Capital & Regional debt falls after Growthpoint injection
Capital & Regional reduced its debt by almost a fifth thanks to a cash injection from Growthpoint in a two-pronged deal in 2019 that gave the SA property group a controlling stake in the owner of retail and leisure properties throughout the UK.
Growthpoint, the largest real estate company in SA, launched a surprise £150.4m bid — worth about R3bn today — for Capital & Regional, saying it would buy about a quarter of the company and subscribe for newly issued shares that would result in it holding a 51.1% stake.
Capital & Regional used the money raised from the newly issued shares to cut its debt by 18.1% to £336.9m, it said in a statement accompanying its annual earnings report, which showed total net income dropped 5% to £49.3m after a £3m hit from retailers that imposed rental reductions under the so-called company voluntary arrangements — insolvency processes that aim to keep financially distressed companies afloat.
“Not only does the investment enable the company to reduce leverage but it also allows it to continue to invest in its shopping centres to enhance their relevance to the communities they serve,” the group's CEO, Lawrence Hutchings, said.
The company cut its dividend payout by 13% to 21p.
The group said the structural shift in the UK market, where the rise of online shopping has wreaked havoc on British high street and triggered a fight for survival for brick-and-mortar retailers, could be worsened by the coronavirus. The epidemic, which has disrupted world trade, could force consumers to stay away from shopping malls.
Hutchings said 2019 was a “critical year of progress for Capital & Regional”.
“Having completed the transaction with Growthpoint in December 2019 the business is on a sound footing with the support of a significant and respected international business,” he said.
At the time of the transaction in December, Growthpoint’s Group CEO, Norbert Sasse, said he believed the UK market had bottomed out and that it offered long-term value.
Growthpoint, which has market capitalisation of R67bn and assets worth R139.4bn, has been branching out of SA with operations in Australia, Romania and Poland.
The Capital & Regional acquisition has pushed Growthpoint’s offshore exposure to about 32% of total assets, and marks its first foray in Britain, where property values have been crushed by Brexit vote.
In morning trade on Thursday, Capital & Regional’s share price was down 7.28% to R35, having fallen by more than a third so far in 2020. It ended the day up 3.31% at R39.
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