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Interim Management Statement for the Period from 1 July 2013 to 5 November 2013
INTU PROPERTIES PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: ITU
5 NOVEMBER 2013
INTU PROPERTIES PLC
INTERIM MANAGEMENT STATEMENT FOR THE PERIOD FROM 1 JULY 2013 TO 5
NOVEMBER 2013
David Fischel, Chief Executive, commented:
“We are encouraged by the positive impact of the launch of Intu and
our investment in infrastructure and teams. The national scale of
our operations is now apparent to retailers, national media partners
and local authorities. We have continued to drive our £1 billion
development programme, with a number of further planning
applications submitted, some notable approvals and works underway at
several centres.”
CONFERENCE CALL
A conference call for analysts and investors will be held today at
9.00 GMT.
A copy of this announcement is available for download from our
website at intugroup.co.uk
ENQUIRIES:
Intu Properties plc
David Chief Executive +44 (0)20 7960 1207
Fischel
Matthew Finance Director +44 (0)20 7960 1353
Roberts
Kate Bowyer Head of Investor Relations +44 (0)20 7960 1250
Public relations
UK: Michael Sandler/Wendy Baker, +44 (0)20 7796 4133
Hudson Sandler
SA: Frédéric Cornet/Cara White, +27 (0)11 447 3030
College Hill
Sponsor:
Merrill Lynch South Africa (Pty) Limited
Introduction
The wide-ranging positive change underway throughout Intu has
continued in the third quarter, as we have rolled out our new brand
and progressed our active asset management and development pipeline.
Our aim is to attract visitors from further, for longer, more often,
thereby reinforcing our centres’ status as priority locations for
retailers and driving long term value creation for shareholders.
Six months after launch, we are already seeing significant impact
from the intu brand. The full national scale of our operations is
now apparent to retailers, media partners and local authorities.
Shoppers are appreciating our innovative approach with refreshed
environments, high quality digital connectivity and a revitalised
customer service experience. Our teams are motivated around our
values, with new belief and commitment.
We have continued to drive our £1 billion development programme,
with a number of further planning applications submitted, some
notable approvals and works underway at several centres.
Also since July we have raised some £170 million of new financing
facilities to help fund the expenditure.
The UK retail environment has continued its gradual recovery, with
statistics showing a 15 month unbroken trend of increasing like-for-
like non-food retail sales. The IPD retail property capital value
index has turned positive for the last two months, not least due to
increased availability of funding for investment.
Trading update
We continue to see signs of recovery in the UK economy with a series
of positive retail sales figures and improved consumer sentiment
influenced by the better housing market and reduced expectations of
unemployment. Occupiers are beginning to show more confidence, with
continued strong demand from catering and leisure operators and
successful retailers taking the opportunity to upsize.
Key operating metrics:
• occupancy remains unchanged from June at 95 per cent by rent,
including one per cent of rent currently being traded by
administrators. There have been no significant tenant failures
in the quarter
• 57 long term leases were signed in the quarter; in aggregate
£11 million of annual rent and eight per cent above previous
passing rent (like-for-like units). This brings the total for
the year to date to 152 leases producing £33 million of new
annual rent, four per cent above previous passing rent. Five
significant transactions were signed in the period to
introduce flagship retailers with a view to improving the
rental tone over the medium term. Excluding these strategic
transactions, in aggregate new long term leases were in line
with valuation assumptions
Signings in the period include:
o a further £1 million of lettings at Cribbs Causeway. We
have now concluded leases for three quarters of those
expiring at this centre in 2013
o 11 new names to Intu centres, including “Size?” making
their shopping centre debut in the Platinum Mall at intu
Metrocentre
o two new lettings to Next, including a much larger store
at intu Uxbridge, following their recent flagship
investments at intu Watford, intu Braehead and intu
Trafford. In aggregate, Next now occupy over 650,000 sq
ft across our centres, a third more than in 2008 (like-
for-like centres)
• 48 new shops have opened in our centres since June, and 125 so
far this year which represent about five per cent of our 2,600
units. A further 30 stores are currently undergoing shop
fitting. Tenants have invested almost £70 million in stores
across the Intu portfolio in 2013, a significant demonstration
of their commitment
• the two per cent reduction in footfall we have experienced
this year is unchanged from June, when we also reported a one
per cent increase in estimated retailer sales (updated bi-
annually), and compares favourably to a four per cent
reduction in the national Experian benchmark
Development activity
We have made considerable progress with projects across the
portfolio. Planning applications have been approved for new
restaurants at intu Eldon Square, intu Bromley and intu Victoria
Centre and we have made applications for major leisure and catering
extensions at intu Watford and intu Lakeside:
• intu Watford: submitted planning application to redevelop and
integrate the recently acquired Charter Place into a
substantially refurbished intu Watford. The £100 million
development will provide new, larger unit retail space, a
cinema and leisure complex and a restaurant hub, significantly
increasing Watford’s draw as a wider regional destination.
Construction is expected to start in 2015 for completion in
2017
• intu Lakeside: started works on the £9 million refurbishment
of the food court. Demand for the units has been strong, with
terms exceeding our expectations. The new combination of
operators, including several international names, is expected
to significantly lengthen the average dwell time and spend in
the eating area and broaden the range to complement the casual
dining available on the Boardwalk. We have also applied for
planning consent for a major leisure development in the
waterfront area, to include an extended cinema, restaurants,
bowling, a fitness centre and night clubs
• intu Victoria Centre: planning consent has been received for
12 restaurants, part of the £40 million refurbishment
programme starting in Spring 2014, the first stage of our
intended investment in Nottingham. Our regeneration plans are
attracting new retail and catering names to the city, such as
Urban Outfitters who will soon be opening a major store in a
key outward-facing location next to the main entrance. The
second stage of our investment in Nottingham is expected to be
a major repositioning and upgrading at intu Broadmarsh, to be
followed by an extension of intu Victoria Centre. See our
video at www.intugroup.co.uk/where-we-do-it/our-centres/intu-
victoria-centre/nottingham-like-youve-never-seen-it-before/
• intu Eldon Square: planning consent received for a £17 million
(Intu share £10 million) development of over 20 restaurants
and in advanced negotiations with a number of catering
operators new to Newcastle
• intu Bromley: following a successful appeal, planning consent
obtained for our restaurant development enabling us to start
securing a line up of catering operators new to Bromley.
Attracted by the affluent catchment and planned £3 million
mall refreshment, new names such as The White Company and
Reebok have already committed to units in the centre
We are pleased with the momentum which we have generated this year
and, with a view to facilitating impending development starts, have
in this quarter increased units held vacant or on flexible terms.
Altogether 2.4 per cent of ERV is now held for development, about a
third of which is let on short term leases for flexibility. While we
foresee some pressure in the short term on underlying earnings from
these units held for redevelopment and from the tenant failures we
experienced in 2012 and earlier in 2013, we continue our focus on
delivering attractive long term overall total returns in the form of
income and capital appreciation from effective asset management.
Funding for our £1 billion pipeline of projects will include
recycling of existing assets as well as the possible introduction of
partners into major assets.
Parque Principado
In October we announced the €162 million acquisition with Canada
Pension Plan Investment Board (CPPIB) of Parque Principado, an
800,000 sq. ft. shopping centre in Oviedo, Northern Spain, one of
the country’s top 10 regional centres.
Key features of this transaction are:
• an initial yield of 7.2 per cent
• a projected equity investment by Intu of around €40 million,
as we intend to secure debt finance at around 50 per cent loan
to value
• earnings accretive
• the establishment of an operational presence in Spain without
diverting significant financial or management resources from
the UK
Combined with our joint venture with Eurofund, the founding investor
and developer of Puerto Venecia in Zaragoza, experience gained on
the ground will inform our assessment of the potential for returns
from the three development sites held under option on which the
joint venture is engaged. The sites are in Malaga, where we have
made good progress on developing a master plan, Valencia and Vigo.
Financing
Net external debt was unchanged in the quarter, at £3.6 billion on
30 September 2013. The net debt to assets ratio based on 30 June
2013 valuations was 48.6 per cent. On a pro forma basis, were the
convertible bonds to convert into equity, the net debt to assets
ratio would reduce to 44 per cent.
On 30 September 2013, the Group had cash and available facilities of
£363 million including £215 million undrawn on the revolving credit
facility. On 4 October, this was augmented by a new £42.5 million
three year facility secured on Barton Square, intu Trafford Centre.
The Group’s weighted average cost of gross debt remains 5.2 per
cent.
Nationwide consumer-facing brand and transformed digital proposition
We are encouraged by the positive impact of the launch of Intu and
our investment in infrastructure and teams. The national scale of
our operations is now apparent to retailers, national media partners
and local authorities. Shoppers are seeing a fresh approach in their
centre with improved physical, digital and customer service
experience. Our aim is to increase footfall, dwell time and spend,
with progress on several initiatives including:
• free, high quality Wi-Fi is now available at seven centres,
with a further two scheduled for launch by the end of 2013.
Enhanced footfall and dwell time analytics are being tested
which will give valuable feedback on how customers spend their
time in our centres. With more than half of registrants opting
to receive marketing communications, we are developing the
opportunity to provide shoppers with highly relevant messaging
• our multi-channel shopping centre, intu.co.uk, is in test mode
with 70 retailers. Around 40 more are currently being
integrated and test marketing is taking place ahead of a
consumer launch in 2014. This will coincide with the opening
of customer lounges at several centres which will offer click
and collect, changing rooms and return facilities
• building on our nationwide network of centres and
relationships with major partners such as Mercedes Benz, Sky,
Nintendo, Blackberry and Cadbury, we have created an in-house
sales team focused on introducing high quality promotional
activities to enhance the visitor experience
Property valuations
Investors continue to demonstrate a good level of interest for the
highest quality retail assets which is keeping yields firm and
underpinning valuations. With an improved range of funding sources
available, demand has now broadened beyond the most prime, with
capital values according to the IPD monthly index relating to all
retail turning positive after 25 months of falling values, and
increasing by 0.4 per cent in the third quarter. This has reduced
the fall in the index for the year to date from 1.1 per cent at 30
June to 0.7 per cent at 30 September (Intu six months to 30 June
2013 – increase of 1.0 per cent).
The next independent valuation of Intu’s assets will be undertaken
on 31 December 2013 and published with the results for 2013 in
February 2014.
Outlook
We are encouraged by the continuing signs of improvement in the UK
consumer environment. We are confident that the income foregone in
the short term by our approach of holding units vacant or on
flexible terms to enable a timely start on a number of projects
within our £1 billion development programme will be more than offset
by the significant enhancement to the long term total return of the
business from these projects. We remain focused on creating the
right mix of retail brands, with a broad range of leisure and dining
options, in an enjoyable environment, and remain confident that our
centres will benefit as increasing retailer confidence in due course
leads to increased commitment to the best locations.
NOTES FOR EDITORS
Intu Properties plc (formerly Capital Shopping Centres Group PLC) is
the UK’s market-leading developer, owner and manager of prime
regional shopping centres. Intu owns and operates some of the very
best shopping centres, in the strongest locations right across the
UK, including ten of the country’s top 25. Every one of the UK’s top
20 retailers is in Intu’s shopping centres, alongside some of the
world’s most iconic global brands.
With over 17 million sq ft of retail space valued at over £7
billion, Intu’s 16 centres attract some 350 million customer visits
a year and two thirds of the UK population live within a 45 minute
drive time of one of the centres.
At the forefront of UK shopping centre evolution since the 1970s
Intu’s focus is on creating compelling destinations for consumers
with added theatre.
On 15 January this year, the company announced the creation of a
nationwide consumer facing shopping centre brand – intu – and the
transformation of the Group’s digital proposition including a
transactional website, to provide the UK’s leading shopping centre
experience on and off-line.
Intu has a UK investment programme of £1 billion over the next ten
years on active management projects and major extensions at most of
the centres. Funding for this programme will include recycling of
existing assets as well as the possible introduction of partners
into major assets.
Intu also has interests outside the UK including an effective
interest of 9 per cent in Equity One, a US retail REIT, a 32 per
cent interest in Prozone, an Indian shopping centre developer, and a
joint venture in Spain for pre-development activity on three major
sites under option, in Malaga, Valencia and Vigo. In October 2013
Intu acquired, with a partner, a regional shopping centre in
Northern Spain for €162 million.
Over 80,000 people are employed at Intu centres across the UK and
the company is fully committed to supporting local communities and
the wider environment through meaningful and hands-on initiatives.
For further information see www.intugroup.co.uk
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