Bids in last night for Britannica Fund’s circa £200m ‘Project Panther’

Bids were submitted last night to buy the seven remaining UK secondary shopping centres within the Britannica fund which fell into administration last September in a deal dubbed Project Panther.

Screen shot 2013-04-25 at 12.03.10ING Bank, the Britannica shopping centre fund’s lead senior lender – alongside Eurohypo and Deutsche Hypo – called in the receivers last September after a series of covenant breaches, appointing Grant Thornton’s Malcolm Sherison and Daniel Smith.

Grant Thornton began a disposal process one month ago offering a targeted pool of investors to bid for either the “prop-co” structures which collectively house the seven remaining shopping centres, the assets directly or the assets with the secured outstanding senior debt.

CoStar News understands that Grant Thornton selected a seven-strong group of potential buyers for Project Panther, comprising: LaSalle Investment Management, which is bidding on behalf of the Mars Pension Fund, Kennedy Wilson, JPMorgan Asset Management, KKR, PIMCO and New River Retail through their joint venture fund, Tristan Capital Partners and Ellandi, as well as F&C REIT Asset Management.

Pricing for Project Panther is expected to come in at between £200m and £250m.

KKR is thought to be among the selected hand-picked group which declined to bid by last night.

LaSalle, which acquired Church Square in St Helens in Liverpool for around £30m, also on behalf of the Mars Pension Fund, is thought to be among the frontrunners. Coady Supple was the sales agent on Church Square.

Last December, PIMCO, through a subsidiary of the global bond investor’s Bravo Fund, LVS, acquired an 8.7% equity stake in New River Retail, the UK REIT, and at the same time established a 90:10 joint venture partner with New River, the New River Retail Property Unit Trust.

The third joint venture investors bidding, Tristan Capital Partners and Ellandi, have teamed up twice in the last 12 months to acquire distressed retail schemes, including the acquisition of Project Royal loan from Lone Star, secured by White River Place Developments, a retail-led mixed-use scheme in Cornwall.

ING Real Estate Investment Management (REIM), which established the 10-year Britannica shopping centre fund in March 2005, financed the acquisition of the original nine assets, then valued at circa £550m, with around £360m of senior debt led by ING Bank, also including Eurohypo and Deutsche Hypo.

The value of the shopping centre portfolio rose and fell with the current of property markets, with Britannica peaking at around £700m in mid-2007, before collapsing in line with the subsequent two-year capital value descent in which secondary assets lost more than 50%.

CBRE Global Investors inherited the Britannica Fund as part of its $900m acquisition of ING REIM’s European funds at the end of October 2011, but the fund fell into administration last September, after the portfolio’s value plummeted to below the outstanding debt.

The poor performance of the Brtiannica Fund has led to significant under investment in recent years which has seen vacancy levels rise leaving a clear distressed investment play for the winning bidder.

Last mid-November, Grant Thornton quoted an estimated value of the then eight remaining assets of £280.9m, against an estimated recovery value of £250.9m and an outstanding senior balance to the three senior lenders of £328.1m, according to accounts filed at Companies House.

Since which, two weeks ago LaSalle acquired Church Square in St Helens in Liverpool, on behalf of the Mars Pension Fund, for around £30m, down from the £46m it was valued at in July 2011, according Companies House accounts.

The Britannica Fund acquired Church Square in August 2006 for £75m from Analytical Properties, a 50:50 joint venture between London & Associated Properties and Bank of Scotland.

Church Square was sold separately as it was in a ring-fenced “prop-co” structure with separate financing agreements with the same lenders.

Based on Grant Thornton’s estimated a circa £30m sales price for Church Square, its November 2012 projected recovery for the three banks can be reduced to around £220m for the remaining seven shopping centres, while the debt has potentially fallen to just under £300m.

However, there is a mark-to-market interest rate swap liability of circa £25m which will further erode the senior lenders’ principal recovery.

The seven remaining shopping centres comprise:

  • County Square in Ashford
  • The Strand, Bootle
  • The Gates, Durham
  • Rivergate, Irvine
  • The Haymarket Centre, Leicester
  • The Spindles and the Town Square, Oldham (counted as two assets)
  • Swansgate, Wellingborough

Eurohypo’s senior loan participation is likely to be part of the impaired pool which is expected to trade to Lone Star by the end of the second quarter, although this loss is expected to be crystalised before the deal closes with Commerzbank.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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