NAMA finally to start €250m Project Club NPL sale process next week

NAMA has finally sanctioned the launch of the €250m Project Club non-performing Irish (NPL) commercial property loan portfolio, with prospective bidders expected to be sent non-disclosure agreements to sign next week ahead of the release of the data tape, CoStar News understands.

NAMA logoProject Club, secured by a series of bilateral loans to Irish property developer and investor Eamon Duignan, is comprised of a series of retail properties and development sites within the commuter belt of Dublin.

All the loans are past due, which are thought to number less than 10, with the level of distress in the assets likely to see Project Club trade for a steeper than 50% discount, CoStar News understands.

CBRE is selling Project Club on behalf of NAMA, which is expected to be willing to consider stapled finance to support the sale, consistent with its stated policy.

The significant development site exposure in Project Club is likely to encourage joint venture bidders, comprised of local developers in tandem with private equity funds as well as interest from the listed property sector, all seeking to capitalise on the nascent recovery in Irish commercial property markets.

First round bids are likely to be scheduled for early September, after all interested bidders have received the data tape and assembled into joint venture consortiums.

Patron Capital has already been linked to Project Club.

NAMA has stated a preference for running one major sales process at a time, and did not want to begin the sale of Project Club until Project Aspen had been concluded, which traded to a Starwood Capital-led consortium at a 75.3% discount.

Earlier in the summer, NAMA is understood to have discussed internally the viability of future loan portfolio sales, compared with sales of direct assets after loan enforcements, to garner updated market intelligence on the most effective route to recover the best return of capital for the Irish government and, ultimately, the taxpayer.

While there is recognition within NAMA that the weight of international capital seeking to capitalise on the nascent recovery Irish commercial property is driving up prices, supporting the case direct asset sales over loan portfolio sales, the Project Club was already in train and was never subject to cancelation.

However, the expectation is that NAMA’s next post-Project Club sale will be a return to direct asset sale, to capitalise price tension created by this weight of capital seeking deployment in Ireland.

Irish commercial property values finally almost stopped depreciating – after almost six years of unbroken quarterly downward movements – with an all-property capital value drop of just one basis point over the second quarter, according to the IPD/SCSI Ireland Quarterly Property Index.

On Tuesday release of IPD’s latest quarterly figures for Ireland, Phil Tily, executive director and head of UK and Ireland at IPD, said in a statement:  “It looks like the recovery is well underway for prime offices, but the difficulty now is encouraging this to spread out of core Dublin stock. In the UK the ‘recovery’ of 2009 to 2011 was essentially restricted to London and the South East, and years later we are still waiting for regional improvements.”

Following NAMA’s sale of the €810m Project Aspen at the turn of May to a Starwood Capital-led consortium, in which NAMA sold an 80% equity stake for €64m and retained the balance, single-borrower NPL sales came under some scrutiny amid concerns that borrowers were teaming up with potential buyers, undermining the reputability of NAMA’s processes.

However, NAMA’s guidelines are clear in respect of underlying borrowers. Once prospective bidders sign the NDA releasing the data tape, bidders are legally bound not to have any further contact, or share information, with the underlying borrowers.

The NAMA NDA effectively seeks to instil a temporary lockdown until NAMA has selected a preferred bidder and closed the transaction.

Project Club is the second NPL sales process CBRE has managed for Ireland’s bad bank after the aborted sale of the €600m Project Island NPL to Orion Capital Managers in summer 2012, secured by 40 development loans extended to property developer Cyril Dennis.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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