REG - Cap Shop Ctrs Grp - Interim Management Statement

Wed Apr 25, 2012 2:00am EDT

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RNS Number : 9600B
Capital Shopping Centres Group PLC
25 April 2012

25 APRIL 2012 





David Fischel, Chief Executive of Capital Shopping Centres Group PLC, commented:

"CSC is determined to provide the best experience to shoppers and to continue to attract leading retailers to our prime regional centres, with 27 new stores opening in the period. While the UK retail environment remains tough, we continue to benefit from last year's transformational Trafford Centre acquisition as we focus on securing the right retailers in the right places paying the right rents with the objective of achieving strong total returns from our assets."   


Highlights of the period

·        Tenant mix improvements:

Exciting new brands brought to CSC centres including Nespresso at Trafford Centre and Locker Room at Lakeside

42 new long term leases signed, in aggregate £10 million of annual rent, around 10 per cent above previous passing rent and in line with ERV   

Active management initiatives driving change, particularly enhancing catering and leisure offerings

·        Progress with major projects:

Lakeside - plans unveiled for a new leisure destination, in conjunction with proposed 325,000 sq. ft retail extension

Nottingham - OFT clearance, active discussions with retailers and local authority

Braehead - mall refreshment plans, preparation of masterplan continuing

Acquisition of adjacent property at Cribbs Causeway with potential for future development

·        Operational indicators:

Footfall down 2 per cent year to date outperforming the national average

Tenants representing 3 per cent of rent entered administration, of which 2 per cent was reported at the time of the 2011 full year results in February; occupancy 94.3 per cent, 95.0 per cent including tenants in administration still trading

·        Capital recycling:

£49 million realised in March from part disposal of Equity One shareholding

Tenant mix improvements

We have maintained progress during the period in respect of our long-standing objective of ensuring the right blend of retail, leisure and catering in all our centres. 27 new stores have opened in our centres since Christmas including Nespresso at Trafford Centre, the UK's third Locker Room at Lakeside, Thomas Sabo at Braehead, Boux Avenue at Chapelfield and Dwell at St David's, Cardiff.

42 new long term leases have been agreed, in aggregate £10 million of annual rent, approximately 10% above previous passing rent and in line with ERV for those units. These include:

·      Forever 21 to come to The Trafford Centre following the opening this autumn of their flagship store at Lakeside

·      A major global brand already trading in several CSC centres to double its space at Manchester Arndale and to open in Harlequin, Watford, and The Glades, Bromley

·      Superdry to extend into an adjacent unit at The Trafford Centre and to open in the former HMV store in Manchester Arndale

·      Café Rouge to join Carluccio's, Yo!Sushi and Ask in the rapidly developing restaurant quarter at Chapelfield, Norwich

With a focus on creating a dynamic environment for shoppers and retailers, in particular to meet demand for more catering and leisure attractions, active management initiatives are underway at most centres, for example we have:

·      agreed terms with an operator, subject to planning permission, for a major new leisure attraction at Barton Square, Trafford Centre

·      agreed terms for the final letting at MetrOasis, a four restaurant development at Metrocentre currently under construction and on schedule to open in the autumn

·      secured planning consent for a 58,000 sq. ft. leisure and catering development at The Potteries, Stoke-on-Trent and are in advanced negotiations with cinema and restaurant operators

·      resubmitted an application for a fully pre-let terrace of five restaurants at Queen's Gardens, Bromley


Operational indicators

A number of factors contributed to a 2 per cent year on year reduction in footfall at CSC's centres for the year to date. By comparison, UK national retail footfall as measured by Experian fell by 3 per cent year on year in the same period. The three and a half month period is too short to enable a conclusion to be made on the likely full year trend and we will report on this measure again in July.

Occupancy across CSC's centres stands at 94.3 per cent, down 2.4 per cent from 31 December 2011 due to post Christmas tenant administrations (see below) and expiry of seasonal lettings.

As we commented at our 2011 full year results, our focus is on securing the right retailers in the right places paying the right rents with a view to capital appreciation over the medium term. We believe that this robust approach is appropriate for CSC even if it impacts vacancy levels, rental income and void costs in the short term.

CSC is benefitting from shoppers' and retailers' increasing concentration on the strongest destinations as our interests include ten of the UK's top 25 shopping centres. Retailer demand for larger spaces for flagship stores in the highest footfall locations remains strong, given the very limited shopping centre construction pipeline in the UK.   

Tenant administrations tend to be concentrated in the post Christmas quarter. Some 3 per cent of CSC's rent roll, 75 units, entered administration in the first quarter of 2012. This includes the 2 per cent which was reported at the time of the 2011 full year results in February.

Of the 75 units, 25 (1 per cent of rent) have been relet or are under offer. The remaining 50 units plus failures from prior periods leave CSC with 78 units (3 per cent of rent) currently let to tenants in administration and treated as vacant in the 94.3 per cent occupancy rate. Adjusting for the 18 of these units which are trading in administration, occupancy is 95.0 per cent.  

As long as the UK economy remains flat, we expect the letting environment to continue to be challenging. However, due to robust evidence, we have seen positive rent review settlements in the period, notably at Manchester Arndale's northern extension and for Lakeside's department stores.


Progress with major projects

We continue to make good progress with major plans for organic growth:

·      We are fully engaged in the planning process to obtain permission for our proposed 325,000 sq. ft. expansion of Lakeside's retail offer. In March, we also unveiled plans for an exciting new leisure destination at Lakeside comprising new cafes, restaurants, bars and leisure uses including family entertainment venues and health and fitness facilities

·      Our acquisition of Broadmarsh, Nottingham, received clearance from the Office of Fair Trading in March, paving the way for discussions to start with retailers regarding their appetite for upgraded space in the city. We aim to bring forward proposals for complementary development of Broadmarsh and our existing prime centre in Nottingham, Victoria Centre

·      At Braehead, work has commenced on a full scale mock-up of the planned visual improvements to the upper level. We continue to work with the local authority on a master plan of a range of uses for the broader Braehead area

·      At Cribbs Causeway, CSC and partner PruPIM have jointly acquired for £24 million the section of the neighbouring Centaurus Retail Park closest to The Mall at Cribbs Causeway which we regard as having considerable strategic potential. The initial yield on purchase price is 5.9 per cent with an average unexpired lease term of 9.6 years


Capital recycling and financing

In March 2012 we disposed of around 4 million shares, just over a quarter of our interest, in Equity One, a US REIT. The shares were obtained by CSC in early 2011 in exchange for our directly held US property interests. The proceeds of £49 million will be reinvested in the group's organic growth projects in the UK. No tax was payable on the disposal. At the current share price and exchange rate, our remaining interest in Equity One is valued at around £140 million.

At 31 March 2012 net external debt has reduced marginally to £3.3 billion and the debt to assets ratio (based on 31 December valuations) was 48 per cent, within CSC's stated target range of 40 to 50 per cent.


Property valuations

Investor demand appears to be keeping prime yields stable for the highest quality retail assets although demand has weakened for non-prime properties. As a result, the IPD monthly index relating to all retail fell 1.1 per cent for the first quarter.

The next independent valuation of CSC's assets will be undertaken on 30 June 2012 and published with the first half results on 26 July 2012.


Conference call

A conference call for analysts and investors will be held today at 9.00 BST.

A copy of this announcement is available for download from our website at




Capital Shopping Centres Group PLC

David Fischel

Chief Executive

+44 (0)20 7960 1207 

Matthew Roberts

Finance Director

+44 (0)20 7960 1353

Kate Bowyer

Head of Investor Relations

+44 (0)20 7960 1250

Public relations


Michael Sandler, Hudson Sandler

+44 (0)20 7796 4133

Wendy Baker, Hudson Sandler

+44 (0)20 7710 8917


Nicholas Williams, College Hill

+27 (0)11 447 3030



Capital Shopping Centres is the leading specialist UK regional shopping centre REIT.

Capital Shopping Centres Group PLC (CSC)

We own and operate some of the very best shopping centres, in the strongest locations right across the country, attracting over 320 million customer visits a year. Two thirds of the UK population live within a 45 minute drive time of a CSC centre.

With over 16 million sq ft of retail space, valued at £7 billion, every single one of the UK's top 20 retailers are in our shopping centres, alongside some of the world's most iconic global brands.

Our five major out-of-town centres and nine in-town destinations include ten of the UK's top 25 shopping centres. Our out-of-town centres include The Trafford Centre, Lakeside, Metrocentre, Braehead, and The Mall at Cribbs Causeway, and our in-town prime destinations include Cardiff, Manchester, Newcastle, Norwich, Nottingham, Bromley, Uxbridge, Watford and Stoke-on-Trent. 

In November 2011, we acquired Broadmarsh shopping centre in Nottingham bringing our portfolio to 15 centres.

We are fully committed to supporting our local communities and the wider environment through meaningful and hands-on initiatives.


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