Liberty International doubles bad debt provision

Permalink: Liberty International doubles bad debt provision
by Lin Freestone

The owner of eight of the UK’s top 21 shopping centres has doubled its provision for retail tenants going out of business. For the nine months to September 2008, Liberty International raised its bad debt provision from £4.5m in September 2007 to £10.2m.

Over the nine-month period 78 units, reflecting 31 tenants, went into administration. However, the company has been able to re-let or place under offer 44 of those units. Including the remaining 34 shops that are unlet, the group’s occupancy rate fell from 98.7% to 97.9%.

Liberty International, which owns the MetroCentre in Gateshead and the shopping centre at Lakeside Thurrock, has been affected by falling values in the commercial property sector. In the nine months to the end of September, £1.083bn was wiped off the value of its properties. Overall valuations fell 12.1%, less than the 14.3% average fall in the IPD UK monthly property index.

There are more than 2,021 shops and stores in the group’s 14 completed centres, which receive 225 million customer visits every year.

Patrick Burgess, the chairman of Liberty, said that the third quarter of 2008 and the period since the end of September will long be remembered for the extreme turbulence in financial markets, which has had a marked impact on the UK commercial property sector.

He considers that the scarcity value and strong competitive position of the company’s UK regional shopping centres is unlikely to be substantially further challenged for a sustained period, given the sharp reduction anticipated in the potential supply pipeline of UK shopping centre space. Liberty International looks forward to addressing the changing environment as the consequences of recent events unfold.

Liberty has decided to delay a number of its smaller expansion plans. However, the company remains committed to extending centres in Cardiff and Newcastle. Scheduled to open in a year’s time, St David’s in Cardiff is just 33% let by income.

Liberty International announced a pre-tax loss for the nine months of £1.06bn after the downward revaluation of £1.08bn.