Borrowers seek new income as maturity date looms for three big UK CMBS deals

Three UK CMBS loans above £150m are due to mature in the next six weeks, the largest of which is the Devonshire Square Estate loan in October, with an expected securitised balloon amount of £285.5m. Rockpoint, owner of the mainly-let City office complex, is topping up the income so that it will cover interest payments.

However, main tenant Aon, which accounts for close to 60% of the rental income, is moving to British Land’s Leadenhall Street development in 2014. A Société Générale CMBS maturities report predicts “a win/win outcome from the loan being extended”, despite loan servicer Morgan Stanley Mortgage Servicing having rejected the borrowers’ request to extend the maturity in 2009.

The £213.3m loan backing the Adelphi buildings is also due to mature in October. Perella Weinberg is in talks to buy the WC2 building for more than £285m from Istithmar, despite the main lease having less than four years left. The loan, which is in breach of the loan-to-value ratio covenant and is underwritten by a £27m interest rate swap, is expected to be repaid as a result of a sale.

The third loan to mature in October is the £167.3m Metro loan, backed by London shopping centres Southside Wandsworth and Shop Stop, Clapham. The loan is well within its interest coverage ratio and has no LTV ratio, so borrowers Land Securities and Delancey are expected to be able to refinance it at maturity.

Meanwhile, the debt backing City investments St Katherine Docks and Woolgate Exchange both matured in July. St Katherine Docks was sold to Max Property Group and Newmarket Property Holdings for £156.3m and a £129m A loan will be repaid on October’s interest payment date.

The non-securitised, £39.7m B loan is likely to suffer a principal loss, however. The loan defaulted on its  LTV covenant in April 2010 and entered special servicing, after borrowers F&C REIT and AREA failed to repay the outstanding balance at maturity last July. The £262m Woolgate Exchange building is up for sale, with the loan now in standstill. The borrower is Irish investor D2 Private.

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