TIDMCLI
RNS Number : 0301H
CLS Holdings PLC
14 May 2014
Release date: 14 May 2014
Embargoed until: 07:00
CLS Holdings plc
("CLS", the "Company" or the "Group")
Interim Management Statement for the period 1 January 2014 to 13
May 2014
The Group announces its Interim Management Statement for the
period 1 January 2014 to 13 May 2014.
HIGHLIGHTS
-- Disposal of Cambridge House, Hammersmith for GBP29.5 million,
32% above the 31 December 2013 external valuation and 65% above
that of 30 June 2013
-- Occupational demand remains firm:
o Overall Group vacancy level down to 3.5% (31 December 2013:
4.4%)
o Vacancy rate in France reduced to 7.3% (31 December 2013:
10.6%)
o Vacancy rate in Germany reduced to 1.6% (31 December 2013:
3.5%)
-- Annual contracted rent currently running at GBP84.2 million,
20% above the same time last year
-- New leases, lease renewals and extensions completed on 9,616 sqm
-- Weighted average cost of debt remains low at 3.80% (31 December 2013: 3.64%)
-- Spring Mews, Vauxhall SE11
o 20,800 sqm mixed-use development on schedule for completion Q3
2014
o Nominations Agreement signed letting 210 student rooms to the
University of Roehampton for 10 years
o Out of 378 student rooms, 69% pre-let for 2014/15, including
the University of Roehampton
-- Clifford's Inn, Fetter Lane, EC4
o Discussions to fully pre-let the 3,423 sqm of refurbished
offices ongoing
o Completion on schedule for Q3 2014
-- Vauxhall Square, London, SW8
o 143,000 sqm scheme with full planning consent in Vauxhall,
London
o Conditional exchange of contracts for a long lease to a
student operator to build and manage 30 storey, 359 student bedroom
development
OVERVIEW - Since 1 January 2014, the Group has made good
progress in a number of areas, including one opportunistic
disposal. Core investment operations have delivered in line with,
or above, expectations, financing costs have remained very low, and
developments have continued to progress well.
The occupational markets are firm, with the Group's vacancy
level remaining very low at 3.5% (31 December 2013: 4.4%) by rental
income. Demand from existing and potential occupiers is steady,
with good interest particularly in London and Germany. Of the
Group's income, 61% benefits from indexation and 73% is paid by
government occupiers (50% of the total) or major corporations
(23%).
On 14 April 2014, the Group sold Cambridge House, 100 Cambridge
Grove, London W6, for GBP29.5 million, a price 32% above its
external valuation at 31 December 2013, and 65% above its external
valuation at 30 June 2013. The net initial yield of 2.34% reflected
that the building, considered a development site, was 50%
vacant.
The Greater London investment market, outside the West End and
City, is more competitive than 12 months ago. We continue to
explore selective investment opportunities within and around the
M25, and in France and Germany, where financing conditions remain
at more attractive levels.
UK - London continues to benefit from its status as a global
safe haven, supported by continued improvement in the economy. The
UK's GDP growth is forecast to be 2.6% for 2014, unemployment has
fallen to 6.9% and inflation is low at 1.6%. Demand remains solid
from overseas investors searching for yield, with increasing
interest beyond the prime West End and City locations.
We continue to be successful in leasing space, due in part to
all of our management being performed in-house, and the vacancy
rate remains low at 2.9% (31 December 2013: 2.4%). New lettings,
lease renewals and extensions were completed on 882 sqm, and
occupiers vacated from 2,407 sqm since the beginning of the
year.
Our Spring Mews development, comprising an extended-stay hotel
and student accommodation, is well under way, and completion is
expected in the third quarter of 2014. In 2013, we signed an
agreement with InterContinental Hotels Group for the 93 bedroom
suite hotel to be operated under its Staybridge Suites brand, and
since 1 January 2014, we have signed a 10-year Nominations
Agreement with the University of Roehampton to let 210 student
rooms (55% of the total). The remaining student rooms, which are
being operated and marketed on a direct-let basis on our behalf by
Fresh Student Living, have already shown good take-up, and,
including the University of Roehampton space, 69% of the student
rooms have been pre-let for 2014/15.
At Clifford's Inn, Fetter Lane, EC4 the refurbishment of 3,433
sqm of new Grade A offices and the development of eight residential
apartments are on schedule to complete in the third quarter of
2014, and we remain in negotiations to pre-let the entire office
space.
The Vauxhall Nine Elms regeneration area, of which our 143,000
sqm mixed-use, residential-led Vauxhall Square scheme will be an
integral part, continues to progress. In January 2014, we entered
into a long lease agreement with a specialist student housing
operator to build and manage the 359 student room building adjacent
to the main site. The agreement is conditional on a number of
matters which we expect to satisfy within the next twelve months,
enabling a projected construction start of this first phase of
Vauxhall Square in 2015. We continue to hold positive discussions
with potential hoteliers and to explore financing options for the
scheme.
FRANCE - With 1% forecast GDP growth in 2014, unemployment at
10.2% and inflation at 0.6%, the French economy is virtually
stagnant. However, there are some signs of improvements in economic
conditions.
We believe the lack of new supply will restrict vacancy levels
and available space. In the overall market, lettings in the Paris
region in the first quarter of 2014 were 19% above the same period
last year. Our vacancy levels appear to have peaked at the end of
December; in the subsequent four and a half months they have fallen
to 7.3% (31 December 2013: 10.6%) and are expected to reduce
further this year. Since the end of December, we have let or
renewed 5,378 sqm of offices and taken back 1,261 sqm.
GERMANY - With 1.8% forecast GDP growth in 2014, unemployment
low at 6.7% and a projected budget surplus for the second
consecutive year, the German economy remains resilient. In the
first quarter of 2014, the German investment market saw a 47%
increase in transaction values over the same period last year, with
yields declining for prime and good secondary assets. Bank debt
availability and pricing remain the most attractive in all of our
regions.
We have seen an increase in activity and enquiries, and our
vacancy rate has fallen to 1.6% (31 December 2013: 3.5%). Since 1
January we have let 3,356 sqm and taken back 385 sqm.
SWEDEN - Swedish GDP is expected to rise by 2.7% in 2014, and
unemployment of 8.6% is forecast to fall to 7.7% by the end of the
year.
Occupancy of the Group's only directly held property in Sweden,
Vänerparken, to the north of Gothenburg, has remained unchanged
with a vacancy of 1.7% by rental value and negotiations remain
ongoing on certain lease renewals due in 2015.
FINANCE - The business generates more cash than a year ago. The
GBP165 million of acquisitions in 2013, which raised the Group's
annualised rental income by 25%, were acquired at a blended net
initial yield of 11.6% and financed at an average cost of debt of
4.0%, and this was evident in the growth in core profit in the
first quarter of 2014 compared to last year. Rent collection rates
have remained high and the weighted average cost of debt has
continued to be one of the lowest in the property sector at 3.80%
(31 December 2013: 3.64%), being 320 basis points below the
property portfolio's net initial yield.
The Group has 56 loans from 22 lenders, two unsecured corporate
bonds, a secured note and a debenture; none of the loan covenants
is in breach. The Group currently has liquid resources of over
GBP245 million, comprising GBP48 million of cash, GBP72 million of
corporate bonds, and available undrawn facilities in excess of
GBP125 million.
In the latest tender offer, all of the shares available were
cancelled by the Company on 2 May resulting in a distribution of
GBP10.0 million to shareholders and leaving 43,287,824 shares in
circulation.
Executive Chairman of CLS, Sten Mortstedt, commented:
"Continuing signs of improvement in the UK economy, both in
London and elsewhere, bode well for CLS, and I am particularly
pleased with the initiatives we are exploring within the Neo
portfolio which we acquired opportunistically last year.
"The Group's core activities are performing well, cash
generation is strong, debt costs remain low and good progress is
being made on pre-letting our development programme.
"With a strong balance sheet and our rental income predominantly
secured by high quality tenants, including governments and major
corporations, we are well positioned to meet future challenges with
confidence. Our financial resources, and our opportunistic
approach, will enable us to continue selectively to seek
possibilities to add value for our shareholders."
-ends-
For further information, please contact:
CLS Holdings plc +44 (0)20 7582 7766
www.clsholdings.com
Sten Mortstedt, Executive Chairman
Henry Klotz, Executive Vice Chairman and Acting Chief Executive
Officer
John Whiteley, Chief Financial Officer
Liberum Capital Limited +44 (0)20 3100 2222
Tom Fyson
Charles Stanley Securities
Mark Taylor +44 (0)20 7149 6000
Hugh Rich
Kinmont Limited +44 (0)20 7087 9100
Jonathan Gray
Smithfield Consultants (Financial PR) +44 (0)20 7903 0669
Alex Simmons
This information is provided by RNS
The company news service from the London Stock Exchange
END
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