Competition for National Asset Management Agency largest yet non-performing loan (NPL) portfolio, the €810m Project Aspen, is expected to be strong, as private equity funds seek to gain a foothold in Dublin’s ever-so gradually improving prime office and retail markets.
All 30 commercial property loans were extended to Irish property developer David Courtney by a mix of Irish banks prior to the global financial crisis, including the formerly named Anglo Irish Bank, Bank of Ireland and Allied Irish Bank.
Courtney’s loans were extended to Regeneration Developments Limited, which also lists Jerry O’Reilly and Terrence Sweeney as directors.
The 30-strong Project Aspen NPL is majority secured by commercial real estate in Dublin, and broadly with a 50: 50 office and retail mix.
Eastdil Secured is selling Project Aspen on behalf of NAMA, with first round bids due by the end of February.
NAMA has not provided prospective bidders with recent full, or even desktop valuations, to go with the Project Aspen “datatape”, which therefore means that bidders have to estimate a current valuation individually.
Failure to supply this information is considered something of a false economy by NAMA, as imposing this additional extra due diligence on prospective bidders is, ultimately factored in as part of discounts tabled for the NPL which can result in a net lower offer.
However, with the underlying real estate portfolio including a few gems with asset management plays, bids for Project Aspen are expected to come at between 30 to 40 cents in the euro, CoStar News understands, which would imply a sale at between circa €240m and €330m.
The difference between the outstanding nominal and the sale price, however, will not be entirely born by NAMA, as Ireland’s bad bank would have likely acquired the circa 30 David Courtney loans at a spread of discounts above and below the blended 58% level at which the €74bn loan book was acquired in 2010.
Project Aspen secured assets includes a police headquarters in central Dublin, for which value can be enhanced by re-gearing the maturing lease, the 265-room Shelbourne Hotel, operated by Marriott International, and the development at Merrion Gates in Sandymount.
Likely bidders could include the long list behind last November’s sale of the outstanding €120m Ulster Bank loan secured by State Street’s Dublin headquarters, which traded to Kennedy Wilson for €108m.
The modest discount was, in part, owned to State Street’s promise prior to a buyer being identified that it would extends its lease in exchange for a rent reduction.
Kennedy Wilson, a likely Project Aspen bidder with Deutsche Bank, could be joined by the unsuccessful bidders on that occasion, which included a Delancey and KKR joint venture, Hines, as well as Irish NPL winners Apollo Global Investors and Lone Star, which won Lloyds €1.8bn Project Lane and AIB’s €660m Project Kildare, respectively.
Cerberus as well as consortium bidders comprised of smaller private equity funds and hedge funds are also likely to bid.
Project Aspen is one of two Irish NPLs which NAMA is set to sell in the coming months, along with the smaller €230m Project Club, which is secured by loan extended to property developer and investor, Eamonn Duignan, according to NAMA Wine Lake.
CBRE is selling Project Club for NAMA.
Since NAMA’s inception to 31 March 2012, the total nominal loan sales for Ireland’s bad bank amount to €1.9bn, with considerable attention now focusing on NAMA’s prime Irish commercial real estate stock, for which incremental green shoots are appearing in the forecasts of investment agents.
Marie Hunt, executive director for CBRE Ireland wrote in a 2013 outlook forecast for Irish commercial property last month that “the prime end of the market [is] clearly entering a recovery phase”. A pick-up in prime office Dublin rents is forecast this year.
However incremental these green shoots are, it appears to be the popular consensus that Dublin will be at the forefront of this emerging property market recovery, with offices and retail likely to be the leading sectors.
Hunt added that “a busy year is in prospect in the Irish commercial property sector as the wreckage is cleared away and we move into a recovery phase for the economy and in turn for the property market”.