Shaftesbury Capital reports strong rental growth in first year after merger

Carnaby Street, West End London, home to many of Shaftesbury Capital’s tenants.

Carnaby Street, West End London, home to many of Shaftesbury Capital’s tenants.

Published Mar 1, 2024


SHAFTESBURY Capital, the central London mixed-use REIT, reported significant rental income growth and cost savings in its first financial year to December 2023, following a merger.

CEO Ian Hawksworth said in an online presentation it had been an “excellent start for Shaftesbury Capital”.

“Positive metrics were reported across the business. We set clear priorities and are pleased with the pace and performance,” he said.

Shaftesbury plc had merged with Capital & Counties Properties on March 6, 2023 to create a portfolio of retail, hospitality and leisure offices and residential properties in London’s West End.

A final dividend of 1.65 pence (R0.40) a share brought the full-year dividend of 3.15 pence a share, well up from 2.15 pence last year.

Notwithstanding the solid results, Shaftesbury’s share price slumped 6.8% on the JSE to R29.82 on the JSE yesterday morning.

Hawksworth said over the medium-term they were targeting rental growth of 5% to 7% per annum.

In response to a question from an analyst at the presentation whether they believed that particularly smaller tenants would be able to afford an increase in rentals of about 33% in five years, Hawskworth said: “We are seeing low vacancy and high demand for our space across the portfolio.”

He said their rentals were relatively affordable when compared with central London rentals.

He said London’s West End held good long-term growth potential and they believe the market could support their rental growth targets.

Estimated rental values were still below 2019 levels, while tenant sales were increasing above pre-Covid levels.

Hawksworth said over the past year there had been strong leasing activity and pipeline growth across all property uses, with 526 leasing transactions completed at rents on average 10% ahead of December 2022 ERV (estimated rental value).

Some 68 new retail and hospitality brands and concepts were introduced to the portfolio.

In addition, demand for offices was strong, and when one of the just over 700 residential units became available, it was typically let within a few days.

“Backed by our strong balance sheet, unique portfolio and talented team, we are confident of delivering further rental growth and attractive returns in the years ahead,” he said.

The portfolio had demonstrated its quality with a stable portfolio valuation, in spite of the geopolitical and macroeconomic uncertainty.

“There is a broad pool of investors attracted to prime West End real estate as demonstrated by recent sales totalling £145 million at a premium to valuation,” said Hawksworth.

Gross income increased 10.4% like-for-like to £192.8m. The valuation of the wholly-owned portfolio slipped marginally by -0.8% on a like-for-like basis at £4.8 billion.

Vacancies were low with 2.1% of ERV available to let by year end.

Some £145m of asset disposals were completed, 8% ahead of valuation, with several other assets under offer.

The balance sheet remained strong with access to £486m of liquidity, little need for substantial capital investment, and the loan to value was at 31% from 28% at the same time a year before.

The refinancing of the merger loan facility through a new £200m secured loan and £350m senior unsecured loan facility was completed.

He said they had a very good pipeline for the group’s available space and additional space would be brought onto the market in coming months.

“Our strong performance and leasing pipeline together with positive trading conditions across our West End locations provide us with confidence in the growth prospects for our exceptional portfolio,” he said.