Morgan Stanley finances PIMCO and Brehon Capital’s Ulysses portfolio with €100m loan

PIMCO and Brehon Capital have financed their joint venture €152.5m purchase of the 25-strong direct mixed-use property portfolio, dubbed Ulysses, with a €100m five-year acquisition finance facility from Morgan Stanley.

Morgan Stanley (correct)CoStar News understands Morgan Stanley priced the loan at sub 400 basis points over Euribor, and will look to part hold and part syndicate the position. Financing underbidders included JP Morgan and Bank of America Merrill Lynch.

The Ulysses portfolio is the former Irish property empire assembled by developer Liam Carroll’s Zoe Developments, originally with financing from Lloyds Banking Group subsidiary, Bank of Scotland (Ireland).

Lloyds put the portfolio into receivership and appointed Green Property, the real estate investment management firm which now exclusively invests for the Green REIT, in August 2011 to asset manage the assets.

PIMCO, the majority equity party of the joint venture, won the Ulysses portfolio last autumn, paying around a 10% premium on the original €140m asking price for the portfolio, which was valued at €2bn at the peak of the Irish commercial property market in last 2007.

Lone Star Funds, Goldman Sachs and Apollo Global Management were underbidders to PIMCO and Brehon Capital.

Ulysses is a 546,511 sq ft portfolio comprises 14 offices, 51 retail units and 31 apartments with 90 underlying occupational leases spanning a mix of long and short-dated terms with the weighted unexpired lease now just under six years. 

The current annual income is €13.94m, while there 89% occupancy level across the portfolio masks the considerable expiries falling due in the coming years.

Within five years, leases securing approximately €8.92m, or 63.96%, of the portfolio’s aggregate income expires, which underlines the scale of the asset management task ahead for PIMCO and Brehon Capital.

Ulysses five largest properties are: the 78,679 sq ft Chapter House; the 62,064 sq ft King’s Inns House; the 57,334 sq ft Macken House; the 43,669 sq ft Jervis House; and the 36,779 sq ft 21-24 Capel Street.

Chapter House, on Upper Abbey Street in Dublin 1, is virtually entirely let to the Commissioners of Public Works, with a break clause on €3.04m per annum lease falling in April 2017.

All parties declined to comment.

CBRE records €2.5bn in transactions and Irish loan sales in 2013

In a review of Ireland’s most active year since global financial crisis for property transactions, CBRE said in a presentation in Dublin this morning that “2013 was a stepping stone to the next cycle in the Irish commercial property market and that 2014 is on track to be even busier than last year”.

In a statement, Enda Luddy, managing director at CBRE Ireland, said: “Although there are several legacy issues still to be tackled and our economy remains susceptible to macroeconomic developments, 2014 is shaping up to be an even busier year for the Irish commercial property market than last year, fuelled to a large extent by improving domestic economic indicators and by some improvement in the availability of debt funding.”

CBRE recorded €1.78bn across 96 investment property transactions last year, compared to 2012’s €545m, with more than 50% of the 2013 activity sourced from overseas investors, and predominantly US private and public equity investment managers.

When loan portfolio sales are included, the aggregate transactional activity for 2013 was €2.5bn.

CBRE’s 2014 forecast: the return of the crane, rental growth and retail recovery

Flush with the wave of US capital pouring back into Ireland, CBRE said 2014 will see “the return of the crane to the Dublin landscape as the next wave of office development in the capital commences”.

Some selective retail development coming on stream around the country, primarily in the form of additional phases in existing schemes, such as the unfinished office and multi-family residential developments schemes within the currently hotly-contested Central Park portfolio from NAMA.

Prime office rents in Dublin 2/4 are set to increase by a further 15% during 2014, predicts CBRE, while retail recovery is expected to gain transaction this year with retailers expanding and relocating.

Prime high street and shopping centres are expected to benefit from limited rental growth which would crystallise the first retail rental growth in more than six years.

CBRE also expects one or two more Irish REITs to emerge this year, including possibly existing Irish entities converting to REIT structures and the existing Irish REIT’s undertaking additional rounds of fundraising.

About CoStar News

Finance Editor, CoStar News
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