Hatfield Philips International (HPI) has initiated the sale of the remaining 142-strong German retail portfolio which secures the Orange Loan in the fruit-themed legacy ABN Amro-issued Talisman 6 CMBS, in a sales process renamed Project Sunrise.
JLL has been instructed to sell the direct property portfolio, which is expected to fall to 127 commercial properties with 15 assets near to separate sales for an aggregate €7.826m, according to the latest quarterly investor note. The marketing process will begin next month.
While no guide price has been offered, and the latest valuation is two years old, HPI’s own expected recoveries across the entire 142 portfolio is between €300m and €380m.
This compares to estimated recoveries of €305m by Deutsche Bank’s European CMBS research team. In recent months, the asset manager Corpus Sireo, in cooperation with Acrest Property Group and IC Immobilien Gruppe, has stabilised the assets in preparation for sale.
Former owner Treveria lost control of the portfolio in October 2012 after HPI declined to grant the specialist German retail property investor a second 12-month extension on the Orange Loan – also known as the Treveria Silo E Portfolio – after LTV and occupancy targets to secure the extension were not met.
Subsequently, at the beginning of 2013, HPI appointed insolvency administrator Ottmar Hermann, Frankfurt, two Dutch insolvency administrators over the property portfolio.
The Orange Loan has an unpaid whole loan balance of €379.7m – comprised of a €340.6m senior loan and a €39.1m junior loan. The last valuation for the 142-strong portfolio was in May 2012 of €394.9m by BNP Paribas Real Estate, which is no longer considered as a relevant guide for current asset values.
The 142-strong portfolio has an annual contracted gross rent of €24.5m, a vacancy rate of 28.05% and a weighted average lease length of 3.77 years, according to the latest HPI quarterly investor note.
Project Sunrise will be marketed in its entirety and mainly consists of city centre retail assets in A and B locations spread throughout Germany.
Amongst others, the portfolio includes the Gloria Galerie on Kurfürstendamm in Berlin, shopping centers in Wilhelmshaven and Solingen, as well as department stores in Brühl, Euskirchen and Koblenz.
In a December 2013 research note by Deutsche Bank, analyst Paul Heaton wrote that Gloria Galerie was the largest single asset in the Orange Loan. “We are much more positive on Gloria Galerie, a multi-tenanted retail complex on Kurfuerstendamm where the valuation is 21% of the total for the defaulted Orange loan in TMAN 6.
“Though the asset has some issues – most prominently an elevated vacancy rate of 28% driven mainly by a vacant hotel – we do not believe these are insurmountable. Based on the strong location, we view the asset as arguably the strongest retail asset remaining in German CMBS, and forecast a sale price somewhere between €90-100m i.e. considerably above the May 2012 valuation of €85.4m.”
In a prepared statement, Blair Lewis, chief executive officer of Hatfield Philips, said: “After careful consideration, we firmly believe now is the appropriate time to market the portfolio given its intrinsic value and attractive lease profile.
“This, combined with the strength of the market, should result in significant investor interest. We look forward to the sales process and maximising proceeds to noteholders.”
Peter Birchinger, head of portfolio investment Germany at JLL, added: “Due to the excellent market conditions and the highly attractive nature of the portfolio, we expect high demand from both national and international investors.”