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Lender Takes Control Of Defaulted Oaktree Shopping Centre Portfolio As Private Equity Bails Out

Fire Sale!

One of the lenders to a portfolio of shopping centres owned by Oaktree Capital has taken control of the assets.

Debt fund DRC had put money into the portfolio to cure a loan-to-value breach on a portfolio of three regional shopping centres, according to a filing by the servicer that manages the loan. As the mezzanine lender, that gives it control of the properties, and means Oaktree’s equity in the portfolio has been wiped out.

The Kingsgate Shopping Centre in Dunfermline, the Vancouver Centre in King’s Lynn and The Rushes in Loughborough were valued at £105M when Goldman Sachs loaned Oaktree £70M of senior debt in December 2017 to refinance the assets. The loan was then securitised.

But earlier this year it emerged the value had fallen by £19M to £86M, an 18% drop. That means the loan-to-value ratio on the senior debt is 78%, against a covenant of 75%. There is also £16M of mezzanine debt against the portfolio, so the assets are worth the same as the loans.

CBRE has been appointed to asset manage the portfolio.

Oaktree tried to sell the three centres as a portfolio in March 2017, appointing agents to market them for £120M, an 8% yield. Today that yield has risen to closer to 12%.

Private equity firms that bought big in regional shopping malls between 2012 and 2015 are now scrambling to sell out, even if that means selling at big discounts.

According to CoStar, Tristan Capital is selling the 178K SF White River Place in St Austell, Cornwall, for £10M, an 11% yield, having bought the property for around £25M in 2012. It is also selling Folkestone’s Bouverie Place for £25M, hoping to make a profit on the £22M for which it bought the asset in 2013.

Cerberus is selling the Leopard portfolio of six shopping centres in Port Talbot, Stafford, Dumfries, Dunstable, Kidderminster and Torquay. The portfolio could fetch less than half the £81M Cerberus paid for it in 2014, according to Property Week.

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