Capital & Regional sells assets to reduce debt

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by Lin Freestone

Capital & Regional, the London-based commercial property investor and fund manager, has overhauled its banking covenants and reduced its overall debt by a significant level. The company has been conducting negotiations with its lenders, selling assets, and entering into joint ventures.

During the past year, the company’s share price has fallen by almost 80%. Following the announcement of the finalising of renegotiations, the share price reached 181p, an immediate rise of 17%.

However, there are still concerns about the level of debt in Capital & Regional’s out-of-town retail property fund, The Junction. The Junction Fund is a specialist retail warehouse fund with a dedicated in-house management team.

It owns a retail park portfolio which includes significant development opportunities. The company is understood to be in talks with investors and lenders that could include a sale of some or all the assets in the fund.

Capital & Regional has just revealed its interim financial results for the six-month period to the end of June 2008. The company has reported a pre-tax loss of £201.4m. Pre-tax profits for the same period in 2007 were £42.7m.

The 30% fall in net asset value during the first half is attributed to problems in the banking and property investment markets, exacerbated by high leverage, rather than in the tenant facing business, which has been resilient.

Revenues for the period decreased to £39.4m, from £49.8m in the same period in 2007.

There has been a 20% fall in the value of Capital & Regional’s properties under management to £5.3bn as its assets struggled to hold their value in the UK’s depressed property market.