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

Vintage clothes shop

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.