Kennedy Wilson buys BoI’s Shelbourne Hotel senior loan stake

Bank of Ireland has sold half the outstanding €206m senior loan which secures Dublin’s prestigious five-star Shelbourne Hotel to Kennedy Wilson in an off-market loan sale, CoStar News can reveal.

KW logoShelbourne Hotel, the Marriott-branded hotel on St Stephen’s Green in Dublin, was bought for €140m in 2004 by five of Ireland’s best-known property developers – Bernard McNamara, John Sweeney, Bernard Doyle, Jerry O’Reilly and David Courtney – and then expensively renovated in the years prior to the market collapse.

Bank of Ireland (BoI) and Anglo Irish Bank funded the acquisition and upmarket refurbishment, with each retaining an equal €103m of the remaining senior loan.

Anglo also lent a circa €15m mezzanine loan, which has accrued to near €20m, and forms one of the standalone tranches in IBRC’s €3.5bn Project Evergreen, the predominantly corporate non-performing loan portfolio.

While the price Kennedy Wilson paid for the €103m tranche of the senior loan is not known, in the last filed annual accounts for SHHL – for 2011 and dated 15 October 2012 – the company’s directors, listed as O’Reilly, Sweeney and Courtney, state that the Shelbourne Hotel was valued at €90m in 2008.

The senior loan expired in December 2009, according to annual accounts filed by Shelbourne Hotel Holdings Limited (SHHL), the Ireland-registered company which owns the hotel along with Rotuma Limited, which lists the same directors. Since which time, the loan has been repayable on demand.

This Friday is the final deadline for IBRC’s Project Evergreen, which consist of 13 separate loan tranches divided by borrower groups.

The Shelbourne Hotel loans in Project Evergreen consist of the €103m senior and the €20m mezzanine facility, which is expected to be competed for by a host of investment bank trading desks, hedge funds, and no doubt, Kennedy Wilson.

In 2008, the Shelbourne Hotel’s value was written down by €155m, prompting the operating company to book an annual pre-tax loss of €156m. In 2011, the annual loss was €2.5m while SHHL’s total net liabilities were €194.1m.

Kennedy Wilson was part of a consortium of five North American investors – including Canada’s Fairfax Financial Holdings, US buyout firm WL Ross & Co, Boston-based Fidelity Investments and California-headquartered The Capital Group – rescued Bank of Ireland in July 2011 with a capital injection which staved of Irish nationalisation.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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