M&S to review store estate for digital age
Marks & Spencer is to review its 668-store portfolio to take account of the rise of online retail and said the scale of recent space expansion will not be repeated.
Speaking at the retailer’s investor day on Tuesday, finance and operations director Ian Dyson said that he envisaged store churn rather than closures.
A multichannel push was a key theme of the day and Dyson acknowledged the industry’s changing dynamics. He said: “Online and multichannel will have a squeeze on property-based sales. “We will do a full review of our portfolio: where it is, its function - and that may change over time. That’s something we’ve not yet done.”
Marks & Spencer, which was slow to move onto retail parks, will focus on ensuring its stores are as well located as possible and play their part in a multichannel offer. Dyson said: “It’s a fair assumption that what we’ve had over the past few years you probably won’t see repeated, that sort of 4% to 5% space growth.”
Director of retail and M&S Direct Steve Rowe said multichannel was the biggest shift in shopping habits since the debut of self-service in the 1970s. On Monday, M&S relaunched its website and extended its Shop Your Way service - including home delivery or collect in-store options - from 46 to 163 locations.
Investec analyst Katharine Wynne said M&S “concedes the channel shift into online may leave stores unviable over time”.
Credit Suisse analyst Tony Shiret said that anticipated flat same-store sales in coming years will mean “material” space reorganisation and or rationalisation. He added: “Clearly the aim of having a multichannel offer is going to be a minimum requirement in the medium term - M&S cannot be faulted for moving toward this.”
M&S has overhauled 80% of its space in recent years, but still has unmodernised shops in some secondary towns that rival retailers believe are only marginally profitable and would be candidates for relocation or potential closure.
House prices rise for fourth consecutive month
House prices rose for the fourth consecutive month in October, and are now 7.1% higher than the market trough in April, the Halifax house price index has said.
The average price of a home in the UK at the end of October was £165,528, 1.2% higher than at the end of September.
However the price is 4.7% less than the same point in 2008.
Martin Ellis, housing economist, said: "Demand for houses has risen in recent months due to the very low level of interest rates, the decline in property prices since the summer of 2007 and a pick-up in consumer confidence on the back of better economic news.
“Higher demand has combined with a low level of properties available for sale to result in rising house prices over the past few months.
“There are some indications that more people are deciding to put their homes on the market, encouraged by the recent improvement in market conditions. A continuation of this trend could help to improve the balance between supply and demand, curbing the strength of the stimulus to house prices resulting from the current imbalance"
First images of £10m Slough bus station
Images of a £10m bus station in Slough, part of the £400m Heart of Slough regeneration scheme, have been released.
It will be built on a site currently occupied by Compair House that will be demolished in September 2009. Construction on the bus station will start in January 2010 with completion expected by January 2011.
The station is a part of the Heart of Slough regeneration project by Development Securities, English Heritage, Thames Valley University and Slough Borough Council.
The council is funding and developing the station which it hopes will help kick-start the regeneration project. The bus station was granted planning consent by Slough Borough council earlier this month.
Wave of commercial property failures predicted
A wave of failures in the commercial property market has been predicted by one of the UK's leading restructuring experts.
Some shopping centres are still thriving but others have gone into administration. Photo: PA
Richard Fleming, UK head of restructuring at accountant KPMG, said that property failures to date are just the "tip of the iceberg".
Mr Fleming said: "Our work on the JJB [Sports] CVA and the Lehman real estate portfolio in Asia has given us an insight into what we think is just the tip of the iceberg. We predict a wave of fallouts in the commercial property market as the true value of losses becomes apparent."
He added that the restructuring that would be required in the commercial property market could be "the next big milestone in this recession".
"With the June quarter day fast approaching and with £43bn of debt repayments falling due this year, we could well see a very busy period of activity," he said.
Yesterday Modus Ventures, a Manchester-based retail property company, appointed KPMG as administrator. Modus owns more than 40 subsidiary companies in the UK, many of which own retail property. Most of those subsidiaries have been ring-fenced and are not in administration, although the Trinity Walk shopping centre in Wakefield and the Grand Arcade Shopping Centre in Wigan went into administration earlier this year.
Meanwhile, Europe's banks are ready to pull the plug on faltering UK commercial mortgages to limit losses.
More than £10bn of commercial mortgages have so far breached their terms, a recent study shows, and banks are running out of patience with problem borrowers.
In 2009, £43bn of property loans mature, posing a much larger risk than commercial mortgage-backed securities (CMBS), which have largely been sold on, according to the De Montfort University study.
Property experts believe that banks are becoming more organised in how they approach their commercial property exposures. Recent data from Begbies Traynor, the turnaround specialist, showed an 87pc year-on-year increase in the number of companies with critical financial problems.
Property Entrepreneur Calls for Return to Old Days
The millionaire property tycoon who founded Heron International, Gerald Ronson, has called for a return to the time when the property market had ‘good, old-fashioned property values’, an article on Telegraph.co.uk has reported. The millionaire, who has a reported worth of £250 million was speaking at his annual lunch, which is one of the best-attended and well-received events in the property industry calendar.
Ronson also claimed that investors have become too preoccupied with returns that are in double figures, which were common during the height of the property boom. He added that the property industry was now a place where “everything was mispriced, from properties selling at 4 per cent yields, to the fees paid to advisers”.
The entrepreneur also believes that no-one can predict when the market will pick up, as far more transparency and trust within the industry is required before that can happen. Ronson said: “A cocktail of greed, coupled with inexperience, has fuelled our problems. Money became too easy to be made rather than as a result of hard work.”
In order for the UK economy to recover, conservative leverage, a strong work ethic and experienced business leaders are required, Ronson believes. He said: “Businesses need to be run by people who understand and know their industry. The result of this chronic lack of experience and expertise is an epidemic of insolvencies.”
Ronson also claimed that his property business, Heron International, is stronger than ever. New development Heron Tower (pictured) is due to open in 2011, adding a 46-storey landmark to London’s skyline.
Canary Wharf Owner Troubled by Housing Slump
The owner of Canary Wharf has blamed the property slump for his failing portfolio, saying that his company, Songbird, may struggle to repay its loans.
According to an article on guardian.co.uk, Songbird is facing a loss of £1.8 billion, which the owner is blaming on the drop in value of commercial property. He has also suggested that the company may be unable to repay its loans before the end of 2009.
Songbird Estates has had to assign advisers to renegotiate the terms of its £880 million loan, which was originally due to be repaid next year. The company said the fall in value of its portfolio is a reflection of the poor state of the commercial property market.
Songbird Estates is not the first property company to be boosting its finances since the beginning of the downturn. Land Securities, British Land and Hammerson have all faced financial difficulties, in response to the drop in rental prices and the value of UK property.
Songbird is the owner of around 60 per cent of the properties at Canary Wharf, but said the value of its portfolio fell by nearly 20 per cent in the second half of 2008 – representing a drop of £4.9 billion. This resulted in a loss of £1.8 billion for 2008, compared with a profit of £182 million in the previous year.
The company is suffering from the effects of companies going bust and laying off staff – particularly banks. Lehman Brothers, the company that rented the prestigious tower for £53 million per year has also gone bust.
Westfield London gets five more retailers
Westfield, the world’s largest shopping centre owner, has signed up five retailers at its Westfield London shopping centre.
Retailers Deichmann, Bebe Bisou, Foot Asylum, Wheels of Sport and Birings will open between now and May.
Deichmann, Europe’s largest footwear retailer, has signed up for 5,108 sq ft store on the first floor near New Look’s flagship store.
Bebe Bisou, a luxury children’s fashion retailer, has signed up for a 3,031 sq ft store on the ground floor and joins other childrenswear brands including Adams Kids, Pumpkin Patch, Adams, POP, Early Learning, The Entertainer, Russell+Bromley Kids and Vincent Shoes.
Casualwear, footwear and clothing retailer Foot Asylum, which sells brands including Gio Goi, K Swiss and Onitsuka Tiger, will take a 2,987 sq ft store on the ground floor.
Wheels of Sport, selling F1 merchandise and memorabilia, will take a 1,236 sq ft store on the first floor and finally newsagent Birings will take a 338 sq ft store on the first floor.
Paul Buttigieg, general manager at Westfield London, said: ‘The addition of these retailers will further broaden the offer at Westfield London and underscores the fantastic retail mix we have attracted to the centre.’
Westfield London has a high turnover of new shops as some existing retailers close. More than forty new stores have opened for trade since the launch four months ago, including CK Jeans, Kathmandu and Parchment.
ProLogis concludes sale and reduces debt
ProLogis has completed the first raft of a number of measures – including sales and debt renegotiations – designed to shore up its balance sheet.
It has concluded the deal to sell its operations in China and Japan to GIC Real Estate and former chief executive Jeff Schwartz and also addressed debt problems across three of its funds.
The proceeds from the sale – a total cash consideration of $1.3bn – will be used to pay down ProLogis’s debt. The global industrial giant already received around $500m in payment for its operations in China and Japan in February and has now received the $845m balance.
It is also about to complete the $140m sale of ProLogis Park Misato, also to GIC Real Estate.
The proceeds will be realised in the second quarter of 2009.
Walt Rakowich, ProLogis chief executive, said: ‘Including the sale of this additional asset in Japan, we will generate approximately $1.5bn in cash proceeds, allowing us to make substantial progress toward our goal of de-leveraging our balance sheet by $2bn by the end of 2009.’
It has also extended the $167m loan in its ProLogis North American Industrial Fund III by three years, agreeing with the fund partner to reduce the loan by $60m; announced that it will repay ProLogis European Properties’ €335.9m of CMBS debt on 5 April, three months earlier than required; and closed a $120m, ten year secured financing deal on a 50% loan to value covenant for the ProLogis California Fund, the proceeds of which were partially used to refinance a further debt facility.
Chief financial officer William Sullivan said: ‘With our recent fund financing activity, we have addressed over 50% of 2009 fund-related maturities. Further de-leveraging activities, including the planned disposition of assets from our direct-owned portfolio, are underway and information will be provided as these initiatives come to fruition over the next 90 days.’