HAIL and Hines close 73% Liffey Valley stake for €253m with €140m BoI senior loan

HSBC Alternative Investments Limited (HAIL) and Hines have completed the purchase of Aviva Investors’ 72.8% stake in Dublin’s Liffey Valley shopping centre for €253m on Friday, financed with a five-year €140m senior loan from Bank of Ireland, CoStar News understands.

HAIL logoGrosvenor has retained the remaining 27.2% stake in the new majority HAIL-led joint venture ownership structure of Liffey Valley, which values the shopping centre at €347.5m.

HAIL and Hines has secured a modest discount for Aviva’s 72.8% stake in Liffey Valley relative to the aborted €350m sale to F&C Reit Asset Management and Area Property Partners exactly three years ago when Aviva and Grosvenor tried to sell the entire asset together. However, today’s acquisition also includes the purchase of development land, which was thought to be valued at €15m which the aborted 2011 trade did not include.

CoStar News understands that Bank of Ireland’s €140m senior loan is for five years and priced at 375 basis points over three-month Euribor, with BoI expected to retain the entire bilateral loan on its balance sheet as the Irish bank gears up to lend up to €750m to support the recovering Dublin transactional market.

HAIL and Hines’ €253m acquisition price reflects a 36.8% discount to the peak valuation in 2008 when the Liffey Valley shopping centre was valued at €550m, implying a 72.8% stake would have been worth €400.4m, CoStar News understands. 

Hines emerged as the frontrunner on the deal last October after the US investor was the first to approach Aviva with an offer for its stake. Subsequently, Hines secured backing from majority equity provider HAIL and formed a joint venture partnership to acquire the near 73% stake in an off-market transaction.

The delay in closing the Liffey Valley transaction was the sole reason why Hines decided not to pursue its interest in Dublin’s Central Park, CoStar News understands, which subsequently traded to Green REIT, Pimco and Kennedy Wilson for €311.5m.

All parties declined to comment on the price and loan size.

Liffey Valley is one of Ireland’s leading regional shopping centres and one of three prime out of town centres in Dublin. The 500,000 sq ft site has occupancy levels in excess of 98% and a 17.3 acre adjacent parcel of development land.

Anchor tenants include Marks & Spencer, Next, Dunnes Stores and Boots. The centre has a further 63 stores, four restaurants and a 2,500 seat Vue cinema. It is located at the interchanges of the M50 motorway and N4 national primary route, making it highly accessible to the Greater Dublin Area and Dublin’s large middle class Western suburbs.

In a statement, Paul Forshaw, head of real estate fund management at HSBC Alternative Investments Limited, said: “The Liffey Valley shopping centre is a landmark asset with considerable upside potential thanks to an improving Irish commercial real estate sector, strong tenant demand and significant development opportunities.”

Brian Moran, managing director of Hines Ireland, said: “We look forward to working with HAIL and Grosvenor and the current and new tenants on the next stage of development of the best strategically located retail destination in the city. We believe that it is a good time to invest in major retail assets in Ireland and have a number of very exciting plans to expand and enhance this shopping destination over the coming years.”

Also in the prepared statement, Paul McDonnell, head of property finance, Bank of Ireland Corporate Banking, said: “We are delighted to support Hines and HAIL in this important acquisition.

“Liffey Valley Shopping Centre represents a significant transaction in the Irish property market and highlights the continuing recovery of the sector and the wider economy. We look forward to supporting growth in the sector and we remain committed to leading the way in supporting domestic and international investment in the property market.”

In July 2012, Hines and HAIL completed the acquisition of Broadgate West office development complex in the City of London for £290m financed with a £169m five-year senior loan provided by MetLife, the US insurance lender.

This put the LTV at around 58.3%, while the purchase price reflects a 6.7% net initial yield.

Chris Paterson, director, real estate at Aviva Investors said: “Liffey Valley has seen some spectacular performance since we developed it over 15 years ago. This has been an excellent partnership with Grosvenor and following lengthy and complex negotiations we are delighted with the end result and outcome for our investors.”

Mike Cutteridge, senior director, international capital markets at DTZ – who represented Aviva – said: “The sale of Aviva Investors’ majority stake in the Liffey Valley shopping centre is the latest single asset deal in Ireland since the recession. Aviva Investors moved quickly to take advantage of the significant weight of money chasing product in Ireland.

“We delayed an earlier sale of the centre because we didn’t believe the market was right with headwinds such as a potential ban on upwards only rent reviews and drying up of available debt. This delay allowed for the removal of a number of uncertainties and a return of confidence to the market.”

Richard Powell, executive director, Grosvenor Britain & Ireland, said: “Grosvenor has a long association with Liffey Valley Shopping Centre having been involved since it was first developed and opened in 1998. We are committed to the next phase of the Centre’s evolution and are looking forward to working with HAIL and Hines to bring it to fruition.”

Aviva Investors has been retained and appointed to act as transitional asset manager and was represented by DTZ. HAIL and Hines were advised by HWBC in Dublin.

HAIL’s club deal for this transaction is now closed for investment.


About CoStar News

Finance Editor, CoStar News
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