LXB Retail is working to return cash to shareholders. They reported a fall in net asset value of 7.5p per share for the six months ended 30 September 2016, after adjusting for a return of capital of 38.0p per share in June 2016. The major constituents of this reduction are:
- losses caused by delays in the programme; highways delays at Rushden Lakes, construction delays at Stafford Riverside and at Greenwich Brocklebank where the contractor ceased trading. These issues have impacted on delivery dates for the retailers and hence rent commencement;
- losses caused by increased construction costs at Rushden Lakes, Stafford Riverside and Sutton; and
- reduced expectations of sales values on the remaining portfolio.
On a more positive note, they were able to buy a further piece of land at Rushden Lakes which enabled an improved scheme to be designed for Phase 2. A planning application, as noted earlier, has now been submitted for this scheme alongside Phase 3. An agreement has been reached with The Crown Estate in principle in relation to these changes.
The amount of ultimate value realisation is heavily dependent on the grant of planning and a legal agreement with The Crown Estate at Rushden Lakes and a successful sale of Stafford Riverside, but the Board remains confident that the final figure will be in excess of the NAV reported today.
During this period they sold the B&Q at Greenwich, albeit after a small hiatus post the Brexit vote, the Kingsmead investment at Stafford in two separate transactions, and a significant part of the investment at Ayr. In addition they are making good progress toward a sale of the remaining investment at Ayr, the sale of Neats Court Retail Park in Sheppey and realisation of remaining interests at Gloucester and Willow Green in Truro. Two of these investments are already under offer and they would hope to conclude several of these sales in the coming months. In addition they expect to receive the final payment from the sale of the Sainsbury’s in Sutton shortly, following practical completion.
The Board will, subject to the need to maintain adequate working capital to cover unforeseen events, continue to return capital to Shareholders as quickly as possible. In the period since the AGM and EGM on 29 February 2016, any surplus funds have been returned in the form of capital returns to all Shareholders and the Board is mindful that this is the preferred method of return for Shareholders; however, they say they are now entering a period where cash receipts are likely to be smaller and relatively numerous and therefore the Board is likely to exercise its authority to return small amounts of cash by way of share buybacks where this can be achieved for the benefit of all Shareholders.
Over and above the cash realisations from the investments referred to above, the Company retains a number of significant investments as well as interests in investments which have been forward funded.
At Greenwich Brocklebank they have suffered delays which mean that practical completion, and hence the final cash receipt, is now likely to be in July 2017.
At Biggleswade, the park is now open and trade is significantly ahead of expectations. They have three units still to let and are in discussions with retailers for all the remaining space, however the final cash receipt is dependent upon the completion of those lettings.
At Sutton they have 27,000 sq ft of space to let next to the new Sainsbury’s and of this they have let 4,100 sq ft. Whilst there are on-going discussions with retailers, they cannot sell the investment until these lettings are substantially complete.
By far the largest remaining assets and interests that they hold, that can realise cash, are the investment at Stafford Riverside and their remaining interest in Rushden Lakes which they have forward funded to The Crown Estate.
After some delays caused by construction issues, Stafford Riverside is now open and trading ahead of expectations. They have a small amount of space still to let and progress is being made to let that space, ready for a sale of the investment by Q2 next year.
The delays on the retail element have had a knock-on impact on the leisure element which is now not scheduled to start on site until January and will not achieve practical completion until December 2017; consequently they are reviewing how best to realise cash from this investment given the time constraints upon them.
At Rushden Lakes the eventual outcome in cash terms is dependent upon final lettings where very substantial progress has been made on Phase 1, with 70% of space let and another 14% in solicitors’ hands. The Phase 1 build has progressed well and has now been substantially completed. We expect to start handing over to the anchor retailers in February next year. Opening has been delayed until July 2017 from the original plan of April 2017 due to highways issues completely beyond their control.
On Phases 2 and 3, planning is now in for the final scheme and they expect a decision by January 2017. The timing of cash receipts from those phases will follow once they have received the go ahead from the Secretary of State and have gone through the judicial review period. It is intended that they will start on site on these phases in Q2 2017.
They say that they therefore have a clear path to the realisation of cash from the Group’s investments and interests in property but much remains to be done in a relatively short period. It is inevitable that some cash will need to remain in the Group following the next AGM to cover outstanding liabilities and awaiting practical completion of various investments.
LXB : Construction problems for LXB Retail