The indebted shopping centre landlord Intu said it was “likely” to have to raise fresh equity after a string of retailer insolvencies hit the group harder than expected.
Intu, whose largest shareholder is the property billionaire John Whittaker, said in a trading update that like-for-like rental income for 2019 would drop about 9 per cent from the previous year, and would continue falling in 2020.
More than half of this year’s decline resulted from company voluntary arrangements — a form of insolvency deal — by retailers such as Arcadia and Monsoon, Intu said. The group owns shopping centres such as Manchester’s Trafford Centre and the Lakeside centre in Essex.
Shares in the company had plunged 14.5 per cent by mid-morning on Wednesday, to 34.4p. They had already been trading at an 80 per cent discount to net asset value, according to analysts at Numis.
Matthew Roberts, chief executive, said: “We continue to consider all options to put us in the best position to deal with both our short and medium-term liquidity requirements as we approach our next material debt maturity in early 2021.
“These options include disposing of assets, where we are in the advanced stages of selling two of our Spanish assets, through to raising equity, which is also likely to form part of the solution.”
Robert Duncan, analyst at Numis, said: “Intu’s balance sheet remains fraught with problems and its assets remain in structural decline, exacerbated by the lack of historic investment . . . in its centres and its inability to finance future investment.”
Mr Roberts has pledged to reshape the business since taking over from David Fischel, who retired in April.
But he faces a heavy debt load: Intu’s loan-to-value ratio is 57.7 per cent based on June property valuations, the company said on Wednesday, but shopping centre values have continued to fall since then amid turmoil on the high street.
The company has sought to sell off assets to help fund debt refinancings: it said it was in “advanced discussions” to sell two Spanish shopping centres, Intu Asturias and Intu Puerto Venecia.
It also sold a stake in its Derby shopping centre in a structured deal for £186.3m in July to Kuwaiti investors.
New lettings activity was slower in the third quarter: Intu agreed 47 long-term leases worth £5m of annual rent, down from 84 leases worth £15m in the same period a year earlier. Rents in the latest deals were 3 per cent below previous levels.
However, Mr Roberts said: “Having visited 17 Intu centres in recent weeks, there is a very different feeling on the ground to the one we read about regularly. Our centres are busy with footfall and occupancy significantly above the industry benchmarks.”