Shaftesbury PLC

Trading update

Good demand for regular space, robust leasing activity and further acquisitions

Shaftesbury PLC, the Real Estate Investment Trust that owns a 15.2 acre portfolio in the heart of London's West End, today announces a trading update for the period 1 April 2019 to 24 September 2019.

Highlights

Brian Bickell, Chief Executive, commented:

"Our exceptional 15.2 acre portfolio, located in some of the busiest parts of the West End, continues to perform well. The small to medium-sized space we mostly provide, combined with our modest rental levels, are a considerable advantage in the current market, attracting good levels of interest. Our long-established tenant selection strategy has ensured that we have been largely unaffected by high-profile retail and restaurant failures and restructurings.

We continue to convert our portfolio's reversionary potential into contracted income, whilst delivering further long-term growth in rental values. During the period since 1 April 2019, leasing activity has been robust, rents continue to be achieved at or above ERV and lease incentive levels have remained stable. Vacancy remains low and consistent with our long-term average; much of our available space is under offer.

Despite the uncertain political and macroeconomic backdrop, London's global city status continues to draw businesses and visitors from across the World, reinforcing the West End's long-term appeal and prospects."

25 September 2019

For further information:

Shaftesbury PLC LEI: 213800N7LHKFNTDKAT98

Overview

The unique features of London's West End, its dynamic, broad-based, seven-days-a-week economy and global reputation underpin its continuing resilience, prosperity and prospects.

Our exceptional 15.2 acre portfolio, located in some of the busiest parts of the West End, continues to perform well. Our proven strategy is operationally-focussed and brings an entrepreneurial approach to the curation of our locations. The small to medium-sized space we mostly provide, combined with our modest rental levels, are a considerable advantage in the current market, attracting good levels of interest. Our skill in adapting the space in our buildings, through reconfiguration or change of use, is invaluable in meeting changing occupier demand and requirements.

We focus on food, beverage, leisure and retail uses and recognise the complementary benefits of a mix of activities in our areas. Over recent years, our strategy has been to increase the number of interesting casual dining and leisure concepts in our popular, high-footfall locations to meet growing interest and spending on leisure activities. Food, beverage and leisure is an important driver of footfall, dwell-time and trading in our villages and now accounts for 38% of our income, up from 28% ten years ago. Over that same period, the proportion of income from retail has fallen from 42% to 32%.

The uncertainty over the timing and terms, if any, of the UK's exit from the European Union continues to dominate sentiment. Government studies suggest a "no deal" Brexit could result in potential short-term disruption to business supply chains, which would be unwelcome, particularly in the important lead up to the Christmas and New Year trading period.

Nationally, political and macroeconomic uncertainties continue to weigh both on business and consumer confidence. Whilst London cannot be completely sheltered from these headwinds, its global city status continues to draw businesses and visitors from across the World, reinforcing the West End's long-term appeal and prospects.

Operating environment

Despite reports of a small decline in overseas visitor numbers, mainly attributed to fewer European tourists, the West End remains busy. In our areas, the largest components of daily footfall comprise the huge local working population and daily visitors from across London and the Home Counties.

Structural changes in shopping and spending patterns continue to have a considerable impact on businesses exposed to these nationwide trends. Our long-established tenant selection strategy focusses on interesting, innovative concepts and independent businesses, rather than formulaic formats and national chains. Consequently, we have been largely unaffected by high-profile retail and restaurant failures and restructurings. In the financial year to date, tenant insolvencies have accounted for less than 2% of portfolio ERV and, where space has been handed back, it has re-let well.

Where we collect data, our food, beverage and retail occupiers have, on average, reported increased year-on-year sales for the quarter ended 30 June 2019. Business profitability continues to be affected by operating cost pressures, for example from higher import prices and increasing employment costs as staff shortages grow.

We continue to convert our portfolio's reversionary potential into contracted income, whilst delivering further long-term growth in rental values. During the period since 1 April 2019, leasing activity has been robust, rents continue to be achieved at or above ERV and lease incentive levels have remained stable. Vacancy remains low and consistent with our long-term average; much of our available space is under offer. At Central Cross, there are now just two shops available, one of which is under offer.

Earlier this month, the Seven Dials Market opened in Thomas Neal's Warehouse, a 23,000 sq. ft. Victorian warehouse in the heart of Seven Dials. The concept is a hybrid operation providing an exciting line-up of street food concepts, a bar and a market selling fresh produce. This has increased the food and beverage offer in Seven Dials, further improving this popular and distinctive village destination.

Schemes

·    72 Broadwick Street, Carnaby (31.3.2019: 3.8% of total ERV)

Having secured planning consent for our 77,100 sq. ft. mixed-use scheme at 72 Broadwick Street in June, we have now commenced works.

The scheme will provide new retail, restaurant and leisure space, activation of the ground floor frontage on Broadwick Street, extended and refurbished office accommodation and 15 new apartments on the top floor.

At an estimated cost of £32 million, the project will take around two years with completion in phases from late 2020.

·    Other schemes: (31.3.2019: 5.5% of total ERV)

Currently, we have over 40 other schemes underway, a number of which will complete over the coming three to six months, and, once let, will provide a useful boost to income. With resilient demand for space in our locations, we continue to investigate and progress new schemes to improve the rental prospects and value of our buildings. In particular, we are identifying opportunities to reconfigure some of our larger shops and restaurants to take advantage of demand for smaller space. Often, this enables us to repurpose space to introduce new, complementary uses, whilst maintaining or enhancing rental income.

Longmartin Joint Venture

The Sussex House mixed-use commercial scheme completed in May 2019. The flagship prominent retail unit at the corner of Upper St Martin's Lane and Long Acre is being marketed and all the 7,500 sq. ft. of office accommodation is either let or under offer.

The scheme to reconfigure the north side of St Martin's Courtyard to create three restaurants, each with outside seating, is currently expected to complete in late 2019 and marketing has commenced. The dining offer will be further enhanced in 2020 when two restaurants fronting Upper St Martin's Lane and backing on to the courtyard are combined to create a 10,000 sq. ft. flagship unit, let to Dishoom under a new lease.

As previously reported, on Long Acre, a street characterised by large retail space, relatively high rents and fragmented ownerships, rental tones are under pressure as vacancy is increasing generally. The joint venture has two large adjoining shops (12,000 sq. ft.; our 50% share of ERV: £0.7 million) which are now effectively vacant. Plans are being prepared to reconfigure the combined space to reduce the retail element and introduce alternative uses at first floor. 

Acquisitions

Since 1 April 2019, we have completed acquisitions totalling £34.9 million (including costs), comprising three shops, one restaurant and 2,600 sq. ft. of office space. This brings total acquisitions for the financial year to £47 million.

Currently, macroeconomic uncertainty is having a noticeable effect on West End transaction volumes. The availability of properties to buy in our locations and which meet our strict criteria continues to be exceptionally limited, as existing owners remain reluctant to dispose of assets which offer both security and long-term growth prospects.

The forward-purchase of a long leasehold interest in 90-104 Berwick Street has been further delayed and we now expect the vendor to complete the development in early 2020. The Board continues to monitor the situation closely.

Notes for Editors

Shaftesbury is a Real Estate Investment Trust which owns a portfolio extending to 15.2 acres in the heart of London's West End. Shaftesbury focuses on restaurants, leisure and retail in highly popular, sought-after and prosperous locations mainly concentrated in Carnaby, Seven Dials and Chinatown, together with substantial ownerships in East and West Covent Garden, Soho and Fitzrovia.

The portfolio comprises 605 restaurants, cafés, pubs and shops, extending to 1.1 million sq. ft., 0.4 million sq. ft. of offices and 605 apartments. All our properties are close to the main West End Underground stations, which currently handle c. 228m passengers p.a., and within ten minutes' walk of the two West End transport hubs for the Elizabeth Line, at Tottenham Court Road and Bond Street, which long-term projections indicate could be handling 200 million passengers annually.

In addition, we have a 50% interest in the Longmartin joint venture, which has a long leasehold interest, extending to 1.9 acres, in St Martin's Courtyard in Covent Garden.

Our proven management strategy is to create and foster distinctive, attractive and prosperous locations. We have an experienced management team focused on delivering our objective of long-term growth in rental income, capital values and shareholder returns. We have a strong balance sheet with conservative leverage.

Forward-looking statements

This document, the latest Annual Report and Shaftesbury's website may contain certain "forward-looking statements" with respect to Shaftesbury PLC (the Company) and the Group's financial condition, results of its operations and business, and certain plans, strategy, objectives, goals and expectations with respect to these items and the economies and markets in which the Group operates. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "anticipates", "aims", "due", "could", "may", "should", "expects", "believes", "intends", "plans", "targets", "goal" or "estimates" or, in each case, their negative or other variations or comparable terminology.

Forward-looking statements are not guarantees of future performance. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many of these assumptions, risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely. There are a number of such factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.

Any forward-looking statements made by, or on behalf of, Shaftesbury PLC speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except as required by its legal or statutory obligations, Shaftesbury PLC does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

Information contained in this document relating to Shaftesbury PLC or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance. Nothing contained in this document, the latest Annual Report or Shaftesbury's website should be construed as a profit forecast or an invitation to deal in the securities of the Company.

Ends