Firesales – Alternative lenders should step in
There were claims yesterday that Hammerson could be forced into a firesale after it reported slashing £800m from the value of its portfolio. Rival Intu is also reported to be at risk if it fails to raise fresh equity to pay down its £4.7bn debt pile. Some analysts believe this could lead to banks taking control of assets and offloading them at distressed prices. This would likely trigger a spiral – with further valuation write-downs and panic selling across the retail property sector.
We believe that this would create a significant opportunity for alternative lenders to step in and support credible owners or buyers of these distressed assets. In many cases, performance of underlying retail assets is actually holding up, but sector-wide cuts in valuations have led to covenant breaches. Owners of retail assets need time. Recapitalisation can help them to buy time and reposition their assets for the future; either as more cyclically resilient retail concepts, or as alternative asset classes.
At Rivercrown we see the environment as presenting contra-cyclical opportunities – enabling us to finance robust business plans and fundamentally sound real estate which is in some cases simply blighted by a negative view on the sector as a whole.
Jacob Lyons is Co-Founder and Managing Director at Rivercrown