Kout Capital Exits the Walnuts Center for a gross selling price of c. £43.9 million at a market peak for UK retail investments.

Kout Capital Exits the Walnuts Center for a gross selling price of c. £43.9 million at a market peak for UK retail investments.
Through its strategic partners in the United Kingdom, the Kuwait-based Kout Capital team has successfully exited the Walnuts investment in Orpington, Greater London area, UK on November 2015.

The investment was acquired in 2011 through non-resident entities based and managed from Jersey Island, for an investment period of five years. The acquisition price, at £21.1M, reflected an initial yield of 8.2%.

Intensive and creative Value-Add initiatives have been implemented on this investment which included the addition of a 7-screen movie theatre let to Odeon, a gym let to Pure Gym, Food and Beverage units let to Bella Italia and Deans Diner, and additional retail units let to B&M. Moreover, an existing and obsolete office building was extended and converted into a 63-room budget hotel let to Premier Inn. On the existing Walnuts scheme, focused asset management efforts were spent to extend existing leases, create a coffee shop in the central atrium, reorganize the units into more appropriate space, and refurbish the premises.

The Value-Add actions established by the Kout Capital team through the support of its local partners, as well as the intensive hands-on management and attention of the team, resulted in turning-around the investment from a purely secondary scheme into an institutional product, making the asset more attractive to large investment funds. This was achieved through an improvement in the quality of income, the length of leases, the reduction of vacancy, and the improvement of the overall shopping experience.

Through continuous monitoring of the investment market and the exclusive yet aggressive market strategy that was implemented, the management team was able to secure the exit from this investment at a time considered by experts as the market peak for UK retail investments, achieving an outstanding exit value for the investors. The investment was sold to Rockspring Property Investment Managers – UK Value 2 Fund, and the shares transaction was completed on November 17th, 2015, earlier than the initially planned exit date, at a gross selling price of c. £43.9M, representing an exit cap rate of 6.35% and a compression of 184 bps.

Kout Capital LLC was acting on this transaction as the investment manager and advisor for its clients. It was supported by Miller development (JV Partner and Development Manager), Shepherd and Wedderburn (Sollicitor), and Cushman & Wakefield and Kitchen La Frenais Morgan (Joint Agents). The investment was financed by HSBC.

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