| Fri 18 Mar 2005, 14:56 | | Liberty International Plc - Trading Update |
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Liberty International Plc - Trading Update
LIBERTY INTERNATIONAL PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: LBT
Issuer Code: LILI I
18 March 2005
LIBERTY INTERNATIONAL PLC
ANNUAL GENERAL MEETING TRADING UPDATE
The following is the text of a statement made by Liberty International at
today`s Annual General Meeting.
Enquiries:
Susan Folger Company Secretary Tel: 020 7887 7000
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.
`General
Liberty International`s preliminary results were released some five weeks ago on
9 February 2005.
The most important corporate event since that date has been the major UK
regional shopping centre transaction with Prudential Assurance Company Limited
(`Prudential`) which was announced three days ago on 15 March 2005.
Transaction with Prudential
For an aggregate consideration of GBP653 million, the Liberty International
group has acquired a 50 per cent interest in Prudential`s holdings in two of the
UK`s leading regional shopping centres, The Mall at Cribbs Causeway, Bristol,
and the Manchester Arndale, together with associated properties.
Cribbs Causeway represents one of the limited number of regional out-of-town
shopping centres in the UK while Manchester Arndale will, on completion of the
Northern Extension development in 2006, rank as the UK`s largest city centre
shopping centre.
The transaction substantially enhances Liberty International`s market position
in the UK shopping centre industry, where our holdings now include nine of the
country`s top twenty five shopping centres. Furthermore, we believe the
association with Prudential should provide long-term strategic benefits to
Liberty International.
Capital Shopping Centres
Retailer demand for space at our completed shopping centres remains at strong
levels with the overall level of void units still a negligible percentage of
total units. Our rent review programme is continuing to produce settlements in
line with expectations, importantly at Braehead, Renfrew, near Glasgow, where
the first round of reviews since the centre opened in 1999 is now well underway.
At this early stage of the year, it is premature to draw conclusions on
retailers` trading performance but footfall levels and turnover figures indicate
that our centres are maintaining their overall attractiveness to the UK public.
The group`s aggregate development programme remains unchanged from the GBP1.3
billion reported at the year end of which GBP1.15 billion related to Capital
Shopping Centres.
Our next major development project to be opened is Chapelfield, Norwich, a new
510,000 sq.ft. centre, scheduled for Autumn 2005. Letting progress has
continued from the position reported at the year end, when 89 per cent of the
space and 82 per cent of anticipated rents were either committed or under offer.
In respect of the GBP850 million potential but as yet uncommitted long-term
shopping centre development programme, progress continues to be made on the
joint venture projects at Cardiff and Oxford and on the major extensions to
existing centres, Eldon Square, Newcastle, and The Harlequin, Watford.
In the case of Cardiff, a detailed planning application for the St David`s 2
development was submitted on 4 March and construction is now scheduled to
commence in Spring 2006 for completion and opening in 2009.
At Eldon Square, Newcastle, the Transport Minister announced on 28 February the
long-awaited GBP11 million of Government funding for the new bus station which
forms an integral part of one of the three extension schemes planned for the
centre. Construction on all three elements is due to start over the next
eighteen months.
Capital & Counties
Investment sentiment remains strong in Central London and provincial retail
sectors. Other than two shop units at Swansea market, we have no UK retail
vacancies. We are in discussion with the Administrator of Allders in respect of
their lease of the major store at The Headrow, Leeds.
Office tenant interest in the West End of London continues to improve and our
ongoing refurbishment programme has enabled us to achieve satisfactory lettings.
A planning application was submitted in February for the 380,000 sq. ft.
refurbishment and redevelopment of the King`s Reach complex on London`s South
Bank.
Financing
At 31 December 2004, the group had cash balances of GBP438 million and committed
facilities of GBP675 million representing over GBP1.1 billion of available
financial resources. We have already reported the successful GBP600 million
refinancing this year of MetroCentre, Gateshead, through the commercial mortgage
backed securities market (the CMBS market) at significantly reduced interest
rate margins.
In order to provide suitable long-term financing for the Prudential transaction
and the group`s development commitments, we are now embarked on arranging inter
alia finance linked to the Braehead shopping centre, which has no attached debt
following the MetroCentre refinancing.
As reported at the year end, substantially all interest payments over the next
five years are at fixed rates with a gradually reducing proportion of fixed
rates beyond that date.
Real Estate Investment Trusts (`REITS`)
We note the UK Government`s re-affirmed commitment to introducing tax-
transparent property vehicles (UK-REITS) in line with other developed economies
around the world. We are reviewing the further Discussion Paper on UK-REITS
released in the UK Budget on 16 March 2005 and intend to make submissions to the
UK Treasury in due course.
Stamp duty land tax
We have commented before on the penal and counter-productive 4 per cent stamp
duty land tax levy on UK commercial property transactions. To some extent this
burden on the property industry had been alleviated in the last two years by so-
called disadvantaged area relief, which participants in the market place had
been led to believe would not be reviewed until the end of 2006.
However, quite unexpectedly, the Budget on 16 March 2005 removed disadvantaged
area relief for non-residential transactions, thereby re-imposing the full
burden on commercial transactions.
Notional acquisition costs, primarily stamp duty land tax, amounting to GBP170
million, equivalent to 48 pence per Liberty International share, were deducted
by our valuers in arriving at the valuations of completed investment properties
at 31 December 2004 and our net asset value per share of 1017 pence as at that
date.
Following the Budget change referred to above, this deduction would be increased
by GBP92 million, equivalent to a further 26 pence per Liberty International
share.
We would, however, point out that investment properties are by definition assets
not earmarked for disposal whereas the notional costs deducted from their values
assume they are sold individually on the open market, taking no account of the
structures through which they are held. Furthermore, in the case of a going
concern and listed company such as Liberty International, the purchase and sale
of shares is the predominant mode of exchange of value for shareholders,
incurring stamp duty at 0.5 per cent, rather than the sale of each underlying
property.
If these notional acquisition costs were added back to reflect a more realistic
position for shareholders, Liberty International`s net assets per share at 31
December 2004 would have amounted to 1065 pence.
Shareholders should note that the Budget change removing disadvantaged area
relief from stamp duty for commercial transactions referred to above should have
only a very limited impact on Liberty International`s profitability and dividend
growth potential.
We do however believe the change adds greater urgency to the need for the RICS
to review their Appraisal and Valuation Standards in order to provide the
flexibility to give proper recognition to the structures through which assets
are held and ensure the balance sheet properly reflects the true value of the
underlying assets.
Concluding Remarks
Finally, following the Prudential transaction, our UK shopping centre interests
held through Capital Shopping Centres are now around GBP5 billion and total
property assets amount to GBP6 billion. Including the Serramonte centre in San
Francisco, we have twelve completed regional shopping centres with a further
three UK projects in Norwich, Cardiff and Oxford at the development stage.
Retail property represents over 93 per cent of our total assets and includes
some GBP180 million of UK retail parks.
With an encouraging start to the year, the directors continue to believe the
company has exceptional long term prospects.`
ENDS
Date: 18/03/2005 02:08:31 PM
Produced by the JSE SENS Department
