London & Associated Properties has written down the value of its Sheffield shopping centre and said there is no sign that an eventual sale would cover its borrowing against the asset.
The investor instructed agents to market Orchard Square in May ahead of the September expiry of a loan from QSix.
Announcing half-year results today, LAP chief executive John Heller said: “We are unable to confirm that any sales proceeds will be sufficient to repay this loan and return a surplus to the group.
“In light of this, we have adopted a prudent approach to the value of Orchard Square and have written it down to the outstanding loan value of £12.65m from £14.75m.”
Heller added that LAP will not be able to refinance the loan without “a significant equity contribution which we do not feel would be in shareholders’ interest”.
QSix has now issued LAP with a reservation of rights letter.
The write-down led to the company posting a loss attributable to shareholders of £3m, down from a profit a year ago of £4.3m.
“This is a disappointing outcome for a property that had performed well over our 24-year ownership,” Heller said in the results statement.
“Orchard Square has, operationally, performed strongly this year. We have recently completed three significant lettings as we continue to reposition the centre with a greater focus on food and beverage operators.
“We have also upgraded the public areas with new paving, awnings for the tenants and a weather proofing canopy having been completed with the support of a grant from Sheffield Council.”
LAP bought the centre in 1999 for £15.8m.
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