NAMA is preparing to launch the sale of its entire €4bn Northern Irish commercial property and development land loan portfolio following PIMCO’s reverse-inquiry prior to Christmas in a process dubbed Project Eagle.
Lazards has been instructed to sell the Northern Irish loan book after PIMCO’s reverse-inquiry prompted NAMA to consider the viability of a sell-off of its entire exposure in a development likely reinforced by a political imperative for Ireland’s bad bank to seize the opportunity to accelerate its overall wind-down.
The challenge associated with selling Project Eagle centres around building an adequate data room for prospective bidders to analyse in order to price the loans, which the Irish Times last week reported could fetch around €1bn, implying a 75% discount.
However, the quality of data is thought to vary considerably across the portfolio meaning discounted cash flow (DCF) analysis will be challenging, and could potentially result in the portfolio being sold off partially or in sub-pools although no decisions are thought to have been made as yet.
Additionally, selling the development land component may prove tricky given the lack of availability for development finance.
This week, Ireland’s finance minister Michael Noonan has told NAMA to assess the viability of an accelerated wind-up of NAMA’s remaining loan book indicating he believed demand for real estate was sufficient to support large scale purchases.
Last month, CBRE forecast that improving economic conditions would bolster demand for new office accommodation in the Northern Ireland market in 2014 with demand expected to emanate from the expansion of existing occupiers as well as from new entrants.
The property consultants expect prime office rents in Belfast to increase by 20% to reach £161.46 per sq m (£15 per sq ft) by year-end.
In its 2014 outlook for Northern Ireland, CBRE wrote last month: “2014 is shaping up to be a busier year for the commercial property market in Northern Ireland, fuelled to a large extent by improving economic indicators and by some improvement in the availability of debt funding.”
“We expect to see further new development and refurbishment starting in the Belfast office market in 2014, as a result of the scarcity of Grade A office accommodation in the city, although shortages will remain until such time as these new office schemes come on stream.
“We expect to see rental growth emerging in the office sector during 2014 for the first time in many years, with prime rents expected to increase by as much as 20% this year.
“However, it is likely to be some time before rental growth re-emerges in the retail and industrial sectors of the market.”
Last year Northern Irelands’ transactional activity was just £160m across in 17 transactions, compared to £92m in eight transactions in 2012, according to CBRE, with 68% in retail and 25% in offices by value.
NAMA has opened the data room on the delayed Micheal O’Flynn loan portfolio, the €1.8bn Project Tower, which has been retained at its full original size despite some deliberation over excluding the UK student accommodation component.
Project Tower’s loans are largely performing but much of the debt is due to mature this month.
On Tuesday, CoStar News reported on a frenzy of €27.bn in live European property loan portfolios sales. The report can be seen here.
NAMA declined to comment.