TIDMSHB
RNS Number : 1162A
Shaftesbury PLC
25 September 2020
Shaftesbury PLC
Trading update
Covid-19 measures continue to affect consumer confidence, West
End footfall and trading; first stages of recovery now evident
Shaftesbury PLC, the Real Estate Investment Trust that owns a
16-acre portfolio in the heart of London's West End, today
announces a trading update for the period 1 April 2020 to 24
September 2020.
Summary
-- Widespread and unprecedented measures to address the Covid-19
pandemic continue to have a significant impact on traditional
patterns of travel, business activity and consumer spending.
-- Since the relaxation of Government restrictions began to take effect from late June:
- The West End has seen a gradual recovery in footfall with the
return of local and domestic leisure visitors and its office-based
workforce.
- After an extended period of closure, most of our 611
restaurants, cafés, pubs and shops have now reopened. Bespoke
packages of rental and other measures to support their recovery in
place and being extended to the end of 2020.
- However, responding to the recent sharp rise in UK Covid-19
infection rates, the Government is now re-introducing national and
localised restrictions, with a risk that further measures may be
implemented until the situation is brought under control.
-- 41% of rents due for the six months to 30 September 2020
collected, 10% are expected to be subject to deferred collection
arrangements, 23% are being waived and 26% remain outstanding at 11
September 2020.
-- EPRA vacancy at 31 August 2020: 9.7% of ERV (31.3.2020:
4.8%); residential accounted for 46% of the increase, as occupiers
from overseas returned to their countries of origin and demand from
long-stay international business and leisure travellers halted.
-- Enquiries for commercial space continue but at a considerably
lower volume than we would normally expect at this time of
year.
-- Acquisitions:
- Acquired three strategically important buildings in Carnaby
and Berwick Street at a total cost of GBP13.3 million.
- More properties which have a long-term strategic interest for
us are now coming to the market.
-- In view of current conditions and uncertain near-term
outlook, the Board has decided not to declare a final dividend in
respect of the year ending 30 September 2020, but intends to resume
dividend payments as soon as it considers prudent.
-- Where required, interest cover covenant waivers for periods
of nine to twelve months from April 2020 completed; constructive
discussions now underway to extend their duration.
Brian Bickell, Chief Executive, commented:
"The course of the pandemic in the short and medium term will
continue to dictate the extent of restrictions imposed by the UK
and other governments to contain the spread of the Covid-19 virus,
with implications for the global economy and the pace of recovery.
As an international destination, local trading conditions in the
West End will inevitably be affected by these macro
uncertainties.
Longer term, the exceptional qualities and features of London
and the West End provide firm foundations for recovery as pandemic
disruption recedes. Their long history of embracing change,
dynamism, creativity and their enduring global appeal will be their
most important strengths in a post-pandemic world of new
priorities, expectations and patterns of activity.
Against this backdrop, and with the benefit of our experienced,
entrepreneurial and innovative management team, we remain confident
in the long-term prospects for our exceptional portfolio and
business."
25 September 2020
For further information:
Shaftesbury PLC 020 7333 8118 RMS Partners 020 3735 6551
Brian Bickell, Chief Executive Simon Courtenay
Chris Ward, Finance Director
MHP Communications 020 3128 8100
Oliver Hughes
Reg Hoare
Shaftesbury PLC LEI : 213800N7LHKFNTDKAT98
This announcement includes inside information.
The person responsible for arranging the release of this
announcement is Desna Martin, Company Secretary.
Background
Widespread and unprecedented measures to address the Covid-19
pandemic continue to have a significant impact on traditional
patterns of travel, business activity and consumer spending, not
only in the UK, but across the world.
In the UK, Government restrictions which resulted in the closure
of all non-essential shops, and all restaurants and leisure
businesses, were eased during the Summer. In late June,
non-essential shops were permitted to re-open, followed in July by
restaurants, cafés, and pubs. However, various social distancing
measures have continued and large public gatherings remained
prohibited, preventing the re-opening of live entertainment venues,
clubs and events spaces. From August, Government advice to work
from home wherever possible was modified to encourage a return to
offices where suitable measures were in place to ensure it was safe
to do so.
In response to the recent sharp rise in UK infection rates, the
Government is now reintroducing restrictions including localised
lockdowns, extending quarantine requirements for arrivals from
abroad, a limit on social gatherings, a 10pm curfew for F&B
businesses, and a reversal of their "return to the office" advice.
Until the situation is brought under control, there is a risk that
further measures may be implemented.
Covid-19 measures: first stages of West End recovery but
recently announced restrictions causing renewed uncertainty
With over 200 million visits annually, the West End's economy
has traditionally benefited from London's reputation as a leading
international destination, with a diverse economy spanning a broad
range of business sectors, along with world-class education and
research facilities, and cultural and leisure attractions. This
exceptional daily footfall has traditionally provided a prosperous,
seven-days-a-week trading environment for the leisure and retail
business which have chosen to locate here.
The effective closure of the West End, starting in February, had
an immediate and very challenging impact on all consumer-facing,
footfall-reliant businesses, which are inevitably cash-flow
sensitive. Since the relaxation of Government restrictions began to
take effect, the West End has seen a gradual recovery in footfall,
particularly noticeable in the vicinity of Oxford Street and Regent
Street, its major shopping streets, and Soho and Leicester Square,
its major dining and leisure destinations. In Seven Dials, after a
slower start, footfall patterns are now in line with these
locations.
The improvement since July was initially due to a return of
local and domestic day visitors, and has been supplemented by the
recent gradual return of the local office-based workforce. Daily
visits to the West End, which are currently approaching 50% of
normal pre-pandemic volumes on the busiest days, are concentrated
in the lunchtime to early evening period. It is too early to assess
the impact of recently announced restrictions on the progress we
have seen to date.
At present, the UK's international business and leisure visitor
numbers are not expected to recover to pre-pandemic levels until
2024(1) , due to their greater reliance on long-haul markets.
The course of the pandemic in the short and medium term will
continue to dictate the extent of restrictions imposed by the UK
and other governments to contain the spread of the Covid-19 virus,
with implications for the global economy and the pace of recovery.
As an international destination, local trading conditions in the
West End will inevitably be affected by these macro
uncertainties.
Longer term, the exceptional qualities and features of London
and the West End provide firm foundations for recovery as pandemic
disruption recedes. Their long history of embracing change,
dynamism, creativity and their enduring global appeal will be their
most important strengths in a post-pandemic world of new
priorities, expectations and patterns of activity. Against this
backdrop, and with the benefit of our experienced, entrepreneurial
and innovative management team, we remain confident in the
long-term prospects for our exceptional portfolio and business.
Support for our occupiers
Our focus since the beginning of the pandemic and lockdown has
been to help our occupiers through this challenging period by
providing financial and other practical support, alongside the UK
Government's various initiatives such as provision of financial
support, business rate relief, employee furloughing and the "Eat
Out to Help Out" scheme. Maintaining occupancy across our
portfolio, wherever possible, will position our business for
sustained recovery over the medium and long-term, as recovery
progresses.
F&B, leisure and retail (69% of ERV(2) )
After an extended period of closure, most of our 611
restaurants, cafés , pubs and shops have now reopened. They have
adapted their operations to ensure effective social distancing
measures are in place, and many have adopted revised trading hours
to reflect current footfall patterns. F&B businesses have
benefited from the use of outdoor seating, especially in our
permanently pedestrianised streets and courtyards in Carnaby and
Chinatown. Westminster City Council is currently consulting on its
future plans for temporary street closures and time-limited
permissions to use external seating. The temporary closure by
Camden Council of streets around Seven Dials outside servicing
hours has presented the opportunity to trial a traffic-reduction
scheme.
Despite the improvement in footfall, many of our occupiers,
particularly retailers, are reporting considerably lower turnover
than in normal conditions, and it is likely the return to the
healthy trading volumes across the West End will be gradual. We
have continued our dialogue with them to agree bespoke packages of
rental and other measures to support their recovery, including rent
payment plans, waivers, deferrals, lease restructuring, service
charge reductions and marketing initiatives.
In view of growing uncertainty surrounding the timing of the
return to more-normal footfall and trading conditions in the West
End, and the impact of restrictions now being re-introduced by the
Government, we are extending our support arrangements by a further
three months to the end of December 2020. A decision on the extent
of further action which may be required will be made in light of
trading in the important period leading up to Christmas and the New
Year, as well as the prospects for the early months of 2021 and
beyond.
Offices (19% of ERV(2) )
We have over 225 office occupiers, many of which are SMEs
operating in the media, creative, fashion and technology sectors,
and which often have direct or indirect exposure to businesses
which themselves have been affected significantly by the pandemic
measures, such as those in retail, F&B, and the performing
arts. Despite this, rent collections have been relatively good,
with limited concessions granted on a case-by-case basis.
Residential (12% of ERV(2) )
Typically, our 622 apartments are occupied by those seeking a
base in the West End for either work or study, and are particularly
popular with younger people from overseas. Understandably, as a
result of the lockdown restrictions, many chose to return to their
country of origin, leaving flats unoccupied. With the continuing
uncertainty, many of these overseas tenants have chosen not to
return to the UK for the time being and have vacated permanently.
In these circumstances, we waived any commitments under their
tenancy agreements. Where appropriate, we are offering support to
residential tenants to assist them in meeting their rental
commitments.
Collection of rents falling due in the period 25 March 2020 to
11 September 2020
Support for our occupiers continues to be our priority through
the period of pandemic disruption. In order to provide certainty
for those businesses, our discussions and agreements with them to
date have focused on a six month period to the end of September
2020. As noted in our Half Year results, we anticipated that up to
50% of contracted rent for the second half of the current financial
year could be collected over the extended period covered by these
new arrangements.
The table below summarises the collection of rents from 25 March
to 11 September 2020:
F&B and Retail Offices Residential Total
leisure GBPm GBPm GBPm
GBPm
--------------------------------- --------- ------- -------- ------------
GBPm
--------------------------------- --------- ------- -------- ------------ ----- -----
Contracted rent due for
the six months to 28.9.2020 22.7 18.0 9.5 7.1 57.3 100%
--------- ------- -------- ------------ ----- -----
Collected by 11.9.2020 4.4 7.1 6.5 5.5 23.5 41%
Amounts expected to be
subject to deferred collection
arrangements 4.7 1.0 0.1 - 5.8 10%
Contracted rents waived 8.6 3.8 0.4 0.1 12.9 23%
Rent outstanding at 11.9.2020 5.0 6.1 2.5 1.5 15.1 26%
--------------------------------- --------- ------- -------- ------------ ----- -----
The eventual recovery of amounts deferred and outstanding will
depend on tenants' ability to meet these commitments. The future
viability of their businesses will be influenced by
pandemic-related factors including the re-introduction of lockdown
and other measures and the implications of a protracted recovery
period.
From 1 October 2020, we will be varying our leases to provide
the option for commercial lessees to pay rent and service charges
monthly rather than quarterly in advance, in order to align our
revenue collection with the cash flows of our occupiers.
In the Longmartin joint venture, 76% of rent for the two
quarters to 28 September 2020 has been collected, 6% has been
waived and 18% remains outstanding. The higher relative collection
rate, compared with that for the wholly-owned portfolio, mainly
reflects the higher proportion of office rental income from its
portfolio.
Occupancy and occupier demand
Inevitably, the uncertain outlook for the national economy and
consumer spending is having a significant impact on business
confidence and investment, which is unlikely to improve materially
until pandemic concerns abate. Retailers, particularly those
exposed to structural changes in shopping habits nationally and
internationally, which were clearly evident before the onset of the
pandemic, are accelerating their review of space requirements, both
in terms of locations and size of shops. Similarly, over-extended
F&B chains are retrenching their operations to focus only on
the most profitable locations and sites.
EPRA vacancy at 31 August 2020
% of total ERV(2)
-----------------------
F&B and
leisure Retail Offices Total commercial Residential Total 31.8.20 31.3.20
GBPm GBPm GBPm GBPm GBPm GBPm % %
----------------- -------- ------ ------- ----------------- ----------- ----- ------- -------
Under offer 0.9 0.7 0.2 1.8 0.3 2.1 1.4% 1.5%
Available-to-let 2.1 4.4 1.9 8.4 3.9 12.3 8.3% 3.3%
-------- ------ ------- ----------------- ----------- ----- ------- -------
3.0 5.1 2.1 10.2 4.2 14.4 9.7% 4.8%
-------- ------ ------- ----------------- ----------- ----- ------- -------
31.3.2020 1.7 3.2 1.4 6.3 0.9 7.2
Area
('000 sq.
ft.)
31.8.20 37 48 32 117 75 192
31.3.20 20 33 24 77 18 95
----------------- -------- ------ ------- ----------------- ----------- -----
Although the West End has a long-term availability/demand
imbalance, over this unprecedented period we have seen a decline in
portfolio occupancy, particularly in retail and residential uses.
Compared with a 10-year average EPRA vacancy of 3.2% of ERV, and a
vacancy rate of 4.8% at 31 March 2020, by 31 August, this had risen
to 9.7% of ERV.
The increase in EPRA vacancy over the period reflects an
exceptional increase in vacant apartments (ERV: GBP3.3 million),
completion of refurbishment schemes (ERV: GBP1.6 million), space
handed back by commercial tenants, and the continuing significant
reduction in letting activity over the five months to 31 August
2020. Lettings and lease renewals during this period amounted to
GBP3.8 million, compared with GBP8.9 million in the same period
last year, and followed a material slowdown in activity in the
preceding two months as pandemic concerns grew.
Tenant insolvencies during the period have accounted for less
than 2% of ERV. The trend in the months ahead will depend on
whether recent improvements in footfall, trading and the local
economy are sustained.
Available-to-let commercial vacancy at 31 August 2020
comprised:
-- 12 restaurants and cafes (24,000 sq. ft.); total ERV GBP2.1 million;
-- 29 shops (38,000 sq. ft.); total ERV GBP4.4 million;
- 11 larger shops (ERV > GBP150,000) shops account for GBP3.2 million of ERV
- 18 smaller shops account for GBP1.2 million of ERV
-- 29 office suites (30,000 sq. ft.); total ERV GBP1.9 million.
Enquiries for commercial space continue but at a considerably
lower volume than we would normally expect at this time of year.
Generally, occupiers in all sectors are looking for greater
flexibility when entering to new leasing commitments and, in
particular, rent suspension in the event of further lockdowns. In
the case of shops and F&B premises, a higher specification of
landlords' basic fit out, rather than taking space in shell
condition, is becoming market standard practice. We are now
providing fully fitted out space in some of our office schemes.
Residential vacancy, which until the pandemic has historically
been minimal, was unusually high at 136 apartments with a total ERV
of GBP4.2 million. This rapid increase was mainly due to occupiers
from overseas returning to their countries of origin when
government restrictions were introduced, and the collapse in demand
from long-stay international business and leisure travellers.
Across the West End, many landlords who would usually let out
their flats short-term or let to serviced apartment operators, are
now attempting to find long-term tenants. This has resulted in a
near-term over-supply of apartments to let, causing some downward
pressure on rents.
Despite challenging market conditions, we have seen improved
levels of activity over the last two months, completing 47 lettings
and renewals, with particularly good interest for our newer studios
and one-bedroom apartments. Demand for larger two-and three-bedroom
properties, which would normally attract interest from overseas
corporates, is much reduced and may not improve significantly in
the near term.
In the Longmartin joint venture our share of ERV from available
to let space was GBP0.9 million (31.3.20: GBP1.1 million).
UK Government announcement on tax-free shopping
On 11 September 2020, the UK Government announced its decision
to end tax-free shopping arrangements, which currently apply to
overseas visitors to the UK other than those from the EU, with
effect from 31 December 2020. The UK will then be the only country
that does not offer this, putting the UK's tourism, retail and
hospitality sectors at significant disadvantage to competing
destinations, particularly other European cities. We are supporting
the lobbying by many trade bodies and businesses to have the
decision reconsidered.
Tax-free shopping is not a major of driver of spending in our
mid-market locations, but the risk to the West End of a decline in
international tourism will potentially affect a wide number of
other sectors including F&B, hotels, theatres and cultural
attractions.
Schemes
72 Broadwick Street (ERV GBP6.0 million; 4.0% of ERV)
Site activity was suspended in March and April, due to lockdown
restrictions, although these were relaxed subject to additional
site safety measures. Assuming no further Covid-19 related delays,
we anticipate completion in phases during 2021.
Of the re-purposed and up-graded accommodation, 77% of the
commercial space by ERV, is now pre-let or under offer. As
previously announced, we have agreed to let 33,000 sq. ft. to
Equinox, an American fitness and lifestyle brand, while 17,350 sq.
ft. of office accommodation is under offer.
Other schemes (ERV: GBP10.1 million; 6.7% of ERV)
At 31 August 2020, we had other schemes underway, with an ERV of
GBP10.1 million, which comprised:
- 9 restaurants (27,000 sq. ft.); ERV GBP2.1 million;
- 16 shops (19,000 sq. ft. ); ERV GBP2.4 million;
- 72,000 sq. ft. of offices; ERV GBP4.8 million; and
- 30 apartments; ERV GBP0.8 million.
Of these schemes, GBP0.6m was under offer. As they complete over
the coming fifteen months, they will increase short-term EPRA
vacancy levels.
At 31 August 2020, our 50% of the ERV of space under
refurbishment in the Longmartin joint venture was GBP0.1 million
(31.3.20: GBP0.6 million).
Adding to our portfolio
Long-term owners in our locations, typically private rather than
institutional investors, are usually reluctant to dispose of their
ownerships, which have a long history of providing security and
growing income. However, currently some are faced with near-term
occupancy challenges and the need to invest in their buildings to
secure tenants, and we are already seeing more properties which
have a long-term strategic interest for us coming to the
market.
Whilst our continuing strategy is to preserve liquidity, we have
completed the purchase of three strategically important buildings
at a combined cost of GBP13.3 million. One has frontages to Kingly
Street and Kingly Court, unlocking a scheme involving two adjoining
buildings already in our ownership. The other two buildings are in
Berwick Street, adding to our ownership in this important Soho
location.
90/104 Berwick Street
We forward-purchased this development in August 2017 but
completion of the vendor's scheme has been delayed by almost two
years, and two contractual longstop dates have now been missed. We
are continuing our discussions with the vendor.
2020 Final dividend
The Board has a policy of long-term, progressive growth in
dividends which reflects both current and future income progression
but always ensures the financing requirements of the business are
prioritised.
In view of current trading conditions, the uncertainty
surrounding the risk of further pandemic restrictions in the coming
months, and the importance of maintaining the Group's financial
resilience, the Board has decided that it would not declare a final
dividend in respect of the year ending 30 September 2020.
The Board intends to resume dividend payments as soon as it
considers prudent, maintaining its policy of sustainable dividend
growth over the long term.
Finance
We have agreed interest cover waivers with our banks and term
loan providers, covering periods from nine to twelve months from
April 2020. We maintain a constructive dialogue with these lenders
and, in view of the short-term outlook, are currently discussing
extensions to the duration of the waivers. We continue to comply
with the interest cover covenants in our two public bonds.
In the Longmartin joint venture, we agreed an interest cover
covenant waiver until April 2021 and are monitoring the position
ahead of possible further discussions with the lender regarding an
extension.
1 Source: Tourism Economics. City Tourism Outlook and Ranking:
Coronavirus Impacts and Recovery
2 As at 31 March 2020
N otes for Editors
Shaftesbury is a Real Estate Investment Trust which invests
exclusively in the liveliest parts of London's West End. Focused on
food, beverage, retail and leisure, our portfolio is clustered
mainly in Carnaby, Seven Dials and Chinatown, but also includes
substantial ownerships in East and West Covent Garden, Soho and
Fitzrovia.
Extending to 16 acres, the portfolio comprises over 600
restaurants, cafés, pubs and shops, extending to 1.1 million sq.
ft., 0.4 million sq. ft. of offices and 622 apartments. All our
properties are close to the main West End Underground stations, and
within ten minutes' walk of the two West End transport hubs for the
Elizabeth Line, at Tottenham Court Road and Bond Street.
In addition, we have a 50% interest in the Longmartin joint
venture, which has a long leasehold interest, extending to 1.9
acres, in St Martin's Courtyard in Covent Garden.
Our purpose
Our purpose is to curate vibrant and thriving villages in the
heart of London's West End. Our proven management strategy is to
create and foster distinctive, attractive and prosperous locations.
We have an experienced management team focused on delivering our
long-term strategic objectives, ultimately to deliver a positive,
long-lasting contribution to the West End.
Our values
We have five core values that are fundamental to our behaviour,
decision making and the delivery both of our purpose and strategic
objectives: being human in how we operate, original in how we
nurture talent and think, community minded in our approach to the
West End, being responsible and long term in our approach to
everything.
Since 2015, we have supported the UN Global Compact principles
of sustainability and, in 2019, we integrated the UN Sustainable
Development Goals into our sustainability strategy. We have long
been committed to operating in a sustainable way. At the core of
our sustainability strategy is reusing and improving, rather than
redeveloping buildings. In doing so, we extend the useful economic
lives of these buildings while preserving the West End's rich
heritage for future generations.
Forward-looking statements
This document, the latest Annual Report and Shaftesbury's
website may contain certain "forward-looking statements" with
respect to Shaftesbury PLC (the Company) and the Group's financial
condition, results of its operations and business, and certain
plans, strategy, objectives, goals and expectations with respect to
these items and the economies and markets in which the Group
operates. Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as
"anticipates", "aims", "due", "could", "may", "should", "expects",
"believes", "intends", "plans", "targets", "goal" or "estimates"
or, in each case, their negative or other variations or comparable
terminology.
Forward-looking statements are not guarantees of future
performance. By their very nature forward-looking statements are
inherently unpredictable, speculative and involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. Many of these
assumptions, risks and uncertainties relate to factors that are
beyond the Group's ability to control or estimate precisely. There
are a number of such factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements.
Any forward-looking statements made by, or on behalf of,
Shaftesbury PLC speak only as of the date they are made and no
representation or warranty is given in relation to them, including
as to their completeness or accuracy or the basis on which they
were prepared. Except as required by its legal or statutory
obligations, Shaftesbury PLC does not undertake to update
forward-looking statements to reflect any changes in its
expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is
based.
Information contained in this document relating to Shaftesbury
PLC or its share price, or the yield on its shares, should not be
relied upon as an indicator of future performance. Nothing
contained in this document, the latest Annual Report or
Shaftesbury's website should be construed as a profit forecast or
an invitation to deal in the securities of the Company.
End
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