Merry Hill owner intu warns it will struggle to see growth
Shopping centre group intu, owner of the Merry Hill centre, has warned it is unlikely to see any growth in its rental income this year.
It blamed slower than expected progress in sealing deals with new tenants for its empty former BHS store premises.
The store at Merry Hill is among those still empty, although intu says agreements for some of these larger units are in an advanced legal stage.
At the same time the 'challenging' UK retail market had seen a dip in the number of shoppers at its centres across the UK.
David Fischel, intu's chief executive, said: "intu has performed robustly over the six-month period in a UK retail environment which continues to be challenging.
"Retail brands are being selective in their expansion, looking at established locations such as our 17 prime shopping centres which are attracting high footfall through their differentiated offering and compelling customer experience."
He added: "The resilience of the tenant market in our centres is shown by our 103 lettings in the period at 7 per cent above previous passing rents, including brands such as Next, River Island, Hugo Boss, Gant, Paul Smith, Victoria's Secret and Tesla.
"Also our tenants continue to invest in upsizing and upgrading their units which has resulted in maintained high occupancy."
The company said like-for-like net rental income for the first-half fell 1.5 per cent, while full-year income is expected to be largely unchanged. Over the period it signed 103 long-term leases, delivering £18 million of annual rent.
Intu is spending £679m across its UK estate by 2020 with work on at Watford and due to start at intu Lakeside.
It has promised around £100m of redevelopment work at Merry Hill, where it recently signed up Next to expand into the former Sainsbury's supermarket site.
Intu's figures show Merry Hill, with 212 stores across its 1.67 million sq ft, is now valued at £917m and annual property income is £40.5m. The company also said it had recently sealed a refinancing deal for Merry Hill with a £488m loan.
Across the group, with sites in the UK and Spain including the Trafford Centre, rental income was £226.2m in the first six months of the year, up by almost £7m. But it warned the amount of people visiting its centres had dipped by 0.5 per cent.
"Our guidance for full year like-for-like net rental income is around 0 per cent, at the bottom end of the previously announced range of 0 to 2 per cent," said the company.
"As previously stated, the precise outcome will be dependent on the timing of letting some of the larger units. These units, predominantly the former BHS units, are now all in advanced legals but closure of these transactions is slightly behind our original targets with longer term growth prospects undiminished."
