Liberty International confirmed plans to split the business into two separate listed companies at its full-year results, which show worrying signs of rental erosion on its prime retail portfolio.
Planned to complete in May, the demerger will split the UK's fourth-largest real estate investment trust (Reit) in two. Liberty will retain the mature shopping centre assets - about £5bn of retail property including the MetroCentre and Lakeside - which will be renamed Capital Shopping Centres. With net rental income of £292m and an adjusted net asset value (NAV) of 339p a share, the Reit will also control Liberty’s US investments, which may soon be sold.
Liberty's £1.24bn central London investment and development portfolio, which includes Covent Garden and Earls Court, will be separately listed as a non-Reit, Capital & Counties. Offering investors a higher-risk long-term development play, this business has net rental income of £74m and adjusted NAV of 127p.
Full-year results underline two difficult years for Liberty, which took a £768m valuation hit on its combined portfolio, with regional shopping centres lagging the rebound in central London values.
Net rental income fell 3 per cent to £371m, but the true extent of rental falls is much greater. Retailer failures led to tenancy changes at 15 per cent of all units in 2009, with new lettings on average around 20 per cent below the previous passing rent. Half of the deals are short-term lets, at 35 per cent below passing rent. Overall, shopping centre occupancy improved from 93.6 per cent to 97.8 per cent and the extension to the St David's mall in Cardiff is now 71 per cent let.
Liberty's shareholders will receive one share in Capital & Counties for every Liberty share held prior to the demerger. In 2010, it is intended that CSC will pay a minimum dividend of 15p, and C&C 1.5p.
| LIBERTY INTERNATIONAL (LII) | ||||
|---|---|---|---|---|
| ORD PRICE: | 489p | MARKET VALUE: | £3.04bn | |
| TOUCH: | 488-489p | 12M HIGH | 580p | LOW: 489p |
| DIVIDEND YIELD: | 3.4% | TRADING STOCK: | £24m | |
| PREMIUM TO NAV: | 25% | |||
| INVEST PROPERTIES: | £6.18bn | NET DEBT: | 137% | |
| Year to 31 Dec | Net asset value (p)* | Pre-tax profit (£bn) | Earnings per share (p)* | Dividend per share (p)* |
|---|---|---|---|---|
| 2005 | 1121 | 0.53 | 28.1 | 26.7 |
| 2006 | 1253 | 0.90 | 32.0 | 29.3 |
| 2007 | 1176 | -0.13 | 27.4 | 32.2 |
| 2008 | 538 | -2.66 | -678 | 16.5 |
| 2009 | 390 | -0.3 | -68.1 | 16.5 |
| % change | -28 | - | - | - |
Ex-div: 19 May Payment: 09 Jun *Prior year figures adjusted to reflect placing and open offer in May 2009. Adjustment factor of 0.944. | ||||
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