intu properties plc has exchanged contracts with the Queensland Investment Corporation to acquire the remaining 50% of the Merry Hill estate for £410m (€527.43m) before expenses. This represents an income yield of 5.2%, based on net rental income of £43m (€55.28m).
The estate comprises the intu Merry Hill shopping centre, two retail parks, office and leisure uses along with development land.
A £500m (€642.77m) loan has been arranged, with a 2018 maturity, which will replace the current £191m (€245.54m) loan facility, maturing in 2017, secured on the 50% originally held. The all-in cost of debt of this new facility is estimated to be around 3%. The balance of the consideration will be met from intu’s existing resources.
The acquisition, which is scheduled to complete shortly, is expected to be earnings accretive from completion. An external valuation of 100% of the asset by Cushman & Wakefield prepared in connection with this transaction amounts to £889m (€1.14bn), at a nominal equivalent yield of 5%. intu’s pro forma loan to value increases to 43% compared with 41% at 31 March 2016.
David Fischel, chief executive, commented: “We are pleased to have been able to acquire the remaining 50% interest in intu Merry Hill, some two years after our original 50% acquisition in 2014. Our ownership and asset management to date has provided us with ample evidence of the centre’s upside potential, whatever the outcome of the EU referendum.”
In May 2014, intu acquired a 50% interest in the Merry Hill estate. The acquisition price was £408m (€524.86m), with intu taking on the established asset and development management rights at that point. QIC retained the 50% holding which they originally acquired in 2007 but took the strategic decision in 2015 to exit this interest.
Located 10 miles west of Birmingham, the UK’s second largest city by population, it has a catchment of approximately 3 million living within a 45 minute drive time.
The asset comprises the main shopping centre, intu Merry Hill, together with a number of other assets including retail parks, offices, leisure and development land covering 229 acres.
Retail space totals 1.7 million ft² (158,000m²) spread between the shopping centre (1.4 million ft² or 130,000m²) and adjacent retail parks (300,000 ft² or 17,870m²).
intu Merry Hill is the super-regional shopping centre for the West Midlands and has potential with intu’s asset management initiatives to considerably strengthen its penetration of this catchment. It is arranged over two levels featuring 214 units, including six anchor stores, retail shops and catering units.
Anchored by Marks and Spencer, Debenhams, Primark, Next, Sainsbury’s and Asda, the shopping centre is 96% occupied with a weighted average unexpired lease length of 6.7 years.
The centre has around 10,000 car parking spaces and a footfall of 22 million.
