Trafford Centre owner looking at options to sell off parts of shopping mall in future years

Trafford Centre

The owner of Manchester’s Trafford Centre has revealed it is looking at options for potentially selling off part of the shopping centre in the future.

Intu, which also owns the Arndale, added that there is no sign of the problems facing retailers easing any time soon.

There has been series of big names on the high street who have been forced into Company Voluntary Agreements in recent months.

And Intu has warned that the number of CVAs will run at a higher level than in 2018 with more potential restructurings on the way.

The property firm said in a trading update it is considering refinancing the legacy debt at the Trafford Centre.

The move would reduce the cost of the debt and remove amortisation payments which increase over the coming years.

The refinancing would incur associated break costs but would “simplify the structure and increase optionality for any potential part disposal of the centre at a future date”.

Matthew Roberts, has taken over as chief executive, following the departure of David Fischel.

Mr Fischel stepped down in the wake of a failed takeover £2.9bn bid for the firm led by Manchester based Peel Property.

Mr Roberts said: “I am delighted to have officially started in my role as chief executive of intu.

“As previously disclosed, my priority is to reduce our loan to value to below 50 per cent and our plans to achieve this are underway.

“Our operational performance in the quarter has been stable. We have continued to see good letting activity with 53 long-term leases signed amounting to £6m of annual rent at an average of 1 per cent above previous passing rent.

“These include new types of tenants such as Metro Bank at Manchester Arndale, exciting new catering concepts with Market Halls at intu Lakeside and an expanding leisure attraction at intu Metrocentre with Namco’s mini golf and a climbing attraction.

“However, we expect the remainder of 2019 to be challenging due to a higher than expected level of CVAs and a slowdown in new lettings as tenants delay their decisions due the uncertainties in the current political and retail environments.

“As such, we have revised our approach to how we guide towards our year-end like-for-like net rental income to factor in expected CVAs and have adjusted our 2019 guidance accordingly to minus four to six per cent.

“Despite the current operating environment, I believe we have a very good business and am confident we can meet the challenges we are facing head on. I look forward to updating the market on strategy alongside our interim results in July.”

The firm continued to see good letting activity in the first quarter and agreed 53 long-term leases.

Intu settled 77 rent reviews in the period for new rents totalling £20m, an average uplift of 8 per cent on the previous rents

Occupancy at 31 March 2019 was 95.6 per cent, a 1.1 per cent reduction against December 2018.

Occupancy was affected by previous CVAs and administrations, including the closure of some New Look Men and HMV stores, along with the seasonal reduction in the quarter as Christmas 2018 pop-ups closed.

Year to date footfall in centres is running marginally ahead of the same period in 2018.

It is anticipated that like-for-like net rental income for 2019 will be down by 4 to 6 per cent.

The change from the guidance given at the year-end is due to a higher expected level of CVAs in the rest of 2019 and a slow-down in completing new lettings.

Intu expect CVAs to run at a higher level than in 2018 with some potential restructurings being well publicised.

Russ Mould, investment director at Manchester investment firm AJ Bell, said: “New chief executive Matthew Roberts is remarkably upbeat in his trading update commentary, despite a big downgrade to full year rental guidance – from -1% to -2%, to a new range of -4% to -6%.

“Analysts will have to slash their earnings forecasts for the shopping centre landlord which explains why its share price is particularly weak following this news.

“The amount of retailers undergoing CVAs (company voluntary agreements) is really hurting Intu, so too a slowdown in new lettings as companies remain cautious about the political and retail landscape.

“CVA is an insolvency process that allows financially challenged companies to renegotiate debts with creditors, including landlords. It inevitably sees landlords having to accept lower rents to avoid vacant lots.

“Intu’s pains are far from over as many retail companies are still struggling to stay afloat. The company expects CVAs to run at a higher level than in 2018.

“It is also worth bearing in mind that Debenhams accounts for 3% of Intu’s rent roll. That retailer announced a CVA last week and is closing 22 of its 166 stores.

“While none of this batch are located in Intu’s centres, the risk that further stores will close will hang over the landlord and its share price.”

Russ added: “Roberts is among a group of FTSE 350 chief executives who are facing difficult market conditions and need to come up with a plan to put their respective business back on track, with other examples including Sainsbury’s and BT. It looks like we’ll get Intu’s new plan on 31 July when it reports half-year results.”

Intu’s share price had dropped 8.38%, to 91.80p per share, by 9.40am.

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