Shaftesbury revealed stellar annual results this morning, proving that London’s West End is the most defensive market in a downturn.
The REIT, which focuses on three West End villages, Chinatown, Carnaby and Covent Garden, achieved 9.5% increase in net asset value to 646p a share in the year to 30 September. The rise in the second half of the year – 5.2% - when the property market has been hit by the credit crunch, was higher than in the first half.
8.2%
The portfolio rose by 8.2% in value to £1.39bn, following the revaluation by DTZ, driven by rental growth and asset management activities. Estimated rental values grew by 9.6%, of which 5.1% came in the second half.
‘Yields have ended the year largely unchanged,’ said chairman John Manser. The equivalent yields on the Chinatown, Carnaby and Covent Garden holdings ended the year at 4.73%, 4.68% and 4.59% respectively.
Sustained rental growth
‘We believe that, against a background of continuing strong tenant demand in our markets, the impact on the values of our well located properties, which have the capacity to produce sustained rental growth, will be less marked,’ said Manser of the effect of the credit crunch.
Shaftesbury raised its full-year dividend by 36% to 7.66p a share, which reflects the requirement for a REIT to pay out a minimum of 90% of net rental income. Underlying pretax profits were down 5.7% to £12.7m, reflecting higher property and interest charges.
Quality portfolio
Shaftesbury’s share price rose nearly 2% to 554p in response in early trading on Wednesday. JP Morgan analyst Harm Meijer, although believing that British Land and another West End specialist, Great Portland Estates, offered ‘better value’, said he was impressed with the Shaftesbury results: ‘We believe these solid results are another testament to Shaftesbury's quality portfolio and show that its portfolio valuation is more defensive than the market in the current uncertain climate’.
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