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Interim Management Statement for the period from 1 January 2014 to 8 May 2014
INTU PROPERTIES PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: ITU
8 MAY 2014
INTU PROPERTIES PLC
INTERIM MANAGEMENT STATEMENT FOR THE PERIOD FROM 1 JANUARY 2014 TO 8
MAY 2014
Highlights of the period:
• Acquired 2 more top 25 UK shopping centres in £868 million transaction, funded by
£500 million rights issue and asset-specific debt facilities
• Occupancy remains high at 95 per cent
• Footfall year to date 1 per cent higher than same period of 2013
• 50 new long term leases agreed for £8 million new annual rent, 5 per cent above
previous passing rent and in line with valuation assumptions
• Projects underway at intu Lakeside (foodcourt), intu Potteries (cinema and
restaurants), intu Eldon Square (mall upgrade), intu Victoria Centre (restaurants and
reconfigurations), progress with intu Watford Charter Place extension
David Fischel, Chief Executive, commented:
“We are delighted to have concluded such a significant transaction, reinforcing our position
as the leading owner, developer and manager of top UK shopping centres, with intu Derby
and intu Merry Hill increasing our national coverage of branded centres. Investor interest in
quality UK shopping centres has strengthened in the period. The strong momentum of our
development projects continues, with signs of increased retailer interest as the UK retail
environment continues to improve, particularly for space in those centres where investment
and improvement projects are underway or imminent.”
Acquisition
We announced last week that we had completed the £868 million purchase of interests in
two top 25 UK shopping centres and a retail park funded by a 2 for 7 rights issue raising
£500 million (gross) and £424 million of new debt facilities secured on the properties.
The acquisition of a further two prime shopping centres is in line with our strategy to focus on
the UK’s largest and most successful destinations and establishes a partnership with QIC, a
major global investor, at Merry Hill. It strengthens Intu’s position as the leading owner,
developer and manager of prime UK shopping centres, fills gaps in our national coverage
and extends the footprint of our nationwide consumer facing brand:
• intu Merry Hill and intu Derby, as they are now known, are being rebranded with
intu’s signage, website, uniforms and World Class Service approach
• at intu Merry Hill, we are confident that our active asset management, particularly
repositioning the tenant line-up, increasing the catering and leisure offer and
improving the mall environment, should deliver significant rental growth over the
medium term
• intu Derby provides an attractive income return, with potential for capital growth from
yield compression
• Sprucefield provides the potential for further retail development at a relatively low
initial capital cost
The transaction is expected to be accretive in terms of earnings per share in 2014 and was
structured in line with the Group’s overall capital ratios:
• combined annual rent at the date of acquisition was around £55 million (Intu share)
before anticipated annual outgoings and administration costs of around £4 million
• gross properties of £7.6 billion at 31 December 2013 augmented to £8.5 billion
(illustrative, adding acquired assets at valuation on date of transaction)
• three new 2 ½ year debt facilities, each secured on one of the properties at a
weighted loan to value ratio of 49 per cent. The weighted average all-in cost is 2.5
per cent for the first year, stepping up by 50 basis points after a year and every six
months thereafter
Trading update
The UK retail environment has continued to improve, with another quarter of positive like-for-
like non food sales, a fifth consecutive quarter of GDP growth and improving consumer
confidence with the first above-inflation rise in wages for several years.
We are beginning to see areas of increased interest from retailers, including for new brands
and flagship stores, particularly in centres where we have been or have plans for investing.
The Group’s operating metrics are broadly stable:
• Footfall for the year to date is one per cent higher than the same period of 2013,
ahead of Experian’s measure of national retail footfall which is unchanged year on
year
• Occupancy across our centres remains high at 95 per cent (31 December and 31
March 2013 - 95 per cent). There were no significant tenant failures in the period. In
aggregate units amounting to one per cent of rent are currently being traded by
administrators and are treated as occupied within the 95 per cent
• 50 new long term leases were signed in the quarter, representing £8.1 million of new
passing rent, in aggregate five per cent above previous passing rent and in line with
valuation assumptions. These include:
o 13 new catering lettings, including Five Guys now open at intu Trafford Centre
and soon to open at the newly refurbished intu Lakeside foodcourt,
Carluccio’s in newly converted space at intu Bromley and intu’s first Tortilla at
intu Watford
o a first letting in an intu centre to Michael Kors at intu Trafford Centre
o new brands to individual centres such as Kuoni at intu Braehead, Hugo Boss
at intu Chapelfield and Fat Face and Hotter Shoes at intu Watford
• We have initiated “Tell intu”, the first customer feedback programme of its kind in the
shopping centre industry, which attracted an overwhelmingly positive response in its
first two months. We will be able to respond quickly to issues, identify trends, reward
and spread best practice and benchmark a “net promoter score” against other
consumer-focused businesses
• The installation of fibre-optic backbone at intu Watford and intu Potteries is now
complete with high quality Wi-Fi now available at 11 centres. Total connections are
now approaching three million with well over half of registrants opting to receive
marketing information
Investment market
As announced in March, we have signed non-binding heads of terms to form a joint venture
in respect of intu Uxbridge. The third party investor would acquire 80 per cent of the centre
for a small premium to book value with Intu retaining 20 per cent and continuing to manage
the asset. While there can be no certainty that a transaction will be concluded, the process
continues satisfactorily.
The investment market has had a positive start to the year, with IPD retail capital values
continuing to rise. There appears to be good investment demand, particularly from overseas
investors, for better quality shopping centres and evidence of demand moving beyond
London and the South East to other regions of the UK.
Financing
Net external debt was unchanged at £3.7 billion at 31 March 2014 and the debt to assets
ratio (based on 31 December valuations) was 48 per cent. On a pro forma basis, were the
2.5 per cent convertible bonds 2018 to convert into equity, the net debt to assets ratio would
reduce to 44 per cent.
Overlaying the impact of the rights issue and acquisition, illustrative net external debt at 31
March 2014 would have been £4.1 billion and the debt to assets ratio would not have been
significantly different.
On 30 April 2014 our partnership with CPPIB signed a €95 million 5 year term loan with
HSBC secured on Parque Principado, Asturias, Northern Spain, at an attractive all-in cost
(Intu’s share €47.5 million).
Cash and available facilities amounted to £476 million at 31 March 2014 and on a pro forma
basis, after the rights issue, acquisition and Parque Principado loan, would have been
around £540 million.
Development activity
• intu Lakeside: we have received consent for our £80 million leisure development.
Phased construction, expected to start from 2015, will provide a wide range of new
leisure and restaurant uses such as ten-pin bowling, family restaurants, a health and
fitness centre, a night club, a comedy venue and a hotel
• intu Bromley: as well as the Queen’s Garden restaurant terrace soon to be
constructed, we have submitted a planning application to create a cinema-anchored
leisure development with a cluster of restaurants to provide more choice and variety
for the highly affluent catchment
• intu Potteries: with pre-lets including the cinema anchor securing two thirds of the
income, we have started construction of the leisure development
• intu Eldon Square: our mall upgrade is close to completion, with an impressive new
entrance now open, and has increased the level of interest from quality retailers such
as Lakeland, to open this month, and several catering operators new to the region
• intu Victoria Centre: we have started works which will include 12 new restaurants and
a striking new entrance near the historic Clock Tower
• intu Watford: we are close to exchanging contracts for the cinema and have
embarked on pre-development activities before commencing the £100 million leisure
and catering led redevelopment of Charter Place
Conference call
A conference call for analysts and investors will be held today at 8.30 BST.
A copy of this announcement is available for download from our website at intugroup.co.uk
ENQUIRIES
Intu Properties plc
David Fischel Chief Executive +44 (0)20 7960 1207
Matthew Roberts Finance Director +44 (0)20 7960 1353
Kate Bowyer Business Relations Director +44 (0)20 7960 1250
Public relations
UK: Michael Sandler/Wendy Baker, Hudson Sandler +44 (0)20 7796 4133
SA: Frédéric Cornet, College Hill +27 (0)11 447 3030
NOTES FOR EDITORS
Intu owns and operates some of the very best shopping centres, in some of the strongest locations right across
the country, including twelve of the UK’s top 25. You can find the UK’s top retailers in our shopping centres,
alongside some of the world’s most iconic global brands.
With over 21 million sq ft of retail space, our centres attract over 400 million customer visits a year and more than
two thirds of the UK population live within a 45 minute drive time of one of our centres.
At the forefront of UK shopping centre evolution since the 1970s, our focus is on creating compelling destinations
for customers with added theatre.
Our nationwide consumer facing shopping centre brand - intu - is transforming our customer experience and
digital proposition, including a transactional website with a view to providing the UK’s leading shopping centre
experience both on and off-line at 15 centres.
We have an investment plan of £1.2 billion over the next ten years with projects at most of our centres.
Over 80,000 people are employed at our centres across the UK and we are fully committed to supporting our
local communities and the wider environment through meaningful and hands-on initiatives.
For further information see www.intugroup.co.uk
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
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