Capital & Regional Regulatory News (CAL)

19 May 2022

CAPITAL & REGIONAL PLC ("Capital & Regional" or "the Company or the Group")

UK company number 01399411

LSE share code: CAL

ISIN: GB00BL6XZ716

LEI: 21380097W74N9OYF5Z25

Update on Trading and Property Portfolio

Capital & Regional, the UK convenience and community focused shopping centre REIT, today provides an update on trading and developments within its property portfolio ahead of its Annual General Meeting this morning.

Lawrence Hutchings, Chief Executive, comments:

"Since the start of the year the Group has continued to deliver strong operational results with footfall at almost double what it was for the same period last year and at the highest levels since the restrictions were put in place in March 2020. Leasing momentum has also been maintained, above both ERV and previous rents on aggregate.

We have also made significant progress across a number of key initiatives, most notably with the signing of a new NHS community healthcare centre at Ilford, which is both a first within the UK shopping centre market and a great example of our community shopping centre strategy. We have also now reached an agreement with TK Maxx for a relocation and expansion of its important anchor store, which, together with the amendments we have secured to the loan facility, will deliver a transformation of the centre through delivery of our Ilford community centre masterplan.

We are also pleased to have reached a resolution with the lenders on The Marlowes Centre to acquire the debt, securing the long-term ownership of the centre for the Group while also delivering a significant uplift to our Net Asset Value. 

While inflationary pressures across the UK economy provide a challenging economic backdrop, we are seeing physical retail reaffirm its important place in the retail mix and signs of a shift in sentiment towards our sector, especially in needs based or non-discretionary community centres. This is evidenced by the progress we have made on specific group initiatives and a marked increase in investment market activity, coupled with our robust leasing and occupancy performance. These factors combine to provide us with cause for optimism and support plans to resume dividend payments in the second half of 2022."

Operations and trading

· In the four months to the end of April 2022 footfall was 193.3% of the equivalent period for 2021. In total there were 18.4 million shopper visits, equating to approximately 76% of the footfall for the equivalent period in 2019.

· In the year to date, we have completed 34 new lettings and renewals for a combined value of £1.8 million in aggregate, ahead of previous rent and ERV. 

· At Ilford we have signed an agreement for lease with the NHS for a new community healthcare centre on a 25-year lease term. This will be a flagship project providing a new 20,000 sq ft purpose-built facility that is expected to open to the public in 2024.

· Also at Ilford, we have signed an agreement to relocate and upsize TK Maxx into a new 35,000 sq ft store occupying the first floor of what was the former Debenhams unit. This will enable remerchandising of the existing TK Maxx unit which sits at the entrance next to Ilford station, which will benefit from the opening of the new Elizabeth Line.

· Occupancy has remained stable at 93% at the end of April 2022.  

· Of the quarterly rent due on 25 March 2022, we have so far received 93%. We have now received 96% of the rent due in respect of the first quarter of the year.

· At Walthamstow, we have now secured vacant possession of all units required to unlock the development site and documentation with the Local Authority to facilitate the development is agreed and close to completion. We expect to clear the remaining pre-conditions to enable transaction completion and release of the land receipt of c. £20 million payable by our residential partner, Long Harbour, before 30 June 2022, at which time we will hand over the site to allow them to commence their development programme. 

· Snozone has recovered well after the start of the year was impacted by Government restrictions. Recent weeks' trading has exceeded the equivalent weeks in 2019. 

Property portfolio

Ilford loan amendment

The Group has signed a package of amendments to its £39 million secured loan facility in respect of The Exchange Centre, Ilford, to facilitate the investment of approximately £10 million for the creation of the new community healthcare centre and anchor unit for TK Maxx. 

The amendments provide for a waiver of covenants until January 2023 and improvements to existing covenant terms to apply from January 2023 into 2024. 

The amendment also provides an 18-month conditional extension option that can be triggered at the end of 2023 to extend the loan maturity from March 2024 until September 2025.

The Marlowes Centre, Hemel Hempstead

The Group has agreed to acquire its debt in respect of the Marlowes shopping centre in Hemel Hempstead at a significant discount. The Group has paid £11.8 million in order to settle the loan and associated debt liabilities of c. £24.0 million, representing a discount of approximately 51%.

To partially fund the transaction, the Group has substantially agreed terms on a new loan facility of £4.0 million provided by BC Invest, a subsidiary of the Group's strategic residential partner Far East Consortium. The new debt will be provided for an initial period of three years at a margin of 5.95%. It will be secured on the Marlowes Centre on a non-recourse basis. The remainder of the proceeds will be funded by existing Group cash reserves.

The transaction will result in the Group's Net Asset Value increasing by approximately £12 million, being the level of the discount before associated costs. The asset will no longer be classified as 'Held for Sale' following the transaction. The asset was valued at £10.5 million at 31 December 2021, representing a net initial yield of 12.5% and net equivalent yield of 18.2%.

The Mall, Luton

As detailed in the full year results the Group has been working closely with the lender of the secured debt on the asset to explore a disposal of part or all of the investment or asset. This process remains ongoing and is expected to reach a conclusion before the end of September 2022.

The Company's Annual General Meeting will be held at 10:00 (UK time) at Thomas House, 84 Eccleston Square, Pimlico, London SW1V 1PX

- ENDS -

For further information:

Capital & Regional plc 020 7932 8000

Lawrence Hutchings

Stuart Wetherly

FTI Consulting 020 3727 1000

Richard Sunderland

Katie Hughes

capreg@fticonsulting.com

About Capital & Regional plc:

Capital & Regional is a UK focused retail property REIT specialising in shopping centres that dominate their catchment, serving the non-discretionary and value orientated needs of the local communities. It has a strong track record of delivering value enhancing retail and leisure asset management opportunities across its portfolio of in-town shopping centres. 

Using its in-house expert property and asset management platform Capital & Regional owns and / or manages eight shopping centres in Blackburn, Hemel Hempstead, Ilford, Luton, Maidstone, Redditch, Walthamstow and Wood Green.

Capital & Regional is listed on the main market of the London Stock Exchange (LSE) and has a secondary listing on the Johannesburg Stock Exchange (JSE)

For further information see www.capreg.com.