Intu Properties plc: 1st Quarter Results
8 MAY 2013
INTU PROPERTIES PLC
INTERIM MANAGEMENT STATEMENT FOR THE PERIOD FROM 1 JANUARY 2013 TO 8 MAY 2013
David Fischel, Chief Executive, commented:
"In the first quarter of 2013 we have launched the first UK nationwide prime shopping centre brand, acquired a major asset with considerable growth potential funded by an equity placing and refinanced a third of our debt to achieve a significantly extended maturity profile. Although the UK retail environment remains difficult we have strong momentum across the business, with the roll out of our digitally integrated customer experience and our £1 billion pipeline of development projects as we position each of our centres for medium term value creation."
The UK retail environment remains difficult with retailers continuing to be cautious in entering into store commitments. Intu's centres however continue to out-perform national benchmarks and attract new brands and flagship stores.
* Footfall in our centres during the period has been 1 per cent lower year to
date than 2012. This represents a significant out-performance of Experian's measure of UK national retail footfall which declined 4 per cent reflecting the weak economic background * Occupancy across our centres remains high at 95 per cent, down 1 per cent from 31 December 2012 due to expiry of seasonal lettings (31 March 2012 - 95 per cent). In aggregate units amounting to three per cent of rent are currently being traded by administrators and are treated as occupied within the 95 per cent
* 33 new long term leases were signed in the quarter, representing £8 million
of new passing rent, in aggregate 2 per cent above previous passing rent and in line with valuation assumptions. These include: * + £3 million of new lettings and renewals at Cribbs Causeway, Bristol, a significant portion of the 2013 expiries at the centre and including Arcadia and Aurora brands + Urban Outfitters are to open at intu Victoria Centre in Nottingham, demonstrating confidence in recently announced refurbishment plans + improving our catering mix, including introducing Wagamama at Cribbs Causeway, Ed's Diner at intu Metrocentre and Circle 360 Champagne Bar at intu Lakeside
* To date tenants have committed to investing around £30 million in 2013 into
new shopfits for stores in our centres
Midsummer Place acquisition In March we acquired Midsummer Place, Milton Keynes, a key strategic asset for Intu. The £250 million acquisition was financed by an equity placing. Midsummer Place is a high specification, well-let centre with a modern configuration of retail units. The centre opened in 2000 adjoining the town's original "thecentre:mk". Milton Keynes is a thriving location and one of the UK's leading regional shopping centre destinations. We are confident that the highly accessible centre in an affluent catchment will generate significant rental income growth in a three to five year timeframe with planned active management projects. Financing As announced in February, we have established a new debt funding platform by contributing £2.3 billion of assets into a flexible, ring-fenced security pool and raising £1.15 billion of bond and bank debt secured on it. The inaugural bond issue was highly successful with strong demand supporting upsizing to two tranches of `A' rated debt totalling £800 million with the balance of £350 million provided by a five year bank loan. The transaction represents the first sterling multi-debt sourced real estate structured financing since 2007. Key benefits of the structure are: * access to the bond markets and a range of other instruments diversifies our sources of funding * blended cost of 4.4 per cent, in line with previous funding cost of debt secured on the four assets, whilst extending the weighted maturity on these assets from 2 years to 10 years * tranches of £450 million and £350 million maturing in 2023 and 2028 respectively significantly extend our overall debt maturity profile, from 6 years to 8 years * in refinancing a third of the Group's debt, we have significantly de-risked the 2015-2017 maturities and demonstrated that our prime assets can be financed at around 50 per cent loan to value at competitive margins
Following the acquisition, the equity placing and the refinancing, net external debt was unchanged at £3.5 billion at 31 March 2013 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.
Nationwide consumer-facing brand and transformed digital proposition
We announced in January the creation of intu, a nationwide consumer facing shopping centre brand, now the prefix for our shopping centres as well as the name of the company. Our aim is to generate stronger relationships with customers by providing them with a better experience in a dynamic, engaging and digitally-enabled retail environment.
As the traditional boundaries of online and offline shopping experiences are becoming more blurred, a key part of our plan is to integrate physical and digital retailing:
* we are the UK's first landlord to commit to large scale investment in
directly owned fibre optic networks in our shopping centres, giving direct ownership of the WiFi technology and the subsequent data * the roll out of this £8 million digital infrastructure plan has begun in the period, with the launch of high quality free WiFi throughout the malls of intu Trafford Centre and intu Lakeside, with intu Eldon Square and intu Braehead to follow in the next few months * we are also investing up to £10 million over three years in a transactional, fashion focused, mobile enabled website. This will be launched in summer 2013 to coincide with the provision of free WiFi to a significant proportion of our shoppers and will launch with multi-channel capability including click and collect services at our centres * in addition, we have signed a partnership with Wireless Infrastructure Group to install networks to support multiple mobile operators' 4G services in what is thought to be the first for UK shopping centres
These innovations put us in a strong and flexible position to benefit from changing shopping habits.
In addition, since our announcement in January we have commenced the roll out of the new brand with considerable change taking place within our centres particularly in terms of signage and customer service and we have launched a number of nationwide marketing initiatives. The consumer roll out will continue for 18 months.
Our view is that for a shopping centre to thrive it needs to trade into the evening, providing the extended shopping hours which our customers want and a wider range of catering and entertainment options. Our £1 billion pipeline of organic developments over 10 years, including major extensions at intu Lakeside, intu Braehead and intu Victoria Centre, is focused on projects which position each of our centres as broader destinations, providing top retailers and iconic brands along with a mix of leisure. Significant progress in the period includes:
* Watford: we have acquired the Charter Place precinct adjacent to intu
Watford and are preparing a planning application for submission later this year for its redevelopment and integration to create a 1.4 million sq ft destination. The proposed cinema, restaurants, food store and large format retail units will significantly enhance Watford's overall retail, entertainment and leisure offer and will help in attracting additional
major brands to the town. Our plans to invest around £100 million from 2014
in the combined centre have already attracted significant retailer interest in both the new space and the existing centre, including a new 32,000 sq ft flagship store for Next to open by Christmas 2013 * Nottingham: we have released the designs of a major refurbishment of intu Victoria Centre including impressive new entrances, reconfiguration of space around the Central Square and new ceilings, flooring and lighting. These have been well received both locally and by existing and potential retailers, with several discussions now underway with brands not currently represented in the City. Our planned redevelopment of Broadmarsh, focusing on leisure and catering, followed by the extension of intu Victoria Centre should see Nottingham reclaiming its rightful place in the UK retail hierarchy * Intu Eldon Square: work is progressing well on our refurbishment programme and we are close to submitting a planning application for a cluster of 20 restaurants. These are attracting good operator interest and work could commence in the first half of 2014 * Intu Trafford Centre: Next's expansion into adjacent units to create a 40,000 sq ft flagship store is on plan, with the first phase successfully opening in March. The £6 million investment by Sealife in an aquarium attraction at Barton Square is on target for opening next month
We have established a joint venture in Spain (up to €5 million investment) with Eurofund, a local partner with a track record of successful retail development, for pre-development activity at two sites, in Valencia and Vigo, with potential for regional shopping centres. We are also working with Eurofund on the masterplan for the site of a potential major regional shopping centre in the province of Malaga over which Intu holds a purchase option until 2015.
The pace of activity at Intu has accelerated in 2013 with significant progress in the first quarter. In addition, a range of initiatives is underway across the business which we believe will strengthen our national position as well as reinforce each of our assets in their individual catchments. Tenant failures, lease expiries and tenant caution over new store commitments remain risk factors likely to continue to impact short term earnings. However, we are driving medium term value creation by using our focus, scale and specialism to maximise the opportunities available to us in the changing marketplace.
A conference call for analysts and investors will be held today at 9.00 BST.
A copy of this announcement is available for download from our website at intugroup.co.uk
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
UK: Michael Sandler/Wendy Baker, Hudson +44 (0)20 7796 4133
SA: Nick Williams/Vanessa Hillary, College +27 (0)11 447 3030
NOTES FOR EDITORS
Intu Properties plc (formerly Capital Shopping Centres PLC) owns and operates some of the very best shopping centres, in the strongest locations right across the country, including ten of the UK's top 25. You can find every one of the UK's top 20 retailers in our shopping centres, alongside some of the world's most iconic global brands.
With 16.6 million sq ft of retail space valued at over £7 billion as at 31 December 2012, our centres attract over 320 million customer visits a year and two thirds of the UK population live within a 45 minute drive time of one of our centres. Since 31 December 2012, Intu has acquired Midsummer Place in Milton Keynes, adding over 400,000 sq ft of further space and 17 million annual customer visits.
At the forefront of UK shopping centre evolution since the 1970s our focus is on creating compelling destinations for consumers with added theatre. On 15 January this year, we announced the creation of a nationwide consumer facing shopping centre brand - intu - and the transformation of our digital proposition including a transactional website, to provide the UK's leading shopping centre experience on and off-line.
We have an investment plan of £1 billion over the next ten years on active management projects and major extensions 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.
We changed our name from Capital Shopping Centres Group plc to Intu Properties plc on 18 February 2013.
For further information see www.intu.co.uk
-0- May/08/2013 06:00 GMT