| Tue 28 Apr 2009, 8:32 | | LBT - Liberty international Plc - Interim management statement |
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LBT
LILII
LBT - Liberty international Plc - Interim management statement
For the period from 1 January 2009 to 27 April 2009
LIBERTY INTERNATIONAL PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: LBT
Issuer Code: LILI I
27 APRIL 2009
LIBERTY INTERNATIONAL PLC
INTERIM MANAGEMENT STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2009 TO 27 APRIL 2009
Highlights of the period:
* Improved UK shopping centre occupancy rate despite further
retailer failures in the first quarter of 2009, at some cost in
terms of rental levels achieved on re-lettings, the majority
of which have been short-term lettings of less than 5 years.
- short-term lettings provide flexibility to benefit from
market recovery.
* Disposals of non-core assets totalling GBP203 million.
* Cash and committed facilities increased from GBP291 million to
GBP313 million.
- development commitments GBP195 million (31 December 2008 - GBP238
million)
* Progress with development lettings
- St. David`s 2 Cardiff, now 57 per cent let by area, 47 per cent by
income with a further 11 per cent in advanced negotiations.
* Estimated first quarter like-for-like reduction in investment property
market values of 8.0 per cent for CSC`s completed UK regional shopping
centres and 8.5 per cent overall based on external valuations at 31 March
2009.
* Estimated impact of valuations to reduce Liberty International`s net assets
per share (diluted, adjusted) by approximately 147p from 745p at 31
December 2008.
Enquiries
Liberty International PLC
Patrick Burgess, Chairman +44 (0)20 7960 1273
David Fischel, Chief Executive +44 (0)20 7960 1207
Ian Durant, Finance Director +44 (0)20 7960 1210
Public Relations
UK: Michael Sandler, Hudson Sandler +44 (0)20 7796 4133
SA: Nick Williams, College Hill Associates +27 (0)11 447 3030
This press release contains "forward-looking statements" regarding the
belief or current expectations of Liberty International PLC, its directors
and other members of its senior management about Liberty International PLC`s
businesses, financial performance and results of operations. Generally,
words such as, but not limited to, "may", "could", "will", "expect", "intend",
"estimate", "anticipate", "believe", "plan", "seek", "continue" or similar
expressions identify forward-looking statements. These forward-looking
statements are not guarantees of future performance. Rather, they are
based on current views and assumptions and involve known and unknown risks,
uncertainties and other factors, many of which are outside the control of
Liberty International PLC and are difficult to predict, that may cause actual
results, performance or developments to differ materially from any future
results, performance or developments expressed or implied by the forward-looking
statements. These forward-looking statements speak only as at the date of
this presentation. Except as required by applicable law, Liberty International
PLC expressly disclaims any obligation to update or revise any forward-looking
statements contained herein to reflect any change in Liberty International
PLC`s expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
Any information contained in this press release 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.
Introduction
The main 2009 objectives for Liberty International are:
* To maintain occupancy levels at our existing assets and secure development
lettings in a difficult letting market where, until confidence returns to
financial markets and the general UK economy, retailer failures are
probable;
* To conserve cash resources and strengthen the financial position of the
company in the face of possible further falls in asset values, while
progressing active management and development initiatives for launch when
market conditions are more suitable;
* To position the group for market recovery in due course with retail, and
thereby prime retail property, likely in our view to be at the forefront of
such recovery.
The group has achieved the following in the year to date:
* Improving CSC`s overall occupancy rate despite further retailer failures in
the first quarter of 2009, at some cost in terms of rental levels achieved
on re-lettings, the majority of which have been short-term lettings of less
than 5 years;
* Further disposals of non-core assets in excess of GBP200 million of which
over GBP150 million has been realised in cash in the year to date;
* Increasing cash and committed facilities to GBP313 million at 31 March 2009
(31 December 2008 - GBP291 million) while expenditure in the period has
reduced capital commitments on property developments from GBP238 million to
GBP195 million.
In addition, an equity capital raising has been launched as set out in the
separate announcement issued today.
Operations of Capital Shopping Centres (investment properties of GBP5.0 billion
at 31 December 2008, 70 per cent of the group total)
CSC has always focussed on retail assets of the highest quality, with fourteen
centres including nine of the UK`s top 30 regional shopping centres. The benefit
of this approach becomes most obvious in more difficult periods, with occupancy
at high levels as described below and CSC`s assets performing well operationally
compared with retail assets of lower quality.
CSC`s retailer tenant mix is diverse. The top 20 tenants account for 39 per cent
of CSC`s rent roll with the top 3 (Arcadia, Boots and Next) accounting for 11
per cent. National or international multiple retailers represent over 90 per
cent of the rent roll.
The current winning retailer formats are value brands and trusted names with a
strong complementary on-line presence. Reflecting difficult trading conditions
and less amenable debt markets, retailer failures have been at abnormally high
levels in each of the last two quarters, affecting 92 units in the first quarter
of 2009, out of CSC`s 2,028 units in aggregate, involving passing rent of
GBP14.5 million per annum (final quarter of 2008 - 59 units, GBP16.1 million).
While the retail failures in 2008 and early 2009 will have a negative impact on
CSC`s net rental income (GBP281 million in 2008), CSC`s focus on quality centres
in strong locations has enabled the group to be successful in retaining high
profile retailers entering into and emerging from the administration process who
are keen to maintain their representation in CSC centres.
Key indicators of performance in the year to date are as follows:
* Estimated footfall at CSC`s centres in 2009 has continued to show
encouraging strength with our 12 completed centres recording an increase of
over 3 per cent in the year to date.
* Headline occupancy levels at 31 March 2009 have remained high at 98.5 per
cent (31 December 2008 - 98.7 per cent).
As a result of the positive re-letting activity in the period the occupancy
level, adjusted for units affected by administrations still to be re-let,
has increased to 95.4 per cent at 31 March 2009 from 93.6 per cent at 31
December 2008.
CSC has made 55 re-lettings in 2009 to date involving GBP4.1 million of new
annual passing rent, compared with GBP5.4 million previously. These tenancy
changes in the period included 13 long term lettings, 36 short term
lettings, two lettings by our commercialisation business, CSC Enterprises,
and four turnover-only transactions.
Also included in the adjusted occupancy percentage at 31 March 2009 are 99
units under offer or where terms are agreed, of which the majority are
short term lettings of less than five years.
Short term lettings have generally been agreed below previous rental
levels, but are an important part of the overall strategy to manage for
occupancy maintaining attractiveness of the centres and minimising exposure
to void costs, while providing flexibility for CSC to benefit from market
recovery by longer-term lettings in due course.
* Rent review settlements have continued to be agreed in line with
expectations. * Rent reviews prior to 2008 are now mostly agreed while good
progress has been made with the 15 per cent of CSC`s income which was
subject to review in 2008, particularly at The Mall, Cribbs Causeway
* CSC has only 2 and 3 per cent by rental income of leases expiring in 2009
and 2010 respectively. The first major round of lease expiries is at
MetroCentre in 2011 which management are already addressing pro-actively.
* Excluding tenants in administration, and adjusted for payment plans granted
on the grounds of proven hardship, 98 per cent of the March quarter rent,
the second quarter income for 2009, was collected within 28 days of the
quarter date (December 2008 quarter date - 97 per cent within 28 days).
Payment plans, mostly involving monthly rental payments, represent a small
percentage of overall income.
Active management and development by Capital Shopping Centres
* Notable active management initiatives are:
- the upgrade of leisure and dining facilities in the Yellow and Blue
Quadrants at MetroCentre, Gateshead. The first phase of construction
is now complete and several of the restaurants are now shopfitting.
The new Odeon Cinema and family entertainment centre are on programme
for opening this Autumn with Phase 3, reconfiguration of the Blue
Quadrant, due to complete in Autumn 2010. Lettings have continued to
progress well with 74 per cent by income and 83 per cent by area now
committed;
- the third and largest stage of the redevelopment of Eldon Square,
Newcastle, the St Andrew`s Mall at the southern end of the Centre,
which when complete will increase the overall size of the centre to
1.3 million sq.ft. The new mall due to open in Spring 2010 is 75 per
cent let or in solicitors` hands by income and 83 per cent by area.
CSC has a number of value adding active management and development
opportunities within existing centres to be undertaken when market
conditions are appropriate.
* CSC`s largest development project, St David`s, Cardiff, a joint venture
with Land Securities, is on programme to open in Autumn this year. The
project will extend the existing St David`s centre by 967,500 sq.ft. to 1.4
million sq.ft. overall. Overall around 125 new shops and restaurants are
being developed which, when added to the existing centre, will enlarge St
David`s into one of the UK`s largest city centre retail schemes.
We are confident of the future prospects for the enlarged St David`s centre
with the existing centre already attracting 22 million customer visits each
year.
Cardiff is expected to rise to 8th place in the UK retail rankings on
completion of the St David`s development which has already attracted
several new retailers to Wales.
The new library was handed over to Cardiff Council on schedule in December
and John Lewis is currently fitting out its 260,000 sq.ft. store. Cardiff
will be its largest store outside London.
57 per cent of the area and 47 per cent of anticipated rental income is
currently either exchanged or in solicitors` hands (26 February 2009 - 51
per cent and 40 per cent). The additional tenants now secured include New
Look, H&M and the Disney Store. A further 11 per cent by income is in
active negotiations or at heads of terms stage.
In 2008 a significant number of new shopping centres opened during the year
adding over 10 million sq.ft. of retail space, generally well let. In 2009,
only a small number of large retail schemes are due to open including St
David`s Cardiff. Following this, supply will be curtailed sharply, as the
current economic environment has halted many projects in the pipeline.
However, we anticipate the letting market to continue to be challenging in
2009 as retailers approach expansion with caution.
Capital & Counties (investment properties of GBP2.1 billion, 30 per cent of the
group total, and GBP129 million of investments at 31 December 2008)
Capital & Counties is principally engaged in non-shopping centre investments
focussed on Central London (GBP1.4 billion of assets) especially the Covent
Garden Estate in the heart of London`s West End and Earls Court & Olympia, a
sound operational business with major medium to long term development prospects
from the Earls Court site.
Tenant engineering at Covent Garden has continued with five new leases signed in
the period. All conditions have now been satisfied in respect of the letting of
Bedford Chambers to a major global retailer. Overall occupancy has remained
strong at 98 per cent excluding planned vacancies.
The underlying exhibition business at Earls Court & Olympia has continued to
perform soundly with Q1 EBITDA in line with 2008 levels with some loss of income
from conferences reflecting market conditions offset by cost savings. Capital &
Counties has continued to make good progress with adjacent land owners in
respect of longer term plans for a major integrated mixed-use development around
Earls Court.
The remaining activities of Capital & Counties, including the Great Capital
Partnership, the Central London joint venture with Great Portland Estates, and
the international activities have continued to perform satisfactorily. The
group`s U.S. business successfully concluded a U.S.$14 million asset-specific
financing at a fixed rate of 6.9 per cent for five years.
Property Market Conditions
According to the IPD UK monthly property index, UK property capital values,
which started to decline nearly two years ago in the second half of 2007, fell
by a further 8.9 per cent in the first quarter of 2009 (retail property - minus
9.6 per cent).
Based on external valuations as at 31 March 2009, as set out in the table below,
the directors estimate that, after taking account of capital expenditure, asset
sales and currency movements, the underlying likefor-like reduction in the
market value of investment and development properties since 31 December 2008
amounted to 8.0 per cent for CSC`s completed UK regional shopping centres and
8.5 per cent overall:
Marke Market
t
value value
31 31 Nominal
equivalent
yield
March Decemb 31 31
er
2009 2008 March Decemb
er
GBPm % GBPm % 2009 2008
UK regional 4,622 72% 5,009. 70% 7.13% 6.67%
shopping centres .8 6
Capco Covent Garden 532.6 8% 590.3 8% 5.59% 5.16%
Capco Earls Court 540.4 8% 568.9 8%
Capco London GCP 242.4 4% 275.4 4% 6.36% 6.33%
Capco Opportunities 43.7 1% 182.7 3% 11.43% 8.60%
Capco USA 452.4 7% 485.9 7%
Total investment 6,434 100% 7,112. 100%
properties .3 8
The cumulative decline from peak for Liberty International`s investment
properties amounted to 27.2 per cent at 31 December 2008 and an estimated 33.4
per cent at 31 March 2009 outperforming the comparable IPD UK all-property
monthly index declines of 35.6 per cent and 41.4 per cent respectively.
After deducting the minority interests` share of the reduction in market value,
the estimated impact of the first quarter`s valuation decline is to reduce
Liberty International`s net assets per share (diluted, adjusted) by
approximately 147p from 745p at 31 December 2008.
After a period of virtual standstill, the UK direct property market has shown
more activity in 2009, particularly for smaller lot sizes. We have taken
advantage of this improvement in market conditions to achieve the GBP203 million
disposals of non-core assets. Market conditions remain difficult for larger lot
sizes as debt finance is not readily available.
Disposals
We have continued to make good progress with disposals of non-core properties,
predominantly assets of Capital & Counties which do not form part of its Central
London focus.
Disposals to date in 2009 amount to GBP172 million, of which GBP120 million has
completed, GBP22 million has exchanged and GBP30 million is under offer.
In addition the group has realised GBP31 million from the disposal of internal
and third party CMBS notes.
Financing
Cash and committed facilities at 31 March 2009 amounted to GBP313 million
(31 December 2008 - GBP291 million), in excess of our property development
commitments of GBP195 million (31 December 2008 - GBP238 million).
Net external debt has reduced from GBP4,100 million to GBP4,043 million at
31 March 2009. The proceeds of disposals in the period have been applied towards
capital expenditure commitments and debt repayment.
The group`s debt structure is predominantly non-recourse with over 90 per cent
of the group`s debt being asset-specific and non-recourse with limited cross-
default exposure. The group has no major non-recourse debt refinancings until
the Lakeside CMBS in 2011.
This structure permits the group a higher degree of financial flexibility in
dealing with individual property issues than a financing structure based on a
single group-wide borrowing facility.
The group`s first unsecured debt repayment is a GBP79 million convertible bond
maturing in the second half of 2010.
The group remains in compliance with all debt covenants. The group`s preliminary
results announcement issued on 26 February 2009 contained full details of
covenants on both corporate and asset-specific non-recourse debt arrangements.
With regard to non-recourse debt structures, compliance with financial covenants
is constantly monitored. Actual covenant breaches can be rectified by a number
of remedies such as additional security, temporary cash deposit or partial
repayment before an event of default occurs. The group has initiated discussions
with non-recourse lenders where the group considers the arrangements are
particularly sensitive to falls in property valuations or reduction in net
rental income.
As disclosed in the preliminary results, we agreed certain important changes to
the terms of our GBP360 million corporate bank facilities, including extending
overall maturity into 2011. These changes were contingent on the group raising
not less than GBP350 million of additional equity.
Prospects
While 2009 will undoubtedly be a further difficult year for the UK economy and
property industry, Liberty International has a high quality and defensive UK
regional shopping centre and retail property business, which includes 9 of the
top 30 UK centres and prime Central London sites such as Covent Garden.
Relatively our properties have performed well in capital value terms since the
downturn which began nearly two years ago in the second half of 2007. Tenant
failures amounting to some GBP30 million of CSC`s passing rent in the last two
quarters will adversely impact underlying earnings, notwithstanding the
satisfactory re-letting progress this year.
We have already taken a number of steps, including over GBP1 billion of asset
sales since we became a UK REIT in January 2007, to improve liquidity and
financial strength. Today`s equity capital raising announcement is an important
additional measure.
Our predominantly non-recourse and asset-specific debt structure provides
considerable financial flexibility.
We are positioning the group for market recovery in due course, and believe
retail, and thereby prime retail property, is likely to be at the forefront of
such recovery.
27 April 2009
BACKGROUND ON LIBERTY INTERNATIONAL
LIBERTY INTERNATIONAL PLC is one of the UK`s largest listed property
companies and a constituent of the FTSE-100 Index of the UK`s leading listed
companies. Liberty International converted into a UK Real Estate Investment
Trust (REIT) on 1 January 2007.
Liberty International owns 100 per cent of Capital Shopping Centres ("CSC"),
the premier UK regional shopping centre business, and of Capital & Counties,
a retail and commercial property investment and development company.
At 31 December 2008, Liberty International owned GBP7.1 billion of
properties of which UK regional shopping centres comprised 70 per cent and
retail property in aggregate 85 per cent. Adjusted, diluted shareholders`
funds amounted to GBP2.8 billion. Assets of the group under control or
joint control amounted to GBP9.3 billion at that date.
CAPITAL SHOPPING CENTRES has interests in 14 UK regional shopping centres
amounting to 12.7 million sq.ft. in aggregate including 9 of the UK`s top 30
regional shopping centres with a market value of GBP5.0 billion at 31
December 2008. CSC`s largest centres are Lakeside, Thurrock; MetroCentre,
Gateshead; Braehead, Renfrew, Glasgow; The Harlequin, Watford; and
Manchester Arndale. CSC has a 50 per cent share in the extension of St
David`s, Cardiff, which is due to complete in Autumn 2009.
CAPITAL & COUNTIES held assets of GBP2.1 billion at 31 December 2008,
amounting to 7.4 million sq.ft. in aggregate, of which GBP1,434 million was
invested in Central London. Capital & Counties had GBP590 million invested
in the Covent Garden area including the historic Covent Garden Market, and a
further GBP275 million in London`s West End, primarily through the Great
Capital Partnership, a joint venture with Great Portland Estates plc.
Capital & Counties owns 50 per cent of the Earls Court and Olympia Group and
of the Empress State building in Earls Court amounting to aggregate assets
of GBP569 million. In addition, Capital & Counties has interests in the USA
amounting to GBP486 million (2.6 million sq.ft.), predominantly comprising
retail assets in California, including the 856,000 sq.ft. Serramonte
Shopping Centre, Daly City, San Francisco.
28 April 2009
Joint sponsors:
Merrill Lynch South Africa (Pty) Limited
UBS South Africa (Pty) Limited
Date: 28/04/2009 08:32:01 Produced by the JSE SENS Department.
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