Derek Quinlan and PropInvest have less than six months to arrange the refinancing of more than £1bn of debt on the 42-storey Citigroup tower in Docklands, E14.
Accounts for the tower at 25 Canada Square, filed this week at Companies House, reveal that loans totalling close to £1.1bn are due to mature by 30 November.
The £1bn acquisition of the 1.2m sq ft property from Royal Bank of Scotland in 2007 was funded with senior debt from Allied Irish Banks and Santander and a £204m junior loan from Royal Bank of Scotland. Both the senior and junior debt were syndicated.
The £870m of senior debt has breached an interest cover covenant.
In the accounts, the directors said: “A formal waiver of the breach has subsequently been issued by the lenders, and the directors have commenced discussions with the lenders regarding an extension of the facility, which in the directors’ opinion is likely to be agreed.”
The loan facilities also include a loan-to-value covenant. However, due to the uncertainty in the market caused by the downturn, PropInvest – run by Glenn Maud – and Quinlan have not revalued the building since November 2007, when it was given a value of £1.2bn. The bank has not yet asked for a test of the LTV.
The approaching maturities and breach have led the owners to include an emphasis of matter statement in accounts for the tower, which states: “The directors have concluded that these circumstances represent a material uncertainty that casts significant doubt on the company’s ability to continue as a going concern.”
The lack of a recent valuation has also caused the owners’ auditors, KPMG, to qualify its report on the accounts. It said: “The company’s principal property has not been revalued since November 2007. Having regard to the decline in UK real estate values since that date, the potential effect on both the state of affairs of the company, its loss and total recognised losses might be significant.”
The parent of the companies owning the tower recorded a loss of £105m for the year ended 30 June 2009.
Allied and RBS are not expected to push for a sale of the property, however, because Quinlan and Maud used an interest rate swap to fix interest on the loan. The swap, agreed with Citi, would need to be repaid ahead of the debt. The swap was held as a £119m liability at 30 June 2009.
According to the latest De Montfort report, more than £52bn of commercial property debt is due to mature this year.
