London landlord hit by West-End slump as next shutdown looms

London

LANDLORD Shaftesbury slashed the value of its London restaurants, bars and stores by almost £700 million (S$1.24 billion), as it braces for further pandemic restrictions to hit the capital's West End.

The company, which owns properties in Soho, Covent Garden and Chinatown, said that vacancies surged to 10.2 per cent in the year till September, almost tripling from a year earlier, in a statement on Tuesday. The landlord warned of more challenges ahead, as rent declines spurred a 24 per cent drop in net property income.

"London moving into tier-three restrictions is a setback," chief executive officer Brian Bickell said, referring to the capital's tighter lockdown rules from Wednesday. "People really needed to have that period of trading in the run up to Christmas."

Shaftesbury's portfolio of trendy stores and dining spots has been at the epicentre of Britain's pandemic fallout, with a collapse in tourists and office workers commuting into central London.

Most of its tenants have been unable to pay full rent, hitting the value of the firm's properties and forcing it to raise capital and agree waivers with lenders.

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The company's portfolio is now valued at £3.1 billion, down 18.3 per cent from a year earlier. The writedowns pushed the company to a loss after tax of £699.5 million.

News of effective coronavirus vaccines boosted Shaftesbury's shares by more than 16 per cent in November. Still, the company remains about 40 per cent down this year and is now facing a period in which London will be under the UK's highest level of restrictions. That means its bars and restaurants will only be able to serve takeaway food and drink.

Vacancy rates have risen disproportionately in Shaftesbury's portfolio of apartments that sit above its stores and restaurants, Mr Bickell said, with many younger tenants now working from family homes or studying online. The company has also seen some office units vacated by smaller companies that switched to permanent home working, he added.

Following the capital raise, Shaftesbury has repaid some loans in anticipation of further valuation falls next year. It has also secured waivers from lenders where it is at risk of breaching covenants relating to income cover after rental collections fell.

"It certainly won't all be over by Christmas, and may even not all be over by next Christmas," Mr Bickell said. BLOOMBERG