TIDMCLI
RNS Number : 2501S
CLS Holdings PLC
17 November 2011
Release date: 17 September 2011
Embargoed until: 07:00
CLS Holdings plc
("CLS", the "Company" or the "Group")
Interim Management Statement for the period 1 July 2011 to 16
November 2011
The Company announces its Interim Management Statement for the
period 1 July 2011 to 16 November 2011.
HIGHLIGHTS
-- Occupational demand continues to improve; vacancy level reduced further to 4.0%
-- New leases, lease renewals and extensions completed on 7,360 sq m
-- Acquisition of Falcon House and Quest House in Hounslow, London for GBP5.5 million
-- Planning consent achieved and pre-let developments begun on two schemes in Germany
-- Proposals for 140,000 sq m mixed-use scheme at Vauxhall
Square, London and a 18,500 sq m mixed-use scheme at Spring Mews,
London progressing
-- Refinancing of all loans from Anglo Irish Bank completed for GBP8.6 million
-- Weighted average cost of debt 4.5%
-- Over GBP190 million of liquid resources for investment
OVERVIEW - Since 1 July, the Group's core operations have
continued to deliver: occupational markets have proven resilient;
and progress has been made on development opportunities. The Group
has further reduced its vacancy rate to 4.0% (30 June 2011: 4.2%)
on its investment portfolio and we continue to be cautiously
encouraged by a steady level of demand and new enquiries from
occupiers. 67% of the Group's rental income is subject to
indexation, and 41% is derived from government occupiers. Proposals
for our two separate mixed-use developments in Vauxhall, London are
both on schedule to be submitted for planning permission before the
end of the year. In addition, two pre-let development schemes in
Germany, with an aggregate area of over 7,000 sq m of new space,
are now on site and progressing on time and on budget.
Since July, the volatile financial markets caused by the
Eurozone issues have led to the euro falling against sterling to
around its level at the beginning of the year, an increase in the
market value of our interest rate derivative liabilities, and the
reduction of the market value of our corporate bond
investments.
LONDON - The prime property investment market in London has
continued to be attractive to international, non-debt based buyers,
whilst the banks have increasingly acted to reduce their loan
books. This has presented opportunities for CLS and we bid on a
number of properties. In September, we acquired Falcon House and
Quest House in Hounslow, London for GBP5.5 million. These
buildings, which comprised 4,693 sq m in aggregate, provided a
yield after costs of 10.1%, rising to 10.9% within twelve months,
from tenants such as Aer Lingus, Alitalia, and Telefonica O2.
The letting market for the high-yielding type of property in
which we specialise has been healthy, and our London vacancy rate
has fallen to 4.1% (30 June 2011: 4.2%). New lettings have been
achieved on 2,694 sq m, including 966 sq m at Great West House,
Brentford, 520 sq m at Westminster Tower, SE1, and 274 sq m at CI
Tower, New Malden. Lease renewals and extensions totalled 1,245 sq
m, while tenants vacated from 3,649 sq m.
Spring Mews, a mixed-use proposal for over 400 student beds and
a 120 bed hotel in Vauxhall has been through consultation with
stakeholders and will be submitted for planning by the year end. It
is expected to total over 18,500 sq m, and the Group is in active
discussions with operators for pre-lets.
The proposals, which we announced in February, for a major new
mixed-use scheme, Vauxhall Square, have been progressed through the
design stage, taking into account comments received from a variety
of stakeholders. A detailed planning submission is expected to be
made before the end of the year, with consent targeted for the
second half of 2012. The scheme is now planned to total over
140,000 sq m.
FRANCE - The French real estate investment market has continued
to be strong across both prime and secondary markets, with greater
availability of bank debt than in London. We have continued to seek
new acquisitions but the supply of suitable product has been
limited. Occupational markets have been encouraging, probably
better than the media's perception of the broader economy. There
appears to be very little new construction of offices, which should
reduce availability and thus be good for rental levels in Paris and
Lyon.
During the period, leases totalling 1,861 sq m expired, of which
1,472 sq m was renewed together with a further 1,086 sq m being
let. As a result the vacancy rate fell to only 3.0% (30 June 2011:
3.5%).
GERMANY - Both the investment and letting markets in Germany
have been robust, with a number of occupiers discussing long-term
investment plans and requirements.
Since 1 July we have received planning consent for, and begun
construction of the 5,400 sq m development of, a fourth building
pre-let to EON in Landshut, near Munich on a 17 year lease. Upon
completion of the building in 2012, this will result in an
additional rent receivable of EUR659,000. Planning consent was also
gained for the 1,642 sq m extension at Grafelfing, Munich, pre-let
to Dr. Holne AG, and construction has begun.
Leases totalling 573 sq m were signed and, consequently, by 1
November the vacancy rate had fallen to 6.0% (30 June 2011:
6.3%).
SWEDEN - Positive progress has been made on the 150,000 sq m
mixed-use development proposals for the remaining property owned by
our 29.9% associate, Catena. Catena's share price of SEK 64 at 16
November means the current market value of our interest exceeds
book value by GBP7.4 million, which would add 16 pence per share to
CLS's net asset value.
The void rate at Vanerparken, the Group's only directly held
property in Sweden, fell to 1.6% (30 June 2011: 2.0%) on the
letting of a further 290 sq m.
FINANCE - Core profit has continued to be resilient, with stable
net rental income, high debt collection rates, tightly controlled
costs, and a low cost of debt of 4.5%.
At 30 September the Group had cash and liquid resources of over
GBP190 million. Since 1 July, loans of GBP8.6 million from the
Irish Bank Resolution Corporation (formerly Anglo Irish Bank) have
been repaid from cash resources or loans from other banks. At 16
November 2011 the Group had 58 loans from 20 lenders, in addition
to its unsecured corporate bond; none of the loan covenants was in
breach, none of the debt was securitised, and the Group had no
exposure to the CMBS market. The Group's unsecured corporate bond
began trading in Stockholm in July and has maintained a price at or
around par.
The financial turmoil in Europe since 1 July has created
volatility in the values of some of the net assets of the Group:
the euro, in which half of our business is conducted, has returned
to around its level at the start of the year against our reporting
currency of sterling; the long-term swap rate has fallen to
historically low levels, increasing the mark-to-market value of our
derivative liabilities; and the market value of corporate bonds has
fallen.
The corporate bond portfolio is generating an attractive
interest coupon of over 9.5% on current values, and we continue to
monitor actively the underlying strength and performance of all the
issuers. There are currently 40 different bonds in the portfolio,
giving broad diversification. Since 1 January 2011, the total
return for the bond investments has been minus 3.7%.
Executive Chairman of CLS, Sten Mortstedt, commented:
"The operating performance of our core property activities
remains robust, with the vacancy rate falling still further, driven
by an encouraging number of new lettings.
"I highlighted in the Half-Yearly Report the challenges within
the financial markets. We are not immune from their effects but the
benefits of our strategy to raise finance in the first six months
of the year are now clear. The balance sheet is strong, and our
liquid resources remain at high levels.
"We are delighted with our recent London purchase, are actively
seeking more acquisitions, and are excited by the progress of our
development opportunities, which may add significant value in the
medium term."
-ends-
For further information, please contact:
Sten Mortstedt, Executive Chairman, CLS Holdings plc +44 (0)20 7582 7766
Henry Klotz, Executive Vice Chairman, CLS Holdings plc +44 (0)20 7582 7766
Richard Tice, Chief Executive Officer, CLS Holdings plc +44 (0)20 7582 7766
Jonathan Gray, Kinmont Limited +44 (0)20 7087 9100
Alex Simmons, Smithfield Consultants +44 (0)20 7903 0669
This information is provided by RNS
The company news service from the London Stock Exchange
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