Helical Bar Regulatory News (HLCL)

25 July 2016

Helical Bar plc ("Helical" or the "Company")

Trading Update for the period since 1 April 2016

GOOD PROGRESS MADE ACROSS HELICAL'S DEVELOPMENT, ASSET MANAGEMENT AND INVESTMENT OPERATIONS

ENCOURAGING POST-REFERENDUM LONDON REAL-ESTATE ACTIVITY

Helical Bar plc today announces its trading update covering its activities for the period 1 April 2016 to 24 July 2016 ("the Period").

Commenting on the Company's activities, Michael Slade, Chief Executive, said:

"Our strategy to capture the reversionary potential of our portfolio and develop high quality space is proceeding to plan, with good progress made at The Loom, London E1 and Churchgate and Lee House, Manchester.

"Although the result of the EU referendum has led to some uncertainty, we have been quietly encouraged by the continuation of both letting and transactional activity witnessed across the London market since the vote. As a business, we remain cautiously optimistic that, given our robust financial position and the characteristics of our London assets, which we believe will remain attractive to a variety of different types of occupier, we are well-positioned to weather any headwinds.

"Whilst commercial development has come under particular scrutiny, Helical's own development programme is substantially de-risked, with its two largest office developments, at One Bartholomew Close EC1 and One Creechurch Place EC3, being funded by its partners, with Helical providing limited equity with negligible additional exposure required.

"This is my last update as Chief Executive and I now hand over to Gerald Kaye, who I trust to successfully navigate this current period and continue the success of the Company in the future. I look forward to continuing to support the Board in my new role as Non-Executive Chairman."

HIGHLIGHTS

· £37.9m of investment property sold at book value including retail warehousing in Harrogate, Stockport, Ellesmere Port and Scarborough with two further retail assets under offer for c. £21m;

· 17 new lettings delivering £1.16m of annualised rental income including 9,000 sq ft at The Loom, Whitechapel, London E1 at £54.00 psf, 12,000 sq ft in Churchgate House, Manchester and seven leases in Shepherds Building, Shepherds Bush, London W14 in aggregate these lettings were at 10% above March 2016 ERV;

· The letting at The Loom, Whitechapel, London E1 is the first following the comprehensive refurbishment and at 9,000 sq ft is the biggest unit available within the building. This ten year lease at a rent of £54.00 psf sets a new benchmark rent for the building and was completed post the EU vote. The tenant, Erdem, is a high end fashion group selling to retailers including Selfridges, Harvey Nichols and Barneys of New York;

· Nine lease renewals securing £243,000 of rental income, 26% above previous passing rent;

· The retirement village business has continued to perform strongly with completed sales of 30 units for a total value of £12.1m;

· Phase 4 at our retirement village at Bramshott Place, Liphook, comprising 40 cottages, has started on site. Marketing has commenced with seven cottages reserved on the day of the launch representing £4.8m of sales;

· Our term loan facility with Deutsche Pfandbriefbank has increased by £21m to £120m to fully fund the redevelopment of our refurbishment at 23-28 Charterhouse Square, London EC1;

· Amendment to our existing retirement village facility with HSBC to provide finance for the development of the final phase of Bramshott Place, Liphook.

LONDON PORTFOLIO

Our London portfolio provides rental income, opportunities for capital growth and development profits.

The Bower

At The Bower, Old Street, London EC1: -

· Phase 1 is fully let to CBS, Farfetch, Pivotal, Allegis and Stripe (The Warehouse) and John Brown Media (The Studio);

· Retail operators Bone Daddies, Draft House and Enoteca da Luca have now opened, joining Honest Burger, Maki and Good and Proper Tea;

· Phase 2 of the development, the refurbishment of The Tower, continues to progress and will deliver a further c. 171,000 sq ft of offices and c. 7,500 sq ft of restaurant use. It is due for completion in Q1 2018.

Barts Square

At Barts Square, London EC1: -

· We have exchanged contracts on 104 residential units in the first phase of the development comprising 144 units, for a total sale value of £133.2m at an average of £1,581 psf, with delivery expected in Q3 2017;

· A further unit has been placed under offer since the EU referendum, for £0.94m, at £1,724 psf;

· The demolition of the existing building continues in advance of constructing One Bartholomew Close, a new 12 storey office building of c. 213,000 sq ft, pre-sold to clients of Ashby Capital LLP;

· The remaining phase of residential, comprising an additional 92 units, is due to commence in November 2016 for delivery in Q1 2019.

One Creechurch Place

At One Creechurch Place, London EC3:-

· Construction of a c. 272,000 sq ft new office building, being built in joint venture with HOOPP (Healthcare of Ontario Pension Plan), is nearing completion (October 2016). We expect the building to be launched into a supply constrained market and initial interest is being shown by potential tenants.

Charterhouse Square

At 23-28 Charterhouse Square, London EC1 we have:-

· Continued to progress our comprehensive refurbishment of the current building which will create c. 38,500 of office space and 5,100 sq ft of retail/restaurant and works are expected to complete in Q1 2017;

· Secured bank funding of the site and the development costs.

The Loom

At The Loom, Whitechapel E1 we:-

· Will shortly complete a major refurbishment of the reception, common parts and various units, which has comprehensively modernised and repositioned the building. This will provide a new primary entrance and reception onto Gowers Walk, a bike store, showers and an onsite café. On completion in early August, there will be circa 35,000 sq ft of refurbished office space available in varying sized units. Although the building has not yet been formally launched, we have had interest in a number of the suites and the largest unit of 9,000 sq ft is now let at £54.00 psf. This compares to the current average rent for the building of £25.00 psf, indicating its significant reversionary potential.

REGIONAL PORTFOLIO

Our regional portfolio provides significant cash flow for the Company. We have a broad spread of income providing diversity between tenants and sectors of the market.

We have:-

· Sold £37.9m of investment property at book value including retail warehousing in Harrogate, Stockport, Ellesmere Port and Scarborough;

· Placed £21.0m of retail asset sales under offer.

Churchgate and Lee House, Manchester

Since 1 April 2016 we have:-

· Completed two leases totalling 12,000 sq ft adding rental income of c. £215,000 pa. The building is now 95% let.

Retirement Villages

Since 1 April 2016:-

· The retirement village business has continued to perform strongly with completed sales of 30 units for a total value of £12.1m. In addition, sales of six units have exchanged (value of £2.6m) and a further 45 units have been reserved (value of £20m);

· Construction is progressing well with 57 units completed at Millbrook Village, Exeter and the remaining 107 units are under construction. At Durrants Village, Faygate, 105 units are built with construction of the final 51 due to commence shortly. The first 45 units are on site in Maudslay Park, Great Alne. The final phase of 40 units at Bramshott Place, Liphook are now under construction and have been financed through the existing facility with HSBC. Seven of the cottages were reserved on the first day of the launch, representing c. £4.8m of sales. 

Cortonwood Retail Park

Since 1 April 2016 we have:-

· Forward funded this scheme with clients of Aberdeen Asset Management. The 79,750 sq ft retail park is 95% pre-let to tenants including Outfit, H&M, New Look, River Island and Marks and Spencer. Construction on site has started with completion due in June 2017.

FINANCING

Since 1 April 2016, we have:-

· Increased our term loan facility with Deutsche Pfandbriefbank by £21m to £120m to fund the development of our site at 23-28 Charterhouse Square, London EC1;

· Amended our existing facility with HSBC to provide finance for the development of the final phase of 40 units at our retirement village at Bramshott Place, Liphook;

We now have funding in place to complete the construction works on all our committed developments.

There are no facilities due for repayment or refinancing before November 2019.

At 30 June 2016, the Company's bank facilities comprised:-

· £590m of investment facilities of which £495m was drawn down. These borrowings have an average maturity date of four years and seven months and a weighted average cost of debt of 4.0%;

· £60m of development facilities of which £50m was drawn down, leaving £10m to fund the retirement village development programme. These borrowings have an average debt maturity date of four years and one month and a weighted average cost of debt of 5.5%;

· A share of bank facilities in joint ventures of £58m of which £40m was drawn down. These facilities have an average maturity date of three years and six months and a weighted average cost of debt of 3.4%.

Including the £80m retail bond and the £100m convertible bond, Helical's total net debt as at 30 June 2016, including debt and cash held in joint ventures, was £688m (31 March 2016: £682m), with an average maturity date of four years and three months (31 March 2016: four years and six months) and a weighted average cost of debt of 4.3% (31 March 2016: 4.2%). Of the borrowings, £682m (89%) is fixed at an average rate of 4.2% with the remaining £88m (11%) floating at an average rate of 4.9%. The Company has £107m of interest rate caps protecting it against base rate rises up to a weighted average of 4%.

The net loan to value ("LTV") at 30 June 2016, based on values at 31 March 2016, was 42% on a secured basis. This compares to maximum LTV covenants on our secured investment loans of between 65% and 75%. Including our retail and convertible bonds our net LTV was 56% at 30 June 2016.

DIVIDEND

The final dividend for the year ended 31 March 2016 of 0.72p, if approved by Shareholders, will be paid on 29 July 2016. This will take the total dividend for the year to 8.17p.

BOARD CHANGES

As announced on 28 November 2015, Michael Slade is to take over as Non-Executive Chairman of the Company following today's 2016 AGM and is to be replaced as Chief Executive by Gerald Kaye. Our current Non-Executive Chairman, Nigel McNair Scott, and Non-Executive Director Andrew Gulliford, are to retire from the Board at the same time. Following these changes the Board will be comprised of a Non-Executive Chairman, four Executive Directors and five independent Non-Executive Directors.

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