intu properties plc ('intu') and Cale Street Investments LP ('Cale Street'), an investment firm backed by the Kuwait Investment Office, London, are pleased to announce the establishment of a 50/50 joint venture for the intu Derby shopping centre.
Cale Street will acquire for cash the 50 per cent interest for consideration which values their share of the property at £186.3 million, before taking account of senior debt finance and customary working capital adjustments. This structured equity transaction includes a prioritisation waterfall for distributions to the joint venture partners.
The consideration for the 50 per cent interest is in line with the valuation at 31 December 2018 of £372.5 million (100 per cent), which represents a net initial yield of 6.6 per cent. The net rental income of the property was £25.2 million for the year ended 31 December 2018.
intu Derby is located in the centre of Derby and is a key retail and leisure destination in the East Midlands, with an annual footfall of 22 million. The 1.3 million sq ft centre was extended and redeveloped in 2007 and provides over 200 units and includes key retailers such as M&S, Debenhams, Next, H&M, Sainsbury's, Zara, Hollywood Bowl and Showcase Cinema de Lux.
intu will continue to manage the centre on behalf of the joint venture. The closing of the transaction will be subject to completing senior debt finance, the discussions for which are well advanced, and certain other completion conditions.
The transaction further advances intu's stated strategy of reducing its debt to assets ratio through disposals, part-disposals and introducing partners to assets. Following the joint venture financing process, intu will use the net proceeds of the transaction to repay debt.
Matthew Roberts, Chief Executive Designate, commented:
“We are pleased to announce our new partnership with Cale Street and look forward to working with them at intu Derby.
In what is a challenging investment market, this innovative transaction, which is in line with the December 2018 valuation, shows intu is delivering on its strategy of reducing loan to value through disposals and part-disposals. On a pro-forma basis, we expect the impact of this transaction to reduce our loan to value by around one per cent.”