Home Intu suffers as commercial tenants withhold rent
March 26, 2020
Intu received less than a third of the rent it was owed by tenants on Wednesday, pushing the struggling shopping centre owner closer to collapse and highlighting the impact coronavirus is having on the UK’s largest commercial landlords.
The company, one of the UK’s biggest shopping centre owners, said it had received just 29 per cent of the rent it was due for the second quarter of the year, down from 77 per cent for the same period last year.
Matthew Roberts, chief executive, warned Intu would need some waivers from its lenders and was likely to breach its debt covenants in July. The low rent take meant it was also facing issues with interest cover, which was 1.67 times at the company’s full-year results on March 12.
Intu is saddled with more than £4.5bn of debt and failed in its attempt to raise £1.5bn of equity this month.
Mr Roberts said the collapse in rental income “just brings forward the conversations we were having with banks anyway”.
All UK shops except essential stores such as supermarkets and pharmacies were forced to shut on Monday, as the government elevated its response to coronavirus. Intu’s tenants Primark, the fashion chain, and department store group Debenhams were among the businesses that said they had no intention of paying rents, leaving retail landlords to pick up the cost.
Mark Robinson, head of shopping centre investor Ellandi, expected most landlords would have seen a similar rent take to Intu, the bulk of which would have come from the essential shops that are still open. Some had received less than 10 per cent of due rent, he added.
Shares in Intu plunged 11 per cent in the first hour of trading on Thursday to 3.6p, leaving it with a market capitalisation of just over £40m. In the year to date, its shares have shed close to 90 per cent of their value.
The group, which owns the Trafford centre in Manchester, is considering selling some of its 17 shopping centres, but willing buyers would be scarce, said Robbie Duncan, an analyst at Numis. “People buy these assets for yield, which will be very low for the next year or two.”
Mr Roberts added that the company was finding out whether it could “find a way to be cut into that £330bn package announced by the government last week.”
British Land, another big commercial landlord, with roughly 40 per cent of its tenants in retail, announced it was cutting its dividend and waiving rents for smaller businesses on Thursday.
“The government has, rightly, squeezed the toothpaste to a different bit of the tube — from retailers to landlords,” said Chris Griggs, British Land chief executive. The property owner has extended its revolving credit facility and has £1.2bn in undrawn cash as a result, he said.
“This is fine as a temporary move, but you can’t expect landlords to do this forever. You will have very strong businesses not paying rents to relatively small landlords. Those landlords have loans to pay, he added.”
Capital & Counties, or Capco, the Covent Garden landlord, announced it was suspending its share buyback scheme and focusing on preserving cash on Wednesday.
“I think this might catalyse a stimulus package for the sector. There’s so much stimulus thrown at the whole economy, why should one sector take the pain?” said Mr Duncan.