To shed some more of its debt burden, Capital & Regional, managers of the Mall Fund with Aviva Investors, have sold the Castle Mall Shopping Centre in Norwich for £77.3 million.
Largest secuitised property loan in UK
The Mall Fund was partially funded by a £1 billion loan, securitised by AAA-rated commercial mortgage backed securities (CMBS), which has conditions to ensure that the extended amortisation profile and therefore repayment of the debt are adhered to. The Mall Fund has been in breach of this condition, which has prevented it from making cash distributions to its investors. Over the past four years, the fund’s managers have focused on reducing leverage in the fund and generating cash in the face of falling UK real estate prices and challenging occupier markets.
Buyer of tired shopping centres
The buyer is Infrared European Active Real Estate Fund, which was subject to an MBO from HSBC last year. It seems to want to buy tired shopping centres and invest to reinvigorate them. Last year, it bought the Galleries Shopping Centre in Bristol for that purpose. Castle Mall, once the premier destination in Norwich, lost its top spot when the Chapelfield development opened.
Not a AAA performance
The Mall Fund debt will be reduced to £577 million, in line with the 2014 target of being under £600 million and the LTV must be under 60%. The proforma LTV will be 67% and net debt to value, reflecting the significant level of cash within the fund, would be less than 56% on a proforma basis.
To recommence distributions, The Mall must meet two thresholds: the debt must be below £600 million; and the LTV must be below 60%.
C&R CEO Hugh Scott-Barrett said:
"The successful disposal of Norwich is an important milestone in deleveraging The Mall. The sale reinforces the position of The Mall as a business focussed on dominant community schemes in and around Greater London."
Either the CEO's geography is amiss, or he has forgotten that Blackburn and Sutton Coldfield are not around Greater London, or he has already mentally disposed of those Malls as well.