LONDON (Alliance News) - Real estate investor Shaftesbury PLC Friday said that interest rate movements could mean that terminating some of its financial contracts used to manage interest rate risk will cost between GBP30 million and GBP40 million and result in a hit to a measurement of its net asset value.
In a statement, Shaftesbury said the reduction in long-term interest rates over the quarter meant the fair value deficit of its interest rate swaps - derivative financial instruments used to manage interest rate fluctuations - increased by GBP27.2 million to GBP106.0 million at the end of 2014.
The company said discussions are continuing to refinance its remaining 2016 debt maturities, which total GBP150 million. Plans to refinance its debt mean the group could terminate some of those interest rate swaps at a cost.
"As part of this, our intention is to secure new long-term, fixed rate facilities which, in the current environment, will benefit from exceptionally low long-term interest rates," Shaftesbury said.
"As a consequence, it is likely we will terminate certain of our interest rate swaps. With the recent movement in rates, we now estimate this could cost between GBP30 million and GBP40 million, a reduction in EPRA net asset value per share of around 10 pence - 15p, equivalent to 1.5% - 2% of last reported EPRA NAV," the company said.
EPRA NAV refers to European Public Real Estate Association net asset value.
News of Shaftesbury's plans to refinance came as the company said that the availability of assets for acquisition remains restricted due to a reluctance to sell by owners in London's West End, where the real estate investor owns 587 shops, restaurants, cafés and pubs, but said it has secured six properties regardless.
The real estate investment trust said the six properties, which are in Soho, Charlotte Street and Carnaby, were acquired at a cost of GBP20.4 million and included a shop, two restaurants, two cafés, a vacant pub, 3,100 square feet of office space and eight apartments, of which four were unoccupied.
"These acquisitions complement our existing, extensive ownerships and offer the potential for improvement to deliver future rental and capital value growth," Shaftesbury said.
The real estate investor also said it is advancing its plans for two acquisitions made in 2014, namely Charing Cross Road/Newport Court/Newport Place in Chinatown, and 57-59 Broadwick Street in Carnaby.
"We are now in detailed discussions with Westminster City Council in advance of submitting formal planning applications for both schemes. Subject to receiving the necessary consents we currently expect to commence on-site in 2016. We currently estimate a total cost of circa GBP22 million across both schemes," Shaftesbury said.
In an update for the first quarter of the company's financial year to December 31, the group was positive on trading over in the run up to Christmas and through to the New Year, reporting good visitor numbers, which brought "buoyant trading" across its shops, restaurants, cafés, bars and pubs.
"The unique character of our villages, and the environment we create, continue to attract strong demand across all uses and consequently vacancy levels remain very low," Shaftesbury said.
"Not only are we seeing new requirements for retail, restaurant, leisure and office space from businesses seeking to establish in our areas, but also from existing tenants wishing to expand their operations. In addition, our apartments let readily to those wishing to live in our vibrant locations," the company added.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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