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Shopping centre owner Intu bullish as Hammerson takeover looks shaky

Rhiannon Curry
Intu owns Manchester's Trafford Centre - Getty Images Europe

Intu has sought to defend its portfolio of shopping centres with a bullish trading update as it scrambles to save its planned £3.4bn tie-up with Hammerson.

Chief executive David Fischel said he was keen to “dispel myths” that have persisted about the quality of Intu’s portfolio, and which have caused Hammerson’s shareholders to express concern over the wisdom of the takeover.

Last week it emerged that Dutch pension fund APG had written to Hammerson chief executive David Atkins and chairman David Tyler saying it had “substantial concerns” over the deal, citing the current retail environment, increased financial leverage, and the potential that Intu would “dilute” Hammerson’s portfolio.

Intu brought forward its planned trading update by a week in order to reassure the market. Mr Fischel said the company had experienced “record retailer demand” and “strong operational performance” during the period.

In comments that could also be seen as Intu preparing to go it alone should the deal fall through, he pointed out that more than 80pc of its value in the UK is in 10 shopping centres, all ranked within the top 25 nationally.

“We have a substantial ongoing investment programme that will see us open our £180m extension at Intu Watford later this year and the £72m leisure extension at Intu Lakeside next year, with lettings proceeding strongly in both cases,” Mr Fischel said. “We are also planning to invest over £560m in our UK centres over the next three years.”

Intu’s board is still recommending a takeover of the group by rival Hammerson, which was initially given a boost last week when French company Klépierre walked away from its own potential offer for Hammerson.

But Intu will be keen to show investors that it is performing well in its own right, in case the tie-up with Hammerson fails.

The trading statement revealed that Intu had signed 60 leases during the first quarter, equating to £10m of annual rent, 5pc higher than the previous value, while occupancy of shops across the portfolio improved from 95.8pc last year to 96.1pc.

Intu’s rent roll is expected to reduce by £3.9m, or 0.8pc, this year due to the high number of retail casualties in recent weeks, including New Look and Toys R Us. But Mr Fischel said that he was not unduly concerned about the longer term performance of the business, or the company’s ability to relet space.

“The reality is that this is what we do for a living,” he said. “Tenants go bust - the trick as a landlord is to make sure that we can turn it to our advantage.”

Retail jobs

Analysts suggested that Intu was seeking to show the market that its shopping centre portfolio was dominant enough to assuage Hammerson's shareholders' fears.

But David Brockton, analyst at Liberum, said that it had “not convincingly demonstrated how the transaction can sustainably improve long-term growth prospects for the enlarged business”.

He added that by increasing the size of its UK portfolio, Hammerson only risked losing more ground to online retailers.

Shares in Intu were 0.43pc lower on Tuesday morning at 207p, while Hammerson’s shares were 0.57pc higher at 490.1p.