JP Morgan Asset Management is preparing to sell its retail park in Hertfordshire at the behest of its lender RBS, in further signs that declining values are denting the retail sector.
The duo have instructed CBRE and Avison Young to seek more than £40m for Brookfield Shopping Park in Cheshunt, in what is believed to be a consensual sale.
JP Morgan bought the retail park from Standard Life in 2015 for £92.1m, on behalf of its European Fund. RBS financed the acquisition with a £62.2m loan, also in 2015. However, it is understood that the debt has since reduced to around £45m.
Based on a reserve rent of £5.6m in 2015, a deal would put the yield at around 11%. However, to give a tentative sense of the change in rental tone since then, market sources have estimated that a re-let at one of the park’s units was recently agreed at roughly £25 per sq ft. This compares with an equivalent of just over £62 per sq ft in 2015.
The 90,000 sq ft site’s tenants include Outfit – one of 23 stores that could soon close under Arcadia Group’s proposed company voluntary arrangements – as well as River Island, New Look, JD Sports, Next, Boots and Argos.
The news highlights that the woes affecting retail landlords are beginning to manifest in other categories beyond the shopping centre sector.
Broadly speaking, there is not as much debt in the retail warehouse market. Until now, signs of pressure on the sector have largely been limited to shopping centre landlords, with several struggling to meet loan repayments in recent months.
Those affected so far have included private equity firms Oaktree Capital, which has defaulted on a loan on three regional assets that it bought in 2012, and Lone Star, which has transferred ownership of five centres that it bought in 2014 back to Austrian bank BAWAG.
Listed companies RDI REIT and New Frontier Properties have each breached loan-to-value covenants on shopping centres earlier this year.
Additionally, the Nicholsons Shopping Centre in Maidenhead, previously acquired by Vixcroft and Cheyne Capital in 2015, fell into receivership last year before it was purchased by Areli Real Estate.
However, this latest development highlights that it is a more widespread issue that the entire retail sector must pay attention to.
All parties declined to comment.
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