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Commercial Property News
Will RBS save Dunedin's Industrial Fund from collapse?
Dunedin Property Industrial Fund is in trouble. The fund owns the 10m sq ft Industrious portfolio, which has been up for sale for some months.
The fund’s problems were revealed on September 5th when a notice was issued to holders of the commercial mortgage-backed securities issued by RBS, which securitised the senior part of the loans in October 2006.
The amount outstanding on the bonds is £472.7m, while RBS and the junior lenders are owed £585m of debt – £60m more than the value of the portfolio, which fell from £631m in September 2007 to £521m at 30 June.
The notice made it clear that if £4 million of new cash were not received by September 15th the fund could crash into administration. In any event the notice saw the need for an additional £11 million to keep the lights on past that date as well as asking junior lenders to convert their debt to equity and to relax loan-to-value and interest cover covenants.
Roun Barry, Director at Dunedin Property put out a message a few days ago explaining that the the recent introduction of rates on empty property has had an adverse impact on their financial position, despite cutting costs by bringing property management in-house, increasing rental income by 4% and reducing the vacancy rate from 20% to 16%.
This case becomes a test case of how far banks and stakeholders are prepared to go, or are able to go, in this current downturn to support those property companies which are in breach of covenants due to asset value reductions or serviceability issues.
The fund’s problems were revealed on September 5th when a notice was issued to holders of the commercial mortgage-backed securities issued by RBS, which securitised the senior part of the loans in October 2006.
The amount outstanding on the bonds is £472.7m, while RBS and the junior lenders are owed £585m of debt – £60m more than the value of the portfolio, which fell from £631m in September 2007 to £521m at 30 June.
The notice made it clear that if £4 million of new cash were not received by September 15th the fund could crash into administration. In any event the notice saw the need for an additional £11 million to keep the lights on past that date as well as asking junior lenders to convert their debt to equity and to relax loan-to-value and interest cover covenants.
Roun Barry, Director at Dunedin Property put out a message a few days ago explaining that the the recent introduction of rates on empty property has had an adverse impact on their financial position, despite cutting costs by bringing property management in-house, increasing rental income by 4% and reducing the vacancy rate from 20% to 16%.
This case becomes a test case of how far banks and stakeholders are prepared to go, or are able to go, in this current downturn to support those property companies which are in breach of covenants due to asset value reductions or serviceability issues.
Fri, 12th Sep 2008