ALNA Alina Holdings Plc

 

TIDMLSR 
 
RNS Number : 0454N 
Local Shopping REIT (The) PLC 
10 February 2009 
 

The Local Shopping REIT plc 
Interim Management Statement 
 
 
(London: 10 February 2009) - The Local Shopping REIT ("LSR" or the "Company"), a 
UK real estate investment trust focused on investments in local shopping assets, 
is pleased to provide the following update on trading for the four months to 31 
January 2009. 
 
 
Highlights 
 
 
  *  Letting market remains active - 23 vacant retail units successfully let at an 
  average of 5.2% above Market Rent, at a rent of GBP271,000 per annum 
  *  Overall void rate rose from 10.6% to 11.8% in line with management expectations 
  with continuing demand for smaller units 
  *  Annual rental income increased by more than GBP32,000 through active asset 
  management, producing uplifts above Market Rent 
  *  Successful sale of 13 ex-growth properties for a total of GBP3.42 million, 4.1% 
  below their September 2009 valuation 
  *  Additional rental income of GBP156,000 per annum expected to be produced through 
  the refurbishment of 24 flats, with redevelopment of a further six currently 
  underway 
  *  No ongoing loan-to-value default provisions on existing debt and GBP60.0 million 
  of unused facilities 
  *  Business well positioned to exploit buying opportunities arising from current 
  market conditions. 
 
 
 
Market Outlook 
 
 
The wider retail sector is undoubtedly under considerable pressure at present. 
However, under difficult conditions, our occupier base, which mainly comprises 
smaller, independent traders is performing relatively well, particularly where 
their trade relies less on discretionary spend than the traditional high street. 
This is reflected in the ongoing demand for the units we have available to let, 
together with our continuing success in letting vacant units.  As values 
continue to fall in our sub-sector, we have seen a few bargain hunters return to 
the market but, overall, transaction volumes remain low. The imperfect nature of 
our market has allowed us to make a number of sales at good prices, particularly 
to owner occupiers, but such opportunities are becoming less frequent, with bank 
finance still in extremely short supply. 
 
 
The vast majority of lenders have still to fully evaluate the extent of bad 
loans within their loan books. However, we believe that increasing levels of 
tenant default, as the economic environment deteriorates, will force banks to 
manage their loans more proactively towards the second half of the year. Until 
this happens, however, we do not anticipate that there will be a substantial 
number of acquisition opportunities, either because the prices are not 
sufficiently discounted, or they lack potential for value enhancement or 
preservation through deployment of our asset management skills.  Therefore, in 
the meantime, we remain focused on ensuring that the Company maintains its 
strong financial position, which will enable us to take best advantage of these 
opportunities at the appropriate time and price. 
 
 
Asset Management 
 
 
Since 30 September 2008, the Company has continued to actively manage its 
portfolio and has successfully implemented the following initiatives: 
 
 
  *  23 vacant units let at a total rent of GBP271,000 per annum (5.2% above Market 
  Rent) 
  *  Rent reviews carried out on 38 units, increasing rental income by GBP19,113 per 
  annum (an average uplift of 3.9% and 7.5% above Market Rent) 
  *  Leases renewed on 12 units, adding a total of GBP13,590 per annum (an average 
  uplift of 14.1% and 5.6% above Market Rent). 
 
 
 
We continue to refurbish our vacant residential units and currently have 24 
flats undergoing works, which we expect to generate additional rental income of 
GBP129,000 per annum when fully let. Additionally, in Epsom and Tewkesbury, we 
are creating six flats out of existing retail space with a potential rental 
value of more than GBP27,000 per annum.  As part of our drive to extract value 
from the under-used upper parts of some properties and adjacent unused land, we 
have submitted planning applications for 25 residential units and undertaken 
pre-application consultations with local authorities on a number of other 
projects.  During the period, we have also been granted a change of use consent 
for a retail unit in Bathgate from A1 (shops) to A3 (caf�/restaurants). 
 
 
While trading conditions over the Christmas period were undoubtedly challenging, 
tenant defaults have remained in line with our expectations. During the 
period, our overall void rate rose from 10.6% to 11.8%. Within this, residential 
voids fell to 1.0% (September 2008: 1.4%); while deliberate voids rose 
to 2.6% (September 2008: 2.3%) as we continued to take back space for 
refurbishment and conversion into residential letting units; and, reflecting the 
difficult retail environment, our commercial void rate, which includes two units 
where tenants are in administration but likely to cease trading, rose to 8.2% 
(September 2008: 6.9%). 
 
 
However, the lettings market for our smaller units remains active and we have 
25 units under offer, which we expect to produce annual rental income of 
GBP318,100, together with a 1.8% reduction in our void rate. 
 
 
Acquisitions and Sales 
 
 
In recent months we have not identified sufficiently attractive acquisition 
opportunities in a market with limited stock. As a result, we have not purchased 
any properties since 30 September 2008 and have no properties under offer to 
purchase.  In line with our stated strategy of selling ex-growth and lower 
yielding properties, we sold 13 properties during the period, including one part 
sale, for GBP3.42 million, at an average initial yield of 8.38% (September 2009 
valuation: GBP3.57 million). 
 
 
As a result of these sales, the Company now has a portfolio of 632 
properties comprising more than 2,000 letting units. 
 
 
Financing 
 
 
The Company has two fully drawn loans with debt outstanding of GBP116.9 million 
at an average interest rate of 5.68%.  The term of both loans is until 2016 and 
there are no ongoing loan-to value default provisions.  It has an additional 
undrawn long term committed facility available from HSBC of GBP60 million. 
 
 
Share Cancellations and Buybacks 
 
 
Since 30 September 2008, the Company has cancelled 675,000 Ordinary 20p shares 
held in Treasury.  The Company also purchased 630,000 Ordinary 20p shares at an 
average price of 33p.  Of these shares, 605,000 are held in Treasury and 25,000 
were transferred to the Employee Benefit Trust in order to satisfy share awards 
to employees, which may crystallise in the future.  After these transactions the 
Company has 91,669,870 shares in issue of which 9,164,017 are held in Treasury. 
 
 
 
Nick Gregory, LSR's Joint Chief Executive Officer, said: 
 
 
"Despite the weak economic environment, our asset management team has been very 
effective in maintaining occupancy levels across the portfolio. The successful 
letting of 23 retail units since 30 September 2008 demonstrates the robustness 
of our model and the relative strength of our underlying tenant base." 
 
 
Mike Riley, LSR's Joint Chief Executive Officer, added: 
 
 
"Given the deteriorating economic environment, 2009 will be a challenging year 
for property investors. However, the Company has the skills to manage our 
occupier base and a strong financial platform from which to exploit the 
acquisition opportunities that these difficult market conditions will 
undoubtedly provide in the coming months." 
 
 
For more information please contact: 
 
 
The Local Shopping REIT plc Tel: 020 7292 0333 
Mike Riley/Nick 
Gregory 
 
 Financial DynamicsTel: 020 7831 3113 
Stephanie Highett/Richard 
Sunderland/Jamie Robertson 
 
 
About The Local Shopping REIT 
 
 
The Local Shopping REIT plc ("LSR") is the first specialist start-up Real Estate 
Investment Trust ("REIT") to launch in the UK. 
 
 
Already a major owner of local retail property, the Company is building a 
portfolio of local shops in urban and suburban areas, investing in neighbourhood 
and convenience properties throughout the UK. Typical of the portfolio are shops 
in local shopping parades and neighbourhood venues for convenience or 'top-up' 
shopping. As at 31 January 2009 the Company's portfolio comprised 632 
properties, with over 2,000 letting units. 
 
 
For further information on LSR, please visit www.thelocalshoppingreit.co.uk. 
For further information on REITS, please visit www.reita.org. 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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