In it's interim statement today The Local Shopping REIT plc, said that demand for it's smaller retail units remains steady and that in the past 4 months it has let 34 vacant units, which has helped reduce it's void rate to 10.8% from 11.1%. It has over 2000 units in it's 649 properties. |
Since announcing a joint venture with Pramerica Real Estate Investors at the end of last year, LSR has acquired 3 properties for £4.98 million, exchanged contracts on a further 4 properties for £4.15 million and has 5 additional properties under offer for £11.64 million. Should these all complete, this would bring the total value of transactions so far to over £22 million.
With Pramerica committing to provide 80% of the equity (£30 million) and LSR providing the remaining 20% (£7.5 million), the JV is structured so that LSR and Pramerica act as co-investors and LSR will act as Manager and be responsible for sourcing the investments. Debt finance is being provided by HSBC, to raise the total firepower to £100 million.
Nick Gregory, LSR's Joint Chief Executive Officer, said:
"Tenant demand for smaller local shopping assets remains resilient and our proactive approach to leasing space is reflected in the successful letting of vacant units, reducing our overall void rate, and in the encouraging progress we have made in growing rents through reviews and lease renewals. We are confident that the wide geographic spread and diversity of our portfolio of assets and tenant base, with its focus on supporting the top-up shopping needs of local communities, will continue to underpin our strong, cash generative business model."
LSR report some distressed property being offered to them by the banks, but report that many lenders are reluctant to take a substantial write-down to move the property, and much of what is offered is over-priced, as banks seek to recover the full amount owing. They see banks seeking longer term asset management-led solutions for the distressed properties and portfolios on their books.
LSR is offering the banks a national specialist asset management service, which is their best hope if they intend to work out the assets to get the maximum value from them, in an unforgiving market.
House prices in the UK continue to fall according to a report published today by LSL Property Services and Acadametrics, which is based on Land Registry data. Prices have reached the December 2009 level, but after a 3% fall in Q2 the fall in July was just 0.1%.
The main feature of the market is the low volume of transactions, which are down 5.9% year on year, as cheaper mortgages fail to stimulate demand. Over the last 15 years the annual turnover of the market in England & Wales has been 102,800 per July, but last month it was 60,000, with transactions for the year at 58% of the long term average.
Within this flats are the weakest market, while detached and semi-detached houses are the strongest, despite the fact that the Buy-to-Let market has strengthened, which is predominantly in the flats sector. Flats are mostly driven by first-time buyers and they are conspicuous by their absence, being unable to find the deposits required.
David Brown, commercial director of LSL Property Services, comments: “The fact that prices have only fallen by 0.1% means the steep declines seen between April and June have ceased. Transactions met their expected seasonal rise of 5% in July. This indicates that the market is not falling off a cliff in the short-term, but that it remains weak in the longer term." “Since 2007, only Greater London has seen a rise in property prices, but even this 5.6% rise over the last four years means prices in the capital have fallen 7.5% in real terms. Nationally, prices have fallen in real terms by just over 17%. This has significantly reduced homeowners’ ability to fund additional spending through equity release, but means cash buyers and low LTV borrowers will find property great value.”
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