Intu sells shopping centre stake to Kuwait-backed fund to cut debt

By Samantha Machado and Pushkala Aripaka

(Reuters) - Britain's Intu Properties plans to sell a 50 percent stake in an East Midlands shopping centre to a Kuwait-backed real estate investment firm for 186.3 million pounds in an attempt to cut its debt.

Cale Street Investments, which is backed by Kuwait's sovereign wealth fund, plans to buy half the interest in the Derby shopping centre, which is visited by 22 million shoppers each year, Intu said in a statement on Thursday.

"While expected, the transaction provides some confidence in Intu's ability to dispose of assets in what is a tough backdrop for retail assets – at a price which is supportive of current valuations," Liberum analyst James Ashley said.

Intu bought the shopping centre, which had net rental income of 25.2 million pounds in 2018 and houses retailers such as Marks & Spencer, Next, H&M, Sainsbury's and Zara, for 390 million pounds in 2014.

Intu, which has a market valuation of 1.33 billion pounds, has net external debt of 4.87 billion pounds, had in February said it would hold off on British disposals as investors weighed the outcome of Brexit.

In a bid to preserve cash, the owner of the Trafford Centre in Manchester which last year was the target of two failed takeover bids by rival Hammerson and some of its biggest shareholders, also scrapped its final dividend in 2018.

"On a pro-forma basis, we expect the impact of this transaction to reduce our loan to value by around one percent," Intu Chief Executive Matthew Roberts said.

Intu's debt to asset ratio stood at 53.1 percent in 2018, compared with 45.2 percent in 2017, according to its latest annual report. Intu plans to bring this below 50 percent.

Intu, which is also looking to sell assets in Spain, said the Derby shopping centre was valued at 372.5 million pounds at the end of last year.

Shares in Intu, which competes with British Land and Land Securities, were largely unchanged.

(Reporting by Samantha Machado and Pushkala Aripaka and Writing by Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr and Alexander Smith)