West End landlord, Shaftesbury, sees losses spike after hospitality and retail closings during lockdown weighed on rental income
- The company posted a loss of £ 338.6 million in the six months to the end of March
- Lower rental income, high vacancy rates and rent waivers are affecting real estate income
- Shaftesbury’s trust has grown since hospitality and retail locations reopened
National lockdowns continued to weigh heavily on Shaftesbury as the half-year losses increased as the coronavirus continued to hit the hospitality and retail sectors.
The West End landlord posted a loss of £ 338.6m in the six months to the end of March compared to £ 287.6m in the same period last year, mainly due to a loss in value of more than £ 340m.
During the reporting period, it was found that there was only seven weeks of trading – with social distancing and lower footprint restrictions – and only three weeks of trading over the “important” Christmas and New Years period.
Quiet Streets: Shaftesbury has been hurt by its portfolio focus on central London and the lack of commuters traveling to work and tourists visiting the area
Falling rental income, higher vacancy rates and the granting of rent exemptions to support tenants resulted in net property income falling 42.6 percent year over year to £ 36.5 million.
Only half of the rent due in March was collected from the group, which said hotel and retail companies were less likely to pay than office and apartment renters.
Although real estate companies have been hard hit by the pandemic, Shaftesbury has been further affected by the concentration of its portfolio in central London and the lack of commuters traveling to work and tourists visiting the area.
The closure of theaters, cinemas and nightclubs, the closure of other cultural attractions such as museums and galleries, and a slump in international tourists visiting the capital have affected business.
Even so, Shaftesbury has found that since the UK government partially eased restrictions last month, it has reopened almost all of its leisure, hospitality and retail stores, with visitor numbers and spending rebounding significantly.
The company is confident that visitor numbers and trade will recover in the summer and fall months as restrictions continue to be relaxed and domestic tourism and local spending in the West End revive this year.
Closure: The closure of London’s West End theaters, as well as cinemas, nightclubs and other cultural attractions, has hurt Shaftesbury’s business over the past year
Starting next year, an additional boost is expected from the opening of the central section of the Elizabeth Line, which should open in December 2018, but is affected by construction delays.
Brian Bickell, Shaftesbury CEO, said: “After more than a year of unprecedented disruption, a revitalization of the broader West End economy is underway.
“Since reopening on April 12, we’ve seen an encouraging increase in demand for space and rentals, as well as a return in visitor numbers and spending at our locations.”
It also said its hospitality tenants had received a significant boost from working with councils to make alfresco dining possible. This has resulted in the streets in Covent Garden and Soho being overcrowded with guests for the past six weeks.
Sunny days: Alfresco dining has sprung up on the streets of Covent Garden and Soho since the UK government allowed hotels to serve customers al fresco last month
Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, said this could prove to be a positive long-term benefit if given the right support.
She added, “Adjusting to the new normal will still be a huge challenge, although Shaftesbury says the flexibility built into its portfolio will help buildings innovate and adapt.
‘This adaptability and agility to meet changing business needs should benefit Shaftesbury as the economy recovers. The reopening of West End productions with more shows slated to begin in the coming weeks will give a much-needed boost.
‘However, many producers are waiting for a final exit from the lockdown in late June before premiering plays and musicals, and there are fears that some venues may remain closed for the long term.
“With tourism and trade in office workers also limited, it will likely be a long time before the shocking pandemic is reduced to a few forgotten lines.”
Shaftesbury’s shares fell 3.4 percent to £ 5.78 late this morning.