Mailbox owner suspends dividends as £30m loan talks drag on
The owners of the Mailbox are in talks to raise £30m in response to breaching a covenant after the value of the Birmingham city centre property was heavily marked down.
The year-end revaluation reduced the property’s value down from £189.7m to £157m, and so increased the property’s loan-to-value (LTV) ratio to 69.1% – well above the agreed covenant of 60%.
In January the property company had said it “expects to be able to announce a resolution to this issue in the near future”, but negotiations have dragged on with lenders through a period of interest rate rises.
Mailbox REIT needs to reduce its senior debt facility by £27.5m and fund the penalty rate of interest that has been accruing since the debt fell into default in April.
The company blamed “the lengthy discussion with the lender syndicate, together with raising the cure for the senior debt” for the delay in signing off its 2022 accounts, which finally happened yesterday.
It has slashed its dividend from 7p to 4p and suspended future dividend payments while debt negotiations with its syndicate of lenders are ongoing.
Mailbox REIT’s show a £33m pre-tax loss, mostly caused by the revaluation.
Non-executive chairman Stephen Barter hailed the “operational resilience” of the property, which resulted in increased rent and a 17% rise in operating profits.
“Some £11.00 million of annualised rental income is being received from a diverse mix of high quality tenants occupying 94% of the building’s floor area,” he said.
“The company continues to benefit from strong quarterly rental collections, with 99% of the half-year rents of 2023, and 99% of the full-year rents of 2022 now received. As a result, the company’s debt service obligations continue to be well covered.”
Mailbox REIT is also being affected by the decision by the International Property Securities Exchange (IPSX) to wind down its operations.
The real estate stock exchange failed to find new investment to keep the platform alive and will shut in 90 days.
Mailbox said it is in discussions with an alternative platform and expects to take a final decision shortly.
Barter added: “While we are sad to learn that IPSX is to wind down, we have been preparing for the possibility of such an outcome.
“We are finalising arrangements for listing and trading on an alternative platform, where access to trading and liquidity will be improved, while protecting the interests of all our shareholders.”