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British Land and Intu offer contrasting tales of property sector

The two companies own some of the largest shopping centres in the UK

Intu Properties PLC - British Land shopping centres
Up one side, down the other

While FTSE 100 property developer British Land Co (LON:BLND) was giving tenants a three-month rent holiday, rival shopping centre owner Intu Properties PLC (LON:INTU) tenants were seemingly forced to take the matter into their own hands as the coronavirus forces retailers to bring down the shutters.

Intu, the owner of the massive Trafford Centre and Lakeside shopping centres and a former FTSE 100 giant itself, said on Thursday that it is having to renegotiate its bank covenants as footfall and rents at its sites slump in the coronavirus crisis.

With all its UK and Spanish shopping centres operating on a semi-closed basis, with only essential stores open, the group received 29% of its expected rent for the second quarter compared to 77% this time a year ago.

This came on the same day that British Land, which owns the Meadowhall shopping centre in Sheffield and Ealing Broadway in London, came over all the benevolent capitalist, suspending its dividend payments in order to offer smaller shopping centre tenants a three-month rental holiday, with larger retailers and leisure tenants offered the choice of delaying payments across future years.

It did not say how much of its rents it had actually received, with only around 200 units open – or 12% of the total — though crucially retail is only 41% of total group portfolio by value.

Analysts at Liberum said Intu 29% of rents collected was “ahead of our expectations” as it they “had started modelling scenarios where zero rent is collected for a number of months”. 

“While this may be a positive read-across to other UK landlords, Intu needs all the cash it can get.”

Analysts at Peel Hunt pointed out that as British Land hasn’t announced how much rent they received, investors cannot tell if they received more, less or the same.

Indeed, as independent retail analyst Nick Bubb says, the issue is that British Land doesn't have the debts and the lack of headroom that Intu has, “so it can afford to be magnanimous with cafes and restaurants”.

“It didn't mention rents from mainstream/fashion retailers and the situation at BL's Meadowhall say should be no different from, say, Lakeside.

Bubb also says Intu has all its eggs in centres like Lakeside whereas Britsh Land own a lot of retail parks, where the non-rent payment issue “may be less of a problem”.

While Intu, which had rent payment issues last year during a surge of CVA's taken up by retailers, had £184mln of cash and facilities were available at the corporate level at the start of the week, and has cut back central costs and is reducing non-essential service charge costs for tennants, it is looking to the government’s £330bn support package to help its commercial tenants pay.

Intu’s covenant headroom is significantly lower than its peers, the Peel Hunt analysts noted, which is why it needs to seek covenant waivers and it is in talks with lenders and the government.

Maybe things would have been different if Intu hadn't turned down the merger with Hammerson (LON:HMSO) in 2018. 

Quick facts: Intu Properties PLC

Price: 4.37313 GBX

LSE:INTU
Market: LSE
Market Cap: £530.09 k
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