rates which are below those
currently prevailing in the market. Furthermore the rates which have been
achieved through interest rate swaps as the base level for future borrowings are
at reducing average interest rates and appear attractive in the context of long-
term historic rates in the UK.
In the first quarter of 2007, long-term interest rates in the UK continued to
rise, with the 10 year interest rate swap, a reasonable proxy for our hedging
profile, rising from 5.11 per cent at 31 December 2006 to 5.35 per cent at 31
March 2007. Since the quarter end, the ten year interest rate swap has risen
further to 5.46 per cent on 19 April.
Notwithstanding their purpose being to reduce the volatility of cash flows, we
now mark-to-market under International Financial Reporting Standards the
derivative financial instruments used to fix the interest cost of our long-term
debt. The valuation surplus on these items amounted to over GBP100 million in
the first quarter of 2007.
Quarterly Reporting
We indicated at the time of announcing our 2006 results that we were intending
to report on a quarterly basis commencing with the first quarter of 2007.
We anticipate releasing our first quarter`s results including a full external
independent property valuation in early May 2007 and will defer until that date
any comment on the valuation outcome for the first quarter or other components
of the first quarter`s results.
Impact of notional acquisition costs deducted from market values
As we have regularly pointed out to shareholders and analysts, the valuation
process in respect of investment properties assumes each asset is sold
individually on the open market at the balance sheet date. Investment properties
are required to be valued after deducting notional acquisition costs, including
stamp duty land tax at 4 per cent in the UK. This deduction amounted in
aggregate to GBP370 million at 31 December 2006, equivalent to 98p per Liberty
International share, over 7 per cent of Liberty International`s adjusted net
asset value as the impact is magnified by the company`s gearing.
This point is especially relevant now shareholders have full tax transparency
with Liberty International`s REIT status. As stamp duty on share transfers only
amounts to 0.5 per cent, an incoming shareholder in Liberty International can
effectively invest in the assets at a substantially lower acquisition cost than
is assumed by the valuers in the direct property valuations.
The net asset value per share of 1327p reported at 31 December 2006 is
equivalent to 1425p if adjusted for notional acquisition costs deducted from
market values.
Furthermore, no account is taken in the valuation process of any additional
value were our UK regional shopping centre portfolio to be considered as a
whole.
Capital Shopping Centres
CSC is the UK`s industry leader in large scale shopping centres with 14 major
centres valued at GBP6.5 billion at 31 December 2006 including 8 of the UK`s top
21 regional shopping centres and significant development activities referred to
below.
Occupancy levels at CSC`s completed shopping centres remain high at 98.4 per
cent, virtually unchanged from 98.6 per cent reported at 31 December 2006.
These occupancy figures exclude new developments, particularly Manchester
Arndale Northern Extension where the final phases of the major 550,000 sq.ft.
addition opened in Autumn 2006; we have continued to make steady progress with
lettings in the 1.4 million sq.ft centre and now have 94 per cent committed by
rental value.
Rent review settlements continue to progress in line with expectations.
Nationally, retail sales have seen steady positive growth for the last 12 months
and our prime regional shopping centres continue to attract both retailers and
shoppers alike, offering premium destinations against a background of continuing
competition between different retail formats.
CSC Development Activities
Good progress continues to be achieved on CSC`s high quality development
pipeline, extending existing prime retail locations.
At St. David`s 2, Cardiff, the main construction contract has commenced on site
and the development, which will provide 967,500 sq. ft. of additional retail
space, anchored by John Lewis, is due to complete in Autumn 2009.
In Oxford, planning consent has now been granted for our major mixed-use project
which will extend the existing Westgate Centre to 750,000 sq.ft. retail, also
anchored by John Lewis. Tendering for the construction contract is at an
advanced stage for scheduled commencement in early 2008 and completion in 2011.
In Newcastle, the new state-of-the-art bus station has opened and work has
commenced to provide 48,000 sq.ft. of new retail space on the site of the old
bus concourse. Following the CPO inquiry held in March, we expect to start
construction of Eldon Square South, the third and largest element of the overall
redevelopment of Eldon Square, providing 410,000 sq.ft. of well-configured
retail space, including a new department store for Debenhams, in September 2007
for completion in 2010.
At Lakeside, Thurrock, the Boardwalk project, providing 11 new restaurants and a
children`s entertainment area overlooking Alexandra Lake, is on programme to
open in June. With all the restaurant space now committed, substantially
enhancing Lakeside`s casual dining offer, and a comprehensive refurbishment of
the cinema underway, we look forward to considerable benefits for the entire
centre.
Capital & Counties
In addition to the two transactions referred to above, Capital & Counties, which
had investment properties of GBP1.65 billion at 31 December 2006, has recorded
considerable progress in the year to date. Most notably at Metro Building,
Hammersmith, where 90,000 sq.ft. was refurbished last year, 64,500 sq.ft. has
been let at the highest rent achieved in Hammersmith for over 5 years; at St
Martin`s Place, Slough, where 54,000 sq.ft. was available, 11,000 sq.ft was let
during February and a further 43,000 sq.ft. is currently under offer and in
lawyer`s hands; and at Wincheap Estate, Canterbury, we have been selected by
Canterbury City Council as their preferred developer in respect of the
regeneration of over 25 acres to the southwest of the city centre. The
intention is to develop a mixed-use scheme incorporating retail, leisure,
offices and residential accommodation.
Concluding remarks
REIT status brings many advantages including tax transparency for shareholders,
significantly increased flexibility to recycle and enhance our investment
properties and an internationally recognised property holding vehicle.
After an exceptionally busy start to the year, our sound financial position and
the underlying strengths of our business mean we are well placed to continue to
prosper and to respond to challenges which lie ahead.
Sir Robert Finch
Chairman
Date: 20/04/2007 08:09:06 Produced by the JSE SENS Department.
