intu flirts with new cornerstone investor


intu flirts with new cornerstone investor

Published Date: 2020-02-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

intu flirts with new cornerstone investor

The debt-laden shopping centre owner says it is in discussions with Link REIT and shareholder Peel Group to back a cash call.

intu Properties says Peel Group and new investors including Hong Kong's Link Real Estate Investment Trust (REIT) are among investors it is engaging with to back an equity raise. It plans to release more details of the proposed rights issue alongside its annual results at the end of the month.

intu has been taking measures to rein in an overstretched balance sheet, including disposing of some of its UK and Spanish shopping centres. The sales have helped it reduce external debt, which sat at £4.71 billion at the end of its first half.

The UK's The Times newspaper earlier reported that Link REIT was one of the investors that would back a £1 billion cash call and would become a cornerstone investor, while Peel Group, which already owns about 27% of intu's shares, would also back the rights issue.

Peel Group was among a consortium of investors including Saudi conglomerate The Olayan Group and Canary Wharf owner Brookfield Property Group that abandoned a takeover of intu in November 2018 due to the weak fundamentals for UK retail property. Earlier in 2018, fellow shopping centre owner Hammerson scrapped a £3.4 billion takeover of intu, saying the opportunities it previously saw for value creation had diminished.

In November, intu warned of a big decline in rental income for its 2019 financial year and warned that it may resort to a rights issue to sort out its debt, sending its shares 20% lower on the day it made the announcement. It said it was considering all options to deal with its short and medium-term liquidity requirements, including disposing of assets and raising equity. It didn't pay an interim dividend for the six months to end-June in order to preserve cash.

intu's shopping centres have been affected by a number of retailers entering administration and company voluntary arrangements (CVAs), putting downward pressure on rentals. CVAs were slightly worse than expected in the three months to end-September and letting activity was slower as some customers delayed decisions due to continued political and economic uncertainty in the UK.

Last month, it and joint-venture partners Canada Pension Plan Investment Board sold the intu Asturias shopping centre in northern Spain to ECE European Prime Shopping Centre Fund II for €290 million, 3.6% above its book value of €280 million. That followed the sale of their jointly-owned Puerto Venecia shopping centre in December, with intu's share working out at €237.7 million. The sale of intu Asturias brought total disposals since the beginning of last year to nearly £600 million, including the part-disposal of intu Derby last July and sundry asset sales.

intu's shares closed 24% higher at R3.20 yesterday.

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