Liberty ‘holds up well’ in troubled UK market

Posted On Monday, 03 August 2009 02:00 Published by
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Liberty International says its managing to weather the global economic storm, which has severely affected the UK property markets.


Deputy Companies Editor

UK-BASED property company Liberty International, which has a significant South African shareholding, on Friday said it was managing to weather the global economic storm, which has severely affected the UK property markets.

The group said in its half-yearly report that its net rental income of £190m for the six months to June was only 2% below last year’s first half of £194m.

Liberty International, which has a primary listing on the London Stock Exchange and a secondary one on the JSE, has a property asset base that consists predominantly of prime regional shopping centres.

The company said in its interim report, released on Friday, it had held up well in the economic climate. On a like-for-like basis, its UK regional shopping centres reported net rental incomes of 5% below the first half of last year as a result of tenant failures.

In terms of property breakdown, 86% of the group’s investment properties were prime retail, while UK regional shopping centres comprised 73%. The remainder of the portfolio consisted of offices and exhibition space.

The company’s share price had also recovered significantly since March this year when it bottomed out at about £2,65, which provided the platform for a successful placing and open offer of new ordinary shares, raising £592m.

Liberty International said the extra capital had “substantially improved the group’s financial position in the face of sharp reductions in investment property values”.

The company’s share price was trading at about £4,37 on Friday.

Speaking from London on Friday, Liberty International CE David Fischel said the group’s debt to assets ratio was about 56%.

At the end of December last year it was 58%, but without the capital-raising exercise it would have been about 10% higher because of the drop-off in value in the group’s property portfolio.

The scale of the fall-off in property values in the UK had been massive. Fischel said that between June 2007 and June this year property values in the UK had dropped 44% according to the Investment Property Databank index.

He said Liberty International’s property values dropped 36% during that same period.

Fischel said that, operationally, Liberty International’s assets had performed well, with visitors to its shopping centres increasing 3%.

The group’s property occupancy had increased from 93,6% at the end of December to 96,3% at the end of June this year.

“We are re-letting steadily. We had a terrible month in December 2008, with 5% of our shopping centre rent roll going into administration. There was a further 5% (going into administration) in the first quarter of 2009. Since then we have seen a marked slowdown in rental failures and we have successfully re-let a large number of these units,” said Fischel.

Liberty International would pay an interim dividend of 5,0p a share.

Referring to the general UK property environment, Liberty International said that “after a two year period of exceptional turmoil, with the real estate downturn reaching its greatest intensity in the last quarter of 2008 and early months of 2009, we can, with some relief, report to shareholders welcome signs of at least a measure of stability, if not yet recovery, in property and economic market conditions”.

Evan Jankelowitz, co-head of Stanlib Property Franchise, said Liberty International’s results were better than expected. “Indications are that the rate of decline in asset values is starting to slow down and income was surprisingly robust compared to the news coming out of the UK economy.”

Andre Stadler, MD of Catalyst Fund Managers, said the results reflected an “extremely difficult environment in the UK”.

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Source: Business Day

Publisher: I-Net Bridge
Source: I-Net Bridge

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