Shaftesbury claims 'good' trading ahead of year-end

West End-focused real estate investment trust Shaftesbury posted a trading update for the period from 1 July to 28 September on Thursday, reporting trading across its shops, restaurants, cafés and bars as “good” throughout the summer months.

The FTSE 250 company said with sustained tenant demand across all uses and in each of its locations, available-to-let vacancy remained low.

Its scheme to reconfigure Thomas Neal's Warehouse, Seven Dials remained on track to complete in October, when Shaftesbury will formally commence marketing the “flagship accommodation” totalling 22,000 sq. ft., including up to 3,000 sq. ft. of restaurant space.

The company’s substantial Charing Cross Road-Chinatown project also remained on schedule.

Its board said the scheme will provide 32,000 sq. ft. of retail on Charing Cross Road, 13,500 sq. ft. of restaurant space, fronting Newport Place and Newport Court, and create a much-improved gateway into Chinatown.

“The reconfiguration of the lower floors of this building is creating space with exceptional floor-to-ceiling heights, providing an opportunity to increase floor space by adding mezzanine floors in a number of locations within our scheme, if required by tenants,” the board said.

“Formal marketing of the scheme will commence in early 2017, once works are sufficiently progressed to show space to prospective occupiers.”

Shaftesbury said it continued to support Westminster City Council's plans to create a part-pedestrianised public square in Newport Place at the eastern end of Gerrard Street, and currently expected works to begin following the Chinese New Year celebrations in February 2017.

Construction at the company’s third major project had commenced, the board confirmed, at 57 Broadwick Street by the eastern entrance to Carnaby.

“Scheduled to complete in phases from late 2017, this 30,000 sq. ft. scheme will provide 8,000 sq. ft. of retail and restaurant space over the lower floors, 20,000 sq. ft. of refurbished and extended grade A office accommodation across the upper floors and two apartments totalling 2,000 sq. ft.”

During the period, the company said it acquired properties totalling £19.5m in Covent Garden, Soho and Charlotte Street, bringing the total additions to the portfolio for the year to 30 September to £62.7m.

Looking at Shaftesbury’s books, following an EGM vote by holders of its 8.5% First Mortgage Debenture Stock 2024, the company plans to redeem the existing stock in exchange for a new benchmark-sized issue of secured sterling bonds.

“We are currently marketing the new bonds and, subject to market conditions, expect shortly to conclude an issue with either 12 or 15-year maturity.

“The new bonds would raise significant additional resources for investment in our portfolio, whilst taking advantage of historically-low long-term interest rates.”

The expected cost of redeeming the existing Debenture Stock will be determined upon issue of the new bonds and, in NAV terms, is estimated currently at around 10p - 12p per share.

Should the bond issue proceed, the board anticipated utilising some of the proceeds over time to cancel interest rate swaps with a notional principal of up to £55m, which will further reduce its blended cost of debt.

“London's global status and its importance as the largest city in Western Europe underpin its long-term prospects,” the board said, looking ahead.

“The West End, with its exceptional choice of world-class attractions, shopping and innovative, accessible dining and leisure options, is a major draw for visitors and an important location for domestic and international businesses.

“Although the referendum vote to leave the European Union may create a period of uncertainty for businesses until new trading and other arrangements are negotiated, to date we have seen no adverse impact on occupier demand, footfall or trading.”