SHAFTESBURY PLC

Impact of the Coronavirus (COVID-19) pandemic on our operations and financing

Shaftesbury PLC, the Real Estate Investment Trust that owns a 15.2-acre portfolio in the heart of London's West End, today is providing an update on the impact of the Coronavirus (COVID-19) pandemic on its business and measures being taken to manage the associated risks.

Context

The COVID-19 pandemic is presenting unprecedented challenges which are having a major impact on people and businesses around the world. As a responsible, long-term investor in London's West End, our focus is on safeguarding our employees and working closely with our occupiers, and other stakeholders, with a range of actions to respond to the current situation.

Summary

·    Following recent UK Government actions to halt the spread of the virus, across the West End, shops, restaurants, cafés, and bars have temporarily closed and office workers are working from home.

·    Notwithstanding this short-term global uncertainty, our focus is on sustaining the long-term intrinsic value and prospects of our impossible-to-replicate portfolio, which is underpinned by the  resilience of the West End.
 

·    We are supporting our commercial occupiers with solutions, including rent deferral, to help to ease their short-term cash flow issues, so they are in a position to resume trading once the current restrictions are lifted.

·    Shaftesbury has a well-financed Balance Sheet with 24% LTV¹, no debt maturities until May 2022, diversified sources of finance, and a weighted average debt maturity of 8.8 years.

·    Strategy to preserve liquidity over coming months:

o  Moratorium on all non-essential expenditure, new schemes and acquisitions, other than by exception.

o £150 million has been drawn against our committed revolving credit facilities as part of a prudent approach to cash management, increasing our available cash to c. £179 million.

o After capital and acquisition commitments, total available liquidity (cash and undrawn revolving credit facilities) is around £170 million..

·    Full year EPRA earnings (year ending 30 September 2020) are now expected to be significantly below current market expectations, although, given the uncertainty over the length of time until normal conditions begin to return, it is not possible at this stage to quantify the impact.
 

·    To preserve liquidity, no interim dividend will be declared at the half year. The dividend position for the full year will be kept under review.

·    31 March 2020 valuation likely to include a statement from the independent valuers highlighting the material uncertainty, given the current situation.

Brian Bickell, Chief Executive commented: "We are committed to supporting our occupiers and residents through this period of unprecedented upheaval in normal patterns of life and business activity. The ability of our commercial tenants to resume trading when current restrictions begin to be relaxed is our priority.

The global appeal and resilience of the West End and our locations, together with our initiatives in recent years to ensure our finances are robust, underpin the intrinsic worth of our impossible-to-replicate portfolio and the long-term value of our business." 

Operational challenges

Our carefully-curated and dynamic villages are high footfall and spending locations, which provide the foundation for prosperous trading for our 607 restaurants, cafés, bars and shops. The central pillars of our footfall are Londoners, the estimated 700,000 workers in the City of Westminster, and tourists, both domestic and from overseas.

Following UK Government actions to halt the spread of the virus, across the West End, shops, restaurants, cafés, and bars have temporarily closed and office workers are working from home.

Supporting our occupiers

It is the Board's view that supporting our occupiers through the current situation is the right thing to do and is the best way to preserve the long-term value and prospects of our exceptional portfolio. The unprecedented package of financial support from the Government is welcomed and will be helpful for many of our occupiers. We are in direct contact with our commercial occupiers, and, where they are unable to meet their lease obligations in the short term, we will continue to support them with solutions, including rent deferral, to help them manage their cash flows so they are in a position to resume trading once the current restrictions are lifted.

Well-financed business

We are a well-financed business with conservative leverage. At 30 September 2019, our group loan to value ratio, based on net debt, was c. 24%. The weighted average maturity of our debt is currently 8.8 years (8.7 years including the Longmartin joint venture) and our earliest maturity is in May 2022.

For now, the financial covenants in our debt arrangements are currently well-covered. For the year ended 30 September 2019, interest cover was 2.7x. We will continue to keep covenants under close scrutiny, and maintain regular dialogue with our lenders.

Notes:

1.     for each source of finance LTV ratios are based on the assets secured by way of fixed charge to each provider.

2.     ICRs are also based on assets secured to lenders, except for the revolving credit facilities, which are based on group consolidated financials.

Strategy to preserve liquidity

Our strategy over the coming months is to preserve liquidity, which is currently c. £254 million, comprising c. £29 million of cash and £225 million of committed revolving credit facilities.

We have placed a moratorium on all non-essential expenditure, new schemes and acquisitions, other than by exception. Furthermore, given the unpredictability of income levels during this period of uncertainty, we are drawing £150 million of our committed revolving credit facilities as part of a prudent approach to cash management, increasing cash balances to c. £179m. The marginal cost of these drawings is c. 1.4%. Undrawn committed revolving credit facilities will then be £75 million.

After capital and acquisition commitments, total available liquidity (cash and undrawn revolving credit facilities) will be around £170 million.

Full year earnings and dividends   

It is currently difficult to predict the length of time until normal conditions begin to return. Given this uncertainty, it is too early to quantify the full impact on our financial results. However, in view of the likely reduction in rents collected in the coming months, full year EPRA earnings are now expected to be significantly below current market expectations.

In turn, this may have an impact on dividends for the year. In line with the strategy to preserve liquidity over the coming months, the Board has decided that no interim dividend will be declared at the half year.

The dividend position for the full year will be kept under review and we will report to the market as appropriate.

Valuation

Our portfolio is scheduled to be externally valued at 31 March 2020 for our half year results. The valuation community have recently announced that the current situation will make their professional judgements less certain than under normal market conditions. Consequently, their valuation reports will include a statement highlighting this material uncertainty.  

Whilst the valuation will be taking place at a point in time when there is unprecedented short-term uncertainty, the structural resilience of the West End as a global destination underpins the intrinsic long-term value of our exceptional and impossible-to-replicate portfolio.

24 March 2020

For further information:

Shaftesbury PLC LEI: 213800N7LHKFNTDKAT98

This announcement includes inside information.

The person responsible for arranging the release of this announcement is Desna Martin, Company Secretary.