LAP marks down value of Sheffield shopping centre
Property management firm London & Associated Properties (LAP) has written down the value of a Sheffield shopping centre by £2.1m.
LAP had instructed agents to find a buyer for Orchard Square Shopping Centre before September 2023, but declared that no sales proceeds would be sufficient to “return a surplus to the group”.
It has now marked down its valuation of the scheme from £14.75m to £12.65m. LAP said this loss was the maximum it can incur.
The devaluation comes “despite strong operational performance” at Orchard Square, which had an operating income of £1.7m per year by the end of June, unchanged from December.
The scheme recently welcomed three “significant” lettings, as LAP looks to reposition the shopping centre’s focus towards the food and beverage market. A number of upgrades to the centre’s public areas have also been undertaken with the support of Sheffield Council, including new paving, awnings for tenants, and a waterproof canopy.
LAP said it was a “disappointing outcome for a property that had performed well over [its] 24 year ownership”.
This comes as the firm released its results for the first half of the year, ending 30 June.
During the period, the value of LAP’s assets declined from £32.5m in December to £29.3m by the middle of the year. The writing down of the company’s portfolio led to a loss for shareholders of £3m, compared to a profit of £4.3m in 2022.
During the period, LAP made no new acquisitions, but said it is “actively seeking to reinvest cash in targeted sectors”.
However, the group said that occupancy rates had improved, increasing from 97.6% in December to 98.4%.
It added that the remainder of its portfolio is performing “satisfactorily”. The group’s revenue from property activities declined slightly to £3m (2022: £3.3m), reflecting the disposal of a shopping centre in West Bromwich in July 2022, the proceeds from which “have not yet been reinvested”.
LAP said: “The results for the six months to 30 June 2023 have been impacted very significantly by interest rate increases. Not only have the additional costs damaged operating performance, but negative sentiment has meant that the investment market for asset sales is becoming more uncertain.
“We are, though, seeing rental growth in both the industrial properties and the value-orientated retail properties that we continue to hold.”