Merry Hill owner Intu plans £85 million revamp

The shopping centre's owner wants to improve its Brierley Hill mall amid concerns the impact of the closure of 10 BHS stores could reduce the level of rental income growth this year.

The group is to re-model the now vacant BHS store at the shopping centre.

It has announced a £350 million bond offering with part of the money raised to be used to finance the initiatives planned by 2018 to improve the shopping centre.

The group spent £410 million buying the 50 per cent of intu Merry Hill it did not previously own in June from the Queensland Investment pension fund in Australia.

It said it remained on target to deliver growth in like-for-like net rental income for 2016 in the range of three to four per cent.

A statement said: "We expect this momentum to continue in 2017 with good progress on lettings and rent reviews as set out in this statement.

"We also have opportunities to improve the tenant mix from re-letting the BHS stores and taking major stores back for re-modelling at intu Lakeside and intu Merry Hill.

"The void periods this creates could impact 2017 growth by two per cent to three per cent resulting in a lower level of aggregate growth in like-for-like net rental income than we expect to achieve in 2016."

Since the start of July the group has sold intu Bromley for £177.9 million and has agreed 67 new long term leases – 61 in the UK and six in Spain – for £13m of new annual rent.

Occupancy across its centres is 95.6 per cent, a reduction of 0.6 per cent from June.

It said new lettings in the year have more than offset the one per cent impact from the closure of BHS.

Year-on-year shopper numbers to date in the UK are up by 1.2 per cent.

Chief executive David Fischel said: "We continue to demonstrate the attractiveness of our top quality prime shopping centres to shoppers, to retailers and to global investors, with increased footfall, good progress on lettings and rent reviews and the disposal of intu Bromley at a consideration above June 2016 market value.

"The business has a pipeline of attractive organic investment opportunities in both the UK and Spain which will enhance intu's long-term growth potential."

Intu is at various stages of negotiations on letting eight of the former BHS sites and fully expects to re-let them through the rest of 2016 and in 2017 with an improved tenant mix.

The number of visits to the intu website continues to grow, with annual visits to the website currently running at 27 million

The group said that while the prospects for the UK economy are particularly unclear as the Brexit agenda is pursued, it continued to be positive about the performance of the intu business with stable footfall, occupancy over 95 per cent, good progress on lettings and rent reviews and strong momentum in its programme of active management and extensions.

The bond offering will also be used to fund the expansion of the company's centre in Watford, as well as provide financial resources to enable the company to pursue further projects such as the leisure extension at intu Lakeside, the redevelopments of intu Broadmarsh in Nottingham and Barton Square at intu Trafford Centre and the development of the intu Costa del Sol shopping resort.

The bonds will have a maturity date of November 1, 2022.