Barclays, Lloyds and Blackstone urge Warner Estate property sell-off

Warner Estate is in the midst of a firesale of its remaining 39-strong £162.1m wholly-owned UK secondary property portfolio to repay the outstanding £229.4m debt with Barclays, Lloyds Banking Group and a Project Isobel loan managed by Blackstone which matures in exactly five months’ time.

With the near term prospect of selling all the properties before the end of year debt maturity, and at fair value, remaining unlikely, chairman Philip Warner said this morning that the company has agreed with Barclays, Lloyds and Blackstone to sell £90.8m of its total £162.1m-valued portfolio within the next 12 months.

The 39-strong investment property portfolio has fallen in value from Warner’s previously recorded historical cost basis by almost £90m – from £251.7m to the current £162.1m, driven by capital depreciation, lease run-off and dislocation in the retail market.

Across the entire wholly-owned portfolio, an aggregate £13.5m in annual rent is received, against a £14.7m estimated rental value, reflecting a net initial yield of 7.7% and a void rate of 5.6%.

But even if Warner successfully sells £90.8m at or near par, the property company will still owe Barclays, Lloyds and RBS around £138.6m with an investment property security pool of just £70.9m.

Remaining investment properties could be sold via members’ voluntary liquidation on a solvent basis, Warner suggested in its interim statement this morning.

Cushman & Wakefield and CBRE provided the latest valuations on the £162.1m, which puts Warner’s portfolio’s LTV at 141.5%.

These figures follow the disposal of eight properties for £61.9m over the 12 months to the end of March.

RBS’ loan to Warner Estate was spun into the bank’s £1.36bn Project Isobel, as a result, the sub performing loan portfolio winner, Blackstone, is managing the work out process through the private equity firm’s Real Estate Debt Advisers division.

Chairman Philip Warner admitted this in this morning’s interim results that his company’s inability to repay the outstanding debt by maturity leaves “uncertainty” which casts “significant doubt over the ability of the group to continue as a going concern”.

Warner said: “From the group’s perspective, the ultimate aim of these negotiations is to dispose of the investment property business and continue thereafter as an asset management business, initially based on the asset management contracts for the Ashtenne Industrial Fund and the Apia Regional Offices Fund.

“Achieving the release of the security over the asset management business is fundamental and the continuing viability of the asset management business is dependent on the timing and quantum of management fee income and the implementation of further cost savings.”

Warner has agreed that Blackstone can have control over rental for specific properties which is “consistent with the existing practice for the other two lenders”.

Warner also has an unpaid REIT conversion charge of £600,000 to pay, with a payment plan to be agreed with HMRC.

For the year to the end of March, Warner made a post-tax loss of £38.7m, compared to a £7.2m loss for the previous 12 month period, driven by fair value adjustments on investment properties and as well as losses from selling at discounts to fair value on disposals so far.

jwallace@costar.co.uk

About James Wallace

Finance Editor, CoStar News
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