Finalists emerge on RBS’s reduced Project Button as NAMA buys Dundrum position to unite legacy debt

RBS has selected three finalists to progress to the second round on the reduced Irish and UK commercial property loan portfolio, dubbed Project Button, as part of the bank’s accelerated de-leveraging programme for its Ulster bank subsidiary.

Ulster Bank logoCoStar News understands that Blackstone’s Real Estate Debt Strategies, LaSalle Investment Management and a combined bid by Kennedy Wilson and Deutsche Bank are all through to the second round of the Project Button loan portfolio sales process, albeit bidding across differing numbers of the remaining six tranches.

BREDS is understood to be bidding across the entire Project Button, as is Kennedy Wilson including some tranches with Deutsche Bank and others possibly solo.

LaSalle is expected to only bid across certain tranches which are targeted as viable recapitalisation opportunities for its Special Situations Fund, in a strategy partly consistent with BREDS’ own.

Last week, NAMA acquired Ulster Bank’s €129m syndicated loan at par value, secured by the 1.6m sq ft Dundrum Town Centre shopping centre in south Dublin, reducing Project Button’s gross unpaid loan balance from €844m to €715m.

In addition, NAMA acquired an €108m syndicated loan from KBC Bank Ireland at par, which reflected 14% of the total Dundrum Town Centre, according to the Irish Times.

NAMA, which already owns the remaining €538m, has therefore united the entire €775m Dundrum Town Centre shopping centre debt – originally extended to developer Joe O’Reilly – and is now expected to either sell the entire senior loan or, more likely, enforce over the defaulted debt and sell the hard asset.

The first-of-its-kind loan acquisition strategy by NAMA is expected to deliver a much greater capital recovery for the existing circa €538m which the bad bank already held.  Dundrum Town Centre, Ireland’s largest shopping centre with over 169 tenants, is valued at close to €1bn.

Project Button has six tranches remaining, following the trade of the Cross Ridge Investment tranche which made up the Dundrum Town Centre debt which was sold to NAMA.

CoStar News understands that the remaining six Project Button tranches comprise:

  • Cosgrave syndications and Cosgrave bilaterals: around €45m unpaid balance secured by a redevelopment plot and 30 residential units owned by Cosgrave Property Group and group company, Romford Luxembourg Holdings. Separately, Cosgrave Property’s founders and Romford are claiming more than €250m in damages from Ulster Bank over alleged mis-selling of interest rate swaps, according to the Irish Times last month.
  • Monohan: total unpaid balance of €57m including a building in the Old Bailey and two central London offices, with €55.3m maturing in November 2016 and €1.7m in November 2018. There is also a long-dated swap;
  • Cleveland Investments: total unpaid balance of €137m across four regional Irish shopping centres comprising a general mall in Galway, one Debenhams in Waterford, on the South East coast, one Debenhams in Limerick and a Tesco and Debenhams in Tralee, in County Kerry.
  • Corbo: total unpaid balance of £77m which is part of a legacy Bank of Ireland-led £316m syndicate loan secured by 22 retail properties in Northern Ireland. Kennedy Wilson and Deutsche Bank own the bulk of the balance of the syndicate outside of Project Button;
  • James Stanley: total unpaid balance of €50m secured against residential and commercial land.

In total, following the Dundrum Town Centre debt sale, there are 71 assets left in Project Button comprising around 3m sq ft, including 2.3m  sq ft of retail and 660,000 sq ft of offices. There is also a very small amount of residential and development.

Eastdil Secured is selling Project Button on behalf of Ulster Bank. Final bids are due on Friday 9 May.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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