A shopping centre owned by private equity firm InfraRed Capital Partners, which was once valued at over £73 million, has gone into administration. It has been revealed that it comes after the loan secured against it matured. So how does this reflect on shopping centres? After the heavy loss to the high street that has been felt nationwide, the security of shopping centres may not be certain.
Partners from EY, a corporate real estate strategic consulting service, were appointed as the administrators to a group of companies that owned St George’s shopping centre in Preston. As the impact of the pandemic becomes ever more apparent, it is clear to see how hard the retail sector has taken it, and how we will feel the reverberations of the high street struggle for some time to come. The amount of shopping centres and retail companies going into administration and receivership is growing at an alarming rate.
It comes as nine other shopping centres or leisure-led schemes have fallen into administration, including the Ladysmith shopping centre in Ashton-under-Lyne in the North West, the Market Gates centre in Great Yarmouth in the east of England, and the Idlewells shopping centre in Sutton-in-Ashfield in the Midlands, as well as Manchester’s Trafford Centre, who’s parent company have handed control of their assets to partners.
InfraRed Capital bought the St George’s centre for its Active Fund III from Aviva for £73M in February 2015. The fund manager bought several shopping centres between 2011 and 2015, most of which it then sold on.
Documents at Companies House show that Wells Fargo provided a loan to fund the purchase.
Accounts for one of the companies in the centre’s ownership structure show the loan matured in March but was not repaid. The accounts said that loan-to-value and interest-cover-ratio covenants were likely to be breached and that the lender was controlling the bank account into which rent was being paid by tenants.
According to the accounts, it was due to lockdown closures. The shopping centre joins a long list of retail businesses that have fallen victim to the effects of the pandemic, and it is more than likely that it will not be the last to do so. Realistically, it is likely that it will get worse for the retail sector before it gets better, but with retail now back open, and companies such as Primark preparing to pay back furlough money to the government due to soaring profits since reopening, it stands to reason that high street retail is not done just yet.