Lone Star has appointed DTZ as receivers over F&C REIT Asset Management’s 26-strong Midlands and Northern England industrial and office portfolio, known as the Tawny portfolio, which the private equity firm acquired as part of the Project Acorn Eurohypo non-performing loan portfolio from Commerzbank.
Hudson Advisors, the loan servicing division wholly-owned by Lone Star, appointed Fergus Jack and Bryn Williams of DTZ as fixed charge receivers on August 8, according to a Deed of Appointment seen by CoStar News, over the entire 5.5m sq ft Tawny portfolio, implementing a straight loan-to-own investment strategy on behalf of Lone Star.
F&C REIT Asset Management acquired the Tawny portfolio from Evans of Leeds in August 2007 for £380m – just one month after the peak of the UK commercial property market – reflecting a 5.8% net initial yield and financed with a £300m senior loan by Eurohypo.
The collapse in value for the regional portfolio in the subsequent six years, together with a considerable run-off in the Tawny portfolio’s income profile, has seen the value fall considerably from the £380m purchase price to likely around £220m today.
Full details of the Tawny portfolio are outlined below.
Lone Star decided to accelerate the loan, upon acquiring the legacy defaulted and matured Eurohypo loan, to implement its own workout strategy which differed from F&C REIT, whose ties with the assets are now entirely severed.
However, F&C REIT hedged its interest rate risk on the senior loan financing with a long-dated interest rate swap, which Lone Star is expected to burn off before disposing of assets.
In the interim, the workout strategy for the Tawny portfolio is expected to be a straight asset management programme, undertaken by DTZ alongside Hudson Advisors, including investing capex to improve the condition of the properties, re-letting and selling when stabilised and the swap has run-off.
According to the original Tawny portfolio sales brochure, prepared by Jones Lang LaSalle in April 2007 and seen by CoStar News, 52% of the aggregate £23.875m annual income, or £12.4m, was due to expire within five years – a threshold which passed 18 months ago.
A further 26% of the original Tawny portfolio’s income, or around £6.2m per annum, is scheduled to expire by April 2017, and a further 18%, or £4.3m per annum, by April 2022.
The Tawny portfolio
Tawny portfolio is comprised of five properties in the Midlands, 16 properties in the North East and Yorkshire, four properties in the North West and one in Scotland.
By sector, 15 of the 26 separately listed properties are industrial, distribution or warehouse facilities, while nine are offices and there is a bus depot and one unspecified asset.
The Midlands properties:
- Fradley Park in Lichfield, a 1.98m sq ft industrial and distribution estate
- Sinfin Lane in Derby, a 938,721 sq ft industrial estate
- Swift Park in Rugby, a 116,398 sq ft distribution unit
- Swinderbury Industrial Park in Lincoln over 179,684 sq ft
- Victoria Park House in Stafford, a24,676 sq ft town centre 5-storey office block
The North East and Yorkshire properties:
- Follingsby Park in Gateshead, a 625, 688 sq ft industrial warehouse estate
- Dewenthaugh Industrial Estate in Gateshead, a 17.2 acre site (at the time of the original sale six years ago)
- Albion Park in Leeds, a 147,908 sq ft industrial park
- Apex Park & Canon House in Leeds, 10 industrial units across 52, 836 sq ft and a 10,298 sq ft office block, Canon House
- Firth Court, Firth Street in Leeds, a bus depot over 2.8 acre site 100% let to Rider Holdings until 2016
- Hunslet Units in Leeds, includes a 66,136 sq ft industrial unit on Moor Road let to Facultatieve Technology and a 70,141 sq ft warehouse unit on Old Run Road
- Viceroy Works in Leeds, 7,207 sq ft near Elland Road considered to have conversion potential for a casino
- Mill House in Horsforth, a 16, 024 sq ft office block let to two tenants
- Hume House, Wade Lane in Leeds, a 18,716 four-storey office block
- Pheonix House in Leeds, a 38, 846 sq ft office block 100% let to The Environment Agency until 2022
- 52 & 54-58 High Street in Hull, the High Street office is 5,169 sq ft and 54 High Street is 16,957 sq ft
- Furnival House & Readers House in Sheffield Central, Furnival House is 58,549 sq ft and Readers House is 94,019 sq ft
- York Business Park, a mixed-use business park over 102,809 sq ft
- Clifton Moor Industrial Estate, comprising Stirling Park, Lancaster Park and Horizon Park over 91,026 sq ft
- Piccadilly Court in York, four separate office blocks over 80,293 sq ft
- Stonebow House in York, a 38,149 office and retail block
The North West Properties:
- Deeside Industrial Estate & Drome Road, 32 industrial buildings and two multi-let offices constructed on a former RAF base. Deeside Industrial Estate consists of 47 units and the two offices, over 287,980 sq ft, and Drome Road has 30 units over 102,474 sq ft
- Blackrod Estate in Bolton, a three-unit warehouse, office and manufacturing property over 253, 543 sq ft, eight miles west of Bolton town centre
- Mill Lane in Warrington, a 184,949 sq ft industrial warehouse facility
- Dale House in Stockport, an eight-storey 44, 046 sq ft office block in Stockport town centre
The Scottish property:
- Forth Bridge in Edinburgh, three separate units comprised of two restaurants and an office block over 42,644 sq ft, six miles from Edinburgh Airport
All parties declined to comment.