Lakeside-owner Intu to lay bare coronavirus rent crisis

Lakeside-owner Intu to lay bare coronavirus rent crisis
By: Business Posted On: March 25, 2020 View: 13

Lakeside-owner Intu to lay bare coronavirus rent crisis

One of Britain’s biggest shopping centre-owners will this week lay bare the scale of the crisis hammering retail landlords when it reveals that it received barely a third of the rent it was owed this week.

Sky News has learnt that Intu Properties, which owns Lakeside in Essex and Manchester's Trafford Centre, will disclose that the coronavirus pandemic has triggered a slump in its revenue - in what should be one of its most lucrative weeks of the year.

Retail industry sources said on Wednesday evening that Intu was preparing to disclose in a stock exchange announcement that it had received little more than 30% of the rent it was owed by tenants.

Shopping centre in Manchester is deserted shortly before coronavirus lockdown announcement from prime minister
Manchester shopping centre deserted
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The staggering decline in rent paid to Intu comes after revelations by Sky News during the past week that Sir Philip Green's Arcadia Group, which owns TopShop, the fast-food chain Burger King and B&Q-owner Kingfisher planned to withhold or restructure their rental payments on Wednesday's so-called quarter day.

Debenhams, Superdry and Primark are among the other chains which have disclosed that they would seek rent holidays of varying lengths as British non-food retailing becomes an online-only activity for the foreseeable future.

The closure of all non-essential shops as part of Boris Johnson's response to the COVID-19 crisis has left tens of thousands of stores mothballed across Britain for a period that could last several months.

It has also intensified the challenge confronting shopping centre-owners, which have already been under pressure from the accelerating shift to online shopping.

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Intu is an important player in some of the UK's largest regional economies.

The company employs 2,300 people directly, but a further 102,000 people are employed in its 17 UK shopping centres - a figure that equates to 3% of the total UK retail industry workforce.

Intu also owns Lakeside shopping centre in Thurrock, Essex
Image: Intu also owns Lakeside shopping centre in Thurrock, Essex

Another 30,000 work in Intu's broader supply chain.

At its Metro Centre mall in Gateshead, the headcount comprises 7.5% of the entire local workforce, while that figure rises to 8% at Lakeside.

Intu had been forced to warn that its future as a going concern was in doubt even before the pandemic hit the UK.

The company, which has been trying to raise £1.3bn in equity to strengthen its balance sheet, recently reported a £2bn loss.

It has a gargantuan debt pile of more than £4.5bn, while its equity is now valued by the stock market at just £51m.

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Intu's shares have fallen by more than 96% over the last year.

It is now trying to sell a number of its smaller UK shopping centres, as well as assets overseas.

Last week, a group of Intu's banks brought in advisers to prepare for negotiations about possible covenant waivers as it battles for survival.

The company's tenants have benefited from a range of emergency measures announced by the chancellor, Rishi Sunak, including a business rates holiday, VAT deferrals and a three-month moratorium on evictions by landlords if they fail to pay their rent.

Intu also announced earlier this week that it would reduce its service charges to retail tenants by 22% during the second half - making an 11% cut for the full year.

However, retail landlords such as Intu and rival Hammerson have yet to be afforded any specific assistance from the government.

"There just have not been sufficient measures to support landlords who are being hit by the catastrophic loss of rental income," a property industry source said.

"Companies like Intu are being squeezed by banks on the one side, and tenants on the other."

Intu's capital structure, with its shopping centre assets largely held through special purpose vehicles, makes a restructuring highly complex.

An Intu spokesman declined to comment.

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