09.10.09

By David Hatcher

Lloyds Banking Group offers “stapled finance” for its Pollock shopping centre

Silverburn, the 1m sq ft shopping mall in Pollock, near Glasgow, was brought to the market this week in the hope of a sale by the end of the year.

Questions are already being asked about why Lloyds Banking Group is choosing to sell a prime retail asset that does not appear to be distressed.

It is true that the centre has been affected by the same devastating collapse in values that has knocked all UK properties, which prompted its lender, Lloyds, to step in.

However, Silverburn, which was bought by Paul Green’s Retail Property Holdings with finance from Bank of Scotland — now part of Lloyds, has a near-zero vacancy rate, generates £18m in rent a year and has potential for rental growth when retailers’ five-yearly rent reviews begin in 2012.

Lloyds, which is advised by Deloitte and Jones Lang LaSalle, is thought to be seeking offers of more than £250m — a 7.2% yield — although the debt on the centre is thought to be about £300m.

London & Stamford Property, Universities Superannuation Scheme, Grosvenor, Capital & Regional, Orion, British Land, Hammerson, Deka, Meyer Bergman, AEW Europe and Area are all understood to have expressed interest.

It is thought Lloyds is seizing a “golden window of opportunity” before any “double dip” and is believed to be willing to transfer part of the debt as “stapled finance”.

This would give a buyer access to funds and provide the bank with an opportunity to renegotiate loan terms.

It will also allow Lloyds to more actively manage its loan books to minimise writedowns.

Richard Low, managing director of Combined Property Services, which is servicing Green’s assets, says: “There is an opportunity to add

a huge amount of value and that is what is attracting so much interest.” 

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Source: Property Week (www.propertyweek.co.uk)