Local Shopping REIT said it will wait for the second half of the year to buy.
In its interim management statement today it said: ‘The vast majority of lenders have still to fully evaluate the extent of bad loans within their loan books. However, we believe that increasing levels of tenant default, as the economic environment deteriorates, will force banks to manage their loans more proactively towards the second half of the year. Until this happens, however, we do not anticipate that there will be a substantial number of acquisition opportunities.’
In its statement it said for the four months to 31 January 2009 its vacancy rate across its retail portfolio of local shopping parades rose from 10.6% to 11.8%. But it said this was in line with management expectations.
Mike Riley, LSR’s joint chief executive officer, said: ‘Given the deteriorating economic environment, 2009 will be a challenging year for property investors. However, the company has the skills to manage our occupier base and a strong financial platform from which to exploit the acquisition opportunities that these difficult market conditions will undoubtedly provide in the coming months.’
It said it had sold 13 assets for a total of £3.42m, 4.1% below the September 2009 valuation.
Until it sees an opportunity to buy it will continue to concentrate on asset management. In the past four months it let 23 vacant units at a total rent of £271,000 a year, 5.2% above market rent while rent reviews have been carried out on 38 units, increasing rental income by £19,113 a year at 7.5% above market rent.
It said it has two fully drawn loans with debt outstanding of £116.9m at an average interest rate of 5.68% running until 2016. It said there are no ongoing loan-to value default provisions. It also has an additional undrawn available loan from HSBC of £60m.