The mezzanine lender that took over the ownership of a trio of UK shopping centres has seen its investment in the portfolio eroded in just nine months.

Debt-fund manager DRC took control of a portfolio of three UK shopping centres in June after previous owner Oaktree Capital Management defaulted on a securitised loan.

When Oaktree bought the Kingsgate Shopping Centre in Dunfermline, the Vancouver Centre in King’s Lynn and The Rushes in Loughborough in December 2017, they were valued at £105M. Goldman Sachs provide a £70M loan that it then securitised, and DRC provided £16M in mezzanine debt.

But by January 2019, the value of the portfolio had fallen to £86M, a 78% loan-to-value ratio compared to an LTV covenant of 75%.

In June, DRC made a payment to cure the breach, and in October it enforced the loan and took over as owner of the portfolio from Oaktree, according to notices from the servicer that manages the securitised loan.

But according to a notice last Thursday, a valuation undertaken in March showed the value had fallen to £69M, which the servicer said was a 96% LTV. The notice said the owner had 15 days to cure the default.

The valuation change represents a 20% fall in the space of 14 months, which highlights the risk new owners face when they buy into the retail sector.