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Intu warns on income as CVAs, used to reshape store estates in the light of online growth, pass its expectations

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Intu today said it expected its rental income would be down in its full-year, amid a “challenging” time for stores in a retail environment and higher than expected levels of CVAs, used by retailers to reshape their store estates as retail transactions move further online.

The shopping centre business warned in a trading update, that it now predicted like-for-like rental income would fall by between four and six per cent in its full-year, after a period in which large numbers of retailers have put CVAs (company voluntary agreements) into place. Retailers from New Look to Mothercare and most recently Debenhams have used CVAs to reduce both the number of stores that they operate, the rents that they pay, and the length of time to which they are committed to those stores. Recent LDC figures put the overall figure at more than 1,000 in the first quarter of this year alone. Intu said the closure of stores including some New Look Men and HMV stores had been a factor in a fall in its overall occupancy as of March 31 to 95.6% from 96.1% a year earlier. 

Matthew Roberts, incoming chief executive of Intu, said his focus would be on reducing Intu debt levels, with a priority of reducing its overall loan-to-value to under 50% from 53.1% as of December 31 3018. The task that has started with the sale of a 50% interest in Intu Derby for £186m, a deal that is expected to reduce loan-to-value by about 1%. The business also aims to sell or and part-sell assets both in the UK and Spain. 

He said that while the business was seeing “good letting activity” with 53 long-term leases worth £6m a year signed in the opening of the year, between January 1 and May 2, it expected the rest of the year to be difficult.

“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 to uncertainties in the current political and retail environments. As such, we have revised our approach as to how we guide towards our year-end like-for-like 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.” 

Intu said that none of the 22 stores that Debenhams has earmarked for closure through its own CVA proposals, are in intu centres, despite the department store accounting for 3% of Intu’s rent roll.

It also pointed to the arrival of new types of tenant in its shopping centres, from Namco’s mini-golf and climbing, through to the Metro Bank and the Market Halls communal dining business, which has opened its first venue outside London at Intu Lakeside.

Image courtesy of Intu

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