retail

UK retail woes hit West End landlord Shaftesbury

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The West End landlord Shaftesbury saw the value of its portfolio decline in the year to September for the first time in a decade as the UK retail crisis rolled in to prime central London.

The landlord, whose 15 acre portfolio spans Carnaby Street, Covent Garden, Soho, Fitzrovia and China Town, said the decline was mainly down to falling valuations of large stores on Long Acre in Covent Garden. Its overall net asset value dropped 9p a share, or 0.9 per cent, to £9.82 per share, or £4bn.

Stores held in Shaftesbury’s Longmartin joint venture with the Mercers’ Company, a livery company, shed 19.4 per cent of their value — partly as a result of falling rents in the area and partly because of an increase in the yields investors are seeking from retail property. Tenants at the Longmartin site are mostly mass market retailers and, in the year to September, included preppy casualwear chain Jack Wills, which fell into administration before being acquired by Sports Direct for £12.8m.

A series of retailers have entered insolvency arrangements over the past two years, while others have called a halt to expansion plans as they battle weak consumer confidence, higher costs and the transition to online shopping.

The hardest hit areas have been those in “secondary” locations where store turnover is lower, leading to plummeting values for regional shopping centres. But retailers are now taking a more conservative approach to their portfolios even in central London areas popular with tourists.

This month shopping centre owner British Land, which owns shopping centres including Meadowhall in Sheffield, said its retail portfolio had shed a tenth of its value.

Declining valuations, in contrast with a revaluation surplus recorded a year earlier, pushed down Shaftesbury’s full-year profits by 85.2 per cent to £26m. Shares in the group had dropped 4.1 per cent to 912p a share by mid-morning.

Poonam Lodhia, analyst at Numis Securities, said the decline was partly down to risk-averse retailers shunning larger stores.

“Following the launch of larger-scale schemes in recent years, such as Thomas Neal’s Warehouse and Central Cross, [Shaftesbury’s] exposure to larger units has increased, and these are seeing greater downward pressure than smaller units given the uncertainty faced by retail and [food and beverage] occupiers,” she said.

However, Shaftesbury said rents across its portfolio still rose, with net property income up 4.5 per cent to £98m, helping the group to push up its final dividend by 5.9 per cent to 9p a share.

Brian Bickell, chief executive, said: “In a year dominated by domestic political uncertainties and a slowing national economy, the qualities of our portfolio, business model and proven strategy, together, have delivered a resilient performance.”

The company said stores, bars and restaurants in its portfolio had continued to report increasing turnover, but were wresting with cost pressures and staff shortages.

Shaftesbury also faces a further burden in the form of legal proceedings from shareholder Samuel Tak Lee, who has accused Shaftesbury of misconduct in connection with a 2017 share placing. He owns 26.3 per cent of the group’s shares.

Mr Lee is seeking about £10.4m in damages, Shaftesbury said, with the case expected to play out over the next 18 months. “The board considers the claims to have no merit and intends to defend the allegations robustly,” it said.

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