Intu shares fall on plan to raise capital to fix the balance sheet

UK-BASED intu Properties fell more than 6 percent on the JSE yesterday after the shopping centre landlord announced that it was planning to raise capital with its annual results at the end of February.

But the share recovered quite dramatically and closed 1.88 percent higher at R4.34 on the JSE, as intu said in a market update that the planned capital raise was part of its efforts to fix the balance sheet.

“The company is engaged in constructive discussions with both shareholders and potential new investors on the proposed equity raise,” intu noted.

It said recent progress on improving the balance sheet included the announcement in December of the disposal of intu Puerto Venecia, the biggest shopping centre in Spain, for €475 million (R7 611m), with intu’s share at €238m, with the rest going to co-owner, the Canada Pension Plan Investment Board. The proceeds will be used to repay intu’s debt and reduce loan-to-value by about 1 percent.

intu owns several UK centres, including Lakeside in Essex and Manchester’s Trafford Centre, but is battling falling rents and company voluntary arrangements (CVAs), as well as falling property valuations.

Anchor Capital Property and Research head Craig Smith said the plan to raise capital was likely the cause of the (brief) share price decline.

True North Enhanced Property Fund portfolio manager Wim Prinsloo said there may have been a camp of shareholders who thought the company was over the worst, and the announcement had prompted them to sell their shares.

“This company is in serious trouble with debt. Even a £1 billion (R18.79bn) capital raise will only reduce the loanto-value to 50 percent, and ideally it should be less than 40 percent,” Prinsloo said.

Meanwhile, nearly £500m of assets were sold in 2019, with negotiations for the sale of intu Asturias, also in Spain, at an advanced stage.

intu chief executive Matthew Roberts said: “We have delivered a robust operational performance for 2019, finishing with a busy Christmas trading period. Total footfall in 2019 was 0.3 percent ahead of 2018, flat in the UK, which significantly outperformed the Springboard footfall monitor for shopping centres.”

Occupancy was stable at 95 percent, and 97 percent of rent had been collected for the first quarter of 2020.

“We are making good progress with fixing the balance sheet, our number one priority, and are confident we have the right strategy in place to enable us to prosper as we see continued polarisation between the best destinations and the rest,” said Roberts.