Central London REIT Shaftesbury is to continue to exploit investment opportunities in the West End following its £150m rights issue earlier this year.
In an interim management statement released to the stock exchange today, the investor and developer said it will look to buy across its “villages”, which include Carnaby Street and Berwick Street, W1, but said supply remains limited as established owners are reluctant to sell good long-term investments.
It added: “In spite of strong competition, our local market knowledge and substantial financial resources give us considerable advantages over other prospective purchasers.”
Since 1 April 2009, the company has purchased or contracted to buy around properties at a total cost of around £20m, including two restaurants and seven shops.
Updating on its financial position the company said that the capital raising strengthened its equity base and has provided it with considerable additional headroom within our banking arrangements.
In the short term, the net proceeds of around £149m have been used to reduce bank borrowings, which are being redrawn to finance new investments.
At 31 July 2009, its bank borrowings stood at £360.3m, with committed facilities totalling £575m.
It has long-term interest rate hedging in place on £360m of our bank debt, currently at a weighted average rate of 4.71%, so that the average all-in cost of its bank debt at 31 July 2009 was 5.58%.
Short term interest rates remain low, so that the all-in cost of bank debt it draws in excess of our hedging is currently below 1.5%.
In contrast, long-term interest rates are rising, which is reducing the non-cash, mark-to-market valuation deficit of its long-dated interest rate hedging.
The company provided an update on the construction of St Martin’s Courtyard, the largest project in its joint venture with the Mercers’ Company, which it said is “progressing well”.
The shops and restaurants are expected to be completed in phases and will be ready for tenants to fit out from February 2010.
The 69,000 sq. ft of offices in four buildings and 37 flats are also due to be completed in phases and will be ready for letting and occupation between February and September 2010.
Shaftesbury’s share of the potential rental income of this project is around £5.2m.
The company said the total amount of vacant commercial space across its wholly-owned portfolio remains very low.
Excluding accommodation which is either undergoing refurbishment or under offer, the rental value of space vacant and ready to let was £0.8m at 31 July 2009.
It added: “London’s West End, which has proved very resilient throughout the recent period of economic turbulence, continues to prosper and there is now evidence of stability returning to financial and property markets.
“We are confident that demand for our well-located shops, restaurants and residential accommodation will remain strong.
“With the proceeds of our recent rights issue we now have substantial additional resources which will enable us to continue to exploit further investment opportunities across our chosen areas.”
