Catalyst Scoops $289M Development Portfolio

The purchase of the 21-site portfolio is controversial because the winning bidder was not originally on the shortlist. Only Miller Developments, Kier Developments and Parkridge/Standard Life were invited to the final stage of bidding. Parkridge subsequently dropped out of the race leaving Miller and Kier to go head to head. But Sainsbury's board allowed Catalyst, which has funding from HBOS, to submit a late offer and subsequently pick up the prize.

Catalyst, run by Julian Newiss a former colleague of the 1980s property investor Sir John Beckwith, has had an active few months with three deals in two months but this is the private investor's first foray into the development market. Recently the company bought six British shopping centres from REIT Asset Management for £315 million ($506.4 million) portfolio and a £96 million ($154.3 million) one from Dunedin. Earlier this year Catalyst spent £400 million ($640 million) on investments in Paris and Marseille.

Sainsbury's put its development arm up for sale in February to concentrate on its core supermarket business. The portfolio comprises 21 sites in various stages of development but with potential for 2.3m sq ft of retail and office development. It already generates £4 million ($6.4 million) of income a year, from £124 million ($198.9 million) of developments that are either half-let or prelet.

But the under-developed state of the portfolio means bidders will need to provide equity of around £50 million ($80.3 million. Even so, the development potential is seen as considerable. The sites are located mainly in regional or subregional centres and are capable of being completed within six years. Seventy-five per cent is retail and nine of the 21 schemes have hard-to-come-by open A1 consents, which authorities are often reluctant to grant.