The Mall Fund, the shopping centre fund managed by Morley Fund Management and Capital & Regional, is refinancing £1.06bn of bank debt.
The Mall Fund, the shopping centre fund managed by Morley Fund Management and Capital & Regional, is refinancing Ł1.06bn of bank debt. This is believed to be the largest single tranche of Sterling AAA rated Commercial Mortgage Backed Securities ever issued - this AAA rating being awarded by all three rating agencies - Fitch, Moody’s and S&P. The MallBonds will be listed on the Irish Stock Exchange and have been priced at LIBOR +18 bps.
The benefits for the Mall and its investors are:
- Additional returns to Mall investors of Ł6m per annum due to reduced interest costs.
- Flexibility to allow the fund to exploit asset management opportunities
- Extra protection against future interest rate movements
- A new Ł300m Revolving Credit Facility which supports the growth of The Mall business
- The average duration of the Mall’s debt will increase from 4 to 7 years.
Commenting on the refinancing Philip Nell, fund manager for The Mall at Morley Fund Management, said: "This is a major and innovative deal in terms of size and quality but, more importantly, our decision to refinance The Mall Fund’s debt is of significant bottom line benefit to our investors. To have achieved a AAA-rating from all three rating agencies is testament to the quality of the Fund’s assets, and the integrity of the business model."
Ken Ford, chief executive of The Mall, comments: "The AAA rating confirms the effectiveness of The Mall’s revenue based, direct management model and our disciplined investment approach. The innovative structure of this refinancing arrangement also gives us the operational flexibility we require to continue offering excellent returns for our investors. Following our third year of outperformance we are looking forward to continuing to grow The Mall’s portfolio pushing towards our target of 30 community shopping centres across the UK within three years."
Credit Suisse First Boston was the lead manager and sole book-runner on the transaction.
Further information on the refinancing
At present 50% of the value of The Mall portfolio is financed by a syndicated loan facility and a working capital facility. The MallBonds and the Ł300m revolving credit facility will replace all existing fund debt, but will not involve the release of any equity.
The MallBonds are secured on 20 out of the 22 Malls. Interest is payable at LIBOR + 0.18% and the repayment date is 2012. Significant flexibility has been negotiated into the terms of the MallBonds with regards to:
- Occupational leasing
- Capital expenditure
- Acquisitions and disposals
The interest rate has been fixed on Ł825m of the borrowing for seven years through the execution of interest rate swaps.
The Ł300m revolving credit facility is secured on the remaining 2 Malls and has a second charge over the other 20. It is intended for use in financing acquisitions and developments and to allow increased efficiency in the management of working capital.
Further information on The Mall
The Mall was established by clients of Morley Fund Management and Capital & Regional plc in 2002 and since then has grown to over Ł2 billion in size with 22 shopping centres in its portfolio. Institutional investors in The Mall include Hermes Property Asset Management, F&C Asset Management, Norwich Union, Prudential Property Investment Managers, ING Real Estate, Scottish Widows Investment Partnership and Arlington Property Investors.
The total return to investors since the launch of The Mall in March 2002 has averaged nearly 30% per annum. It has outperformed its benchmark, the IPD Annual Shopping Centre Series, at a geared and ungeared level every year since its formation.
The Mall has continued to expand its portfolio across the UK with the acquisition earlier this year of Main Square in Camberley for in excess of Ł130m. In addition, The Mall purchased six shopping centres during 2004 – Gloucester, Preston, Bristol, Blackburn, Maidstone and Middlesborough – in deals totalling almost Ł700m. The Mall plans to expand its portfolio to 30 centres over the next three years, establishing The Mall as the UK’s leading community shopping centre brand.
Stabilisation / FSA
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For further information please contact:
Liz D’Oliveira/Paul Haines 020 7224 4300
Redwood Consulting for The Mall
Fiona Baker/Laura Cook 020 7809 8617 / 020 7809 8125
Morley Fund Management
Notes to editors
About Morley Fund Management
Morley Fund Management (‘Morley’) is a London based, asset management business with over Ł128 billion* under management. The property team manages in excess of Ł15 billion* of UK Property assets, making Morley one of the largest property fund managers in the UK. Winners of the high profile Property Week Fund Manager of the Year Award 2004, the team consists of 60 investment professionals and manages a range of funds on behalf of institutional, pension and retail clients. Morley has been at the forefront of innovation in property fund management and has launched eleven specialist sector based funds with partners, including the Jersey-based Unit Trusts: Ashtenne Industrial Fund, Quercus Healthcare Property, The Junction and The Mall. Visit www.morleyproperty.com
*Not including mortgage assets, as at 31/12/04
About Capital & Regional plc
Capital & Regional plc is the co-investing asset manager, which specialises in town centre shopping centres, out of town retail parks, and urban entertainment complexes.
Capital & Regional founded The Mall and Junction Funds in conjunction with Morley Fund Management. It also founded the X-Leisure fund with Hermes Investment Management Limited, and has a number of other joint ventures and developments. Its shares are quoted on the London Stock Exchange.