Shopping centre owner Intu is expecting to report a sharp drop in rental income for 2019 after a higher-than-anticipated volume of insolvencies from its occupants.
Shares in the group tumbled 13 per cent after the bell this morning as the real estate giant revealed that it might have to sell off assets or make a cash call.
The retail landlord said today that it was forecasting like-for-like net rental income for 2019 to be down by roughly nine per cent compared to last year, with more than half the reduction coming from the impact of controversial cost-cutting insolvencies known as company voluntary arrangements (CVA).
Retail giants including Sir Philip Green’s Arcadia and Monsoon have both embarked on CVAs to close stores and cut jobs amid an industry downturn.
New rent in the nine months to 30 September 2019 hit £19m, falling from £32m during the same period last year.
However, footfall rose 0.9 per cent, “significantly outperforming Springboard footfall monitor for shopping centres which was down on average by 2.4 per cent”, the group said.
During the third quarter, Intu agreed 47 long-term leases amounting to £5m in annual rent, compared with 84 leases equalling £15m in annual rent in the same period a year ago.
“In the last quarter, we have continued to face challenging market conditions along with the rest of the sector. In particular, CVAs were slightly worse than expected,” said chief executive Matthew Roberts.
He added: “In the face of these challenges, there is much that gives me confidence about intu. Many of our top customers are global, well capitalised businesses and having visited 17 intu centres in recent weeks, there is a very different feeling on the ground to the one we read about regularly.
“Our centres are busy with footfall and occupancy significantly above the industry benchmarks. We know we have the best centre in each city and region that we operate.”
Read more: City AM’s Property of the Week
Shares in the Lakeside and Trafford Centre owner have tumbled more than 75 per cent this year, with Roberts vowing to turn around the business after replacing David Fischel as chief executive in April.
More to follow