Kuwaiti-Backed Investor Wants To Buy Back Debt On £216M Shopping Centre At A Discount

The owner of a 1.3M SF shopping centre has launched an offer to buy a chunk of the debt secured against the asset at a discount. 

Cale Street Investments, which is backed by the Kuwait Investment Authority, has launched a tender offer to buy up to £50M of a £131M loan secured against Derbion, a 1.3M SF shopping centre previously called Intu Derby. The loan was securitised, and Cale Street will buy back bonds that were sold to investors.

It has offered to buy back senior bonds at 92.5% of their nominal value and junior bonds at 84% of their nominal value. It said it was undertaking the tender offer to give the bondholders liquidity. 

Cale Street previously owned the centre in a 50/50 joint venture with Intu, the giant shopping centre REIT that went into administration in June 2020. 

Cale Street paid £186M for a 50% stake in the centre in 2019 and took complete ownership of the asset following Intu’s administration. 

By October 2020, the value of the entire centre had fallen to £203M, though it had risen again to £216M as of April last year as income at the centre improved. 

The value and income of the centre were affected by the pandemic, and in August 2021, Cale Street agreed a deal with lenders to waive covenants on the loan.

The servicer said that interest-cover and loan-to-value covenants would be waived until July 2023 in exchange for paying down £13.5M of the loan. 

Contracted rent increased by £1M to £19.8M in the year to November 2022, DBRS Morningstar said in a note, attributing the change to fluctuations in income from car parks.

Over the same period, vacancy declined to 9.1% from 11%, and the number of leases increased to 336 from 314.