A further sign of distress in UK property has emerged with a real estate joint venture owning a network of Pendragon car dealerships breaching banking covenants.
According to a report in the Sunday Telegraph, Pendragon and property investor aAim have been asked to inject a further £20 million (€25 million; $39 million) into the ownership vehicle. The breach of banking covenants is due to declining property values, according to the report.
Pendragon and aAim, a relative newcomer to institutional property management, set up the property joint venture in July 2007 when the Royal Bank of Scotland sold its equity stake to the private equity vehicle and simultaneously provided it with £325 million of debt. The joint venture owns around 115 sites.
The newspaper reports that Pendragon owns the leases and could decide to walk away from the joint venture without obligation to support it.
A fortnight ago, Pendragon announced 500 jobs cuts owing to the consumer downturn. It also revealed sales of new cars to retail customers were down 10.