Intu Properties has said it is ready to take “robust action” against large tenants who have failed to pay rent owed during the coronavirus crisis.
The owner of the Trafford Centre in Manchester and Lakeside in Essex said it had collected 40% of the rent due by the end of March, up from 29% collected on the due date, and some tenants were refusing to enter talks to find a solution to unpaid bills.
Intu said: “There are a very small number of cases where customers are not currently engaging with us to find a consensual solution – these are large, well-capitalised brands who have the ability to pay but have chosen not to. In these instances we are prepared to take more robust action to enforce the legally binding terms of those leases.”
The company said it would consider legal action including sending statutory demands, a formal request for payment or winding-up petitions – a legal notice usually sent by a creditor to request that the courts close a company that owes it money – to the one or two tenants who were refusing to pay.
The government has banned commercial property landlords from taking legal action against tenants who have not paid their rent until 30 June, to protect retailers and other businesses during the coronavirus crisis.
However, the government has asked high-street retailers and other companies to “pay what they can” to their landlords, and Intu believes a couple of retailers are taking advantage of this situation.
The shopping centre owner is offering monthly rather than quarterly rent payments until the end of the year and has reduced its service charges, and it said it was negotiating rent payment plans with some tenants.
The indebted company also used the update to investors to announce it had agreed waivers with some of its lenders to prevent potential breaches as it struggles with plummeting rental income. Intu warned in late March it would breach the terms on its debt commitments after a collapse in retail rents.
Colm Lauder, a property analyst at the investment bank Goodbody, said the debt waivers would give Intu some breathing space. “While the waivers don’t give Intu much flexibility – lasting until June – they only pose weekly battles for the firm rather posing a long-term hurdle. This also signals a good likelihood that other retail landlords will benefit from covenants waivers,” he said.
Intu said all of its centres were operating on a “semi-closed basis” with only essential retailers remaining open. It has furloughed about 60% of its shopping centre staff and 20% at its head office.
The company has appointed a chief restructuring officer to help as it “works through its strategy to fix the balance sheet”. David Hargrave was previously a partner in the restructuring practices of the big-four accountancy firms PwC and EY.
Intu has been struggling for some time with its £4.5bn debt pile, and posted a loss of £2bn for 2019. Its share price has fallen by more than 90% over the past 12 months.
Even before the coronavirus crisis began, the company had been hit by a spate of retailers closing stores and restructuring, and had been forced to write down the value of its centres by nearly £2bn.
The company cancelled its emergency cash call at the start of March because of “extreme” market conditions as Covid-19 spread around the world. It had aimed to raise at least £1.3bn from investors.
