Lloyds Bank is providing a £395 million senior loan and £50 million capital expenditure facility as part of the recapitalisation of four former Intu shopping centres.
In an update to bondholders, SGS Property Finance, the vehicle that controls the debt secured against the four malls, said that terms had been agreed with a leading commercial real estate lender, but did not name the lender. CoStar News has learned it is Lloyds. The loan, which reflects 46% loan-to-value, matures in 2028 and can be extended by a year.
The four shopping centres – Lakeside, Watford, Nottingham and Braehead – were valued at £858 million as of December 2023 reflecting a weighted average net equivalent yield of 8.6%. The valuation was 21% higher than in June 2021 thanks to increased income. Asset manager Global Mutual believes there is more value in the properties as it expects to increase net rental income to £94.4 million by March 2027, from £ 80.5 million as of 31 December 2023, which was a 22% increase from June 2022.
To implement the restructuring, creditors will have to agree to a scheme of arrangements. The proposed recapitalisation transaction is forecast to deliver a net debt repayment to existing lenders of £452.1 million. The loan facility from Lloyds will be partly used to repay existing lenders. They can swap remaining debt for equity.
SGS Finance said the recapitalisation will “facilitate a shift to a new market standard governance and management structure for the Group, designed to follow a typical real estate privately-owned structure and empower a newly constituted board to take commercial and operational decisions.”
As part of this, Jaap Tonckens, former chief financial and chief investment officer at Unibail-Rodamco-Westfield will be appointed as non-executive chairman of the board. Tonckens holds Board positions at VIA Outlets and citizenM, and he serves as a senior adviser to Value Retail.
Shopping centre owner Intu collapsed into administration in 2020. Some shopping centres were sold off, while £74 million was invested in the four shopping that were part of the recapitalisation. Tenants contributed another £68 million. Footfall and rent collections have since improved. A further £82 million of capital will be invested in asset management initatives by March 20227.
AlixPartners advised on the restructuring, having undertaken an executive management and board role since 2020.
(Updated on 6 March with additional information on the performance of the shopping centres)