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Capital & Regional shares gain as its shopping centres avoid Debenhams store closures

"Clarity around Debenhams is welcome news, enabling us to plan our capex and remerchandising proactively,” said Capital & Regional chief executive Lawrence Hutchings

Footfall across the retail portfolio dropped but not by as much as the national average

Capital & Regional PLC (LON:CAL) shares rose on Friday as the shopping centre owner said none of the three Debenhams stores in its retail centres portfolio were among the 22 the troubled department store chain announced it will close next year.

Debenhams was taken over by lenders last month as it collapsed into administration under the weight of a £720mln debt pile. Its creditors backed a company voluntary arrangement (CVA) for Debenhams, allowing it to close around 50 stores in total and negotiate lower rents on other stores.

Capital & Regional said while none of the Debenhams stores in its shopping centres are closing, it estimates the struggles at the retailer will shave £700,000 off net rental income in 2019, or £1.3mln on an annualised basis.

READ: Debenhams lenders back restructuring plan, leaving 50 stores facing the axe

"Clarity around Debenhams is welcome news, enabling us to plan our capex and remerchandising proactively,” said chief executive Lawrence Hutchings. “In addition, we continue to take forward plans to unlock the underlying value of our real estate through mixed use development rights above and immediately adjacent to our centres."

In the first four months of the year, the real estate investment trust completed 20 leasing transactions at an average premium of 3.0% to passing rent and 5.2% to estimated rental value. That comprised eight new lettings and 12 renewals for a combined annual income of £1.2mln.

Major deals completed in the last month include a 10-year lease renewal with Tesco PLC (LON:TSCO) and the letting of the final two floors of the Arndale House office to the council, both in Luton. Leasing deals with Vodafone, The Entertainer and Wenzels the baker were also completed in the period.

READ: Capital & Regional shares drop as shopping centres owner slashes its dividend as 2018 net income stalls

The company said the leasing pipeline is strong with 30 deals agreed or in solicitors' hands for new lettings or renewals representing more than £2mln of annual income. At the end of April, the occupancy rate stood at 96.7%.

Footfall falls less than national average 

Footfall across the portfolio dipped 0.6% to 24.6mln visits in the period, reflecting the pressures retailers are facing from online competition and subdued consumer spending. But that was better than the national index, which was down by 3.2% in the first four months of the year. 

Footfall performance was strongest at community shopping centres, which the company is focusing on instead of large complexes.

"We continue to see solid progress in executing our strategy to reposition our community centres to focus on needs based and less discretionary goods, especially in our London and South East assets,” Hutchings said.

“We firmly believe that our repositioning and remerchandising plans, low average rents and high footfall metrics, differentiates our centres and ensures they remain relevant, profitable and attractive to retailers as the structural changes in physical retailing continue to evolve.”

Strong interest for residential portfolio, growth in indoor ski slope business 

In the residential portfolio, Capital & Regional said it has received a “significant level of interest” in its pipeline of up to 1,000 apartments in three London locations, of which 650 have planning consent. 

Snozone, the group’s UK indoor ski slope business, had a strong first quarter after seven consecutive years of profit growth and the company said it was confident that this this track record will continue.

Shares rose 6.3% to 20.05p in morning trading.

Quick facts: Capital & Regional PLC

Price: 37.6 GBX

Market: LSE
Market Cap: £42.04 m

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