Merry Hill owner Intu sees value of shopping centres fall as retail suffers
Takeover target Intu – the owner of Merry Hill – has seen the value of its shopping centres drop following difficult retail conditions.
The group, which is being courted by a consortium led by John Whittaker's Peel Group, said its net asset value fell three per cent in the third quarter.
This, Intu said, "reflects current negative investor sentiment towards UK retail property".
Despite this, the company said it had delivered "a strong and resilient operational performance" since the start of July.
The latest revaluation comes on top of a 5.6% fall fall in its property values in the first half of the year and comes amid a high street bloodbath.
The likes of Toys R Us, Maplin and House of Fraser have collapsed this year, with several other retailers announcing store closure programmes.
Intu is behind 18 shopping centres across the UK, including the Trafford and Arndale Centres in Manchester, Lakeside in Essex and Metrocentre in Gateshead.
It's Merry Hill centre in Brierley Hill is set for £100 million of investment over the next few years, with a new cinema and more restaurant space. This summer it saw the opening of a major new Next store on the site of the former Sainsbury's supermarket while Primark is expanding to take over part of the former BHS store.
Intu's portfolio was valued at £9.58 billion as at September 30.
Last week, Mr Whittaker's Peel Group, Olayan and Brookfield Property tabled a £2.8 billion offer for Intu. Mr Whittaker is also the deputy chairman of Intu.
The consortium has been granted access to company documents for due diligence as it considers whether to make a firm offer.
The bidders must decide by November 1.
Between them, Peel Group and Olayan Group already hold 29.9% if Intu.
Intu added that it expects to take a 1.5% hit on rental income from high street failures that have marred the year.
In 2018, Intu expects like-for-like net rental income growth of up to 1% in 2018, while the aim is for 2% to 3% of growth per year over the next three to five years, although in 2019 Intu expects only 1% growth.
Occupancy has improved, it said, to 97% in September from 96.6% in June, while tenant demand has continued with 84 new leases signed in the third quarter compared with 73 in the same period a year earlier.
David Fischel, Intu's chief executive, 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 8 per cent above previous passing rent and have increased occupancy by 0.4 per cent to 97 per cent. 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 20 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."
He said the fall in property valuations between the end of June and the end of September "reflects current negative investor sentiment towards UK retail property".
"We are however confident our business and assets are resilient and can weather the challenges we are currently seeing."
