Merry Hill owner completes £488m refinancing deal

The owner of the giant Merry Hill Centre has completed a £488m refinancing deal on a loan agreement taken out to facilitate its full ownership of the shopping complex.

Intu bought a 50% stake in the centre in March 2014 for £408m from Westfield with Queensland Investment Corporation retaining the other 50% stake, for which it paid £524m in 2007.

In its drive to improve the site, intu agreed to acquire the remaining 50% from QIC last year in a £410m deal.

It has now completed the refinancing with a £488m loan, which will mature in 2024.

The refinancing deal was led by Linklaters and involved a consortium of four lenders including Wells Fargo and BNP Paribas.

In last month’s interim results, intu stated: “We have carried out significant refinancing activity in recent years which has resulted in diversified sources of funding, including secured bonds plus syndicated bank debt secured on individual or pools of assets, with limited or no recourse from the borrowing entities to other group companies outside of these arrangements.”

The group has its work cut out improving the centre, which although one of the largest in its portfolio of major regional centres, currently has the lowest occupancy rate at 92%.

It still manages to generate a rental income of £40.5m but that has been impacted during the past year with the closure of its large BHS unit following the group’s administration and Sainsbury’s decision to pull out of its supermarket at the end of last year.

The Sainsbury’s unit, and an adjoining one formerly occupied by a Burger King restaurant, are both being converted to accommodate a new Next store, which will go some way towards making up the shortfall.

However, Next already occupies two units in the complex – one a large unit away from the main mall specialising in homeware – and what the fate of these two units is, remains to be seen.

Plans have just been submitted to locate a new Starbucks coffee shop in the car park next to the homeware unit, which may herald future development at the site.

In the meantime, intu is ploughing £110m into the centre to try and upgrade facilities in the hope it can encourage a more affluent customer base.

At 48% it has the lowest percentage of ABC1 customers amongst any of the group’s major regional centres.

Part of the plan is to develop a new restaurant quarter and to encourage larger units, with the aim of attracting more high quality tenants.
The centre, which is valued at £917m, is the UK’s seventh largest shopping centre and attracts an annual footfall of around 22 million people.