Capital & Regional’s regional portfolio values dent NAV

Capital & Regional has reported a 3.5% decline in portfolio value on the back of plummeting regional valuations. The full-year results announcement also saw non-executive chairman Hugh Scott-Barrett outline plans to step down from his role. Scott-Barrett, who is the former chief executive, became non-executive chairman in June 2017 while Lawrence Hutchings took on the chief executive post. “Now that this transition is complete, I have decided it is time to seek my successor,” Scott-Barrett said. A recruitment process, led by senior independent director Tony Hales, will begin after the landlord’s AGM in May. Scott-Barrett will step down once a successor is appointed. The news comes as C&R posted an IFRS loss of £25.6m in the year to 30 December, compared with profit of £22.4m in 2017. The REIT blamed this on a fall in valuations, driven by negative sentiment towards its regional retail assets that failed to offset gains across its London portfolio. The loss on revaluation of investment properties for the year was £52.5m, compared with £6.3m in the previous year. The valuation of the REIT’s wholly-owned portfolio stood at £855.2m, reflecting a net initial yield of 6.23%. It is down 3.5% on the previous year’s equivalent. The value of the landlord’s three London assets increased by 6.6% to £449.1m over the year, driven primarily by income growth in Walthamstow following on from the remerchandising of the previous BHS unit into a new Lidl, gym, restaurant and Pret store. But outside of London, its centres in Hemel Hempstead, Luton, Maidstone and Blackburn were significantly impacted by negative sentiment. Headline valuation for the Mall Blackburn plunged by more than 20%, while the three South East assets declined by 10.1%. Consequently, EPRA NAV per share fell to 59p in the period, down from 67 in 2017. As such, the landlord reduced its final dividend of 0.60p per share – a 68.6% drop on the previous year’s equivalent of 1.91p. This was done to preserve cash for funding capex investment, as well as mitigate leverage while meeting REIT distribution requirements. Outside of these assets, the Kingfisher Centre in Redditch was valued at £118.6m. C&R revealed it restructured the debt on the asset earlier this month, reducing its percentage holding to 12%. Subsequently its net interest in the asset at 30 December was £0.8m. Like-for-like net rental income during the year inched up marginally by 0.6% despite suffering the brunt of 20 CVAs and retailer restructurings. These impacted NRI by approximately £1.5m, or 2.9%. Adjusted profit grew 4.8% to £30.5m, while adjusted earnings per share climbed by 3.2% to 4.23p. Hutchings said: “These operational results clearly support the new strategy we launched just over a year ago that is focused on responding to the structural changes currently under way in the retail sector. “The assets where we are most advanced in delivering our strategy have performed very strongly even in a challenging UK macro environment. This is evidenced by our footfall figures and our 87 new lettings and renewals which have on average been secured at premiums to both previous rents and ERV, while remaining at rent levels that are cost effective for occupiers. “We have seen an increase in the pace of the structural change that is underway in the retail sector and this requires us to continue our proactivity, with a focus on the repositioning and remerchandising of our assets whilst investing in our internalised management platform to ensure that we have the rights skills and culture to respond effectively to the changes in the sector. “I remain confident that our strategy will realise the potential of our existing portfolio, which is underpinned by its bias towards high population growth areas in London and proximity to busy transport hubs. “We continue to believe that the intersection of where product meets people remains of critical importance to brands and retailers and that our centres have a vital role to play as distribution platforms for goods and services.” To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette