These South African investors will be hurting after a large property company lost 30% of its value in one go
- The UK and Spanish mall owner Intu, which is listed on the JSE, has plummeted by almost 30%.
- The company's rental income fell by almost 8% in the past six months.
- Some of its major SA shareholders are Coronation and the Public Investment Corporation.
- For more stories, go to Business Insider SA.
The UK mall owner Intu – long a favourite of South African investors wanting offshore exposure – has had almost 30% of its value wiped out on Wednesday.
The company, which owns 17 of the largest shopping centres in the UK as well as a number of Spanish malls, reported that its rental income for the six months to end-June fell by 7.7%. The company is listed in London and on the JSE, where its share price fell by almost 30% to 893c by Wednesday afternoon.
Intu's interm results as bad as expected. EPRA NAV fell 19%, UK asset values down 10.4%. Like-for-like net rental income was down 7.7%. Guidance for rental growth of -4% to -6%. LTV increased to 57.6%. Outlook remains grim.— Garreth Elston (@Africanadian) July 31, 2019
Intu is caught in a death spiral of negativity, says Garreth Elston, chief investment officer at Reitway Global, a specialist manager of global property investments.
It has mounting problems, primarily that it has a "substantially sub-optimal balance sheet" with a debt structure that truly complicates its ability to emerge from its current predicament, says Elston.
"Then when you add in changes to consumer consumption patterns, including that more people are shopping online, and that large retailers have closed branches in some of Intu’s malls it becomes clearer how deep the company’s predicament is." Also, large chains (including New Look, Toys R Us, House of Fraser, Debenhams and HMV) have either gone out of business, or negotiated lower leases as part of insolvency agreements.
Of late, its position has been worsened by large losses on the pound, as the prospect of a no-deal Brexit (the UK leaves the EU with no agreement on trade tariffs) becomes more likely, says Elston.
UK retailers will be among the hardest hit as the prices of imported goods become more expensive. Consumers, who will be under increased pressure, will cut back spending, Elston predicts.
“So, on top of Intu’s own considerable baggage, the situation in the UK is now taking its toll– with very few positive catalysts on the horizon.”
A recent shareholder register shows that its main South African shareholders included:
- Coronation (a 16.99% holding in Intu)
- The Public Investment Corporation, which manages civil servant pensions (5.9%)
- Sanlam Investment Management (1.2%)
- Investec Asset Management (1.02%)
- Old Mutual (0.6%)
- Stanlib (0.5%)
- PSG (0.4%)
Elston says many Intu investors, especially those with large positions, have been stuck in the shares, waiting for takeover bids so they could exit at an acceptable price. A number of bids for Intu have failed in recent months.
Still, he thinks that the price will eventually reach a level that will attract a buyer, most likely a private equity group.
“But at the moment, with all the economic risks in the UK, you have to be willing to accept a lot of risk.”
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