INTU SGS - initiation

All,

Today we have initiated on INTU SGS  following on from  INTU Metrocentre here and INTU Trafford Centre here, previously. .

We favour out-of-town shopping centres, versus city centre based shopping centres and intu SGS structure has two city centre based centres in Victoria (Nottingham) and Watford.    These only account for c.30% of the valuation, with over 50% of the intu Valuation as at Dec-19, is based at Lakeside, an out of town centre.  However, the value of Lakeside is dampened due to the proximity of Bluewater shopping centre just across the Dartford tunnel.  

Although significant time and effort is placed on short term assumptions surrounding rent collections and vacancies over the coming 6-12 months, it is important to realise that the security valuation, i.e. the centre valuation, is primarily influenced by long-term assumptions and discount rates.  Depending on the structure, the short term liquidity concerns can be alleviated by various liquidity facilities at individual structures.  The value of the asset, and in turn the value of the bond, is determined by the medium term assumptions in relation to occupancy rates and rental income. 

Therefore, there will be a polarisation of the shopping centres in the UK between regional shopping centres which enjoy higher footfall and larger retail spaces to accommodate "destination shopping" versus city centre shopping centres. 

We are not taking a position currently across the IINTU structures but are actively debating it.

Please feel free to call to discuss.

Tomas