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Capital Markets

CMBS: British Land set to convert to Reit status

British Land’s decision to convert to a Reit might prompt the restructuring of its Meadowhall securitization.

Meadowhall shopping centre will likely be spun into a fund

British Land’s indication that it will “in principle” convert to Reit status in early 2007 is an interesting test case for the impact of traditional CMBS issuers converting to Reits. The property company is expected to redeem its long-dated unsecured debt in order to crystallize this loss before conversion, and the company has also stated that it might consider “the introduction of a fund format to the [Meadowhall Shopping Centre’s] ownership structure” in future. “We have specifically structured our securitizations so that they do not have a change of control clause and we are able to sell down equity in existing structures,” notes Peter Clarke, executive officer at British Land. The Sheffield-based Meadowhall development backs a £825 million ($1.53 billion) CMBS transaction that was put in place in 2002. Given spread compression since then (together with the fact that this single asset is now worth £1.5 billion), the deal has long been a candidate for a refinancing. British Land restructured its Broadgate CMBS transaction last year, a move that is estimated to have saved the company £384 million on spreads alone.

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