Trafford Centre owner could be forced to sell off prize assets as investors snub £1.5bn fundraising bid

Troubled shopping centre owner Intu may be forced into selling off some of its prized assets after a failed bid to raise £1.5bn from investors.

This morning Intu announced it was ditching a fundraising bid due to lack of interest from investors.

The news comes just weeks after a Honk Kong investor Link Real Investment Trust pulled out of a deal.

John Whittaker’s Manchester property firm Peel Goup is the biggest investor in the business.

The owner of the Trafford Centre and the Arndale Centre has been struggling to deal with a debt mountain of £4.5bn.

The struggling firm is having to deal with falls in property prices and a wave of administrations of retailers.

The value of the firm’s property portfolio fell by 22% in the last year amid the ongoing crisis on the high street.

And the company warned this morning in a trading update that it could be at risk of breaching debt agreements by the summer if the market does not improve.

Last month Intu announced it had extended its overdraft on condition that it would raise £1.5bn from investors.

But it now seems increasingly likely it will be forced to sell off prime assets to balance its books.

The company, which has also been the focus of several failed takeover bids, has been holding discussions with its shareholders and potential new investors regarding a possible equity raise of between £1bn and £1.5 bn.

It has now become apparent that there is little appetite for a fundraise.

The firm said the current uncertainty in the equity markets and retail property investment markets meant investors were not willing to come forward.

But  Intu has said it has received several expressions of interest to explore alternative capital structures and asset disposals.

The firm also issued a trading update.

Footfall in its centres increased by 0.3 per cent with footfall in UK centres remained flat.

Full year 2019 like-for-like net rental income is in line with the guidance given in the November 2019 trading and is down by 9.1 per cent.

Rents and occupancy rates have been affected by a series of firms going into administration last year.

The company said underlying rental income remains resilient and over the past five years intu has delivered underlying rental increases on new lettings and rent reviews.

Rental income is underpinned by a strong and diverse tenant customer base, with around 800 unique tenant customers and many of the best-known names in the retail and leisure market.

According to Market Data, retailers trading in Intu’s centres typically outperform their UK chain average sales by 28 per cent and outside London and the South East, intu has the majority of the best performing malls in terms of sales productivity in each region.

The independent valuations of Intu’s portfolio at 31 December 2019 delivered a valuation deficit of £2bn, a like-for-like decrease in value of 22 per cent for the year and around 33 per cent from the peak valuation in December 2017.

At the end of December 2019,  debt to asset ratio was 68 per cent following the property revaluation deficit.

Within the next 12 months, £189.7m of borrowings are due to be repaid or refinanced.

The company has managed to raise £600m through sales but is still struggling to pay off debts.

Chief executive Matthew Roberts said:  “We remain focused on fixing our balance sheet in the near term to ensure this business has the financial footing it needs to realise its significant potential.

“While it is disappointing that the extreme market conditions have prevented us from moving forward with our planned equity raise, I am pleased that a number of alternative options have presented themselves during the process which we will now explore further.

“We have a concentrated and well-invested portfolio of many of the UK’s best retail and leisure destinations where both shoppers and customers want to be.

“Operationally our business is strong, delivering a resilient rental performance despite ongoing pressure from CVAs and administrations, with stable occupancy rates and footfall that consistently outperforms the benchmark.

“Our centres are the best performers in the regions in which we are present and independent research shows that stores with intu outperform retailers’ average sales by nearly 30 per cent. This is a compelling proposition and one that will stand the test of time.

“We will face further challenges in what has been an extraordinary few months for Intu and the wider sector, but I am confident that we will face these head on and emerge a leaner, fitter and more focused business”