Reubens Buy out hbos Debt

06 March 2005 – John Waples The Sunday Times

The three-way consortium that bought Chelsfield, the property company, for £2.1 billion is about to buy out its banks less than four months after the deal was completed.

As part of this pay-back, the billionaire Reuben brothers, who are leading members of the consortium, have agreed to pay off £415m of expensive mezzanine finance that had been raised from a banking group led by HBOS.

This move will slash the consortium’s interest bill. It will also create more financial flexibility for its members, who include Multiplex and Westfield, to work on Chelsfield’s two big London development projects at White City and Stratford, and a third one in Gibraltar.

In addition, Westfield is about to pay back a further £800m when it buys out Merry Hill, the huge retail complex in Dudley outside Birmingham, from Chelsfield. Acquiring this asset was one of the main reasons Westfield joined the consortium.

Since the acquisition was completed at the end of last year, more than £500m has been raised from sales. These include disposal of the Waterside office development at Paddington Basin and the sale of Wentworth Golf Club to Richard Caring, the clothing tycoon.

The remaining assets, which include White City and Stratford, will be held virtually debt free. All that remains will be £110m borrowed from Anglo Irish Bank and secured on the Global Switch assets. Some further debt is also still held in a subsidiary operation called Sapphire and this will be re-financed.

Despite indications that the economy is slowing, the property sector is still running at full throttle. Prudential, Britain’s biggest pension-fund group, is about to raise £1 billion from the sale of its interests in three of the country’s largest shopping centres.

The disposal comes just days ahead of an announcement by the government that it will introduce American-style, tax-efficient, real-estate investment trusts by April of next year. It is through the Treasury has listened closely to the industry and the trusts will not be as prescriptive as once feared.

The announcement, which is due to accompany the budget statement, should further boost shares in the property sector.

Prudential is selling its 35% stake in the Bluewater retail complex in Kent. One mooted buyer Westfield, which is already the world’s biggest owner of shopping centres. In a ??? deal, Liberty International, the quoted property company chaired by Donny Gordon, is in advanced talks to acquire the Pru’s stake in Cribbs Causeway, just north of Bristol, and the Manchester Arndale for about £600m. An announcement is expected within a fortnight.

Martin Moore, managing directors of Prudential Property Investment Managers, said that after strong growth, the retail assets were now too bulky for its life fund and it wanted to diversify its interests.