(Bloomberg) — Landlord Shaftesbury Plc slashed the value of its London restaurants, bars and stores by almost 700 million pounds ($932 million) as it braces for further pandemic restrictions to hit the capital’s West End.
The company, which owns properties in Soho, Covent Garden and Chinatown, said that vacancies surged to 10.2% in the year through September, almost tripling from a year earlier, in a statement Tuesday. The landlord warned of more challenges ahead as rent declines spurred a 24% drop in net property income.
“London moving into tier-three restrictions is a setback,” Chief Executive Officer Brian Bickell said in an interview, referring to the capital’s tighter lockdown rules from Wednesday. “People really needed to have that period of trading in the run up to Christmas.”
Shaftesbury’s portfolio of trendy stores and dining spots has been at the epicenter of Britain’s pandemic fallout, with a collapse in tourists and office workers commuting into central London. Most of its tenants have been unable to pay full rent, hitting the value of the firm’s properties and forcing it to raise capital and agree waivers with lenders.
The company’s portfolio is now valued at 3.1 billion pounds, down 18.3% from a year earlier. The writedowns pushed the company to a loss after tax of 699.5 million pounds.
News of effective coronavirus vaccines boosted Shaftesbury’s shares by more than 16% in November. Still, the company remains about 40% down this year and is now facing a period in which London will be under the U.K.’s highest level of restrictions. That means its bars and restaurants will only be able to serve takeaway food and drink.
Vacancy rates have risen disproportionately in Shaftesbury’s portfolio of apartments that sit above its stores and restaurants, Bickell said, with many younger tenants now working from family homes or studying online. The company has also seen some office units vacated by smaller companies that switched to permanent home working, he added.
Following the capital raise, Shaftesbury has repaid some loans in anticipation of further valuation falls next year. It’s also secured waivers from lenders where it is at risk of breaching covenants relating to income cover after rental collections fell.
“It certainly won’t all be over by Christmas, and may even not all be over by next Christmas,” Bickell said.
(Updates with CEO comments from third paragraph. An earlier version of this story was corrected to remove erroneous reference to retail closures under new restrictions)
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