Merry Hill owner Intu accelerating plans for shopping centre revamp
Merry Hill owner Intu says it aims to accelerate major revamp plans for the giant shopping centre following its £410 million deal to buy the half it didn't already own.
At the same time the shopping centre group hailed a 'strong set of results' for the first six months of the year, with rental income rising £12m to £219.4m.
Intu also outlined major redevelopments at its Lakeside and Watford shopping centres and plans for more than 30 new restaurants at Gateshead's Metrocentre, Bromley and at Eldon Square in Newcastle.
Intu said that buying the other half of the £890m Merry Hill site in June from Australian investment group QIC would enable it "to accelerate re-engineering the retail, catering and leisure mix to unlock the full potential of this centre".
A revaluation of the site following the deal showed it was worth £35m more than expected.
The company said today: "We believe the centre presents a significant opportunity to re-engineer and update the tenant mix.
"Encouraging large flagship formats and reducing the number of smaller units will make the centre more attractive to retailers and customers, and improve the rental tone. This strategy is similar to that which has been successfully implemented at intu Trafford Centre and intu Lakeside."
Merry Hill is the fourth biggest of intu's UK shopping centres, with 213 stores and 1.67 million sq ft of space. As well as increasing the size of its biggest stores the group plans on major improvements to the restaurant and leisure facilities at the centre.
The acquisition helped boost the value of intu's assets to more than £10 billion. Across its shopping centres it saw the number of customers increase by 1.3% over the six months. 96.1% of its stores are occupied. It faces the imminent closure of BHS stores, following that companies collapse this year, but intu said it had interest from other retailers in all the sites.
But profits for the group were down sharply in the six months to the end of June, to £48m from £262.3m a year ago, largely due to a £131m fall in the value of financial instruments such as interest rate swaps, compared to a £162m boost from a property revaluation last year and a £32m hike from financial instruments.
Chief executive David Fischel said: "We are pleased to report a strong set of results for the first six months of 2016 with a 10 per cent increase in underlying earnings per share driven by excellent growth in net rental income of 7.5 per cent on a like-for-like basis. We have therefore raised our guidance for full year like-for-like net rental income growth to 3 to 4 per cent.
"Letting activity was also very positive leading to an improved occupancy ratio of 96 per cent. Our established retailers, such as Zara and Next, have been upsizing space and we have welcomed new lifestyle brands and international retailers at a time when the supply of quality retail space is limited. We continue to focus on strengthening and improving our prime regional shopping centres, introducing new leisure concepts and increasing the dwell time of our 400 million customer visits per year.
"With over £500 million of cash and available facilities, we are well positioned to take opportunities when they arise, such as the acquisition in the period of the other half of intu Merry Hill which adds to the considerable momentum from our active asset management and development projects, both in the UK and Spain."