Value Retail secures £425m Bicester Village refi

Value Retail has secured a £425 million refinancing of its Bicester Village outlet shopping centre in Oxfordshire with a syndicate of five banks.

The deal was led by co-ordinating banks pbb Deutsche Pfandbriefbank and Santander. Crédit Agricole Corporate and Investment Bank, Royal Bank of Scotland (RBS) and Deutsche Hypothekenbank also feature in the deal as mandated lead arrangers. The loan is understood to have a term of five years.

In 2013, Bicester Village was refinanced in a restructuring deal led by Lloyds Bank Commercial Banking. Value Retail pre-paid a £190 million loan written in 2009 by WestImmo (now part of Aareal Bank Group) and DG Hyp on the asset and high-yielding debt lent to the sponsor entity.

Helaba, RBS and Santander provided finance in 2013 alongside Lloyds. The five-year interest-only loan included £14 million to repay a swap from the earlier loan and around £300 million after costs secured on Bicester Village.

Speaking to Real Estate Capital, Value Retail’s director of finance, Charles Mackintosh, explained that the latest deal allows Value Retail to take advantage of favourable market conditions.

“We have been talking to pbb and Santander about this for several months. We explored the possibility of staying with the deal we had, but for a number of reasons we couldn’t make it work to reflect the value of the asset and its potential,” said Mackintosh.

“Bicester Village will be expanding in the next two years so we needed a group of banks that can deal with that, and which we can eventually speak to about an expansion facility,” he added.

Incumbent lenders Santander and RBS have been joined in the latest financing by banks with which Value Retail has existing relationships. Aside from RBS, the new club is notable for being composed of continental European banks.

“UK banks are handicapped by the regulatory environment so we find ourselves talking to continental banks,” Mackintosh said.

Mackintosh added that the firm considered a CMBS solution for the refinancing of Bicester Village but decided against it. Debt secured by the property was securitised in the Epic Value Retail CMBS prior to 2009.

“Contrary to received wisdom CMBS is not always a cheaper option and it does not provide the relationship lending needed for an asset like Bicester Village on a daily management basis.”

Bicester Village is one of nine European outlet centres owned by Value Retail, which was founded by chairman Scott Malkin in 1995. It contains 130 shops and is popular with tourists from China, the Middle East and South East Asia, which generate around 50 percent of sales.

Speaking to Lloyds Bank’s Martin Green at the Real Estate Capital Europe Forum in October, Malkin explained that lenders are increasingly familiar with luxury outlet centres like Bicester Village.

“Our experience is that lenders are rigorous; we get much more scrutiny than a traditional deal that ticks a lot of boxes and feels familiar,” Malkin said. “I think the overlay of regulation on banks has made everything cumbersome and increased the need for the transparency between borrower and lender. To get things done you have to have a partnership. It works for us, as we’re relationship borrowers.”