LXB.L Regulatory News (LXB)

LXB RETAIL PROPERTIES PLC

(the "Company" or the "Group")

INVESTMENT PORTFOLIO UPDATE

LXB Retail Properties Plc, a Jersey resident closed-ended real estate investment company focused on edge of town and out of town retail assets, today provides the following portfolio update.

The Group's interim results announcement for the period ended 31 March 2014 included a commitment to provide shareholders with an update on progress across the investment portfolio towards the end of the current financial year. The Group is mindful that, with the continuation vote due to take place in early 2015, shareholders need to have an up to date understanding of progress on the Group's activities.

It is pleasing to report that there has been substantial progress across virtually the whole portfolio. During the period since the interim announcement on 18 June 2014, the Group has signed pre-lets covering another 42,872 sq ft of ground floor space. The Group's annual rent roll (assuming rent free periods have expired and excluding assets treated as sold at the last balance sheet date) is now £17.31m, an increase of £0.99m (6.09%) since the interim report.

The removal of key uncertainties surrounding the planning permissions at Banbury Gateway and Rushden Lakes, together with a successful outcome of the Compulsory Purchase Order inquiry for Biggleswade, have all resulted in additional interest from potential occupiers and, in addition to the pre-lets signed as of the date of this announcement, a large number of other lettings are either in solicitors' hand or under offer.

Shareholders will recall that the Banbury Gateway investment was sold to The Crown Estate in December 2013, subject to satisfaction of a number of planning and letting related conditions. Recent progress (which is reported in greater detail below) has ensured that the Group is optimistic that the transaction will complete in October 2014. If it does, significant cash proceeds will be received and if, as expected, they exceed the equity required in the remainder of the investment portfolio, the Board will again consider using its authority to return capital by a purchase of own shares. An announcement will be made in due course if that is the chosen course of action.

The market for retail investments has attracted a lot of capital in the last few months and yields have hardened. With the Group's portfolio of high quality investments reflecting today's trading formats and based on affordable rents, it is inevitable that approaches are frequently received from other investors looking to improve their portfolios. Offers for the Group's investment properties will always be considered seriously if it is in the best interests of shareholders to do so. Even though the investment market is very active, there is often a long lead time on negotiations to conclude a transaction and negotiations may prove abortive if the Group considers that the detailed terms being offered are not in shareholders' best interests. The Group is currently in discussions in connection with a number of its investment properties but there is no certainty at this stage that transactions will be concluded satisfactorily. If and when they are, further announcements will be made.

 A detailed update on each of the Group's principal investments is provided below:-

Ayr

Having secured approval "in principle" for a 101,000 sq ft foodstore, 750 houses, a primary school and a neighbourhood centre, the major focus of activity in recent months has been on agreeing the detailed terms of the Section 75 planning agreement. The Group hopes to submit detailed plans before the end of the year for the first infrastructure works and expects to be in a position to start work on site in June 2015.

Banbury Gateway

The confirmation of the planning position following a lengthy challenge process has encouraged further occupier interest; the Group recently signed pre-lets with Fat Face for a 9,500 sq ft (6,000 on ground floor) unit, Poundland for an 8,000 sq ft (6,000 on ground floor) unit and Ed's Easy Diner for a 2,500 sq ft ground floor unit; one other pre-let for a 1,708 sq ft ground floor unit is expected to be exchanged shortly. When it is, the Group will have secured pre-lets for 84% of the ground floor space.

As previously announced, The Crown Estate has contracted to acquire this investment and fund the construction programme once a number of planning and letting related conditions are satisfied. The Group is optimistic that the remaining conditions will be satisfied during October 2014 at which time the deal will complete and cash proceeds in excess of £42m will be received.

Under the terms of the agreement with The Crown Estate, the Group will remain responsible for overseeing the development and for letting the remaining space. The preparatory works have started and the terms of a fixed price Design and Build contract have been agreed. It is expected that this contract will be signed at the same time as the transaction with The Crown Estate completes.

Biggleswade

Construction of Phase 1 of this three phase project is now well advanced with Practical Completion anticipated in March 2015. This involves constructing six units in the main retail park and the three unit terrace ('Plot S') which stands opposite the main retail park.

The Group has planning permission for over 364,000 sq ft of retail space (251,000 on ground floor) but implementation of the whole consent requires vacant possession. Since the interim results announcement, contracts have been exchanged with both Halfords and Bensons Beds for those businesses to relocate to Plot S. Discussions are ongoing with the remaining three tenants but the local authority made Compulsory Purchase Orders ('CPO') in case vacant possession could not be secured by agreement. Significant progress was achieved on 13 September 2014 when the Secretary of State for Communities and Local Government upheld the finding of the July 2014 public inquiry that the CPOs should proceed. This decision removes a major uncertainty regarding delivery of the whole scheme. 

As well as the pre-lets to Halfords and Bensons Beds, contracts have been exchanged to let a 12,600 sq ft (6,500 on ground floor) unit to River Island. The three unit terrace at Plot S is now 100% pre-let as is 74% of the ground floor space at Phase 1. Advanced discussions are ongoing with several other major retailers and, if these all result in exchanged pre-let agreements, 100% of the ground floor space at Phases 1 and 2 and 13.4% of the ground floor space at the 41,000 sq ft Phase 3 will be pre-let.

Gloucester

The previously announced disposal of three acres of land to Rygor Mercedes is expected to complete around the end of September 2014. The Group's remaining land interest of 5.82 acres has planning consent for 139,523 sq ft of Employment, Trade and Cash and Carry uses, 11,022 sq ft for a car showroom and 8,191 sq ft of Retail, Restaurant and Professional Services use. A pre-let has been agreed with Costa for a 1,851 sq ft 'Drive Thru' unit and the Group has sought a variation of the planning permission to allow the Retail and Restaurant element to be developed when the Rygor Mercedes commences on site. It is hoped that the planning variation will be confirmed before the end of October 2014.

Greenwich

On 16 September 2014 the Secretary of State for Culture, Media and Sport determined that the Sainsbury's store at Greenwich Peninsula will not be categorised as a listed building. The application for listing was a major potential barrier to IKEA's proposed acquisition of the Group's interest in that store. Whilst this does not fully conclude the conditionality to enable the IKEA transaction to go ahead, it is nevertheless a major step forward; discussions on the remaining outstanding points are expected to be finalised by the end of October 2014.

The 160,000 sq ft (76,000 on ground floor) retail development at Greenwich Brocklebank continues to make progress. The Section 106 agreement was concluded in September 2014 and terms have now been agreed with all tenants of Brocklebank Industrial Estate to ensure that vacant possession will be available by the end of 2014, and work on site is expected to start in January 2015. Practical Completion is expected to occur by December 2015.

Letting discussions continue with a number of potential tenants to occupy alongside Next's 38,500 sq ft three storey (16,000 on ground floor) unit and further announcements will be made in due course.

Rushden Lakes

The Group announced on 4 August 2014 that after a lengthy and thorough review process, the planning permission for this 494,329 sq ft investment was confirmed and beyond challenge. This very positive outcome has stimulated significant interest from potential occupiers seeking a presence at Rushden Lakes which has the potential to be one of the UK's foremost retail and leisure destinations. Preparatory site clearance work started in September 2014.

Sheppey

Construction of the 66,776 sq ft retail park adjacent to the foodstore and KFC (both of which were acquired by Morrisons in May 2013) at Sheppey is progressing well. Practical Completion of the first terrace occurred in August 2014 and the second terrace will reach that stage in October 2014.

The B&M and Iceland stores are both scheduled to open for trading in September 2014 and there has been further lettings success since the last update with Sports Direct having signing a pre-let for a 10,000 sq ft unit in September 2014. The lettings strategy was to hold back the remaining three units in these two terraces until they were close to Practical Completion; a marketing campaign will be launched in October 2014 and a number of retailers have registered interest already.

The Group has submitted a planning application in respect of the final phase of this investment. The application seeks consent for a pub/restaurant, 15,000 of business space and 8,500 sq ft of additional retail/A3 space and a decision is expected in October 2014.

The freehold of the pub/restaurant is under offer to Marston's and assuming the planning permission is confirmed, completion is expected in October 2014.

Stafford

Construction of the multi-storey car park has commenced, as have the enabling works for both the Kingsmead and Riverside investments. Kingsmead is 100% pre let and discussions are underway with a number of potential occupiers for the remaining space at Riverside; 80% of the ground floor space is currently pre-let.

The documents to confirm bank funding of the construction work are well advanced and the Group expects to sign these, together with the building contracts within the next few weeks.

A planning decision on the recent application for the development of a multiplex cinema on the Bridge Street part of the site is expected in October 2014 and discussions with potential operators continue. In addition several pre-lettings of restaurant units are in solicitors' hands.

The Old Gasworks Sutton

This investment project is moving forward as anticipated. The Group expects to acquire the final piece of the site in October once Southern Gas Networks have completed the gas diversion works. At that stage, a five month programme of ground remediation will commence ahead of construction of the Sainsbury's foodstore scheduled to start in March 2015. A number of banks have expressed interest in providing development finance for the foodstore.

Since the last update the Group has continued to review the offers received from housebuilders seeking to acquire the residential element of the Sutton investment. An offer has recently been accepted by the Group's Investment Committee and discussions on contracts are now in progress. A further announcement will be made if and when contracts are exchanged.

Truro

The interim announcement reported that the Group's application for a development on the western side of Truro which includes a 78,000 sq ft ASDA foodstore and 435 houses would be heard by the Planning Committee in June 2014. Things have not progressed as quickly as anticipated at that time because a number of competing planning applications for foodstores have been presented to the local authority in recent months. As a result, the hearing of the Group's planning application has been deferred until 26 September 2014 so that three applications may be considered by the Planning Committee at the same time. The Group understands that its application will be presented to the Committee with an officers' recommendation that it is approved. A fourth foodstore application which has come forward recently is not scheduled for consideration at that meeting.

The Group's Living Villages project at Higher Newham Farm has seen significant progress over the summer. A public consultation event was held, receiving an overwhelmingly positive response, and dialogue is ongoing with the local authority, Truro City Council and community interest groups. The feedback from the consultation process was reflected in the outline planning application which was submitted to Cornwall County Council in August 2014. The application includes the provision of 155 new homes; a community hub; a restaurant and cookery school to be operated by Cornwall Food Foundation; and a community farm and educational facility which will be run by Duchy College. The Group hopes to have a decision before the end of the calendar year. In addition to Higher Newham Farm, the Group is looking at a number of other potential Living Villages opportunities.

For further information please contact:

LXB Adviser LLP Tel: 020 7432 7900

Tim Walton, CEOBrendan O'Grady, FD

Buchanan Tel: 020 7466 5000

Charles Ryland/Sophie McNulty/Clare Akhurst