Capital Shopping Centres reported robust results in the face of widespread retail peril, with the Arndale showing rental improvement on the back of 97.7% occupancy and Trafford Centre visitor numbers continuing to rise.
CSC owns 48% of the Arndale in Manchester city centre through a joint venture with Prudential. The 1.6m sq ft centre was valued at £347.6m on 30 June, compared to £322.5m in the middle of 2010, reflecting a net initial yield of 5.51%. The 232-unit mall generates £22m a year in rent. The company's half-year report to the stock exchange this morning said the Arndale, where zone A rents are £225/sq ft, was among the best performers in the group of 13 shopping centres.
The statement said: "The strongest valuation performance came from Metrocentre, reflecting steps taken to manage pro-actively the forthcoming lease expiry profile and Manchester Arndale where underlying rental levels have improved. The Trafford Centre valuation is unchanged since the acquisition at the end of January 2011."
The Trafford Centre, acquired in January 2011, is valued at £1.65bn, generates £85m in rent, and is now CSC's largest asset by value, representing one quarter of the group's total. CSC said footfall has increased by 8% year-on-year with an estimated 6% increase in retail sales. Occupancy decreased marginally to 96%. Zone A rents are put at £400/sq ft.
The statement said: "New stores have been opened by Thomas Sabo, Boux Avenue and Ted Baker with another new brand to the centre, Banana Republic, due to open in August. The Circle 360 Champagne Bar opened in July, successfully bringing one of Manchester's most popular venues to The Trafford Centre, and Lego Land's second ride has further increased its popularity. M&S and Debenhams have both opened their extended stores showcasing new ranges and Dune's new concept flagship store follows later this month."
The report continued: "CSC has plans to invest around £50m in revenue-enhancing active management projects at The Trafford Centre, including £30m at Barton Square. An application to part-enclose the central courtyard of Barton Square with a glass roof has been approved and permission has been renewed for the reconfiguration and enclosure for recycling use of two service yards on the south side of the centre."
Meanwhile, the Trafford Centre management team has taken responsibility for three other CSC centres; Manchester Arndale and Cribb's Causeway, Bristol, the two assets jointly owned by CSC and the Prudential, and Braehead, Glasgow.
CSC said the Trafford Centre team is "making good progress on taking forward the opportunities for these assets".
Across the group, underlying earnings increased 53% from £43m to £66m with net rental income growing from £135m to £178m including five months of Trafford Centre operations. Average occupancy was high at 97% and like-for-like net rental income was up 6%, mostly on deals done in 2010.
David Fischel, chief executive officer of Capital Shopping Centres, commented: "With 6% growth in like-for-like net rental income and increased footfall at our centres, CSC has delivered a sound operating performance in the first half of 2011. The Trafford Centre has proved an excellent addition and the Group has a range of active management projects and extensions in the pipeline to deliver future growth. Although the economic environment remains challenging, large centres such as those owned by CSC with a strong catering and leisure component are continuing to outperform."
Shares in CSC were unchanged at 372p, valuing the business at £3.2bn.