Retail landlords suffer £1bn loss after Intu hits record low

Almost £1 billion was wiped off the value of Britain’s biggest retail landlords yesterday after a shopping centre owner warned that it may need to raise equity in the face of fast-declining rental income and property values.

In the starkest sign yet of the fallout from the commercial pressures facing the retail sector, Intu Properties said that it was considering several “self-help” measures as it reported an £840 million first-half, pre-tax loss.

The owner of the Lakeside shopping centre in Essex and the Trafford Centre in Manchester said that net rental income had fallen by 18 per cent to £205.2 million in the six months to the end of June as a result of retailers falling into administration or using insolvency measures to close stores or cut rents.

The FTSE 250 group warned of more declines in rent in the second half of the year, before improving in 2020. The valuation of Intu’s shopping centres was reduced by 9.6 per cent, leading to a £872 million writedown, which in turn pushed it into the red.

The results shocked investors and its its shares fell 32 per cent to an all-time low of a little under 48p, wiping more than £300 million off its value.

Listed retail landlords were caught up in the sell-off. Hammerson, which this week reported a sharp fall in rental income and property values for its UK shopping centres, fell by 10 per cent; Capital & Counties fell 5.7 per cent; Newriver Reit, which owns shopping centres, retail parks and pubs, closed down 4.2 per cent. British Land and Landsec, FTSE 100 property companies with big retail holdings, lost 3.4 per cent and 3.5 per cent, respectively.

Intu was formed in 2010 from the demerger of Liberty International, which split its shopping centres business from its London property holdings. It owns 17 shopping centres in Britain and a handful in Spain, attracting 400 million shoppers a year.

It is trying to sell assets to reduce its £4.7 billion debt and limit the risk of it breaching its debt covenants because of falling valuations. It is also planning to introduce alternative uses to its shopping centres, including housing, hotels and flexible workspaces.

Primark demands landlords give them 30% rent cuts for not using CVAs

Primark is demanding that landlords cut its shop rents by 30 per cent after struggling high street chains used insolvency tools to slash theirs.

New Look, the Topshop owner Arcadia and Monsoon used company voluntary arrangements (CVAs) to close stores and reduce their bills.

CVAs have doubled in the past two years as bricks and mortar retailers have been caught out by the rise of online shopping. The CBI reported that retailers had recorded the longest period of falling sales for eight years.

Primark, which has so far resisted launching an online store, has 189 shops in the UK and made £7 billion of sales last year. In return for rent reductions, the discount fast-fashion retailer has been offering landlords lease extensions or an investment in store refurbishment. “We have a duty to our shareholders to maintain a competitive cost base,” Primark told The Sunday Times.

Its demand will add to the woes of Britain’s listed property companies, including Intu and Hammerson, which are facing investor scrutiny about the inflated values of shopping centres.

Next has secured average rent reductions of 29 per cent. WH Smith is paying no rent on a handful of stores while Julian Dunkerton, co-founder of Superdry, warned that if landlords did not agree to rent cuts he would shut shops. Hotel Chocolat’s founder, Angus Thirlwell, said “arrogant and dominant property owners” were now being forced to be more supportive of retailers.