The old Lib­erty In­ter­na­tional back in the black

Finweek English Edition - - Front Page - JOAN MULLER joanm@fin­

RE­SULTS AN­NOUNCED last week by mall owner Cap­i­tal Shop­ping Cen­tres (CSC) in Bri­tain – for­merly known as Lib­erty In­ter­na­tional – con­firm con­sumers in Bri­tain are be­gin­ning to spend again. The first set of in­terim re­sults pub­lished since Lib­erty In­ter­na­tional’s shop­ping cen­tres were split from its smaller, cen­tral London-fo­cused busi­ness Cap­i­tal & Coun­ties in May show the com­pany has fi­nally re­turned to profit fol­low­ing Bri­tain’s twoyear prop­erty slump.

In the six months to end-June this year CSC in­creased its un­der­ly­ing earn­ings by 28%, while the mar­ket value of its prop­erty port­fo­lio was up 6% to £4,9bn (around R56,1bn). CEO David Fis­chel says it ap­pears re­tail sales in Bri­tain are on the mend, which is prompt­ing re­tail­ers to again start ex­pand­ing their foot­prints. Fis­chel says na­tional re­tail­ers such as food store Pri­mark, fashion chain Next and elec­tron­ics gi­ant Ap­ple are all look­ing to ex­pand their ex­ist­ing out­lets at many of CSC’s re­gional malls, in­clud­ing the likes of Lake­side (near London) and Metrocen­tre (Gateshead).

An­a­lysts have de­scribed CSC’s re­sults as favourable. Macquarie First South Se­cu­ri­ties prop­erty an­a­lyst Leon Al­li­son says its progress on the let­ting front is a stand-out fea­ture of its re­sults. Al­li­son notes that in the six months to June, CSC had signed 131 let­tings at pass­ing rentals up a hefty 38% on lev­els pre­vi­ously fetched for those units. A fur­ther 194 let­tings are un­der of­fer, with rentals an im­pres­sive 53% higher than be­fore. Al­beit off de­pressed lev­els, Al­li­son says strong rental re­ver­sions will pro­vide a key un­der­pin for growth. There’s also been a shift to­wards more long-term leases.

Other pos­i­tives in­clude steadily ris­ing oc­cu­pancy lev­els, with the port­fo­lio va­cancy down from a high of 6,4% in De­cem­ber 2008 to less than 2% cur­rently. Al­li­son says ten­ant fail­ures con­tinue to de­crease, with first quar­ter 2010 ten­ant fail­ures at their low­est level in four years.

How­ever, Al­li­son says in­vestors shouldn’t ex­pect fire­works from CSC over the next 12 to 24 months. “Con­cerns re­main the Bri­tish govern­ment’s aus­ter­ity mea­sures and the rise in the VAT rate from 17,5% to 20% from 1 Jan­uary next year could slow Bri­tain’s eco­nomic re­cov­ery and con­sumer spend­ing.”

He’s placed a neu­tral rec­om­men­da­tion on the stock. “Al­though there’s rea­son­ably good po­ten­tial for CSC to show earn­ings and div­i­dend growth off a low base over the next 12 months, the stock cur­rently looks fully priced at a div­i­dend yield of 4,4%.”

Al­li­son notes other London-listed prop­erty coun­ters, in­clud­ing Bri­tish Land, are trad­ing at a more at­trac­tive yield of 5,7% and a larger dis­count to NAV and there­fore cur­rently show more value than CSC.

How­ever, Al­li­son says CSC re­mains an easy en­try point for SA in­vestors want­ing to gain ex­po­sure to Bri­tain’s real es­tate mar­ket with­out hav­ing to use their off- shore al­lowance.

Keith Craw­ford, an­a­lyst at Lon­don­based KBC Peel Hunt, says CSC’s port­fo­lio of 13 re­gional shop­ping cen­tres re­mains Bri­tain’s best qual­ity shop­ping of­fer­ings. How­ever, he cau­tioned in an is­sue of London’s

Fi­nan­cial Times last week that the con­sumer spend­ing out­look in Bri­tain isn’t all that rosy with the po­ten­tial of a re­newed down­turn af­ter Bri­tain’s govern­ment an­nounced huge pub­lic sec­tor spend­ing cuts. In­fla­tion wor­ries are also grow­ing and taxes are set to in­crease.

Says Craw­ford: “The easy gains of pas­sive yield shift have now come to an end and – as a re­sult of CSC’s ex­po­sure to re­tailer oc­cu­pier mar­kets – fu­ture per­for­mance may lag other leader stocks.”


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