KPI is a 50/50 joint venture between UK regeneration specialist St. Modwen (LSE:SMP) and Salhia Real Estate Company K.S.C (Salhia). It acquired the Elephant & Castle Shopping Centre in May 2002 for GBP29.25m, in line with St. Modwen’s ongoing strategy to own income-producing assets which offer the potential to grow value through active asset management initiatives and ultimate redevelopment.
The sale to Delancey and APG for GBP80m reflects a yield of 4.25%, which is said to be significantly above the current book value of the asset. Proceeds from the sale will be used to reduce the debt held by the KPI joint venture against the shopping centre and other jointly owned assets. Profits accruing to the company from the sale will be in addition to St. Modwen’s previous profit expectation for the year to 30 November 2013.
St. Modwen’s chief executive, Bill Oliver, stated:
“For the last 11 years, we have significantly increased the value and potential of the Elephant & Castle Shopping Centre through strong asset management initiatives and we had also looked forward to redeveloping the Centre to drive a wider scale regeneration of the area.
Jamie Ritblat, CEO of Delancey, commented:
“We are delighted to be continuing the delivery of a significant residential investment strategy in Elephant and Castle with such a high calibre partner as APG; particularly at a time, when the affordability of housing in London is an increasing concern.
“Combining an exceptionally well-connected Zone 1 location with Zone 3 pricing, Elephant & Castle is one of Europe’s foremost regeneration projects, and represents a hugely exciting project for us to be moving forward.”
St. Modwen said it will issue its pre-close announcement on Wednesday 4 December 2013.