This is a difficult moment for Intu’s chief shareholder, John Whittaker.
Whittaker, who built the Trafford Centre, now faces some unenviable choices as the main Intu corporate vehicle confronts administration. Whittaker has seen shares in the company once worth hundreds of millions of pounds go to zero.
Bisnow reflects on what options he has, and what he might be thinking.
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How Very Dare They
The Trafford Centre, now valued at around £1.5B, was a very personal project for Whittaker, as a 2012 interview with Property Week revealed.
The centre is a monument to his personal interests, ranging from a birth overlooked by the Peel Tower to placing his mother's Mercedes car on the first floor as a prize exhibit.
There are elements of the centre’s design that are hard to reconcile with profound religious faith (he considered becoming a priest at one point), not least more than 100 statues of naked ladies (and just one partly clad man).
To lose control of such a personal property could prompt thought number two.
I Could Buy The Trafford Centre
The widely shared view in Manchester is that Whittaker is the Trafford Centre’s most likely purchaser. But this might not be easy for three reasons.
The first is that when Whittaker tried this (as part of an Intu takeover) in the much less troubled days of 2018, the £2.1B bid came to grief because of uncertain market conditions. If 2018 felt uncertain, then today must feel like a holiday in crazyland. That does not bode well for a fresh bid.
The second is that Intu data suggests that before the coronavirus pandemic, the centre only just earned enough income to pay the debt secured against it. Today, with retail valuations radically down and consumer spending depressed, it is difficult to see how the maths could work. See here for the calculations. Loan-to-value ratios proved an expensive distraction for Whittaker in 2018, and he may not wish to go down that road again.
The third problem is that rival retail landlord British Land has been associated with the project, with React News reporting it could be allocated a management role. British Land may consider a rival bid of its own.
Whether Whittaker or British Land or somebody else gets to take control depends heavily on junior lender Canada Pension Plan Investment Board, which has a £250M loan secured against the centre.
Which prompts thought number three.
Canadian Investors Are Trouble
This would be a very natural thought, given that the Canada Pension Plan Investment Board declined to agree to a 15-month debt standstill, the straw that finally broke the Intu camel’s back and forced it into administration.
One potential outcome is that the Canadians take control. This would hardly be a welcome move for Whittaker, unless it was a prelude to a future partnership between them. Unless, of course …
Shall I Open The Secret Fourth Floor At The Trafford Centre?
Rumours that the Trafford Centre has a secret fourth floor have been around for years. A series of blind arcades above the third-floor mall prompted speculation that additional floorspace had been included, in case demand for shops mushroomed and more was needed.
The story is (almost certainly) nonsense. But if it were true, no doubt the additional square footage would make a difference to the yield, and to future use.
However, rather than needing more floorspace, the Trafford Centre probably needs less.
Greater Manchester has the ambition of providing 119,000 new homes on brownfield land.
Is this a map for the future of the Trafford Centre? A large brownfield site connected to trams and the motorway could be just what residential developers need: The immediate vicinity holds plenty of options, including Trafford Centre car parks. In the U.S., mall sites have often been rethought as residential, with more than 120 U.S. malls becoming housing locations.
In the meantime, Peel is pressing on with plans for a 700K SF spa on the former Event City site next to the Trafford Centre, which may be a sign of the future direction of travel.
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