Liverpool malls go under the hammer amid debt call in fears

Two Liverpool shopping centres once caught up in a legal wrangle when the loans against them were sold by Nationwide after the global financial crisis will be put up for auction at a fraction of their former value. Joint administrators at Moorfields have instructed online auctioneer BidX1 and agent Savills to put Belle Vale Shopping Centre and Port Arcades Shopping Centre at Ellesmere Port up for auction on 29 September. They are guiding £4.6m for Belle Vale, which reflects a capital value of £15.37 per sq ft, and £3m for Port Arcades, a capital value of £8.76 per sq ft. The pair were previously bought by Paul White’s Frogmore using a Nationwide loan in 2006 along with a third smaller centre, the Broadwalk Shopping Centre in Bristol, for a combined £130m, reflecting a 5% yield. Plummeting retail values have led to a growing number of shopping centres going under the hammer with major commercial auctioneers Allsop and Acuitus in recent years. However, this joint sale between an auctioneer and an agent suggests the growing appeal of certainty of execution offered by the auction contract in such uncertain times. The centres collapsed into administration in 2016, after plummeting values triggered a legal row between Frogmore and Nationwide. Savills is understood to have been advising on the centres for about a year, replacing Colliers International. Belle Vale was under offer in a private treaty sale earlier this year, but the Covid-19 pandemic scuppered the deal. Interest in Port Arcades had been stymied by a headlease from the council which was due to jump from £88,000 to £200,000 in five years’ time. This prompted Savills to delay putting it to market until the headlease was renegotiated. A new 250-year lease at £100,000 pa is now close to being signed. The 302,831 sq ft Belle Vale centre has 67 retail and leisure units. Currently 83% let by floor area, tenants include Wilko, B&M, Argos, McDonald’s, Greggs, New Look and Poundland. The gross passing rent is £1.8m pa, resulting in a net operating income of just over £1m pa. Tenants at the 326,217 sq ft Port Arcades include Wilko, Iceland Food Warehouse, EE, Peacocks, Specsavers and Boots and the centre also has potential to expand. It is 64% let by floor area and currently generates a gross income of £1.6m pa and net operating income of £498,735 pa. BidX1 director Oliver Childs said: “There is a realisation that there is a window of opportunity at the moment, so for legacy cases it makes sense to go to the market now to achieve the best outcome before the needle rises as more debts are called in.” Frogmore’s dispute with Nationwide In 2015, Frogmore attempted to sue Nationwide for breach of contract over the building society’s sale the previous year of a £115m loan secured against the three shopping centres.  Frogmore sought as much as £51m in damages over allegations that Nationwide breached a contract relating to the loans when selling them to Cerberus as part of the £1bn Project Carlisle deal involving UK non-performing loans.  It claimed the right to buy back the loans at the market value of the three malls – a figure Frogmore put at £50.8m in 2014. Frogmore had drawn down around £105m of the facility by 2009, at which point tumbling commercial property values meant the outstanding balance of the loans was higher than the value of the shopping centres and Nationwide halted further drawings.  Frogmore contended that, given the outstanding balance of the loans now held by Cerberus was £102.1m and the value at which it should have been able to purchase the loans was £50.8m, it was entitled to damages of £51.3m.  The legal dispute was settled, but administrators were called in by the lender in 2016.    To send feedback, e-mail julia.cahill@egi.co.uk or tweet @EGJuliaC or @estatesgazette