Capital & Regional’s The Mall Fund has completed the refinancing of its CMBS by entering into a new five-year secured bank facility comprising a GBP350 million term loan and additional GBP25 million capex facility.
This facility provides substantial flexibility for the continued execution of a programme of capital investment that will enhance the returns available from The Mall Fund’s assets.
The CMBS will be settled from a combination of both the new GBP350 million term loan and, along with an associated GBP10.67 million interest rate swap liability triggered on repayment, from The Mall Fund’s existing cash resources.
The new term facility has been provided by Morgan Stanley and comprises a fixed rate tranche of GBP233.3 million with interest fixed at 1.86 per cent plus applicable margin and a floating rate tranche based on three month LIBOR of GBP116.7 million. The latter tranche will be hedged using an interest rate cap at a strike rate of 2.75 per cent. The capex facility will also be at the same floating rate and interest rate hedging on this element of the facility will be determined as it is drawn down.
The initial margin on all elements of the facility is set at 1.9 per cent, but the margin is dependent upon the loan to value ratio (LTV). The margin would increase by 25 bps if the LTV were to exceed 60 per cent. However, it would fall by 15 bps if the LTV were to reduce to 45 per cent. There is a commitment fee on the undrawn element of the capex facility of 40 per cent of the prevailing margin. Assuming that the capex facility undrawn, the day-one cost of debt would be 3.37 per cent based on three month LIBOR of 0.53 per cent. If floating interest rates on day-one were at the level of the interest rate cap of 2.75 per cent, the blended rate of interest that would be payable would be 4.11 per cent, again, assuming that the capex facility is undrawn.
The LTV covenant under the new facility is 75 per cent and, based upon the published 31 March 2014 valuation of The Mall Fund’s properties, the initial LTV would be 51 per cent prior to the drawdown of any of the capex facility. The Mall Fund and Aviva, its fund manager, were advised by Rothschild on the refinancing.
Hugh Scott-Barrett, chief executive, says: “This refinancing has been achieved at a very attractive all-in cost against the current initial yield of 6.7 per cent produced by The Mall Fund’s assets. It has allowed us to establish a strong platform for growth by creating the flexibility for The Mall Fund to continue its programme of capital investment in order to create long term value, at a time when sentiment is improving in both the investment and tenant markets.”