The Livingstone brothers’ London & Regional continues to race against a £362m securitised loan maturity as rating agency Standard & Poor’s has downgraded the debt.
The agency has reduced the rating on the class A and B notes in the London & Regional Debt Securitisation, LORDS 1, in light of the increasing refinancing risk as the loan approaches maturity in October.
Although the debt continues to perform well, and its financial ratios remain stable, impending lease expiries on two of the five properties securing the loan are expected to make new financing difficult.
Analysts from Chalkhill Securities said: “In May of this year, rumours of lease renewal negotiations on Trinity Bridge House emerged. However, these talks appear not to have reached any conclusion.
“The property is an eight-story office block located in Salford, Manchester, and is let in its entirety to the Secretary of State for the Environment, although HMRC currently occupy it. It is significantly over-rented due to fixed rent reviews, and the market demand in the surrounding area is of concern.”
S&P has also singled out London office Skipton House (pictured), which is let to the Secretary of State for the Environment, for its 2016 lease expiry, with its secondary location in Southwark seen as an additional hurdle when refinancing.
The three remaining London properties – the Guinness headquarters at Park Royal; St Georges Court, WC1, let to the Secretary of State for Defence; and 68 King William Street, EC4 – are not mentioned in S&P’s reasoning for the downgrades.
King William Street is on the market for around £70m following the appointment of Savills to market the office and retail building.
In June, L&R appointed debt specialists AgFe to advise it on options ahead of the debt maturity. However, Chalkhill adds that “given there is limited scope for London & Regional to extend the loan with the bonds maturing in 2014, S&P downgraded both tranches”.
The five properties were valued at more than £400m at the height of the market, but are now thought to be worth less than the value of the debt.
bridget.oconnell@estatesgazette.com
