TIDMCLI
RNS Number : 8426M
CLS Holdings PLC
12 May 2015
Release date: 12 May 2015
Embargoed until: 07:00
CLS Holdings plc
("CLS", the "Company" or the "Group")
Trading Update for the period 1 January 2015 to 12 May 2015
The Group announces a Trading Update for the period 1 January
2015 to 12 May 2015.
HIGHLIGHTS
-- Acquisition of Tangentis, Betastrasse 5/9a, Munich for
EUR24.4m at a net initial yield of 7.9%
-- Occupational demand remains firm:
o Overall Group vacancy rate 4.8% (31 December 2014: 3.0%)
o 8,420 sqm vacated or expired, of which 4,966 sqm taken to
development stock
o 5,231 sqm of new leases, lease renewals and extensions
completed
o 4,421 sqm of former development stock added to available for
letting
-- Weighted average cost of debt remains low at 3.62% (31 December 2014: 3.64%)
o Spring Gardens, SE11 refinanced with GBP97 million 6 year loan
fixed at 2.8%
o Acquisition of Schellerdamm, Harburg financed by EUR24 million
7 year loan fixed at 1.9%
-- Spring Mews hotel opened end of January - averaging 80% occupancy within four months
-- 405 Kennington Road, SE11 - 1,380 sqm of offices under refurbishment, pre-let for 12 years
-- Continued progress on Vauxhall Square, London, SW8 (143,000
sqm scheme with full planning consent)
o Expect to satisfy all conditions in Q3 2015 for a long lease
to a student operator to build and manage 30 storey student
development
o Acquisition of 109 & 111 Wandsworth Road, SW8 adjoining
main site for GBP3.3 million
OVERVIEW - Since 1 January 2015, the Group has made good
progress in a number of areas: the completion of developments has
provided further space in central London available for letting;
core investment operations have delivered in line with, or above,
expectations; new bank financing has brought down still further our
financing costs; and the pipeline of potential investments has
continued to provide opportunities with a further acquisition in
Germany.
The occupational markets are firm: the Group's vacancy level has
risen to 4.8% (31 December 2014: 3.0%) by rental income following
the release of 4,421 sqm of new space from our development
portfolio. Demand from existing and potential occupiers is steady,
with good interest particularly in London. Since 1 January, 8,420
sqm of rented space has expired or become vacant, of which 4,966
sqm has been taken off the market and added to our development
stock, 3,851 sqm has been let or renewed, and a further 1,380 sqm,
which is under refurbishment, has already been pre-let. Of the
Group's income, 56.0% benefits from indexation and 67.5% is paid by
government occupiers (46.3% of the total) or major corporations
(21.2%).
The Greater London investment market, outside the West End and
City, remains competitive. We continue selectively to explore
investment opportunities within and around the M25, and in Germany
where financing conditions remain more attractive.
LONDON - London continues to benefit from its status as a global
safe haven, supported by an economy which remains stronger than
those of most of its European trading partners. Demand remains
solid from overseas investors searching for yield, with increasing
interest beyond the prime West End and City locations. Whilst the
UK's forecast GDP growth for 2015 of 2.6% is expected to ease
marginally to 2.4% in 2016, unemployment is expected to fall from
5.5% in 2015 to 5.2% in 2016, and CPI inflation is forecast to rise
from 0.4% in 2015 to 1.7% the following year.
With all of our asset management performed in-house, we continue
to be successful in leasing space. The vacancy rate has risen to
7.5% (31 December 2014: 3.3%) due mainly to 4,421 sqm of space
becoming available for the first time on completion of the
developments at 138 Fetter Lane and Spring Mews. Occupiers vacated
2,360 sqm, including 1,380 sqm at 405 Kennington Road, SE11, where
a new tenant signed for a 12 year term six months before the
completion of the building's refurbishment. New lettings, lease
renewals and extensions were completed on a further 1,807 sqm since
the beginning of the year, with Great West House, Brentford now
achieving record rents and having only one half of a floor vacant
in the 30 floor building.
Our 20,800 sqm Spring Mews development, comprising up-market
student accommodation, an extended-stay hotel and 1,133 sqm of
office space, completed on time last year. The student space is
fully let for 2014/15 and early bookings for 2015/16 are
progressing well. The adjoining 93 bedroom hotel under the
Staybridge Suites brand of InterContinental Hotels Group, and
operated by Cycas Hospitality on our behalf, opened for guests in
January and has already achieved an occupancy rate of 80%, at the
higher end of expectations. On TripAdvisor it is rated in the top
20 out of 1,063 hotels in London. We recently began marketing the
office space, which is included in our vacancy numbers for the
first time.
At 138 Fetter Lane, EC4 the refurbished 2,896 sqm of new Grade A
offices and eight newly developed residential apartments were
launched in January. Demand for the offices has been strong, and
half of the space is now under offer on ten-year leases.
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. The new American and Dutch
embassies are well under construction, and many residential schemes
are now on site. Since January we have acquired two town houses
adjacent to the main site at 109 & 111 Wandsworth Road, SW8 for
GBP3.3 million. We are close to satisfying the conditionality of
the sale to a specialist student housing operator to build and
manage the 454 student room building adjacent to the main site. We
expect construction to start on this first phase of Vauxhall Square
in 2016. We continue to explore financing options for the main
scheme, on which we gain vacant possession in early 2017, and we
expect to be in a position to clarify our intentions towards the
site early in 2016.
REST OF UK - Of the 32 properties in the Rest of UK portfolio,
99% by rental value is let to central government departments, and
0.9% is vacant (31 December 2014: 0.9%). 687 sqm of space in
Brooklands Office Campus, Plymouth expired in March and an
agreement to lease has been entered into with a new tenant for a 15
year term.
FRANCE - With GDP growth expected to be 1.0% in 2015,
unemployment 10.4% and CPI inflation 0.2%, the French economy
remains challenged. However, our offices, particularly in Paris,
reflect a demand for less expensive, non-prime space.
In the overall market, lettings in the Paris region in the first
quarter of 2015 were 27% below the same period last year. Since the
beginning of January we have taken back 5,080 sqm of offices, of
which 3,698 sqm have been added to development stock and are no
longer immediately available for letting, and 1,105 sqm have been
let or renewed.
GERMANY - With GDP growth in 2015 forecast to be a modest 1.8%,
unemployment low at 6.4%, and CPI inflation only 0.4%, German
domestic demand should remain resilient. In 2015, the investment
market in Germany registered its second best first quarter since
2009, assisted by a competitive debt market.
In early May we exchanged unconditional contracts to acquire
Tangentis, Betastrasse 5/9a, Munich for EUR24.4 million at a net
initial yield of 7.9%. This office building, 8 kilometres
north-east of Munich, spans 14,630 sqm of lettable space and 252
parking spaces, and generates over EUR2.0 million of annual rent
from 11 media and technology tenants, including Sky Deutschland,
Kabel Deutschland, and the Bavarian Academy of Television.
Completion is expected to take place before the end of June.
Excluding the fully let Tangentis acquisition, our vacancy rate
in Germany remains very low at 2.5% (31 December 2014: 2.6%). Since
1 January we have taken back only 980 sqm of let space, and let or
renewed 939 sqm.
SWEDEN - Occupancy of the Group's only directly held property in
Sweden, Vänerparken, to the north of Gothenburg, has remained
unchanged with a vacancy of 0.8% by rental value. The Group's 13.5%
interest in Catena AB rose in the quarter by GBP7.0 million,
reflecting a 23% increase in its share price.
FINANCE -Rent collection rates have remained high, costs are in
line with budget, and the weighted average cost of debt has
continued to be one of the lowest in the property sector at 3.62%
(31 December 2014: 3.64%), being over 250 basis points below the
property portfolio's net initial yield.
Since the start of the year the Group has refinanced a GBP74.7
million loan on Spring Gardens, SE11 with a GBP97.0 million 6 year
loan at a fixed rate of 2.8%, and has financed the acquisition of
Schellerdamm, Harburg with a EUR24.0 million 7 year loan at a fixed
rate of 1.9%.
The Group has 60 loans from 23 lenders, two unsecured corporate
bonds, a secured note and a debenture. The Group currently has
liquid resources of over GBP225 million, comprising GBP54 million
of cash, GBP77 million of corporate bonds, and available undrawn
facilities in excess of GBP95 million.
In the latest tender offer, all of the shares available were
cancelled by the Company on 24 April resulting in a distribution of
GBP10.4 million to shareholders and leaving 42,402,323 shares in
circulation.
Executive Chairman of CLS, Sten Mortstedt, commented:
"The acquisition of the Tangentis building in Munich
demonstrates once again our ability to find opportunistic
investments at attractive yields and let to strong covenants.
Managing our properties in-house continues to pay dividends and I
am encouraged by our letting performance, particularly in France,
and by the interest shown in the recently-completed developments at
138 Fetter Lane and the hotel at Spring Mews.
"With a low cost of debt, high occupancy levels, and further
rental streams to come from our new developments, we look forward
with confidence to building on a strong start to the year."
-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
Fredrik Widlund, Chief Executive Officer
John Whiteley, Chief Financial Officer
Liberum Capital Limited +44 (0)20 3100 2222
Tom Fyson
Charles Stanley Securities +44 (0)20 7149 6000
Mark Taylor
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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