A 16% drop in the value of its property portfolio since December to £611.3m has seen Capital & Regional post a pretax loss of £115.5m for the first half of 2020.
C&R said the decline in its portfolio valuation reflected “a significant acceleration in negative sentiment on retail assets, with the impact of Covid-19 exacerbating existing structural trends, along with income declines driven by the impact of CVAs and administrations, as well as reduced levels of rent collection currently”.
The value of C&R’s London malls in Ilford, Walthamstow and Wood Green fell by 11.8%, while its regional assets declined by 21%.
The valuations were subject to a material valuation uncertainty clause owing to the impact of the coronavirus pandemic.
The shopping mall owner and operator also saw its net asset value fall from £375.1m at the end of December to £255.5m at the end of June. NAV per share declined by 132p to 229p over the period.
Net rental income was down by £9m to £16.2m, compared to the first six half of 2019, with 76% of rent owed for the first half of 2020 now collected.
C&R said rent collection for the second and third quarters of the year, including monthly invoices to August, was at 54%, up from 14% in early July.
CVAs and administrations, including those that took place part way through 2019, impacted net rental income by £2.4m, C&R reported.
The largest contributor to this was Debenhams, which accounted for £800,000, half of which was from rent reductions. The other £400,000 stemmed from incentives offered to the ailing retailer.
C&R said ongoing CVAs from Travelodge, Select and New Look could affect 10 units across its portfolio. If approved, they could reduce its rental income by circa £600,000.
During the period the firm agreed waivers for all income covenants covering testing for the rest of 2020 on its Ilford loan and four mall asset loan facilities. It has also negotiated the exclusion of the second and third quarters of 2020 from testing come January to mitigate the impact of the lockdown disruption.
C&R added that advanced discussions are also being held on the facility covering malls in Blackburn, Maidstone, Walthamstow and Wood Green, over a package of longer term covenant relaxation. Discussions are also being had with C&R’s lenders on its Luton and Hemel Hempstead facilities.
At the end of June, the company had total cash on balance sheet of circa £80m. Its net debt was up by 3.3% from the end of December to £348.2m and LTV was up from 46% to 57%.
Despite this, occupancy across C&R’s portfolio fell only marginally from 97.2% in December to 95% at the end of June, with 24 new lettings and renewals completed at a combined average premium to previous rents of 9.59%.
The firm is also in advanced negotiations with the NHS over the creation of a purpose-built community healthcare facility at its Ilford shopping centre, an initiative that could be replicated at other centres if successful.
Lawrence Hutchings, chief executive of C&R, said: “While the current Covid-19 situation has placed pressure on leverage, we believe that the combination of the level of cash of approximately £80m, largely maintained from the recapitalisation of the group in December 2019; the measures agreed with our lenders; and the focus on local centres offering non-discretionary goods and services, provide a sound base for navigating the short to medium term.
“We are now working to better understand the long-term impact of the current uncertainties to determine the best approach for reducing debt levels and shaping the group’s future position to best capitalise on its strengths as an owner and manager of community shopping centres.”
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