Finalists vie for former Alburn REC 6 CMBS ‘Ruby’ portfolio

Irvine Sellar’s Sellar Property Group, Isle of Man-based Praxis Real Estate, Legal & General Property, Threadneedle Investments and Kennedy Wilson comprise the five-strong shortlist which submitted second round bids vying to purchase the 29-strong UK distressed Ruby portfolio, CoStar News can reveal.

Savills is acting as LPA receiver on the high-yielding Ruby portfolio, which was marketed with a guide price of £66m and a blended net initial yield of 13.3%.

The Ruby portfolio is comprised of around two-thirds of the original wider 45-strong Alburn Real Estate portfolio, which has been the subject of an elaborate power struggle in which Alburn’s founder, Noel Smyth, has worked tirelessly to retain control.

For the four finalists, who submitted second round bids last Thursday, the Ruby portfolio is a distressed play, and will require significant lease re-gearing and capital expenditure asset management initiatives to improve values.

CoStar News understands that bids are thought to have come in below £60m, reflecting the portfolio’s significant asset deterioration as well as the considerable lease expires in 2012 and 2015 in particular.

Some of the bidders have considered financing a winning bid for the Ruby portfolio with a senior and mezzanine debt package, with senior debt pricing likely to be around 400 basis points to 450 bps over three-month LIBOR, reflecting pricing for limited secondary asset financing.

Ruby comprises office properties in Guildford, Doxford, Birmingham and central London and industrial assets situated in Northampton, Fareham, Wimbledon and Swanley.

The deterioration of the wider Alburn portfolio is due to limited capex spent in the years since the portfolio financed with securitised debt, which resulted in long-running uncertainty over the portfolio’s fate, as well as the collapse – and lack of recovery – of the UK secondary property market.

More than a third of the original Alburn portfolio’s leases – reflecting 37.35% of the original portfolio’s total income – is due to expire this year, followed by a further spike of 24.08% in 2015.

Rothschild has so far confirm the three property sales so far – Colindale Business Centre, Athena Avenue and Churchill Industrial Estate – which were valued by CBRE in April at £3.15m.

Savills is also separately selling four additional Alburn portfolio properties, they comprise:

  • Project House, 110 – 113 Tottenham Court Road in London, a mixed-used building with retail let to Halifax Building Society and offices occupied by Adecco, both until March 2015, for £9.5m, reflecting a net initial yield of 6%.
  • New Kings Court Tollgate Business Park in Eastleigh, a 55,000 sq ft office let for approximately 10 years to Partners at Blake Lapthorn, with a guide price of £10.08m, reflecting a 9% net initial yield.
  • Howemoss Drive in Dyce, Aberdeen, a multi-let industrial investment with a guide price of £3m, reflecting a 9.96% net initial yield.
  • A vacant office at 9 – 10 St Marys at Hill in London, which Savills said has residential conversion potential, with a guide price of £3m.

Savills was appointed as LPA receiver six months ago to the larger 45-strong portfolio, formerly owned by Noel Smyth’s Alburn Real Estate, after Rothschild enforced against the Alburn REC 6 CMBS loan securing the portfolio.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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