EDITOR’S COMMENT: Contagion is a real danger for this industry. It could bring it to its knees if we are not careful.
While I could be talking about the coronavirus outbreak, which has wiped billions off global stock markets and has some people whispering about the next big recession, I am not.
The not entirely unexpected news this week that intu would not be able to complete a £1.5bn equity raise will not just hit the shopping centre owner hard. It will hit real estate hard – particularly retail landlords. Immediately after intu’s announcement that it was canning the equity raise, shares tanked to 6p. In the hour following the announcement the FTSE 350 REIT index fell. Hammerson dropped from 195p to 189.5p, British Land fell from 503p to 494.9p and Landsec tumbled from 829.8p to 817.6p. The cost of intu’s failings will be felt across the sector. With Hammerson writing down values by 20% and intu by 22%, any other owner of retail will have to do the same. It’s a hard pill to swallow, but contagion spreads. If you own retail, especially shopping centres, the market has spoken.
For intu, I’m not convinced there is any medication that is going to help its situation. As we write in this issue, a debt-for-equity swap and a sell-off of its assets are probably the most likely (perhaps only) options for the company now. Only those investors with very deep pockets – and there is really only a couple of them – would have the firepower to swallow up intu and its debt. And only one of those two is likely to have the appetite for retail. And it has already had a go – so will it take a second bite?
The retail contagion will continue to spread, and while I can’t ignore the pessimistic journalistic blood in my veins, I’m also eternally hopeful – particularly when it comes to this industry. So I wonder if we could turn contagion into a saviour. This beautiful new EG was meant to be the issue you would pick up in Cannes. A refreshed, more environmentally friendly version. But, alas, MIPIM will not take place next week. All those meetings, all those steps logged, all those rosés drunk will not happen. Unless, of course, you were involved in one of our excellent panel discussions – we will be recreating them at EG HQ’s studio and streaming live via Twitter, LinkedIn and at www.egi.co.uk/news.
Some of us may be breathing a sigh of relief every time a meeting gets removed from our diaries. Some of us may be thankful we don’t have to endure the throng of blue suits, the late nights and the inevitable sore feet. But some of us are also a little sad, as the annual Cycle to MIPIM has also been postponed as a result of coronavirus. While to some this ride may be viewed as a six-day jolly, it is a huge fundraiser. The ride had already raised more than £200,000 from the 100-plus cyclists taking part this year and was targeting £400,000. Numerous sponsors, including Lockton and Chris Dyson Architects, are honouring their sponsorship despite the change of plans.
Postponing the ride was a really tough decision for organiser Club Peloton, and it will no doubt be out of pocket. While we as businesses can and should shoulder a bit of pain, we cannot and should not pass on that pain to the thousands of children Coram, the ride’s principal charity, helps every single day. Many of the cyclists are organising their own #cycleforcoram rides to make sure the charity doesn’t lose out. I really hope the industry rallies round them.
Debra Yudolph at SAY Property Consulting is trying to do just that. A LinkedIn post suggesting we use time freed up through the MIPIM postponement for charity sparked action. She has set up a website (do-some-good.co.uk) which lists volunteering opportunities. Savills has said it will host a mental health self-care class, Yudolph is seeking space to host a Leap Confronting Conflict workshop, and Norwood is hunting for 40 people to do some gardening at one of the schemes it supports. Use your free MIPIM time well. Make giving contagious.
To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
