Lone Star sells £45m Project Royal loan to Tristan and Ellandi

Posted by CoStar Finance on 22nd Jun 2012

Tristan Capital’s Curzon Capital Partners III fund and Ellandi have acquired the outstanding debt secured against White River Place, a town centre scheme in St Austell consisting of 20 retail and restaurant units, a Cinema and the town’s main covered car park.

The White River Place Developments operating company, now fully-owned by the joint venture partners, had total net liabilities of £23.56m, with the scheme valued at £19.67m, according to its end of year 2010 financial results, against an outstanding £42.66m former Bank of Scotland loan which Lloyds spun into Project Royal last summer.

Since which time, the value of the scheme has improved.

The scheme itself is one of many examples of a scheme over-leveraged at the top of the market, which fell deeply underwater after the market collapsed with values for regional developments more than halving in the two years to mid-2009.

The debt burden obscures a straight-forward asset management play for Tristan and Ellandi, which will be managed by Ellandi, with a 23% vacancy rate to improve on as at 31 July last year.

Lone Star sold the loan for around £20m to Tristan Capital and Ellandi, at a premium to the pro rata price paid to Lloyds Banking Group last December in the £923m nominally-valued deal Project Royal UK loan portfolio, broke first by CoStar News.

The disposal strategy reflects an adaption of a traditional private equity business strategy where a portfolio is bought in bulk at a discount on a scale purchase and sold piecemeal at a premium.

This deal reflects a wholesale-to-retail loan strategy which is likely to become a feature of loan portfolio workouts in the years ahead, as the new owners of formerly heavily-indebted properties are acquired via bulk-buying private equity players after they have booked their profit.

Ellandi, the minority joint venture partner, will run the asset management. Savills has been appointed as letting agent, while Reco has been retained to act in a development management capacity.

White River Place, developed by Reco Properties with support from the HCA, is rated BREAM “excellent”.

Morgan Garfield – a former real estate banker with Deutsche Bank and co-founder of Ellandi – said: “This has been a perfect illustration as to how we can use our expertise in acquiring loans to provide our investors with high quality investment opportunities that are not available to the wider real estate market.

“It has been a complex process requiring close involvement with the debt holders and the existing sponsors. Our ability to work intelligently and commercially with all parties will hopefully ensure this is a good transaction for all parties.”

Pete Mather of Tristan Capital Partners, said: “This is the second value and convenience shopping centre acquisition we have acquired into our JV with Ellandi. We are excited to be acquiring a very well built mixed use scheme at a material discount to build cost where we are confident that we can work with closely with existing tenants and potential tenants to let space and add value.”

The shopping centre comprises 155,000 sq ft of retail, restaurant, cinema and car parking accommodation. Tenants include TK Maxx, Wilkinsons, New Look and Frankie’s and Benny’s. The former Peacocks and Bon March unit has been let to 99p Stores by the new owners.

Source: CoStar Finance

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