Liberty to invest in existing prime assets

Posted On Thursday, 05 November 2009 02:00 Published by eProp Commercial Property News
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Liberty International says that following capital raising last month, it now had more fire power in financial resources to enable it to continue to invest in its existing prime assets.

David FischelUK-based property company Liberty International said yesterday following capital raising last month, it now had more fire power in financial resources to enable it to continue to invest in its existing prime assets to take advantage of their scale and quality.

But the group, which has a significant South African shareholding, said although it welcomed signs of an improvement in the property and debt markets and greater activity in tenant markets, short-term pressure on its earnings continued.

It said in its interim management statement that earnings pressure was as a result of the low returns on temporary cash holdings and the lower income attributable to short-term re-lettings following last year’s tenant failures.

But CEO David Fischel said Liberty was now well placed to take the business forward organically at a time of little new supply of high-quality regional shopping centre space, with its prime destinations continuing to outperform “inferior” locations.

He said following last month’s capital raising of £280,5m from placing 56,1-million new ordinary shares, it now had further financial resources to enable it to continue to invest in its existing prime assets to take advantage of their scale and quality. Several indicators had confirmed the improving conditions in the property investment and debt markets in which the group operated.

In terms of market benchmarks, the Investment Property Databank UK property index for the three months to September had shown capital growth of 1,2%, with a notable firming of valuation yields offsetting the pressure on rental values. According to the index capital shopping centres’ occupancy improved since the end of June from 98,3% to 98,9%.

Excluding tenants in administration occupancy increased from 96,3% to 97,6%.

Liberty said the opening of a major new extension of St David’s, Cardiff last month, had increased the centre size to 130000m².

The group had concluded a £290m debt facility secured on St David’s, which it owned 50%. A collaboration agreement had been signed with adjoining landowners for Earls Court. Fischel said the new £290m debt facility concluded by the St David’s partnership — the 50:50 joint venture with Land Securities — had demonstrated that bank financing was becoming more readily available. The group said it remained in compliance with all financial debt covenants.

“There have been no further compliance-related debt repayments other than the £36m anticipated in the interim report,” he said.

Given more stable market conditions, the group was reassessing the level of cash liquidity required for potential covenant issues. He said options for most efficiently reducing its asset-specific debt were being considered, with a view to reducing the earnings drag from the significant cash balances.

The retail tenant market remained challenging but activity levels had improved and retailer failures slowed down markedly in the third quarter.

He said at the end of September Liberty’s net external debt was £3,3bn, with cash of £547m. The pro forma effect of the capital raising in October was to reduce net external debt to £3,1bn and improve the debt: assets ratio to 51% from 56% in June.

 

Last modified on Monday, 28 April 2014 19:27

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