Local Shopping Reit (LSR) continues to suffer from high gearing in a weak regional property market. Its book value fell 7.5 per cent over the six months to 31 March as a 2.1 per cent dip in the value of its portfolio was exaggerated by £136m of net debt.
The company's unsustainable level of leverage - the loan-to-value ratio in March was 75 per cent, more than banks lend against commercial property - was one reason why the board formally put the company up for sale in November. There is no news on the strategic review currently under way in these results, except that dividends have been suspended.
The occupier market for local shops remains sluggish but manageable. The company's rent roll fell by 0.6 per cent like for like over the half year. To maintain occupancy at 89 per cent, management was forced to offer an opening discount on 11 of 54 new lettings.
The real problem for LSR is the investment market, which continues to weaken for the kind of small retail assets it owns. Outside select market towns in the south east, the private investors and small property companies that have traditionally dominated commercial auction rooms are reluctant to risk their own capital except on very well-let or well-located assets, while bank finance for small-scale commercial property remains virtually non-existent.
LOCAL SHOPPING REIT (LSR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 30p | MARKET VALUE: | £24.8m | |
| TOUCH: | 29-30p | 12-MONTH HIGH: | 44p | LOW: 24p |
| DIVIDEND YIELD: | 6.7% | TRADING PROPERTIES: | nil | |
| DISCOUNT TO NAV: | 35% | |||
| INVESTMENT PROPERTIES: | £178m | NET DEBT: | 342% | |
| Half-year to 31 Mar | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 59 | -3.31 | -4.1 | 2.0 |
| 2013 | 46 | -1.55 | -1.9 | nil |
| % change | -22 | - | - | -100 |
