Zalis was asked to advise SaarLB, a German bank, on a potential transaction to convert into equity the debt issued to a private equity fund and secured by a pledge on a shopping centre in the Paris region, giving it a controlling stake in the shopping centre.
With a an occupancy rate that had dropped to 76% with 12 out of 50 units vacant and several more under notice, a reduced footfall and a damaged reputation the value of the shopping centre had plummeted. After several failed attempts to sell the asset the owner had entered into a voluntary court bankruptcy procedure in order to negotiate an exit from the property under which the lender would take possession of the asset. The bank’s debt had by now an extremely high risk profile and the loan was transferred to the bank’s Special Situations group who asked Zalis to conduct a commercial study on the current situation of the shopping centre and to draw up a potential turnaround plan.
The Zalis study concluded that the shopping centre had sufficient advantages and potential (reasonable catchment area, good motorway access, the right flagship tenant, etc.) to succeed.
Zalis proposed a viable turnaround plan to revitalise the shopping centre, improve its performance and increase its value, but this plan would have taken two years to bear full fruit and it depended on a significant level of change (rent reductions, more appropriate tenants, etc.).
As a result the bank then decided to seek a buyer for its debt rather than exercise its option to take ownership of the property.
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