David Fischel, intu Chief Executive, commented: “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.”  

The Group’s operating metrics remain strong with 67 new long term leases were signed in the quarter, representing £13 million of new passing rent, in aggregate 4 per cent above previous passing rent and in line with valuers’ assumptions. This brings the total for the year to date to 165 new leases producing £30 million of new annual rent, 5 per cent above previous passing rent.

UK development momentum We continue to progress our near-term development pipeline in the UK. Key milestones in the period include:

We have handed over the Grey’s Quarter restaurants at intu Eldon Square. This £25 million development (intu share £15 million) is adding 20 new restaurants to Newcastle city centre. The first five of these are now open, with a further twelve fitting out and opening over the next few weeks. Our £180 million extension of intu Watford continues, with 60 per cent pre-let. The project is progressing in line with our construction programme for an expected opening in Autumn 2018 

intu Experiences, our dedicated promotions business, has secured its £20 million targeted revenue for the year, working with major global brands such as Mercedes Benz, Nespresso and BMW

Our centres continue to perform well benefitting from our asset management initiatives and taking advantage of the improving Spanish economy.

Occupancy remains strong at 99 per cent at intu Asturias and increased to 96 per cent at Puerto Venecia, with the main shopping galleries in both centres being effectively fully let. New lettings in the period include the supermarket operator masymas anchoring the remodelling of one mall at intu Asturias and Globo on the retail park at Puerto Venecia.  

Year to date, footfall and sales are up 2 per cent and 3 per cent respectively  

Disposals We have exchanged contracts to sell our stake in intu Bromley to Alaska Permanent Fund Corporation for £177.9 million, representing a premium to the valuation at 30 June 2016 of £175.9 million. This transaction is expected to complete before the end of the year and is in line with our strategy of recycling capital into our development pipeline. We will repay from the proceeds the current bank debt secured on the asset of £95.8 million.   

Outlook Since the EU referendum vote on 23 June, consumer confidence has remained robust and UK unemployment remains at low levels, but financial markets have been and are likely to continue to be turbulent.  Sentiment in the overall UK property investment market since the vote would indicate a small decline in market values across many sectors including retail property.  

However, little transactional evidence is available for prime UK shopping centres, and our disposal of intu Bromley at a consideration above the June 2016 market value is indicative of the continuing investment demand in this sector. We remain on target to deliver growth in like-for-like net rental income for 2016 in the range of 3 per cent to 4 per cent. 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 remodelling at intu Lakeside and intu Merry Hill.

The void periods this creates could impact 2017 growth by 2 per cent to 3 per cent resulting in a lower level of aggregate growth in like-for-like net rental income than we expect to achieve in 2016. A further update will be given at the annual results announcement in February 2017. Underlying earnings per share in 2017 will also be impacted by the disposal of intu Bromley. 

Overall, while the prospects for the UK economy are particularly unclear as the Brexit agenda is pursued, we continue 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 our programme of active management and extensions.