Our opinion on the current state of CRP

Capital and Regional (CRP), a UK-based Real Estate Investment Trust (REIT), specializes in owning and managing community shopping centres in England. The landscape for UK consumer behavior and property ownership has been significantly affected by both Brexit and the COVID-19 pandemic, leading to decreased footfall and driving some retailers into the British equivalent of business rescue. A significant development for the company was the GBP 77.9 million investment by Growthpoint, which acquired a 51.2% stake in the business, leading to a notable increase in the share price due to the takeover news.

As of 17th January 2022, Capital and Regional reported a 33% increase in December footfall compared to 2020. The company also highlighted its leasing activity in the last quarter of 2021, which resulted in 34 new lettings and renewals with a combined value of £1.5 million, boosting occupancy rates to 93% by the end of December. With 91% of the quarterly rent due on 25th December 2021 received, these figures pointed towards a recovery trajectory for the company.

For the year ending 30th December 2023, the company noted a modest 1.5% increase in footfall and reported an occupancy rate of 93.4%. Remarkably, rental collections reached 99%, although the loan-to-value (LTV) ratio increased to 43.6%. The company experienced a 2.6% like-for-like increase in valuations in 2023, with a notable 4.0% increase in the valuation of Gyle since its acquisition, attributed primarily to the completion of six new lettings and renewals. Overall, the portfolio valuation experienced a 15.5% increase to £372.83 million, including the addition of Gyle, from £322.8 million in December 2022.

Capital and Regional presents a rand-hedge investment opportunity for South African investors due to its UK focus. However, the investment returns are currently under pressure with a relatively high LTV ratio exceeding 43%. Additionally, the share's trading volume is relatively low, with many days experiencing no trades, indicating a lack of institutional interest at this time.

Despite the challenges, the company's strategic efforts to increase occupancy, improve footfall, and manage its property portfolio demonstrate a potential for gradual recovery and stabilization. Investors considering Capital and Regional should weigh the rand-hedge benefits against the current pressures on returns and the market liquidity of the shares.