Intu Properties PLC (LON:INTU) has warned it expects more UK retailers to fail this year, which will likely weigh on the amount of rent collected from its portfolio of shopping centres.
The Trafford Centre and Lakeside owner is now guiding for like-for-like net rental to fall by 4-6% in 2019, with most of the pain to be felt in the first half. It had previously expected a 1-2% dip in like-for-like net rental income.
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FTSE 250-listed Intu said the change in guidance was because it reckons the number of businesses seeking a company voluntary arrangement (CVA) – a controversial form of insolvency – will “run at a higher level” than in 2018.
Among those rumoured to be considering a CVA, which often results in terminated leases or reduced rents, is Philip Green’s Arcadia empire – the retail empire behind Top Shop, Burton and several other high street brands.
Department store chain Debenhams, which accounts for 3% of Intu’s payroll, announced its own CVA last week. Twenty-two stores are set to close as part of that deal, although none are Intu-owned.
As well as struggling existing tenants looking to renegotiate the terms of their leases, the landlord has also seen a slowdown in the number of new lettings in recent months, not helped by Brexit uncertainty.
Brexit uncertainty not helping
“We expect the remainder of 2019 to be challenging due to a higher than expected level of CVAs and a slowdown in new lettings as tenants delay their decisions due the uncertainties in the current political and retail environments,” said new chief executive Matthew Roberts, who took over the reins last week.
“As such, we have revised our approach to how we guide towards our year-end like-for-like net rental income to factor in expected CVAs and have adjusted our 2019 guidance accordingly to minus four to six per cent.”
Shares dropped 8.5% at the opening bell on Friday to 91.7p.