Liberty Says the Value of Its U.K. Malls Declined

Liberty International Plc, owner of MetroCentre and other U.K. malls, said the value of these properties fell in the third quarter as higher borrowing costs and stricter credit controls hurt the commercial property market.

The London-based company's 14 shopping centers were valued at 6.11 billion pounds ($12.7 billion) as of Sept. 30, down from 6.12 billion pounds three months earlier, according to a statement today. Net asset value dropped to 1,369 pence a share from 1,385 pence, said Liberty, which owns eight of Britain's 21 largest retail centers.

The decline in the value of Liberty's properties was less than the 2.9 percent drop for U.K. retail-related real estate in the third quarter, according to figures compiled by Investment Property Databank Ltd. Retail property prices in the U.K. may drop in 2007 for the first time in 12 years.

``The commercial market is getting some of the backwash of the problems in the banking sector and the domestic U.S. housing market,'' Chief Executive Officer David Fischel said today on a conference call.

Liberty shares declined 8 pence to 1,119 pence in London. The stock has fallen almost 20 percent this year, reducing the company's market value to about 4 billion pounds. The FTSE 350 Real Estate Index has dropped 34 percent during that period.

Rental Income

Profit excluding the value of Liberty's properties and derivatives declined to 28.5 million pounds in the third quarter from 32.1 million pounds in the previous three months. Net rental income gained 6 percent to 87.3 million pounds in the third quarter from three months earlier.

Liberty's British shopping centers, which account for three quarters of its assets and have a vacancy rate of 1.5 percent, would generate an annual rental income of 303 million pounds if they were leased at current market rates. That's a 0.4 percent increase in estimated rental value since June 30.

``The key, going forward, is going to be rental growth and these were quite weak,'' said Harm Meijer, an analyst at JPMorgan Chase & Co. Meijer said he expect no more rental growth and further declines in values of U.K. shopping centers.

Nine-month net income amounted to 407 million pounds, Liberty said, without providing a comparable figure for the year-earlier period, which included the value of its real estate investments. It was the first time Liberty released third- quarter figures.

Fischel took advantage of the peak in property prices in the second quarter to sell a 36 percent stake in the Gateshead MetroCentre, Europe's largest mall, to the Government of Singapore. That provided additional funds for acquisitions in London and other cities.

Liberty acquired Covent Garden in August 2006, a 50 percent stake in the London's Earls Court and Olympia exhibition centers formed a venture to develop offices in London's West End district, the world's most expensive business location.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net.

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