Capital & Regional enters new partnership as net rental income falls

(Sharecast News) - Capital & Regional reported net rental income of £13.4m in its first half on Thursday, down from £15.2m year-on-year, as it also announced a new residential development partnership.

The London-listed firm said its adjusted profit was £2.3m for the six months ended 30 June, down from £4.6m a year earlier, as its adjusted earnings per share narrowed to 2.1p from 4.4p.

Its IFRS loss for the period totalled £41.3m, meanwhile, narrowing from £115.5m, while basic losses per share shrank to 36.9p from 111p.

The company's net asset value per share fell to 113p from 229p, and its net tangible assets slid to 117p from 236p.

Group net debt was broadly in line with the prior year at £348m, compared to £348.2m at the interim point of 2020.

Total net debt to property value was 72% at the end of the first half, up from 57%.

"Accepting the further fall in valuations during the period, current market dynamics in the sector as well as the wider economy provide cause for optimism that the investment market may be starting to stabilise," said chief executive officer Lawrence Hutchings.

"This, allied with the relative outperformance of our Investment Assets and the improving operational performance, provide the necessary base for making longer term strategic decisions and determining the best approach for addressing debt levels.

"As we emerge from 18 months of unprecedented challenges we are increasingly confident that a shared need from consumers and retailers for well-located, accessible retail and services with affordable occupancy costs, is highly supportive of our community centre strategy and our belief in the 15 minute neighbourhood."

At the same time, Capital & Regional also announced that it has signed an exclusivity agreement with a subsidiary of mixed-use real estate developer Far East Consortium International (FEC) to work together over the next 18 months to identify and bring forward the development of new residential opportunities across the company's shopping centre portfolio.

The firm said that while the primary aim of the partnership was to facilitate projects that would enhance asset value and generate potential land receipts for Capital & Regional, it would also assess where community retail and services could be added to FEC's existing portfolio and pipeline, as well as seek new projects where the collective expertise and resources of the partnership could be used.

It said the decision to partner with a "well-capitalised, experienced and focussed" residential and hotel developer was a continuation of its strategy to reposition our assets to meet the structural changes in retail and the shift to community and sustainable "15-minute neighbourhoods".

As part of that , the board said it had already looked to extract value from the portfolio in a variety of ways, including the successful disposal of an adjoining land plot at Wood Green for residential development, and its progress in securing a significant residential-led planning consent at Walthamstow, which would see the development of 495 build-to-rent apartments in the town centre.

"Both FEC's and our own management team recognise the importance of sustainable mixed-use urban environments that enhance the sense of place and serve their local communities," Lawrence Hutchings said of the new partnership.

"The combination of our existing skills and resources will help to unlock further opportunities to create these across, and potentially beyond, our existing estate.

"We believe this agreement is a further demonstration of our team's ability to take a highly innovative approach to the management of our community centres and the potential our portfolio offers."

At 1005 BST, shares in Capital & Regional were up 2.49% at 68.26p.