Shaftesbury PLC

Trading Update

Recovery on-track despite short period of disruption caused by Omicron restrictions; Visitors and office workers now returning,

near and longer-term outlook remains positive

Shaftesbury PLC, the Real Estate Investment Trust that owns a 16-acre portfolio in the heart of London's West End, today announces a trading update for the period 1 October 2021 to 3 February 2022. The announcement is being issued prior to the Company's Annual General Meeting, which is being held later today.

Brian Bickell, Chief Executive, commented:

"I am pleased to report that the strong rebound in confidence and activity since last summer continued into the important pre-Christmas trading period. Whilst trading and footfall have been impacted by seven weeks of Omicron restrictions, strong trading prior to the restrictions and the continuation of government support measures have enabled our occupiers to weather this period of disruption.

Robust occupier interest across all our uses and in each of our locations has continued throughout the period, our vacancy levels are trending lower towards pre-pandemic levels and rent collection rates continue to improve. With the lifting of restrictions, visitors and the West End's important working population are now returning. Together with an improving outlook for international leisure and business travel, there is now the prospect of an extended period of uninterrupted trading growth.

The unrivalled attractions and lasting appeal of the West End to both local and domestic audiences, together with our curated, differentiated and affordable locations, will underpin both our continuing post-lockdown revival and our long-term resilience and prospects in the months and years ahead."

Summary

Trading conditions

·    Strong rebound in confidence and activity continued into the important pre-Christmas trading period.

·  Short-term disruption to footfall from Omicron restrictions and related staffing issues for our occupiers now abating.

·  Prospect of an extended period of uninterrupted trading growth ahead with the return of visitors and office workers, together with an improving outlook for international and business travel.

Demand, occupancy and rent collection

·    Robust occupier demand for all uses and each location continues; vacancy continues to decline towards long-term, pre-pandemic average and rent collection continues to improve.

·    Leasing transactions with a combined rental value of £10.6 million completed in the quarter:

-  60 commercial lettings and lease renewals concluded with a rental value of £7.9 million, on average at rents ahead of year end valuation.

-  Rent reviews with a rental value of £1.4 million concluded at c.14% above previous rental levels.

-  49 residential lettings (rental value of £1.3 million). No apartments available to let at 31 December 2021; rental levels improving.

·    EPRA vacancy at 31 December 2021: 5.1% of portfolio ERV, down 0.9% over the quarter; further decrease to 4.9% by 2 February 2022.
 

-  Available-to-let vacancy: 2.9% of ERV, across 57,000 sq. ft. (30.9.21: 2.9%).

-  Space under offer: 2.2% (30.9.21: 3.1%).

·    Rent collection at 2 February 2022:
 

-  88% of rent for the quarter to 31 December 2021 collected to date.

-  77% of January 2022 rents collected to date; further recoveries expected.

-  Collection rates to improve further as footfall and trading bounce back.

Investment activity

·    165,000 sq. ft. of space under refurbishment at 31 December 2021; ERV: £11.3 million, 8.6% of portfolio ERV (30.9.21: 8.9%):
 

-  72 Broadwick Street scheme expected to complete in phases by May 2022

-   Pre-let leisure space expected to be handed over to American fitness and lifestyle brand, Equinox, in February 2022.

-   17,000 sq. ft. of office space now under offer.

-  Other schemes underway extending to 96,000 sq. ft.; 4.4% of portfolio ERV, of which 0.3% under offer.

-  Now considering pro-actively taking back space to make improvements, introduce new concepts and create new rental evidence.

·   Five acquisitions (£18.5 million, excluding acquisition costs) in Covent Garden, Chinatown and Fitzrovia; further opportunities anticipated as owners re-assess their assets in light of the need to invest to meet higher occupier expectations and environmental standards.

·   Disposal of two non-core properties: £11.4 million gross proceeds, 9.6% above book value at 30 September 2021.

Strong Balance Sheet

·    At 31 December 2021:

-  Net debt: £740.9 million (30.9.21: £748.5 million).

-  Available liquidity: £318.9 million, comprising £218.9 million of cash and an undrawn revolving credit facility amounting to £100 million.

·    Compliant with financial covenants in our debt arrangements at latest testing dates.

Background

The strong rebound in confidence and activity following the relaxation of lockdown restrictions in July 2021 continued through the autumn and into the important pre-Christmas trading period. The emergence of the highly transmissible Omicron variant in early December 2021 led to the Government reintroducing certain restrictions, which were in place for a period of seven weeks until 26 January 2022.

Inevitably, rising infection rates and restrictions, including the reintroduction of work from home guidance, had an adverse impact on footfall, which generally fell back to levels seen last summer. Most of our retail and hospitality occupiers remained open throughout, although staff Covid infections and isolation requirements affected some businesses' ability to trade. Strong trading prior to the restrictions and the continuation of government support measures, such as business rates relief and VAT concessions, have enabled our occupiers to weather this short period of disruption.

With the lifting of restrictions, visitors and the West End's important working population are now returning. Together with an improving outlook for international leisure and business travel, there is now the prospect of an extended period of uninterrupted trading growth. Longer term, the West End is set to benefit from the anticipated opening of the Elizabeth Line later this year, which, once fully operational, is expected to bring a material increase in visitor numbers and spending. Our portfolio is uniquely well-placed to benefit with all our ownerships a short walk from the new Tottenham Court Road and Bond Street interchanges.

The unrivalled attractions and lasting appeal of the West End to both local and domestic audiences, together with our curated, differentiated and affordable locations, will underpin both our continuing post-lockdown revival and our long-term resilience and prospects, in the months and years ahead.

Occupier demand and vacancy

The short period of disruption to the West End's rapid post-lockdown recovery has had no noticeable impact on the robust occupier interest we previously reported across all our uses and in each of our locations. Vacancy levels continue to reduce towards our long-term, pre-pandemic average.

During the quarter ended 31 December 2021, we concluded leasing transactions with a combined rental value of £10.6 million, comprising:

·    33 new commercial lettings (47,000 sq. ft.) and 27 lease renewals (50,000 sq. ft.) with a combined rental value of £7.9 million, on average at rents ahead of our year end valuation.

·    Rent reviews with a rental value of £1.4 million were settled, c. 14% above previous rental levels.

·    49 residential lettings with a rental value of £1.3 million. With sustained demand for our apartments, and for residential accommodation across the West End, any space we get back typically goes under offer within days, and we are now seeing improving rental levels.

EPRA vacancy decreased further to £6.8 million (5.1% of portfolio ERV) over the quarter to 31 December 2021 (30.9.21: £8.0 million, 6.0%), of which 2.9% was available to let and 2.2% was under offer. By 2 February 2022, EPRA vacancy had fallen further to 4.9%.

Available-to-let vacancy at 31 December 2021

1.    Includes space let on temporary basis with an ERV of £0.9 million, 0.7% of portfolio ERV (30.9.21: £1.0 million; 0.8% of portfolio ERV)

2.    Portfolio ERV at 30 September 2021, adjusted for acquisitions and disposals in the quarter to 31 December 2021.

Available-to-let vacancy comprised seven restaurants and cafés (12,000 sq. ft.), fourteen shops (15,000 sq. ft.) and 28 office suites (30,000 sq. ft.). No flats were available.

At 31 December 2021, our 50% share of the ERV of Longmartin's vacant space was £0.3 million (30.9.21: £0.7 million).

Rent collection

Rent collection has continued to improve. For the quarter to 31 December 2021, we have collected 88% of contracted rents to date, 10% remains outstanding and 2% has been waived, with our rental support now only being granted on an exceptional case-by-case basis.

In January 2022, collection rates reflected the short-term trading and cash flow reduction suffered by some occupiers due to Omicron-related issues. To date, we have collected 77% and expect further recoveries. Collection rates will continue to improve as footfall and trading bounce back in the months ahead.

In the Longmartin joint venture, 92% of rent for the quarter to December 2021, and 88% of rents for the quarter to March 2022, have been collected to date.

Asset management

At 31 December 2021, space held for, or under, refurbishment in the wholly-owned portfolio extended to 165,000 sq. ft., and represented 8.6% of total ERV, down 0.3% since 30 September 2021.

Space held for or undergoing refurbishment at 31 December 2021

1.       Portfolio ERV at 30 September 2021, adjusted for acquisitions and disposals in the quarter to 31 December 2021.

Our mixed-use scheme at 72 Broadwick Street is expected to complete over the coming months. Handover of the pre-let leisure space to American fitness and lifestyle brand, Equinox, is expected this month and the remainder of the scheme is anticipated to complete in phases through to May 2022. In January 2022, we placed the 17,000 sq. ft. fourth floor office space under offer (1.1% of portfolio ERV). The remaining available space comprises 9,000 sq. ft. of offices and fifteen apartments, which we expect to let on a furnished basis.

Other schemes extended to 96,000 sq. ft. (30.9.21: 101,000 sq. ft.) and represented 4.4% of portfolio ERV, of which 0.3% was under offer. A number of these schemes will complete during this financial year, and whilst they will initially increase EPRA vacancy, they will provide opportunities to improve rental tones across our streets and deliver long-term enhancements to earnings.

With sustained occupier demand and limited availability of space across our portfolio, we are now considering pro-actively taking back units, providing opportunities to improve the space, introduce new concepts and create new rental evidence.

Our 50% share of the ERV of Longmartin's space under refurbishment at 31 December 2021 was £0.9 million (30.9.21: £0.6 million).

Acquisitions and disposals

Since 1 October 2021, we have acquired five buildings in Covent Garden, Chinatown and Fitzrovia for £18.5 million (excluding acquisition costs). These buildings further consolidate the holdings in our ownership clusters, bringing additional long-term value creation opportunities.

We expect further acquisition opportunities to appear as owners reassess their often long-held assets in light of the need to invest to meet higher occupier expectations and environmental standards.

During the quarter, we sold two non-core buildings for £11.4 million (gross), 9.6% above book value at 30 September 2021. Further disposals from a limited pool of buildings no longer core to our long-term strategy are currently being considered.

Finance

At 31 December 2021, net debt was £740.9 million (30.9.21: £748.5 million). Available liquidity totalled £318.9 million, comprising £218.9 million of cash and an undrawn revolving credit facility amounting to £100 million. We were compliant with the financial covenants in our debt arrangements at the latest testing dates.

4 February 2022

For further information:

Shaftesbury PLC LEI: 213800N7LHKFNTDKAT98

Notes for editors

Shaftesbury is a Real Estate Investment Trust which invests exclusively in the heart of London's West End. Focused on food, beverage, retail and leisure, our portfolio is clustered mainly in Carnaby, Seven Dials and Chinatown, but also includes substantial ownerships in East and West Covent Garden, Soho and Fitzrovia.

Extending to 16 acres, the portfolio comprises over 600 restaurants, cafés, pubs and shops, extending to 1.1 million sq. ft., 0.4 million sq. ft. of offices and 631 apartments. All our properties are close to the main West End Underground stations, and within ten minutes' walk of the two West End transport hubs for the Elizabeth Line, at Tottenham Court Road and Bond Street.

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.

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