Legal & General Property ('LGP') announces that it has completed the successful refinancing of its Leisure Fund, agreeing a new £71-million (approx. 83-million) facility with Royal Bank of Scotland ('RBS') for a further five years, with an additional £40 million facility which can be drawn down for future investment opportunities.
Against the backdrop of an increasingly tight commercial property lending market, with a large number of UK and European banks continuing to pull back from writing new loans, this is a significant endorsement of the resilience of the leisure sector and, in particular, the strong performance record and high-quality portfolio of LGP's Leisure Fund. The new loan sees the cost of debt reduced by 2%, which will support the Fund in delivering a strong income distribution to investors.
The Leisure Fund is already one of the highest yielding unlisted funds in the UK, offering exceptional income security from a portfolio of high-quality tenants where 47% of the income has fixed or inflation linked increases and an average unexpired lease term in excess of 15 years.
The leisure sector has been characterized by good income returns over the last two years and continues to demonstrate strong resilience against the economic decline, with both the cinema and restaurant sectors performing well through these challenging times.
Formed in 2002, the Leisure Fund Limited Partnership is held in a Jersey Property Unit Trust ('PUT') and has over £250 million of assets under management, comprising seven prime leisure assets, occupying dominant out of town and edge of town positions across the UK, and one major in-town leisure-based development scheme. LGP is the second largest property investor in the UK's leisure sector.
Earlier this year, on behalf of the Leisure Fund, LGP completed a £42 million equity raise from existing investors and took the opportunity to extend the Fund's life to 2020, from 2014.
Commenting on the refinancing, Andrew Ferguson, Fund Manager of the Leisure Fund, says: "The combination of the refinancing deal with RBS and the equity raised earlier in the year have together given the Fund a strong platform from which to grow its successful story of market outperformance.
"The flexibility and liquidity provided by the new facility will enable the Leisure Fund to further expand and develop its existing portfolio, and reflects our ongoing belief that there is significant value to be found in the leisure sector, which continues to offer long leases off lower base rents, providing an attractive alternative to some of the more traditional investment sectors.
"We are very pleased to be partnering with RBS on this refinancing, which is a significant endorsement of the team and underpins the quality of the portfolio."
Nick Solomon, Director at the Royal Bank of Scotland, comments: "RBS has a long term relationship with both Legal & General and the Fund and we are delighted to continue our support through the refinancing. The Fund continues to deliver strong performance and we look forward to working closely with Management as they further develop and enhance the Fund's portfolio."
Assets currently held by the Fund include Millennium Leisure Park in Greenwich, Coliseum Leisure Park in Cheshire Oaks, Valley Centertainment in Sheffield, Barbican Leisure Park in Plymouth, Aspects Leisure Park in Bristol, Meridian Leisure Park in Leicester and The Leisure Exchange in Bradford. Each Leisure Park is an exciting destination venue in its own right, offering a vibrant and diverse mix of leisure and entertainment, including cinema, bowling, health and fitness, restaurants, hotels, and bars.
Additionally, the Fund is forward funding the Westgate leisure development in Aldershot with Citygrove Securities Plc and Rushmoor Borough Council. On completion, The Westgate will provide a vibrant 170,000-ft² leisure and retail destination complex in Aldershot town center.
Source: FTI Consulting