- What The Mailbox in Birmingham has been refinanced
- Why New senior facility and loan note replaces existing Deutsche facility
- What next First major distressed office refinance of this cycle hints at the market entering recovery mode
The Mailbox in Birmingham has been successfully refinanced after the asset’s manager, Martley Capital Group, secured around £90m of fresh debt, Green Street News can reveal.
The deal marks the Mailbox as one of the first office schemes to be salvaged from distress in the early stages of this cycle.
The new facility comprises a senior facility, along with a loan note instrument that has allowed incumbent lender Deutsche Bank to recoup the majority of its outstanding debt. The German bank was owed around £100m.
Leumi UK has provided around £65m of debt to the asset’s capital stack, with the financing gap closed by the issuance of a loan note by Mailbox REIT.
The loan note – which has an array of investors participating, including Tokoro Capital and existing shareholders of Mailbox REIT – has effectively replaced the outstanding Deutsche debt not covered by the Leumi loan at a mild discount to par.
The refinancing deal puts a stop to the sale of the building – and means shareholders in Mailbox REIT are positioned to benefit from capital recovery as the real estate market emerges from the low point of this cycle.
SevenCapital, led by chairman Bal Sohal, had been the preferred bidder at around the £95m mark to acquire the asset in a consensual process run with lender Deutsche Bank and borrower Mailbox REIT.
Operationally robust
With a successful financing tucked up, Martley Capital Group will execute multiple asset management strategies for a building that is operationally sound and has generated close to £11.5m each year in rental income.
The Mailbox offering totals 682,000 sq ft and includes 200,000 sq ft of offices, 133,000 sq ft of retail, 69,000 sq ft of restaurants, a three-screen cinema and a 700-space car park.
Richard Croft, chief executive of Martley Capital, which manages the Mailbox on behalf of the asset’s shareholders, declined to discuss specific details of the refinancing when contacted by Green Street News. However, he said: “The day-to-day performance of the Mailbox goes from strength to strength and the successful refinancing deal is testament to that. That operational performance will take care of future valuations, when normal market conditions return.”
Mailbox was launched for sale in November through JLL with an asking price of £120m. A consensual sale was agreed with the owner following a covenant breach relating to the Deutsche Bank facility last April.
Mailbox REIT was the first asset to be listed on on IPSX in May 2021, but the specialist exchange went into wind-down last September and it was subsequently determined that an alternative listing would not be pursued.
Relationship director Oliver Stenning, from Leumi UK, said: “We are delighted to complete our debut transaction with Martley Capital Group, enabling the recapitalisation of the Mailbox, a significant mixed-use asset in Birmingham city centre.
“This deal required an entrepreneurial approach and demonstrates Leumi’s conviction to backing buildings with strong fundamentals and sponsorship, regardless of the asset class. The execution was efficient thanks to the quality of the borrower and our advisers and we are excited to develop our relationship with Martley as they continue to expand their platform.”
Glimmers of recovery
Green Street News understands that the new financing parachuted into the Mailbox is the first successful refinance of a big-ticket distressed UK office this cycle, hinting that the market is showing signs of recovery.
This recovery narrative is supported by a relative uptick in liquidity for regional office sales. Ashtrom Properties UK has emerged as the frontrunner to acquire two offices in Leeds worth a combined £100m; Pontegadea is buying the Mint building in Edinburgh; and French fund Iroko Zen is set to acquire Morgan Stanley’s office in Glasgow.
