Weekly data sheet: Return of stapled debt for distressed assets is a sign of the times

An investor confirmed clinching an Edinburgh shopping mall at way below replacement cost with stapled debt from the vendor.

It might be a relatively small deal at £40 mln, but it’s an interesting one. UK shopping centre specialist Capital & Regional was able to make its first acquisition for six years with the help of £16 mln of debt provided by vendor Morgan Stanley in a transaction that is very much a sign of the times.

Morgan Stanley Principal Funding and Bawag had taken control of the 415,000 ft2 mall west of Edinburgh in June last year. The centre had been bought 12 years ago by William Ewart Property for more than £225 mln.

Morgan Stanley gets paid 6.5% for five years for lending to Capital & Regional. But the UK REIT also wins, acquiring the mall on 50 acres at an accretive 13% (which it says will rebase to 12%) at ‘a significant discount to the replacement cost’ and at ‘a highly attractive entry point from which we can create value”.

The mall is reported to have cost about £67 mln to develop, 30 years ago. Last year it recorded footfall of 8.6 million.

In another opportunistic deal closing this week, real estate investor/manager Praxis and private credit investor Veld Capital acquired a big chunk of Birmingham city centre’s mixed-use estate, Brindleyplace for £125 mln.

Vendor HSBC Alternative Investments had put the office-led, mixed-use holding up for sale last November, for £195 mln. The buyers said adding it to their recently assembled portfolio of UK regional offices was a ‘once-in-a-cycle opportunity...at a very compelling entry basis.’

This week also saw Crosstree Real Estate close its third UK special situations fund with £490 mln of capital, its largest to date.

In addition, we track a further four funds raising capital, including the Nrep Income+ Fund, one of Urban Partners’ Nordic vehicles, which added a further €263 mln to its €1.85 bn pot.

About €1.4 bn of new loans have been announced in the last week or so, led by CPI Property Group’s €635 bn jumbo refinancing of a bridge loan which was provided by a club of seven banks.

Click here to access all the data.

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