Capital Shopping Asset Values Stagnate as Retailers Struggle

Capital Shopping Centres Group Plc, the U.K.’s largest publicly traded shopping-mall owner, said the value of its assets stagnated last year as the fragile economy made it harder to raise rents.

Net asset value was 391 pence a share at the end of 2011, unchanged from six months earlier, the London-based company known as CSC said in a statement today. Annual net income fell to 30 million pounds from 511.8 million pounds.

CSC predicted a “challenging” year for retailers as shoppers cut back on spending as unemployment rises. The company signed 198 new leases last year at discounts to their appraised rental value. Retailers in administration, like Peacocks Stores Ltd. and Blacks Leisure Group Plc, represented 3 percent of CSC’s gross rental income, up from 1 percent a year earlier, and rose by an additional 2 percentage points in January.

“These tenants are still trading and paying rents,” Chief Executive Officer David Fischel said on a conference call. CSC’s vacancy rate of 3.3 percent compares with about 15 percent average for shopping centers in inferior locations, he said.

CSC advanced 2.3 pence to close at 337.1 pence in London. The shares have gained about 17 percent in three months, the second-best performance of the 11 members of the FTSE 350 Real Estate Investment Trust Index, which has risen 8.3 percent.

‘Fully Priced’

“The current valuation looks more than fully priced,” said Alison Watson, an analyst at Liberum Capital with a “hold” recommendation on the shares, citing the limited prospects for rental growth and difficulties faced by retailers.

Profit excluding changes in asset values and one-time items rose 43 percent to 138.6 million pounds ($218 million). Net rental income rose 31 percent to 364 million pounds, lifted by the 1.6 billion-pound purchase of the Trafford Centre in the English city of Manchester from Peel Holdings, a property company controlled by billionaire John Whittaker. The mall added 29 million pounds to profit, CSC said.

January’s acquisition of the Trafford Centre was the biggest single property transaction in Europe last year, according to New York-based Real Capital Analytics Inc. CSC now owns 10 of the U.K.’s 25 largest malls by retail sales, including the Metrocentre at Gateshead. The company also acquired a 75 percent stake in the Broadmarsh shopping center in Nottingham for 55 million pounds in November.

Excluding acquisitions, CSC lifted rents by 3.6 percent last year at its properties. The number of visitors to its malls rose by 2 percent last year.

Capital Shopping will pay a second-half dividend of 10 pence a share. That took the final payout for 2011 to 15 pence a share, unchanged from the previous year.

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