US bank Morgan Stanley has this week walked away from more than £100m of retail investment deals over fears it was paying too much for the assets.
The bank, which said last week that it could face losses of up to $6bn (£2.9bn) because of its exposure to the US sub-prime mortgage market, has decided against forward funding a 400,000 sq ft town centre scheme in Lichfield, Staffordshire, and a 110,000 sq ft retail development in Witney, Oxfordshire.
The Morgan Stanley Real Estate Fund was planning to buy the two schemes through its jv with Kandahar – the property investment firm owned by Carphone Warehouse founder David Ross – but is understood to have changed its mind at the last minute when it was unable to renegotiate on price.
Kandahar will now buy the £95m Friarsgate in Lichfield from local developer S Harrison, and Simons Developments’ £40m Marriotts Close in Witney on its own.
Toby Phelps, head of UK investing at Morgan Stanley, confirmed that the bank was no longer investing in the schemes.
“As a partnership, we are not pursuing these acquisitions,” he said, “but we are still looking to invest in the UK retail market, as and when the right opportunities arise.”
Ross’s Kandahar and Morgan Stanley teamed up to create the £500m Kandahar Real Estate UK retail and leisure jv last November.
The jv, which includes the 560,000 sq ft Drake Circus shopping centre in Plymouth, Devon, and a 1m sq ft UK high street retail portfolio, was refinanced by Bank of Scotland in September with £460m of debt finance.
DTZ is advising both S Harrison and Simons Group.
joanne.payne@egi.co.uk
