25th Oct 2016 08:55
LONDON (Alliance News) - Intu Properties PLC on Tuesday noted the lack of transactional evidence indicating a decline in prime shopping centre market values, after selling its Intu Bromley stake at a premium to its June 30 carrying value.
"Since the EU referendum vote on June 23, consumer confidence has remained robust and UK unemployment remains at low levels, but financial markets have been and are likely to continue to be turbulent," Intu said in a statement.
"Sentiment in the overall UK property investment market since the vote would indicate a small decline in market values across many sectors including retail property. However, little transactional evidence is available for prime UK shopping centres, and our disposal of Intu Bromley at a consideration above the June 2016 market value is indicative of the continuing investment demand in this sector," Intu added.
The FTSE 100-listed property group said it was selling the 63.525% stake it holds in the south London shopping centre to Alaska Permanent Fund Corp for GBP177.9 million, ahead of the GBP175.9 million June 30 valuation. The topped-up net initial yield based on market value at June 30 was 5.7%, Intu said.
As part of the transaction, Intu noted Alaska Permanent also acquired Aviva Investors' 21.475% stake in the centre, though it said the London Borough of Bromley was retaining its 15% interest and the freehold. Aviva Investors is part of London-listed insurer Aviva PLC.
The centre, which has an annual footfall of 20.0 million, will be managed by LaSalle Investment Management on behalf of Alaska Permanent, with completion of the deal expected before the end of the year.
Intu said the transaction was in line with its stated strategy of recycling capital into its GBP600.0 million UK development pipeline, and said it will repay from the proceeds the current bank debt secured on the asset of GBP95.8 million.
Following completion of the sale, cash and available facilities will be GBP616.0 million, and Intu will have a debt-to-asset ratio of 43.5%, compared to the current available facilities of GBP534.0 million and debt-to-asset ratio of 44.5%.
Also Tuesday, Intu noted active retailer demand for its properties since July 1, having secured 67 news long-term leases for GBP13.0 million of new annual rent. This is 4.0% above previous passing rent and in line with valuers' assumptions, the company said.
Intu settled 42 rent reviews in the period between July 1 and October 25 for new rents totalling GBP7.0 million, an average uplift of 8.0% on the previous rents.
Occupancy, however, declined 0.6 percentage point in the third quarter, to 95.6%, though Intu noted new lettings in the year have "more than offset" the 1.0% impact from the closure of department store retailer BHS. At the end of September 2015, occupancy stood at 95.5%.
Intu said there has been 10 BHS stores within its portfolio, but said it has since let the former-BHS unit at the Intu Metrocentre, Gateshead, and has acquired the long leasehold of a further unit at Manchester Arndale. The remaining units are at "various stages of negotiations", Intu said, adding that it expects to fully re-let them through the rest of 2016 and 2017.
Intu said its year-on-year footfall to date was up by 1.2% in the UK and added its UK development pipeline was on track. Intu said the GBP180.0 million Intu Watford extension, which is 60% pre-let, was progressing in line with its construction programme and should be opened in Autumn 2018.
In its Spain division, footfall and retailer sales were up 2.0% and 3.0%, respectively, for the third quarter, when compared to the prior year, and Intu reported encouraging lettings. Occupancy at its Intu Asturias centre was 99% at the end of the period and increased to 96% at its Puerto Venecia centre, the company said.
Intu said, as a group, it remains on track to deliver growth in like-for-like net rental income for 2016 in the range of 3.0% to 4.0%, and it said it expects this momentum to continue in 2017.
However, Intu pointed to the current opportunities it has to improve the tenant mix from re-letting the BHS stores and taking major stores back for remodelling at Intu Lakeside and Intu Merry Hill.
"The void periods this creates could impact 2017 growth by 2.0% to 3.0%, resulting in a lower level of aggregate growth in like-for-like net rental income than we expect to achieve in 2016," Intu said in the statement.
"We continue to demonstrate the attractiveness of our top quality prime shopping centres to shoppers, to retailers and to global investors, with increased footfall, good progress on lettings and rent reviews and the disposal of Intu Bromley at a consideration above June 2016 market value. The business has a pipeline of attractive organic investment opportunities in both the UK and Spain which will enhance Intu's long-term growth potential," said Intu Chief Executive David Fischel.
Shares in Intu were down 1.1% at 288.00 pence on Tuesday.
By Hannah Boland; [email protected]; @Hannaheboland
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
INTU.L