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
www.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 Head of Investor Relations +44 (0)20 7960 1250
Public relations
UK: Michael Sandler/Wendy Baker, Hudson Sandler +44 (0)20 7796 4133
SA: Frédéric Cornet/Cara White, College Hill +27 (0)11 447 3030
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:
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
11 new names to Intu centres, including "Size?" making their shopping centre
debut in the Platinum Mall at intu Metrocentre
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