Shaftesbury Capital Plc · LSE:SHC
Shaftesbury Capital — Capital & Counties Properties — H1 2020 Earnings Presentation
43 slides from Shaftesbury Capital's earnings presentation, August 2020
Slide 1: Capital & Counties Properties PLC
Capital & Counties Properties PLC CAPITAL & COUNTIES PROPERTIES PLC
Slide 2: Important Notices
IMPORTANT NOTICES This presentation contains “forward-looking statements” regarding the belief or current expectations of Capital & Counties Properties PLC, its Directors and other members of its senior management about Capital & Counties Properties PLC’s businesses, financial performance and result
Slide 3: Agenda
1. INTRODUCTION Ian Hawksworth 2. FINANCIAL REVIEW Situl Jobanputra 3. COVENT GARDEN Michelle McGrath 4. LOOKING AHEAD Ian Hawksworth 5. Q&A
Slide 4: Introduction
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Slide 5: Significant impact from COVID-19 on operations, valuations and income
SIGNIFICANT IMPACT FROM COVID-19 ON OPERATIONS, VALUATIONS AND INCOME EARLY ACTION TAKEN TO SUPPORT OUR CUSTOMERS CLEAR REOPENING STRATEGY RESULTING IN ENCOURAGING EARLY INDICATORS STRONG BALANCE SHEET INVESTMENT IN SHAFTESBURY AT AN ATTRACTIVE ENTRY PRICE CONFIDENT IN THE LONG-TERM PROSPECTS FOR PR
Slide 6: Capco's priority has been the health and safety of its people, customers and visitors
CAPCO’S PRIORITY HAS BEEN THE HEALTH AND SAFETY OF ITS PEOPLE, CUSTOMERS AND VISITORS SECURITY AND SAFETY MEASURES ENHANCED ON ESTATE LONG-TERM RESPONSIBLE OWNER − Community collaboration and charitable donations DIRECT AND REGULAR DISCUSSIONS WITH CUSTOMERS − Alternative arrangements agreed includi
Slide 7: Leasing transactions, investment opportunities and Lillie Square handovers
22 LEASING TRANSACTIONS SIGNED IN THE PERIOD WELL-POSITIONED TO ACT ON INVESTMENT OPPORTUNITIES GOOD PROGRESS ON LILLIE SQUARE HANDOVERS DIVIDEND DECISION DEFERRED UNTIL YEAR END
Slide 8: Valuation movement: -12% like-for-like
£m 2500 £291m £108m £31m 2000 Initial yield 2.72% -12% lfl +17 bps 6 -12 months Equivalent yield 3.82% overall on retail & F&B 1500 Valuation ERV £2,595m Retail -20% -14% £2,196m £2,165m £2,165m 1000 F&B -25% -19% Offices -4% -2% 500 Residential 1% -3% Leisure/other -7% 3% 0 Total -17% -12% Dec 19 v
Slide 9: Covent Garden estate: 81 buildings, 548 units, 1.2m sq ft
− 81 buildings, 548 units and 1.2m square foot lettable space − Landmark estate with global recognition − Scale and concentrated ownership − Rich in heritage and culture − Attractive open air environment The map above is indicative.
Slide 10: Disciplined approach to investment, returns and capital efficiency
Investment in owned assets Acquisitions on or near Covent Garden estate Development, repositioning and asset management opportunities Other central London opportunities DISCIPLINED APPROACH TO INVESTMENT, RETURNS AND CAPITAL EFFICIENCY Disposal of non-strategic assets Dividend distributions and shar
Slide 11: Acquisition of 26.3% shareholding in Shaftesbury PLC
ACQUISITION OF 26.3% SHAREHOLDING IN SHAFTESBURY PLC − Total consideration of £436 million UNIQUE OPPORTUNITY TO ACQUIRE A SIGNIFICANT STAKE − An exceptional mixed-use real estate portfolio ATTRACTIVE INVESTMENT AND ENTRY PRICE − An implied price of approximately £1,200 per square foot CONSISTENT WI
Slide 12: Financial Review
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Slide 13: Note: All numbers shown at Group share
Note: All numbers shown at Group share
Slide 14: Rent collection for Q2 and Q3 significantly lower than normal
20 £16.9m £17.9m £16.2m 18 3% 5% 2% 16 14 12 53% 65% 10 8 98% 6 4 44% 30% 2 0 Q1 2020 Q2 2020 Q3 2020 Collected Alternative arrangements Outstanding Rent collection for Q2 and Q3 quarter rent dates has been significantly lower than normal levels During this challenging period a small number of tenan
Slide 15: Net rental income bridge June 2020
Includes £5.8m bad £m debt expense 30 25 20 £5.7m £1.4m 15 £25.3m 10 £19.6m £18.2m 5 0 Underlying NRI June 2020 Impairment of tenant Lease modifications Reported NRI June 2020 incentives
Slide 16: Administration expenses and cost efficiency
Administration expenses 60 Cost efficiency targeted at all levels - 50 property, administration and financing 40 Additional costs and disruption in H1 2020, however run rate continues to be 30 reduced £50.5m 20 £32.9m Further consolidation of Group activities 10 £20.0m in H1, with continued focus in
Slide 17: Net asset value and EPRA metrics
1 The market value of investment, development & trading property is £2,305m (31 December 2019: £2,774m) 2 Other primarily includes Capco’s investment in Shaftesbury PLC (£340m as at 30 June 2020) and deferred consideration from the sale of Earls Court (£120m) EPRA net asset value metrics: • NRV (net
Slide 18: Cost of drawn debt, LTV headroom and ICR covenant waivers
WEIGHTED AVERAGE COST OF DRAWN DEBT 2.6% SIGNIFICANT LTV HEADROOM AGAINST VALUATION MOVEMENTS ICR COVENANT WAIVERS AGREED FOR CURRENT FINANCIAL YEAR
Slide 19: Cash and undrawn facilities movement
1000 Earls Court deferred Predominantly the initial investment consideration and in Shaftesbury shares and related £895m Lillie Square debt draw down 900 completed sales 800 £428m 700 £616m 600 £725m 500 £296m 400 £130m £360m £16m 300 £32m 200 £352m £320m 100 £170m 0 Dec-19 Disposals Financing Inves
Slide 20: Financial review summary
DISRUPTION TO NEAR-TERM INCOME Customer support and other initiatives to position for recovery Dividend decision deferred to year end CONTINUED REDUCTION OF UNDERLYING ADMINISTRATION COSTS STRONG LIQUIDITY AND BALANCE SHEET POSITION Access to significant liquidity, LTV headroom and waiver of ICR cov
Slide 21: Covent Garden
Slide 22: Solid start to 2020; significant impact from COVID-19 in H1
SOLID START TO 2020; HOWEVER SIGNIFICANT IMPACT ON BUSINESS FROM COVID-19 IN H1 22 LEASING TRANSACTIONS COMPLETED REPRESENTING £2.7M CONTRACTED INCOME PROACTIVE APPROACH TO OUR CUSTOMERS DURING LOCKDOWN FOCUSED ON REOPENING STRATEGY; PROVIDING CONFIDENCE TO REOPEN
Slide 23: Retail ERV -14%
ITZA psf (£) 1,600 Retail ERV -14% 1,400 1,200 1,000 800 600 400 200 0 Central Covent James St Market Bldg King St Long Acre Royal Opera Henrietta St - Floral St - East Floral St - Henrietta St - Bedford Street London Garden House East West West Prime* Average** Dec 2019 * Based on 30ft Zone A, incl
Slide 24: Direct contact with our customers
DIRECT CONTACT WITH OUR CUSTOMERS − Over 250 direct customer negotiations Q2 RENTS − Moved from quarterly in advance to alternative arrangements inc. monthly rents, rental deferrals and deposit usage BESPOKE SOLUTIONS AGREED FOR H2 2020 IN EXCHANGE FOR LEASE ENHANCEMENTS − Rent deferrals − Rent-free
Slide 25: New brands signed since March 2020
4 NEW BRANDS SIGNED SINCE MARCH 2020 - Including two new London flagships OPENINGS ACROSS THE ESTATE − Ganni flagship opened on Floral Street − American Vintage fit out underway − Peloton European flagship studio fit-out continues − Bucherer’s expansion is underway − Strathberry to open in the Marke
Slide 26: Refurbishment activity underway following COVID-19 interruption
REFURBISHMENT ACTIVITY UNDERWAY FOLLOWING COVID-19 INTERRUPTION − 3 Henrietta Street Townhouse under offer − 5-6 Henrietta Street office refurbishment continues − Vacant possession of office space in Sussex Mansions achieved CONTINUING TO TRACK INVESTMENT MARKET CLOSELY − Significant liquidity to ac
Slide 27: Additional pedestrianised streets and al fresco dining
ADDITIONAL PEDESTRIANISED STREETS − In partnership with Westminster City Council ACCELERATED AL FRESCO DINING STRATEGY − Now over 500 incremental outdoor covers ENCOURAGING EARLY INDICATORS The map above is indicative. Additional streets have been pedestrianised for a trial period
Slide 28: Majority of retail and F&B customers have reopened
MAJORITY OF RETAIL AND F&B CUSTOMERS WELCOMING OPEN AIR HAVE REOPENED ENVIRONMENT ALTERNATIVE RENTAL ARRANGEMENTS AGREED ENCOURAGING EARLY INDICATORS
Slide 29: Looking Ahead
Slide 30: Extraordinary first half of 2020; trading conditions to remain challenging
EXTRAORDINARY FIRST HALF OF 2020; EXPECT TRADING CONDITIONS TO REMAIN CHALLENGING DECISIVE ACTIONS POSITION THE ESTATE TO BENEFIT FROM A RECOVERY AND PROSPER OVER TIME PROVIDING OUR CUSTOMERS WITH CONFIDENCE AND THE SETTING TO GRADUALLY BUILD TOWARDS PREVIOUS TRADING LEVELS SEEK EFFICIENCIES ACROSS
Slide 31: Q&A
Slide 32: Memberships, ratings and awards
EPRA SUSTAINABILITY GLOBAL REAL ESTATE REPORTING AWARDS BALANCE SUSTAINABILITY BENCHMARK 2019: Gold 2019: Green Star CARBON DISCLOSURE PROJECT FTSE4GOOD 2019: B 2019: 90th percentile MEMBERSHIPS
Slide 33: Covent Garden response to COVID-19
- Open air environment - Supporting stores reopening during - Investing in safer, cleaner and - Optimised stores in line with period of significant disruption greener environment government guidelines - Bespoke solutions reflecting the - Additional security presence across - Extensive cleaning regim
Slide 34: Covent Garden portfolio composition
1. Residential includes units sold on long lease interests covering approximately 158,000 square feet
Slide 35: Lease expiry, gross income and portfolio value
LEASE EXPIRY PROFILE1 ANNUAL GROSS INCOME 2020: 10% Retail: 45% F&B: 24% 2021: 12% WALE Office: 20% 8.4yrs 2022: 12% £67.9m Leisure: 4% 2023: 11% Residential: 7% 2024+: 55% 1. Lease expiry profile based on the earlier of lease break and lease expiry PORTFOLIO VALUE TOTAL FLOOR AREA Retail 52% F&B 20
Slide 36: December 2019 and June 2020 Zone A maps
December 2019 Zone A Map June 2020 Zone A Map
Slide 37: Gross rent to ERV bridge
£m 110 100 90 £4.7m 80 £11.2m £1.6m £3.4m 70 £0.8m £5.9m 60 50 £95.5m £90.8m 40 £79.6m £73.8m £74.6m £76.2m £76.2m £67.9m 30 20 10 0 Jun-20 Gross Rent frees & Turnover & Contracted & Total Vacancy Development & Reversion Jun-20 ERV Income stepped rents other income under offer contracted and refurbi
Slide 38: Summary balance sheet: Group share to IFRS
SUMMARY BALANCE SHEET GROUP SHARE TO IFRS AS AT 30 JUNE 2020 less: Group share Joint ventures! IFRS &m £m £m Investment, development & trading Property 2,249 (127) 2,122 Net Debt (721) 9 (712) Other assets and liabilities 500 11 611 NAV 2,028 7) 2,021 1. Primarily Lillie Square. 38 | Interim Results
Slide 39: EPRA NTA movement
Pence 300 290 280 270 260 250 292.9p 0.3p 240 50.6p 0.7p 0.9p 0.5p 230 220 242.3p 241.6p 240.7p 241.p 240.5p 210 200 Dec-19 Covent Garden Lillie Square Shaftesbury fair value Underlying profit Other Jun-20 revaluation revaluation movement
Slide 40: Loan values and Covent Garden loan to value
1. The loan values are the nominal values at 30 June 2020 shown on a Group share basis. The balance sheet value of the loans includes any unamortised fees. 2. Covent Garden comprises £705 million unsecured Revolving Credit Facility (“RCF”), £450 million of which is drawn at 30 June 2020, and £550 mi
Slide 41: Debt maturity profile
500 450 400 350 300 250 200 150 100 50 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030-2037 RCF Lillie Square USPP Series 1 USPP Series 2 USPP Series 3 The Covent Garden revolving credit facility (RCF) is £705 million, of which £450 million is drawn at 30 June 2020
Slide 42: Tax on income and gains
TAX ON INCOME AND GAINS The total tax credit for the year, made up of both underlying tax and non-underlying tax, is £0.6 million. The Group is a UK Real Estate Investment Trust (REIT) and is therefore is exempt from UK corporation tax on income and gains arising from its qualifying property rental
Slide 43: Lillie Square: positive progress on Phase 2 handovers
POSITIVE PROGRESS ON PHASE 2 HANDOVERS − 66 units handed over representing approx. £80m of cash proceeds (£40m Capco share) − Approx. £120m further proceeds expected (£60m Capco share) − Includes £66 million relating to bulk sale of 49 units (£33 million Capco share) VALUATION − 5% decline (like-for
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