Shopping centres could close if Intu falls into administration
Shopping malls including Lakeside in Essex and Manchester’s Trafford Centre could close their doors to shoppers if their landlord Intu goes bust.
The news comes just a week after non-essential retailers reopened after lockdown.
Intu has debts of about £4.5bn and is asking lenders to freeze interest and debt repayments.
If an agreement can’t be reached, the company could fall into administration.
Intu was already struggling before coronavirus struck, but its problems escalated when shops were shut due to lockdown and retailers demanded reduced rents or stopped paying rent altogether at closed sites.
Intu has been in discussions with lenders for some time and needs to reach agreement about credit facilities before a deadline of Friday 26 June.
The company is asking for a payment break on loan repayments for at least 18 months – but negotiations so far have pointed towards a break of just 15 months.
Discussions are also still ongoing about how the operations of individual centres could be funded.
A statement from Intu said: “Notwithstanding the progress made with lenders, Intu has also appointed KPMG to contingency plan for administration. In the event that Intu properties plc is unable to reach a standstill, it is likely it and certain other central entities will fall into administration.
“In this situation, all property companies would be required to pre-fund the administrator to provide central services to the shopping centres. If the administrator is not pre-funded then there is a risk that centres may have to close for a period.”
High street retailers struggling
An increase in online shopping had seen retailers closing outlets, even before coronavirus. This left a number of landlords, such as Intu, struggling to fill empty space. Where units are let, many retailers are finding it difficult to meet rent payments.
Statistics from the Office for National Statistics (ONS) show retail sales are well below pre-lockdown levels.
Sales partly recovered in May, driven by DIY stores and garden centres reopening amid the lockdown. However, despite the May boost, sales overall were still down by 13.1% compared with February, before the coronavirus lockdown measures were introduced.
Online sales rose to their highest proportion on record in May while consumers stayed at home. They accounted for 33.4% of total spending, compared with 30.8% in April, according to the ONS.
Colm Lauder, real estate analyst at Goodbody, says: “The future of Intu Properties remains uncertain as we wait to hear on whether it will secure standstill agreements across its structures from its creditors. If this is not secured it is likely that Intu along with some other central entities will fall into administration. KPMG have been appointed to contingency plan for administration.
“In such situations, property companies would be required to pre-fund the administrator to provide central services to shopping centres, with the risk that centres will have to temporarily close if this pre-funding is not agreed.”