Lone Star wins largest Project Achill tranche – two additional winners and two loans still in the balance

Lone Star logoThe final balance of winners is subject to potential change over the next 24 hours as the initial winners adjusted their offered pricing on provisional confirmation of winning individual, rather than multiple, tranches.   This was due to bidders’ cost of debt slightly rising and their offered loan-to-cost (LTC), in some cases, falling.  

With Ulster Bank, advised by Eastdil Secured, keen to secure the best possible recovery across the balance of the €1.2bn Project Achill portfolio, a number of permutations still remain in play.  CoStar News reported on the Project Achill portfolio here.  

Lone Star wins Pool A and expected to win Pool C

However, CoStar News this afternoon understands that Ulster Bank has committed to selling Pool A to Lone Star for around €400m, reflecting just over a 30% discount on the circa unpaid balance €550m.

Pool A is comprised of 62-74 Burleigh Street in Cambridge, let to Primark; a Russell & Bromleys store in Princes Street, Edinburgh; Exchange House in Belfast; Independent House, Talbot Street in Dublin (home to the Irish Independent); and Blackrock Business Park in Blackrock, Ireland.

In addition in Pool A, assets formerly owned by Irish property developer Bernard Caroll, are also included.  They comprise: 16 completed residential units in Skerries and Malahide; a 128-acre land site with planning permission in Kinsealy, Skerries and Bettytown; and 25 Merrion Square, an office block in Dublin; and 15 houses in Barnageeragh.

Lone Star is also expected to win Pool C, the nominally-valued €80.7m Murdock Group whole loan, which is secured by IBIS & Novotel Hotels in Reading’s Friar Street, two nursing homes and development land in England, Scotland and Northern Ireland. 

Furthermore, Lone Star could win additional tranches based on the balance of net best possible recoveries across the entire Project Achill NPL, as determined by Ulster Bank.

There is a small chance, however, that Pool C could instead be won by one of the underbidders, the lead of which is Cerberus Capital Management.  Oaktree Capital Management and Goldman Sachs’ special situations fund are also underbidders onPool C.

Having won Pool A, and most likely Pool C, Lone Star is in pole position to capitalise on having the most advantageous cost of debt after already securing the largest tranche and therefore portion of the Project Achill.  

Lone Star has lined up Royal Bank of Canada to finance its Project Achill tranche wins, at up to 70% LTC.

Davidson Kempner wins Pool D

US hedge fund Davidson Kempner has won Pool D, the nominally-valued €91m tranche, secured by Belfast’s upmarket The ARC Apartments at Titanic Quarter and The Gateway Offices.

The ARC waterfront regeneration scheme comprises 207 apartments while the Gateway Offices span 130,569 sq ft, of which are 90% leased to Citigroup to June 2020. 

CoStar News understands that Davidson Kempner paid around €82m for Pool D.

Bank of Ireland wins Pool F

Bank of Ireland, the joint original senior lender on the underlying Pool F borrower, Paddy McKillen’s Belfast Office Properties Limited, has won the 50% stake of the unpaid loan it did not already own.

For BoI, the marriage value of uniting the entire £221.0m senior debt is considerable, allowing the active Irish commercial property lender to refinance McKillen directly.

CoStar News understands Bank of Ireland paid in the low 90s pence in the pound for the £110.5m senior loan slice.

Pool F is secured by two major shopping centres, two prime offices and an industrial estate.

The properties include: the Forge Shopping Centre in Glasgow and The Ards Shopping Centre in Newtownards, 10 miles east of Belfast, Waterfront Plaza in Belfast, anchored by PwC; and Mallusk Industrial Estate in Newton Abbey.

The gross rental income in Pool F is €10.65m, while the net rental income is €8.59m.

Pool E – Goldman Sachs, Lone Star and Cerberus still in the hunt

Initially, Goldman Sachs’ special situations fund was understood to have won the €87m Pool E, having offered just over €70m for the tranche which is secured by 208 homes in Tyrellstown, Co Dublin and commercial portfolio over 153,738 sq ft.

Underbidders Lone Star and Cerberus could still win Pool E, while the underlying borrowers Michael and Rick Larkin, the Irish developer brothers, and Oaktree also bid but are less likely now as winners, CoStar News understands.  

The last property valuation for the underlying collateral – 208 homes in Tyrellstown, Co Dublin and commercial portfolio over 153,738 sq ft – was €57.3m in June when the gross rental income was €2.76m.

Pool E is one of the Project Achill tranches in the midst of an ongoing legal row initiated by the Larkin brothers over a mis-sold interest rate swap by Ulster bank.

The Larkin brothers initiated legal proceedings in the High Court in Dublin in mid-June seeking €40m in damages, through two wholly-owned companies, Vieira Ltd and European Property Fund plc.

Lone Star, then, could end up winning Pools A, C and E, while Cerberus could feasibly still win Pools C and E.  Final decisions are expected within the next 24 hours.

All parties declined to comment.


About CoStar News

Finance Editor, CoStar News
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