Improving letting market helps boost Intu Properties

Intu Properties CE David Fischel.

Image credit: Financial Mail

In a trading update released yesterday, the company said it had signed 44 new long-term leases at its UK shopping centre portfolio in the first quarter of this year. That translates into additional rental income of £7m a year, which is 10% above the group's previous passing rental levels.

Intu owns 16 regional shopping centres in the UK including its flagship complex, intu Trafford, near Manchester.

"The continuing improvement in the letting market and overall performance at centre level are encouraging and we are moving forward strongly with our development projects,'' Intu CEO David Fischel said.

The group also owns two malls in Spain, Parque Principado in Oviedo and Puerto Venecia in Zaragoza, which were acquired in October 2013 and December last year respectively. The malls have shown strong footfall growth on an improving Spanish economy.

The company was now ready to seize other growth opportunities in Spain, Fischel said, with four more retail developments potentially in the pipeline.

That could place the company as a leading owner, developer and manager of major regional malls in Spain, which has until now been underdeveloped in terms of quality retail space.

"We are taking ownership of a site in Malaga where detailed discussions with key retailers and leisure operators are under way with the view to start construction on a 175,000m² shopping resort next year.

"We are also making good progress at our other sites under option in Valencia, Palma and Vigo,'' he said.

Intu's share price is 18% higher over the past year after a muted performance in the preceding two years in line with the depressed UK retail sales environment.

Nesi Chetty, head of property at Momentum Asset Management, said Intu was now well-positioned for future growth given continued improvements in the UK's letting market and stronger demand for space from retailers.

"Intu is at an inflection point in the UK property cycle where like-for-like net rentals should start to become positive again."

Chetty said Intu's extensive development pipeline, valued at about £1.3bn, strong balance sheet and available cash facilities meant the firm was ideally placed to benefit from further improvements in consumer sentiment.

It was encouraging that Intu's Spanish acquisitions had shown strong growth in retail sales and footfall, he said.

"The proposed Malaga development could add a significant yield to Intu's Spanish portfolio if management gets the right tenants," Chetty said.