The collapse of mall landlord Intu Properties Plc is about to send shockwaves through a sector that’s already reeling.
Nine of the U.K.’s biggest shopping centers could potentially be sold into a market that had already seized up before the virus struck. With the tenants of those properties only paying a fraction of their rent as the pandemic deepens a prolonged retail crisis, the risk they’re sold at knock-down prices threatens to further sink the values of malls nationwide.
“The buyers of these assets will pay a yield that reflects the increased credit risk, the increased obsolescence, increased vacancy and reduced footfall,” said Andrew Jones, chief executive officer of LondonMetric Property Plc. “Tomorrow’s rent is a lot lower than today’s, so the price will reflect a new paradigm — it’s a pretty scary outcome.”
Retailers paid just 36% of third-quarter rent due last week, compared with 41% on the collection date three months earlier, according to data from Remit Consulting out Thursday. Hammerson Plc, which owns about a dozen large U.K. malls, said on Wednesday it had so far collected just 16% of third-quarter rents that were due last week on its British properties.
The latest rent collections “underline the severe and sudden loss of income, which will have deeper repercussions for lenders, pension funds and savers,” Vivienne King, CEO of retail property trade association Revo, said on Thursday.
Once a reliable source of cash flow, malls and stores have become a major drag on the share prices of landlords including British Land Co. and Land Securities Group Plc. The arrival of Covid-19 has only piled on further doubts about the assets’ future, as the outbreak accelerates a shift to online consumption that was pushing brick and mortar retailers to the brink even before they faced months of forced closure…