Intu forms JV with Kuwait to develop Derby shopping centre
By Iain Gilbert
Date: Thursday 18 Apr 2019
(Sharecast News) - Real estate investment trust Intu Properties has formed a joint-venture with Cale Street Investments for the development of its Derby shopping centre.
Cale Street, an investment firm backed by the Kuwait Investment Office, will acquire a 50% interest in the project for roughly £186.3m in cash, in line with the Derby operation's 31 December valuation of £372.5m, which represents a net initial yield of 6.6%.
The asset is located in the centre of Derby and is a key retail and leisure destination in the East Midlands, with an annual footfall of 22m and a net rental income of £25.2m.
Intu will continue to manage the centre after finalising the joint venture financing process with Cale Street.
Soon to be chief executive Matthew Roberts said: "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 proforma basis, we expect the impact of this transaction to reduce our loan to value by around 1%."
Analysts at RBC Capital Markets said they believe Intu's announcement will positively impact its share price in the near-term, given the very negative sentiment towards UK retail property and the fact that its shares currently trade at a 65% discount to the group's last reported net asset value.
"While Intu Derby is a relatively new shopping centre, we believe that it will be hard for investors to simply dismiss this disposal as cherry picking. At the same time, the disposal is only one small step to reducing its LTV below 50%, which will dilute intu's EPS."
As of 0820 BST, Intu shares were flat at 98p.
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