Topland has refinanced the Marks & Spencer portfolio that it bought two years ago to show a £100m-plus paper profit.
It emerged this week that Sol and Eddie Zakay’s Topland, which bought 78 stores in a £348m sale-and-leaseback deal in November 2001, has had the portfolio valued at £450m-£500m to refinance and to raise cash.
CB Richard Ellis earlier this year valued the portfolio at over £450m, which reflects a 5.5% yield. But sources said Topland could expect another valuation today based on a 5% yield which would reflect £550m owing to the increasing demand for retail property.
Topland completed the refinancing this week to continue its drive to release more equity for acquisitions. It comes after its refinancing of the £350m “Exeter Portfolio” in June.
The combined deals have released around £150m of cash for the private investment firm, which has traditionally been heavily geared.
Banks are increasingly cautious about straight finance deals, pulling back from the loan-to-value ratios of 90% or more that were achieved in 2001/2002 on “bond-style” investments let on long leases.
Sol Zakay said last week that Topland was targeting assets with shorter leases or where “value can be added” (4 October, p43).
The new lending deal is for £373m from a consortium of banks headed by Bayerische Landesbank and including Royal Bank of Scotland. It replaces the original Abbey National debt and releases around £70m of cash when combined with Topland’s original equity.
An insider said: “When M&S originally sold, the retail sector was not so in vogue. Now the huge growth in the sector plus the continuing improvement of M&S as a business has meant that the portfolio has grown substantially in value.”
M&S has also seen its annual rent bill increase by £2m, to over £26m, since selling the properties. The original leaseback deal expires in March 2027, but M&S can renew any of the leases for up to 40 years.
Zakay would not comment but a statement from Topland said: “We set out this year to refinance £800m of assets and have achieved this. The substantial cash that we now have ensures that we are well placed to focus on further big-ticket transactions.”
