Royal Mint Court falls into receivership sparks multiple sales strategies

The outstanding debt secured by the leasehold interest in the former Royal Mint site by Tower Bridge has been placed into receivership on Friday afternoon, which opens up a raft of potential sale possibilities for the historic site.

Julian Clarke and Matthew Nagle of Savills were appointed as joint LPA receivers over the leasehold of Royal Mint Court by Capita Asset Services, the special servicer for the securitised senior loan in a Barclays Capital-issued CMBS sold in 2006.

Capita’s acceleration of the loan, due to an interest cover ratio (ICR) covenant breach and in advance of an imminent default at maturity, allows the servicer and Savills’ Clarke and Nagle to open negotiations with existing and prospective tenants, which was prohibited prior to the removal the defaulted borrower, Gulldale Limited.

Grant Thorton is to be appointed administrator over the two subsidiary SPVs of Gulldale which house the leasehold.

The Royal Mint Court leasehold has fallen in value since its last publicly-disclosed valuation of £32.5m by Savills in April 2012, due to the continued run-off in the office campuses leases, including that of anchor tenant Barclays Bank, whose lease, sublet to Deloitte, expires at the end of the year.

Delancey completed the purchase of the freehold interest in the Grade II-listed four-strong office complex Royal Mint Court from The Crown Estate for £51m in June 2010, and is expected to lead the suitors for the leasehold interest.

However, uniting the freehold and leasehold interests, while a logical solution, is not likely in the short term, given how the expiring lease profile of Royal Mint Court has substantially devalued the leasehold.

The securitised loan had an unpaid balance of £69.5m, while the B-loan, held by a private individual investor, has £14m outstanding balance, against a less than £32.5m valuation for the Royal Mint Court leasehold.

From the perspective of Equinox Eclipse 2006-1 CMBS bondholders, therefore, a quick sale of the leasehold is not economically attractive.

Savills’ Clarke and Nagle are expected to begin assessing the appetite for lease renewals in the short term including for some of the smaller occupying tenants, such as Old Mutual.

In addition, Savills is expected to explore a possible medium-term sale to buyers which see the imminent lease expires as an opportunity for a more comprehensive conversion of the historic site into a more bespoke, one tenant usage, such as an overseas Embassy use.

Although Savills’ mandate does not include a quick sale of the leasehold, competitive off-market bids would be considered if they represented value relative to the anticipated value creation which Savills could feasibly oversee in the next two years.

Capita is likely to seek loan standstill agreements or extensions, linked to improving the value of the leasehold. The loan matures on 16 October, while the legal final maturity of the Equinox Eclipse CMBS notes is not until January 2018.

Royal Mint Court derived an annual rent roll of around £8m, with just under £5m from anchor tenant Barclays Bank, which sublet the office space to Deloitte. In total, almost three three-quarters of Royal Mint Court’s income runs off by the year end, with the remainder by the end of next year.

Gulldale’s former interest in the Royal Mint Court leasehold was formerly owned by two private Irish investors which were advised by Irish investors’ Tom Quinn and Donal O’Mahony.

About CoStar News

Finance Editor, CoStar News
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