Article date: 20 April 2005
The Mall Fund, the shopping centre fund managed by Morley FundManagement and Capital & Regional, is refinancing £1.06bn ofbank debt. This is believed to be the largest single tranche ofSterling AAA rated Commercial Mortgage Backed Securities everissued - this AAA rating being awarded by all three rating agencies- Fitch, Moody’s and S&P. The MallBonds will be listed onthe Irish Stock Exchange and have been priced at LIBOR +18 bps.
The benefits for the Mall and its investorsare:
- Additional returns to Mall investors of £6m per annum due toreduced interest costs.
- Flexibility to allow the fund to exploit asset managementopportunities
- Extra protection against future interest rate movements
- A new £300m Revolving Credit Facility which supports thegrowth of The Mall business
- The average duration of the Mall’s debt will increasefrom 4 to 7 years.
Commenting on the refinancing Philip Nell, fund manager for TheMall at Morley Fund Management, said: "This is a major andinnovative deal in terms of size and quality but, more importantly,our decision to refinance The Mall Fund’s debt is ofsignificant bottom line benefit to our investors. To have achieveda AAA-rating from all three rating agencies is testament to thequality of the Fund’s assets, and the integrity of thebusiness model."
Ken Ford, chief executive of The Mall, comments: "The AAA ratingconfirms the effectiveness of The Mall’s revenue based,direct management model and our disciplined investment approach.The innovative structure of this refinancing arrangement also givesus the operational flexibility we require to continue offeringexcellent returns for our investors. Following our third year ofoutperformance we are looking forward to continuing to grow TheMall’s portfolio pushing towards our target of 30 communityshopping centres across the UK within three years."
Credit Suisse First Boston was the lead manager and solebook-runner on the transaction.
Further information on the refinancing
At present 50% of the value of The Mall portfolio is financed bya syndicated loan facility and a working capital facility. TheMallBonds and the £300m revolving credit facility will replace allexisting fund debt, but will not involve the release of anyequity.
The MallBonds are secured on 20 out of the 22 Malls. Interest ispayable at LIBOR + 0.18% and the repayment date is 2012.Significant flexibility has been negotiated into the terms of theMallBonds with regards to:
- Occupational leasing
- Capital expenditure
- Acquisitions and disposals
The interest rate has been fixed on £825m of the borrowing forseven years through the execution of interest rate swaps.
The £300m revolving credit facility is secured on the remaining2 Malls and has a second charge over the other 20. It is intendedfor use in financing acquisitions and developments and to allowincreased efficiency in the management of working capital.
Further information on The Mall
The Mall was established by clients of Morley Fund Managementand Capital & Regional plc in 2002 and since then has grown toover £2 billion in size with 22 shopping centres in its portfolio.Institutional investors in The Mall include Hermes Property AssetManagement, F&C Asset Management, Norwich Union, PrudentialProperty Investment Managers, ING Real Estate, Scottish WidowsInvestment Partnership and Arlington Property Investors.
The total return to investors since the launch of The Mall inMarch 2002 has averaged nearly 30% per annum. It has outperformedits benchmark, the IPD Annual Shopping Centre Series, at a gearedand ungeared level every year since its formation.
The Mall has continued to expand its portfolio across the UKwith the acquisition earlier this year of Main Square in Camberleyfor in excess of £130m. In addition, The Mall purchased sixshopping centres during 2004 – Gloucester, Preston, Bristol,Blackburn, Maidstone and Middlesborough – in deals totallingalmost £700m. The Mall plans to expand its portfolio to 30 centresover the next three years, establishing The Mall as the UK’sleading community shopping centre brand.
Stabilisation / FSA
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 £128 billion* under management.The property team manages in excess of £15 billion* of UK Propertyassets, making Morley one of the largest property fund managers inthe UK. Winners of the high profile Property Week Fund Manager ofthe Year Award 2004, the team consists of 60 investmentprofessionals and manages a range of funds on behalf ofinstitutional, pension and retail clients. Morley has been at theforefront of innovation in property fund management and haslaunched eleven specialist sector based funds with partners,including the Jersey-based Unit Trusts: Ashtenne Industrial Fund,Quercus Healthcare Property, The Junction and The Mall. Visitwww.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 townretail parks, and urban entertainment complexes.
Capital & Regional founded The Mall and Junction Funds inconjunction with Morley Fund Management. It also founded theX-Leisure fund with Hermes Investment Management Limited, and has anumber of other joint ventures and developments. Its shares arequoted on the London Stock Exchange.