Earlier this week I had a conference call with a distressed debt purchaser about Intu.
Since my last blog, Intu has a new CEO, a new CFO and has sold a 50% stake in Intu Derby at a yield of 6.6%. That sale only reduced the LTV by about 1%. The Company has also provided guidance that current year rental income is forecast to fall by between 4% and 6% due to vacancies and tenant CVA’s.
Notwithstanding the dividend cancellation, Intu is constrained and will be for some time from investing in value accreting opportunities.
The planned sales in Spain will help but could be swiftly offset by further valuation falls in the UK portfolio. The falling rents, which also bring increased costs in rates and irrecoverable service charges will, in our view, almost certainly lead to further outward movement in yields. The forecast drop in rents and yield shift could easily see the portfolio lose a further 15 -20% in value through to the end of 2020.
The new CEO needs quickly to come up with a plan B to de-gear more aggressively to allow Intu to move forward and restore the REIT distribution, or it risks being on life support for many years to come.