Highlights of the period:
• On target for a return to like-for-like net rental income growth for the year as a whole (H1 2015: -1.0 per cent) through improved lettings and rising occupancy.
• Continued improvement in retailer demand with 84 new long term leases agreed for £18 million of new annual rent, 11 per cent above previous passing. rent (year to date: 12 per cent above)
and in line with valuation assumptions.
• Occupancy increased by 40 basis points since 30 June 2015 to 95.5 per cent.
• Year-on-year footfall to date is marginally up in the UK and up 5 per cent in Spain, both outperforming their respective Experian benchmark.
• UK development pipeline on track with £60 million of developments completing at intu Victoria Centre and intu Potteries, where the cinema and restaurants are fitting out for their scheduled
openings in December 2015. On site at intu Eldon Square, intu Metrocentre and intu Bromley with restaurant developments.
• Completed the introduction of CPPIB as our partner at Puerto Venecia, Zaragoza, extending our partnership to two of Spain’s top ten shopping centres and releasing €113 million of funds for
• Way finding and offers app successfully trialled at the recent student nights before its national launch across all intu centres.
• Cash and available facilities of over £550 million and debt to asset ratio of 44 per cent at 30 September 2015.
David Fischel, Chief Executive, commented:
“The economic recovery is now more obviously rippling out from London and the South East to other regions of the UK and our prime centres across the country are seeing strengthening underlying retailer sales performance. As this translates into improved demand for space and rising occupancy, we look forward to a return to like-for-like net rental income growth for 2015 and are well positioned for a more meaningful uplift next year. We have successfully completed development projects in Nottingham and Stoke-on-Trent in the period and our investment programme continues to gather momentum both in the UK and Spain.”
Optimising the performance of existing assets
The Group’s operating metrics are improving as we start to close out vacancy and bring our development pipeline on stream (see below). We are on target, assuming no material tenant failures, that like-for-like net rental income growth in the second half of 2015 will more than offset the shortfall in the first half delivering a return to like-for-like growth for the full year.
In terms of lettings, 84 new long term leases were signed in the quarter, representing £18 million of new passing rent, in aggregate 11 per cent above previous passing rent and in line with valuation assumptions. This brings the total for the year to date to 191 new leases producing £35 million of new annual rent, 12 per cent above previous passing rent. Signings
in the period include:
• Five new leases with Kiko, continuing their UK roll out. They now have seven stores in intu centres, around a third of their overall UK portfoli.
• Leases at intu Trafford Centre and intu Merry Hill with New Look Men, a new standalone menswear concept launched by New Look with a plan to open five stores nationally this year.
• International entrants continuing to expand through intu with David’s Bridal signing its second UK store at intu Braehead and Victoria’s Secret adding to its nine existing locations with a
new store at intu Lakeside.
• 13 new restaurant lettings across the portfolio including Thaikhun at intu Metrocentre and intu Victoria Centre.
We settled 27 rent reviews in the period for new rents totalling £5 million, an average uplift of 7 per cent on the previous rents. Year to date, we have settled 105 rent reviews with new
rent totalling £24 million, an average uplift of 7 per cent on the previous rents.
Three units with a total rent of £0.1 million entered administration in the period. This is the lowest quarterly figure since before the start of the economic downturn some seven years ago.
Driving forward the UK investment programme
Our UK development pipeline is on track:
• At intu Victoria Centre, the £42 million mall refreshment and catering development is complete. This has delivered new brands to the centre such as Superdry, River Island, Kiko and Office and the first restaurant is now open for trade with further openings imminent.
• At intu Potteries, the £19 million fully let cinema and restaurant extension opens in December, stimulating an improved letting pipeline in the main centre.
• Catering developments at intu Metrocentre, intu Eldon Square and intu Bromley are on site creating over 30 new restaurants. Excellent letting progress has been made at all sites with intu
Metrocentre and intu Bromley scheduled to open fully let in Spring 2016, with the intu Eldon Square development due to open later in 2016.
• At intu Watford, we continue to see strong demand from both retail and leisure operators for the 400,000 square foot extension. With over 50 per cent of the project either exchanged or in
solicitors’ hands, we aim to commence site clearance and demolition before the end of the year.
• At intu Milton Keynes the council have resolved to approve our proposed 100,000 square foot enlargement of the existing centre bringing additional retail units, a boutique cinema and new
restaurants. This project represents a great addition to our development pipeline and will significantly enhance the standing of the centre
Making the brand count
• As an example of the increasing power of the intu brand, 130,000 students, representing an increase of over 20 per cent on the 2014 events, attended the recent student nights at 16 of our
centres. Through our nationwide brand and presence we could offer discounts exclusive to intu and partner with the likes of O2 across all centres.
• In September we previewed before its national launch our new app which provides in-centre way finding, personalised special offers and centre information in one easy to use service. The app
was developed by our in-house digital innovation team and takes advantage of our own high quality Wi-Fi infrastructure. It was successfully trialled at the recent student nights with all the
discounts available through the app.
• A further example of our scale and brand power was securing a partnership with MasterCard for the Rugby World Cup 2015. In-centre we delivered match related events and attractions including
match zones and on line launched a ‘Kick the Ball’ gaming app.
Seizing the growth opportunity in Spain
• The Malaga development project, intu Costa del Sol, remains on track for a start in 2016 with a number of design enhancements under evaluation.
• As previously announced, we completed the 50/50 joint venture of Puerto Venecia, Zaragoza with CPPIB, extending the partnership between Intu and CPPIB to include two of Spain’s top ten
• Both our centres continued to perform well in the period with overall occupancy improving to 97 per cent. Footfall at both Puerto Venecia and intu Asturias is up year-on-year, and we have
achieved quality new lettings at both centres at improved rental levels.