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Liberty International – selling West End property

Posted On Monday, 18 October 2004 02:00 Published by
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Liberty International announces disposal of a 25.5% shareholding in London-based Great Portland Estates - at 297.5 pence per share, a total consideration of £123.4m. Aggregate proceeds exceed the original cost by £29m.

Presenter: Lindsay Williams Guest(s): David Fischel

Liberty International announces disposal of a 25.5% shareholding in London-based Great Portland Estates - at 297.5 pence per share, a total consideration of £123.4m. Aggregate proceeds exceed the original cost by £29m. Liberty International CEO, David Fischel

LINDSAY WILLIAMS: You’ve only had this stake for just under three years, or just under three years why the disposal?

DAVID FISCHEL: Yes, we acquired this stake at a time when the West End, and the office market, was very out of favour. We thought it might have given us a few interesting options, but what we’ve now decided is that the money could be better deployed on our own development programme particularly, the shopping centers. We concluded that it was time to take our money and move on.

LINDSAY WILLIAMS: You are focusing now almost solely on the shopping centre business in the UK - what will the money specifically be used for?

DAVID FISCHEL: Yes, we’ve got a total development programme now of about £1.2bn. We’ve just opened the new Red Mall at MetroCentre Gateshead - we’ve got a big shopping centre opening next year in Norwich, and projects at Cardiff, Oxford, and within our existing centres in Newcastle and Watford - so we’ve got masses of things to do, and this money will help us on our way.

LINDSAY WILLIAMS: Masses of things to do, and masses of people spending masses of money in your shopping centres by the sounds of it. The consumer boom we’ve got one over in South Africa are you experiencing the same thing in the UK?

DAVID FISCHEL: Well, I think a boom might be a bit of an exaggeration, but the underlying picture continues to be very healthy, and a steady growth in retail sales has continued for the last few years, and at this point there is certainly no sign that it is coming to an end.

LINDSAY WILLIAMS: How’s the occupancy levels in your centres?

DAVID FISCHEL: Void levels in our centres are negligible sort of one percent of total rents, so really just work in progress.

LINDSAY WILLIAMS: Are your fortunes linked to the UK economy? The spending patterns, the retail sales numbers, consumer confidence that sort of thing?

DAVID FISCHEL: Well, in the long run, yes. In the short term we are more dependent on the rent review programme. We have a five-year rent review cycle in the UK. We’ve got some promising rent reviews coming up, particularly in Braehead in Glasgow - which has just had its fifth anniversary. So we’ve got the first round there. Next year we’ve got a big round of rent reviews in MetroCentre, the year after at Lakeside - so plenty of opportunity for increasing the bottom-line, from good rent reviews there.

LINDSAY WILLIAMS: What sort of increases can you command in a low inflation environment?

DAVID FISCHEL: It varies, but you are looking at a five year rolling average of growth in underlying sales a four or five percent growth in retail sales is the norm across the UK at the moment. We’d hope to achieve that, on an annual basis.

LINDSAY WILLIAMS: You are focusing on the shopping centres now that’s clear from your disposal of the GP stake. You’re focusing very much on the United Kingdom 95% of your business, approximately, there… five percent in the U.S do you not think that there is a case for people to say you are not really diversified enough. We hear about diversification being important. All your eggs seem to be in one basket. How would you counter that sort of argument?

DAVID FISCHEL: Well, we’ve got shopping centres spread throughout the UK.

We’ve got something like 1 500 tenants across those shopping centers, so we are well spread in terms of tenants. Going to the shopping centre is part of the lifestyle in the UK it’s as basic an activity as beer or biscuits. You know, it’s really a core part of what goes on in the UK.

LINDSAY WILLIAMS: And you probably therefore wish for bad weather every day!

DAVID FISCHEL: Well, bad weather doesn’t do us too much harm, I must say.

Unless it gets too bad, and then they can’t even get to the centers. A wet Saturday is one of the best things we can have.

LINDSAY WILLIAMS: Okay, and there’s plenty of those in the UK - from my experience anyway. I noticed recently that Old Mutual Properties have signed a deal with a Saudi Arabian company to manage some of their shopping centers

- new shopping centres going up in that kingdom. Any chance of you ever moving out of the United Kingdom in a bigger way changing your portfolio split?

DAVID FISCHEL: Well, I wouldn’t say never - but it’s not part of our plans at the moment. At the moment we think there is so much for us to do in the UK it’s a big country with 60-million people and there is more than an enough to do than maintain our position in the market place. There is no real pressing need to go elsewhere right now.

LINDSAY WILLIAMS: To recap what you’ve got coming up right now in terms of new centres or redevelopment of existing ones?

DAVID FISCHEL: Yes, the next one is Norwich which is half a million square feet. It’s a £250m project, opening in 2005, and after that the next one we’ll start on will probably be Cardiff, which definitely will be a top twenty centre in the UK.

LINDSAY WILLIAMS: Anything beyond that?

DAVID FISCHEL: Oxford, where we’ve been through a long planning process I hope we are getting towards the end - that could start in 2006. Newcastle - we hope to have some further news on that towards the end of this month, once the local Council have sat down to review our latest plans…

Publisher: Business Day
Source: Business Day
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