Shaftesbury, which owns a 16-acre portfolio in London’s West End, has reported a significant reduction in vacancy in a trading update as footfall and trading recover.
The group said vacant available-to-let space across its portfolio of retail, hospitality, leisure and offices was down to 4.6% at 31 July (from 8.4% at 31 March). This decreased further to 4.1% at 13 August following the letting of more space.
Weekly West End footfall has recovered to 50% to 60% of pre-pandemic levels, with visitors focussing their attention on dining, leisure and socialising – helping its hospitality and leisure occupiers to report strong recovery in trading levels. The group said retailers in its portfolio were reporting improving trade, particularly at weekends. It added that it anticipates a return of West End office-based working population from early Autumn.
The group said that it was encouraged by the pace at which space continued to go under offer. Demand for hospitality and leisure space improved over the period, it said, “reflecting confidence in the long-term prospects for our West End locations”.
There was “healthy occupier interest” in its retail space, including online retailers looking for physical space to provide consumer experience, interaction and engagement and further enhance their brand identity.
Whilst leasing terms were generally in line with estimated rental values (ERVs), Shaftesbury said there was a greater degree of short-term income uncertainty in those retail leases which have a significant element of turnover-related rent.
Rent collection has improved across the portfolio, but still remains one of the lowest of the UK-listed REITs. The quarterly collection rates are as follows:
- For the three months to 31 December 2020, 49% of contracted rent has now been collected (which increases to 78% after allowing for rent waivers granted);
- In the quarter to 31 March 2021, 40% has been collected (77% with waivers);
- Three months to 30 June 2021: 51% of contracted rent; (73% with waivers); and
- For the month of July 2021: 55% of contracted rent (62% with waivers).
Financial position
At 30 June 2021, net debt was £729.1m and available liquidity totalled £330.7m (comprising £230.7m of cash and an undrawn revolving credit facility amounting to £100m).
The group has extended the interest cover covenant waiver on its £134.8m term loan from July 2021 to January 2022. Its nearest term interest coverage ratio (ICR) waiver maturity relates to the undrawn £100m revolving facility, and matures in October 2021. The group said in the event that it requires an extension to this waiver and it is either not granted, or is subject to restrictions it finds unacceptable, it would part cancel or terminate the facility ahead of its contractual maturity.
Chief executive comments
Brian Bickell said: “I’m pleased to report positive momentum in recent months, with footfall and trading recovering, an improving operating environment and significantly reduced vacancy across our villages. West End footfall has, to date, recovered to 50-60% of pre-pandemic levels, as Londoners, domestic day trippers and staycation visitors return in growing numbers. We expect that early autumn will see a return of the West End’s exceptionally large office-based working population, which has always been an important contributor to our local weekday economy.
“The long-term curation we bring to our central, bustling villages, with its focus on differentiated, mid-market choices targeted primarily at a domestic audience, continues to attract both visitors and new occupiers. The progress we have seen towards a return to normal patterns of activity over the period, and improving medium-term prospects, have been catalysts for a strong recovery in confidence and leasing activity, both for commercial and residential accommodation across our locations.
“The momentum of the last four months is providing a sound platform for the continuing revival of the West End in the important months ahead, leading up to Christmas and into the New Year, and the prospects for a return to pre-pandemic patterns of life and activity.”
SHB : Shaftesbury optimistic for London recovery