Interim Management Statement
10 Novembre 2010 - 8:01AM
UK Regulatory
TIDMCLI
RNS Number : 9075V
CLS Holdings PLC
10 November 2010
Release date: 10 November 2010
CLS Holdings plc
("CLS", the "Company" or the "Group")
Interim Management Statement for the period 1 July 2010 to 10 November 2010
The Company today announces its Interim Management Statement for the period 1
July 2010 to 10 November 2010.
HIGHLIGHTS
· Acquisition of Apex Tower, New Malden for GBP21.5 million
· Acquisition of Colt Group's Paris headquarters for EUR14.3 million
· Further pre let developments in Munich and in Landshut, Germany
· Strong performance of Catena AB
· New leases, lease renewals and extensions completed on 16,957 sq m
· Weighted average cost of debt of 4.3%
· Over GBP125 million of liquid resources available for investment
OVERVIEW - The Group has made acquisitions in the UK and in France, and entered
into two pre-let development agreements in Germany since 1 July. The vacancy
rate by rental value is 5.0%, which would fall to 4.2% after accounting for
leases under offer. The market value of the Group's 29.99% interest in
Stockholm-listed property company Catena AB would add 35 pence per share to net
asset value, and the core CLS business has continued to generate high net
initial yields against a low cost debt base.
UK (LONDON) - Since 1 July, commercial letting markets have remained sensitive
to the recessionary climate for occupiers, but the falling vacancy rate in the
central London office market has helped rental value stability. Sentiment in
the prime investment market has remained positive and yields have stabilised
following the sharp compression in 2009. There continue to be good
opportunities to acquire attractive secondary stock and we are actively seeking
new acquisitions.
On 1 November, we completed the purchase of Apex Tower, New Malden for GBP21.5
million, equating to a net initial yield of 8.66% and return on equity of 16.1%.
The property, which is predominantly let to BAE Systems until June 2020,
produces a rental of GBP1.86 million per annum.
We are progressing medium-term redevelopment plans for our two major sites in
Vauxhall and will provide further details in the coming months.
Lease renewals were completed on 296 sq m (3,186 sq ft), new lettings were
achieved on 2,514 sq m (27,060 sq ft) and tenants vacated from 3,496 sq m
(37,631 sq ft).The vacancy rate by rental value rose from 5.4% at 30 June 2010
to 5.8%. This includes space intentionally taken back at Westminster Tower for
enhancement, and we are cautiously encouraged by signs of tenant activity and
new demand.
FRANCE - Since 1 July, the French investment market has continued to be
characterised by investor demand significantly exceeding the supply of good
quality product, and prime yields which were 5.75% are now nearer 5%.
Investment market activity since 1 January 2010 of EUR6.9 billion was over 40%
above the equivalent period last year, and the letting market was 33% above
levels of a year earlier.
In October we acquired 23/27 Rue Pierre Valette, Malakoff, Paris for EUR14.3
million, on an initial yield of 7.38% and producing a return on equity of 15.3%.
The 10,778 sq m (116,014 sq ft) property is let at EUR1.1 million p.a. on an
index-linked lease until 2018 to Colt Group S.A. as its French subsidiary
headquarters and network node.
During the period, leases expired on 5,978 sq m (64,347 sq ft), of which 3,303
sq m (35,553 sq ft) renewed, and a further 1,592 sq m (17,136 sq ft) was leased.
Due to the acquisition of Malakoff, the resulting void rate by rental value was
virtually unchanged at 4.8% (30 June 2010: 4.7%).
GERMANY - Real estate investment market activity in Germany in 2010 has been
more than double that of the previous year. Although across the entire market
voids are over 10%, letting market activity has increased marginally in 2010,
GDP growth is expected to remain strong, and unemployment has now fallen to its
lowest level for 18 years.
Since 1 July we have agreed to develop two buildings for existing tenants in
Germany:
· At Gräfelfing in Munich, Dr Hönle AG will add 1,642 sq m of space to
create an 8,527 sq m (91,783 sq ft) complex in total. The new office, to be
completed in 2011, has been let, along with the existing space, on a combined
new index-linked lease to October 2020 at an initial EUR1.1 million p.a.,
representing an initial yield of 7.7% and a return on equity of 18.3% p.a.
· At Landshut, E.ON will take a fourth building, to be built by summer 2012.
The new space will comprise 3,400 sq m (36,597 sq ft) of offices generating
EUR410,000 p.a. on an index-linked lease until 2030 with no breaks, and
representing a return on equity of 14.9% p.a. with an initial yield of 8.2%
Since 1 July, new lettings were achieved on 2,367 sq m (25,478 sq ft), lease
renewals completed on 6,885 sq m (74,100 sq ft), and a further 1,622 sq m
(17,459 sq ft) became vacant. There has been a fall in the vacancy rate by
rental value to 5.5% (30 June 2010: 5.9%).
SWEDEN - The void rate of the Vänerparken portfolio, currently the Group's only
direct property investment in Sweden, is 1.0%.
In October, Catena AB, a Stockholm-listed property company in which CLS owns
29.99%, distributed a special dividend, of which our share was GBP8.6 million.
Following a significant re-rating of its shares since June reflecting property
sales, improving values in a strong market, and the development potential of one
of its major assets, the market value of our interest in Catena now exceeds its
current book value by over GBP16 million, which would add the equivalent of 35
pence per share to CLS's net asset value.
FINANCE - At 1 November 2010, following the acquisitions in New Malden and
Paris, borrowings were GBP580.3 million (30 June 2010: GBP554.6 million). In
October, interest rate caps were taken out against loans with a nominal value of
GBP206 million for predominantly five years at a weighted average strike rate of
2.67%, leaving 95% of the Group's debt hedged and with a weighted average total
cost of debt of 4.3%. Cash and undrawn facilities stood at GBP45.3 million (30
June 2010: GBP64.0 million), and the Group held corporate bonds with a value of
GBP84.0 million (30 June 2010: GBP58.7 million).
At 1 November 2010 the Group had 59 bank loans from 20 banks; none of the bank
loan covenants was in breach.
Underlying profit continued to be resilient, with stable net rental income, high
debt collection rates, and tightly controlled costs.
DIRECTORATE CHANGES - On 1 January 2011, Richard Tice (Deputy Chief Executive
Officer) will become Chief Executive Officer, Henry Klotz (Chief Executive
Officer) will become Executive Vice Chairman, and Thomas Lundqvist will step
down as Non-Executive Vice Chairman but remain as a Non-Executive Director.
Executive Chairman of CLS, Sten Mortstedt, commented:
"The acquisitions in London and Paris, and the development initiatives in
Germany, continue our investment strategy of focusing on high, secure
cash-on-cash returns, meeting the needs of tenants, and reacting swiftly to
opportunities in our chosen markets. The strongest market so far this year has
been Sweden.
In the prevailing economic climate, our high initial yield and low cost of debt
are key to our continued success. Our focus remains on active portfolio
management to keep vacancy rates low across the portfolio and, with significant
resources at its disposal, the Company remains well placed to take advantage of
investment opportunities as they arise.
I believe the Board changes announced today reflect the most appropriate
management structure to take the Company forward to meet its objectives and
ambitions."
-ends-
For further information, please contact:
Sten Mortstedt, Executive Chairman, CLS Holdings plc +44
(0)20 7582 7766
Henry Klotz, Chief Executive Officer, CLS Holdings plc +44
(0)20 7582 7766
Richard Tice, Deputy Chief Executive Officer, CLS Holdings plc +44 (0)20
7582 7766
Jonathan Gray, Kinmont Limited
+44 (0)20 7087 9100
Alex Simmons, Smithfield Consultants
+44(0)20 7903 0669
This information is provided by RNS
The company news service from the London Stock Exchange
END
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