Another UK Mall Portfolio In Receivership As Lenders Start To Pull Plug

A trio of UK shopping centres once worth more than £100M has gone into receivership and administration, as lenders start to take control of assets hit hard by changing consumer habits and the impact of the coronavirus pandemic. 

Receivers from CBRE have been appointed to The Rushes Shopping Centre, Loughborough, and Vancouver Quarter, King’s Lynn, and partners from Smith & Williamson were appointed administrators to the special purpose vehicle that owns the Kingsgate Shopping Centre, Dunfermline.

After giving borrowers more time to try to increase income and values on struggling assets, lenders are now increasingly using insolvency processes to try to protect their positions.

The centres were previously owned by private equity firm Oaktree, but in June 2019, DRC Capital, the mezzanine lender to the portfolio, took control of the assets. 

The bondholders that bought debt secured against the assets have now appointed administrators and receivers to take control, because there was no clear plan for how they were going to be repaid. A standstill on lenders taking control had been put in place earlier this year. 

“The standstill was subject to a number of conditions, including that, three months prior to expiry of the standstill, the borrowers present an exit strategy showing how they will repay the senior loan in full on the initial termination date,” CBRE, the special servicer to the loan, said in a statement to bondholders. 

“The borrowers failed to provide an exit strategy that met this criteria and, accordingly, the special servicer on behalf of the issuer accelerated the loan.”

The centres were valued at £105M in December 2017. Goldman Sachs provided a £70M loan to refinance the assets for Oaktree, which it then securitised, and DRC provided £16M in mezzanine debt. 

But by January 2019, the value of the portfolio had fallen to £86M, a 78% loan-to-value ratio compared to an LTV covenant of 75%. DRC made a payment in June to cure the breach, and in October it enforced the loan and took over as owner of the portfolio from Oaktree, according to notices from CBRE. 

But a valuation undertaken in March this year showed the value had fallen to £69M, which the servicer said was a 96% LTV, wiping out DRC’s investment as well. In April DRC decided not to put more money in to cure the covenant breach.  

The servicer managing the process for bondholders will now need to decide whether to put the assets up for sale in a difficult market and risk selling for less than the value of their debt or try to improve the income and value. 

The portfolio is the latest example of lenders taking control of beleaguered shopping centre and leisure assets to try to protect their debt positions. 

The largest example is Intu, the former FTSE 100 REIT that was put into administration in June owing more than £4.5B. Its multiple lenders are now working through strategies for the assets, with only the Trafford Centre officially up for sale. 

Last week, Bisnow revealed that administrators had been appointed to a trio of leisure and retail assets owned by a Blackstone fund and the Abu Dhabi Investment Corporation. The assets are now likely to be sold. 

Aviva appointed receivers in May to a portfolio of four centres owned by RDI REIT, and three sold at a big discount in September.

And in November last year, lender PBB put the Houdshill centre in Blackpool into receivership and sold the asset to the local council at a 15% discount to the value of its loan.