The Two Rivers Lifestyle Center will replace a Sh4.5 billion loan with a zero-interest, equity-linked instrument; significantly easing the debt service burden on the company.
The deal means the holding company of Two Rivers Mall will save on interest payments on the portion of debt that has been replaced, while giving the financiers an opportunity to benefit from value appreciation of the business.
The Two Rivers Lifestyle Center, which encompasses Two Rivers Mall and Two Rivers Office Towers, is co-owned on a 50:50 basis by Old Mutual Properties and the Two Rivers Development Ltd where the Nairobi Securities Exchange listed Centum Investment Company, AVIC and Kenya Development Corporation (KDC) are shareholders.
“The financing arrangement will see the replacement of a substantial portion of the existing senior loan with a zero-coupon instrument, but which participates in the upside of on the equity value uplift on the Center,” said James Mworia, CEO of the Centum Investment Company Plc.
Replacement of the loan has been made possible by improved performance of the Two Rivers Lifestyle Center in the past two years since My Spectrum Limited, a property management company headquartered in Europe, took over its day-to-day management.
My Spectrum Limited has ramped up occupancy in the Mall and increased the average daily traffic to the Centre. The improved footfall has increased revenue and boosted cash flows for the Center and brought improved operating profitability, management notes.
Heavy financing costs saw shareholders of Two Rivers Lifestyle Center embark on a review of the capital structure to rebalance debt and equity and ease annual interest payments.
The financing agreement is expected to yield savings in interest costs of Sh340 million per annum, and will see the center achieve profitability after interest and be cash flow positive after annual debt service.
“This agreement has further reinforced our confidence behind the centre and its potential and we are confident that the financing arrangement will strengthen the center and enable it to further deliver as a strong destination for tenants and shoppers.” Said Peter Levett, managing director of Old Mutual Properties.
Two Rivers Mall is the largest shopping complex in the East Africa and Sub-Saharan region outside of South Africa at 67,000 square metres of retail space.
It is home to the largest entertainment park in Nairobi, hosting more than 150 retail brands, over 15 restaurants with a unique river front view and with capacity of more than 2,100 parking bays.
The Two Rivers Office Towers comprises two towers atop the mall, with over 20,000 square metres of gross lettable area.
“As a management team we’re excited to have this new financing arrangement. It has bolstered our strategies, plans and thinking in making the Centre an attractive destination,” said Theodoros Pantis, managing director of Two Rivers Lifestyle Centre.
The Two Rivers Mall has a go-karting race track, and plans to soon open its doors to a cinema hall with six screens.