Tuesday, 15 January 2013

Gemini: A breakdown of the 34-strong portfolio


By Paul Norman - Thursday, August 09, 2012 15:25
Administrators have been appointed to call in the loan secured against Propinvest’s Gemini portfolio. The move has heightened investor interest in a 34-strong wide portfolio that includes major malls, offices and warehouses. CoStar provides a full breakdown of the portfolio.
In a stock market announcement yesterday evening, special servicer CBRE Loan Servicing said it had appointed Deloitte as administrator to the securitised 34-strong Gemini portfolio.
The announcement brought to a head more than a year of discussions between the portfolio’s development manager Propinvest and its adviser Lazard and Special Service Provider CBRELS seeking an acceptable restructuring proposal for bondholders that avoided insolvency.
An orderly work out of a portfolio packed with significant assets spread across all commercial property sectors is now set to be pursued.
The portfolio, which was assembled by Propinvest, was most recently valued by GVA, as at March 2012, at £437.75m. It was valued in 2006 ahead of Barclays Capital's securisation in the November at £1.23bn.
The outstanding loan balance is now £850,362,550. The loan is interest only and matures on 17 July 2016.
Each of the four projected ICRs on the loan is below the required interest cover minimum of 120% and consequently the loan is in breach of its projected ICR covenant.
GVA was appointed in 2011 by special servicer CBRELS to provide six monthly revaluations of the portfolio. In the first valuation in time for the January interest payment date (IPD), on the 25th, GVA reported that, as at September 2011, the portfolio was valued at £460.6m.
The previous valuation to this was conducted more than three years ago – on 26 September 2008 – and put the portfolio at £801.4m.
The continued fall in values seen since then despite the main market rallying in July 2009 has been driven by the asset quality, which is predominantly secondary in regions and segments of the UK market which did not follow the recovery in value.
The Guernsey registered borrowers had been pursuing an alternative solution which would see private equity groups KKR and Westbrook, with the backing of Propinvest, buy out the bondholders in the CMBS at a discount to the face value of the bonds and then take over and asset manage the portfolio.
Development manager Propinvest disputes CBRELS's allegations that there are issues with HMRC over unpaid VAT and also argues that the alternative solution would offer a materially improved return for bondholders to an administration.
Yesterday however CBRELS confirmed it had dismissed the indicative offer for the loan and it is the failure of these talks that was expected to trigger an HMRC move to take action over £15m of allegedly unpaid VAT.
Based on the most recent valuation the lenders face a loss of close to £800m. On top of the collapse in values since the securitisation there is also an interest rate swap liability of £280m with Barclays, which CBRELS has reached an agreement to delay immediate repayment on.

An orderly work out

While there are no doubt further twists and turns in the saga, the latest move brings closer to fruition the potential for a string of disposals from the 34 strong portfolio.
CBRELS's latest Collateral performance and status report on the Gemini (Eclipse 2006-3) CMBS, published today, gives an indication of where values have got to on an individual basis as of March of this year, according to GVA's independent advice.
CoStar News compares and contrasts the document with Barclays Capital’s 2006 Gemini (Eclipse 2006-3) CMBS offering circular to provide an overview of each asset within the portfolio and how it has performed.
At the time of securitisation the Gemini portfolio comprised 36 properties, with 31 located in England, one in Wales and four in Scotland.
Thirteen of the properties, representing 58.7% of the portfolio value, were retail, 11, representing 20.8%, were offices, three, representing 5.5%, were industrial, two, representing 7%, were warehouses, five, representing 5.1%, were leisure properties, and two, representing 2.8%, were mixed-use.
At the cut-off date for the issuance, the portfolio was valued by King Sturge and CBRE at £1.235bn with a net rent of £63.81m, an estimated net rental value of £65.298m, a yield of 5.16% and a net internal area of 4,180,967 sq ft.
There were 386 tenants with 287 or 73.6% in the retail industry – the two largest tenants by value were EMC Europe and Eddie Stobart.
The portfolio had a diverse geographic spread with seven properties or 30.5% by value in the West Midlands, six or 16.8% in the North West, six or 16.8% in North West England 11.89% in Greater London, four or 11.2% in Scotland, seven representing 10.9% located in South East, one representing 7.5% in Yorkshire and Humberside, four representing 6.4% in South West, one, representing 4.1% in the East Midlands and one representing 0.9% in Wales.
The total loan secured on the notes, which was due in July 2019, was £918,862m.
In CBRELS’s circular, the total valuation, as provided independently by GVA, had fallen from £1.235bn to £437.75m in March 2012. One property has been sold – The Headrow shopping centre in Leeds in 2007, and two properties at The Quadrant at Bristol’s Aztec West had been incorporated to create one asset – reducing the portfolio in size to 34 assets.
While CBRELS’s circular does not provide an update on individual asset values it does update on values for each asset class. The below outlines all of the properties in the portfolio, and the change in values among asset classes between 2006 and March 2012.

Shopping centres:

In 2006, the portfolio comprised eight shopping centres valued at £612,400,000. GVA’s revaluation of the remaining seven malls – The Headrow in Leeds was sold in 2007 – put their March 2012 value at £163.35m.
The assets in descending order based on 2006 values are:

Offices

The office portfolio, which includes business parks and in-town and out-of-town assets, was valued at £257,300,000 in 2006 but had fallen in value to £109.5m by March 2012, according to GVA.
The assets ordered in terms of highest value in 2006 are:
  • EMC Tower, Great West Road, Brentford, a major headquarters building valued in 2006 at £62.87m
  • The Grange, Bishops Cleeve, Cheltenham – A modern 178,649 sq ft office headquarters on a 14.75 acre site valued in 2006 at £49.75m
  • 20 Farringdon Street, London – An eight-storey office in Midtown valued in 2006 at £27.25m (pictured third above)
  • Briarcliffe House, Kingsmead, Farnborough – Four-storey office block valued in 2006 at £22.1m
  • Sutherland House, Crawley – A 144,243 sq ft headquarters office building valued in 2006 at £19.4m
  • Helios Court, Bishop Square, Hatfield Business Park, Propinvest Helios Ltd Partnership - office complex in Hatfield Business park valued in 2006 at £17.02m
  • Gloucester Building, Kensington Village, London – A 1990s built office valued in 2006 at £13.87m
  • Nova Building, Herschel Street, Slough – A 1989 built office valued in 2006 at £11.925m
  • The Quadrant, Aztec West Business park, Bristol – Two storey office in Bristol valued in 2006 at £7.92m
  • Regus House, Highbridge Business Park, Uxbridge in West London - A 1998 built office at Highbridge Business Park valued in 2006 at £7.5m

Industrial Parks

The three industrial parks in the portfolio were valued in 2006 at £68m but by GVA’s March 2012 had fallen in value to £26.85m.
The assets in descending order of value as of 2006 are:
  • Wednesbury Trading Estate, Wednesbury – a 442,712 sq ft industrial estate valued in 2006 at £26.3m
  • Units 12 and 13 Woodside Park Industrial Estate, Forester Avenue, Dunstable - a 261,238 sq ft industrial estate valued in 2006 at £26.2m
  • Sussex Manor Business Park, Gatwick Rd, Crawley – an 140,356 sq ft industrial complex valued in 2006 at £15.5m

Logistics warehouses

The two distribution hubs in the portfolio were valued in 2006 at £86.45m. By March 2012 the figure had fallen to £59.75m.
The assets are:
  • Eddie Stobart Unit, Plot 6, DIRFT, Daventry - Distribution and logistics park comprising three separate warehouses and a small office building at the Daventry International Rail Freight Terminal logistics valued in 2006 at £50.365m
  • River Road, Barking - A 271,826 sq ft distribution hub built by ProLogis and valued in 2006 at £36.1m

Mixed-use

The two mixed-use assets in the portfolio were valued in 2006 at £34.95m. As of March 2012 GVA valued them at £8.3m.
The assets in descending order by the 2006 values are:
  • Ashwood House, Princess Way, Camberley, Surrey (pictured) – a mixed-use office and retail scheme valued in 2006 at £22m
  • Charles House, Plymouth – a four-storey mixed use retail and leisure development including a bingo hall valued in 2006 at £14.2m

Retail warehouses and high street shops

The five assets in total were valued in 2006 at 113.065m but had fallen in value to £46.65m as at March 2012 according to GVA.
The assets in descending order of 2006 value are:
  • Waterloo Street, Bolton, Greater Manchester – Thistle Bolton – a retail warehouse in Bolton valued in 2006 at £38.05m
  • Renfrew Retail Park, Argyll Avenue Renfrew, West Glasgow – 124,550 sq ft retail warehouse valued in 2006 at £34.99m
  • Springfields Retail Park, Newcastle Road, Stoke-on-Trent – a 69,955 sq ft terrace of five retail warehouses and a garden centre valued in 2006 at £27.5m
  • 138/141 Friar Street, Reading –A 1989 built shop in Reading high street valued in 2006 at £6.325m
  • Units 1-3, 160 The Marlowes, Hemel Hempstead – Retail block on Hemel Hempstead high street valued in 2006 at £6.2m

Leisure

The five leisure assets in the portfolio were valued in 2006 at £63.255m. As of March 2012 they were being valued at £23.35m by GVA.
The assets in descending order of value in 2006 are:
  • West Strand, Preston Propinvest Fitness - an 82,463 sq ft leisure unit in Preston valued in 2006 at £17.125m.
  • Marcon Way, Crewe, Cheshire – a fitness complex in Crewe valued in 2006 at £12.95m.
  • UGC cinema, Kingsway Leisure Park, Kingsway West, Dundee – a detached, nine-screen cinema complex valued in 2006 at £10.83m.
  • Stansty Road, Wrexham, Clwyd– a fitness centre in Wrexham valued in 2006 at £10.61m.
  • Gade House, 46 The Parade, Watford – a 1970s built leisure unit valued in 2006 at £10.49m.
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