Trafford Centre owner says it is coping well with chaos on the High Street

The owner of the Manchester Arndale and the Trafford Centre said the firm is continuing to perform well in the face of the chaos on Britain’s high streets.

The trading statement from intu came against a backdrop of ongoing negotiations which will settle the ownership of the business.

A consortium led by Manchester firm Peel Group is looking to buy the UK’s biggest shopping centre owner in a deal worth £2.9bn.

If the acquisition goes ahead it would create the country’s largest property business. The offer has come just months after property firm Hammerson walked away from similar negotiations.

John Whittaker’s Peel Group, Canadian asset manager Brookfield and Saudi group Olayan made a preliminary £2.9bn offer.

John Whittaker

Intu said it was considering the proposed offer of 215p a share, a 21 per cent premium to the stock’s closing price on Thursday.

The trading statement made passing reference to the proposed deal but added that the firm is in a strong position despite the problems seen by retailers such as House of Fraser and Debenhams.

Intu chief executive David Fischel said: “intu has continued to deliver a strong and resilient operational performance through a period which has been particularly challenging for UK retailers, demonstrating the clear differentiation between winning destinations such as intu owns and the rest.

“We agreed 84 long-term leases in the period at rental levels eight per cent above previous passing rent and have increased occupancy by 0.4 per cent to 97 per cent.

David Fischel

“Key fashion retailers continue to be attracted to our winning locations, with names such as Monki, Bershka and Ralph Lauren signing up in the period.

“In September, we opened the £180 million retail and leisure extension of intu Watford, 90 per cent let or in advanced negotiations, as we constantly innovate and invest to ensure our business anticipates and adapts to changing consumer trends.

“The top twenty shopping centres in the UK account for some three per cent of UK shoppers’ annual spend and we own eight of them, representing 76 per cent by value of our UK portfolio.

“We are however confident our business and assets are resilient and can weather the challenges we are currently seeing.”

Intu said rent reviews were on average five per cent above previous passing rent.

There was improved occupancy of 97 per cent, a 0.4 per cent increase since June 2018 and 0.4 per cent ahead of September 2017.

Following the offer from the consortium a full property valuation was carried out and the intu property portfolio is currently valued at £9.5bn. The value fell by £298m in three months triggered largely by the current problems facing the retail sector in the UK.

Intu say key fashion retailers continuing to roll out their portfolio of brands, H&M are opening their seventh Monki store in the UK. Inditex are also continuing to expand their brands, alongside Zara.

Ralph Lauren has opened its seventh UK store at Manchester Arndale and Lego is opening one of its first Spanish stores at intu Puerto Venecia

JD Sports brands, Tessuti and Scott’s, have exchanged to be part of the £17 million Halle Place development at Manchester Arndale, which is completing shortly.

Russ Mould, investment director at Manchester investment platform AJ Bell said: “Today’s trading update makes for interesting reading, particularly in the context of its current takeover situation.

“Although a firm bid is yet to materialise, 215p is the mooted offer price by a Peel Group-led consortium.

“Intu’s net asset value has been downgraded by 5% from the half year stage after a 3% decline in property values. That may not be as severe as some investors had expected.

“The company also managed to push through some rent increases and this looks like a reasonably resilient performance given the pressures on the retail sector.

“As such it may lead shareholders to question the generosity of a proposed offer which, adjusted for dividends, comes in at just 210.4p.

“On the other hand, Intu’s high levels of indebtedness, with the loan-to-value ratio increasing from 48.7% in June to 50.6%, could make life as a standalone entity challenging for Intu.

“Peel, and its partners in Canada’s Brookfield and Saudi Arabia’s Olayan, have until 1 November to make an official approach or walk away.”