8th Apr 2019 15:34
LONDON (Alliance News) - RDI REIT PLC on Monday said loan to value ratio of four of its properties rose above 85% due to ongoing uncertainty in the UK shopping centres market.
The trust said four of its shopping centres in the UK, Grand Arcade, Weston Favell, Birchwood and Byron Place, which represent 12% of the portfolio, are financed by a long-term fixed rate debt facility with Aviva Commercial Finance Ltd, a subsidiary of Aviva PLC.
The facility is non-recourse to the company and has an outstanding principal balance of GBP144.7 million, a fixed rate of 5.5% per annum, and a maturity date in April 2042.
RDI REIT said due to ongoing uncertainty around the UK shopping centres valuation and concerns over certain key retailers, Aviva has subsequently undertaken a further valuation of the four assets secured by the facility.
The latest lender's valuation of GBP152.5 million reflects a net initial yield of 9.7% and has resulted in a lender's loan to value ratio of 89.4% which exceeds the 85% loan to value covenant.
The adverse movement in the lender's valuation has been driven almost exclusively by continued upward movements in investment yields, RDI REIT explained. Occupancy as at the end of August 2018 stood at 94.5% and net income across the Aviva portfolio have remained broadly stable, the company said.
Under the terms of the facility agreement, the borrowing entities have until April 23 to cure the
covenant breach which would require a cash cure of GBP9.4 million or the addition of new collateral to reduce the loan to value ratio to below 85%.
In the event the loan to value ratio is not reduced to below 85% and a consensual sales process is concluded, future net operating cashflows after finance costs will be reduced by GBP6.5 million annually.
Given the long-term fixed rate nature of the loan, material break costs are associated with early repayment. A disposal of one or all of the assets is therefore not expected to result in any equity being realised from the net disposal proceeds.
RDI REIT noted that a disposal would reduce its exposure to UK retail to 20% of the portfolio by value from 29% reported at the end of August 2018, as well as reducing the company's loan to value to 44.0%, down from 47.3% in August 2018.
In addition, RDI REIT said trading across the wider portfolio remains robust, with positive occupational demand and leasing activity across the majority of the portfolio.
RDI REIT shares were trading 0.6% lower in Johannesburg on Monday at ZAR28.64 each, while shares were down 1.0% in London at 154.20 pence each.
Related Shares:
Aviva