Kennedy Wilson Europe Real Estate (KWE) has completed the purchase of LinkedIn’s European headquarters, Gardner House in Dublin city centre, for €45.0m after converting a loan from Deutsche Bank’s Project Spring non-performing loan (NPL) portfolio into direct ownership.
Deutsche Bank sold the two non-performing Gardner House loans to KWE on 19 November 2014, after the investment bank’s special situations team purchased the debt as part of the Project Spring NPL from NAMA, last July.
NAMA sold Project Spring, which had an unpaid balance of €427m, to Deutsche Bank for circa €145m, reflecting approximately a 66% discount. KWE was an underbidder on the NAMA Project Spring NPL, along with CarVal Investors, illustrating success at the second attempt for the listed real estate fund.
KWE’s €45.0m gross purchase price, including costs, for the 75,600 sq ft Gardner House office building located on Wilton Place is thought to be a premium to the price Deutsche Bank paid for the Project Spring connection, but still a circa 40% discount to the €74.8m unpaid balance on the two loans.
The Gardner House deal reflects both a profitable trade for Deutsche Bank and a competitive price for KWE, which reflects a 6.7% net initial yield.
Furthermore, KWE’s €45m gross price is still 45% lower than Gardner House traded for by the legacy NAMA creditor, an Irish consortium, which paid in April 2006 paid €82.1m, in a reminder of the exuberant pricing in Dublin prior to the crash.
In a statement this morning, KWE said the acquisition of the property was completed “through a cashless acquisition of the property following the consensual resolution of the NPL investment with the underlying borrower”.
Gardner House is a prime Dublin office location between Baggot Street and Leeson Street being less than two kilometres from Dublin City Centre.
The property is let in its entirety to PWC, but after the advisory giant’s moved to One Spencer Dock, the asset was comprehensively refurbished in 2010 and sublet to LinkedIn as its European headquarters for the remaining 3.8 years unexpired lease term, which matures in December 2018.
KWE’s statement adds that Gardner House “benefits from an unimplemented planning consent to extend the building by 42,000 sq ft including a new façade,” perhaps hinting at the listed real estate investment firm’s ambition for the prime located office block.
“The off-market purchase of the Gardner House loans back in November provided KWE with a high quality income stream while we explored resolutions with the borrower,” said Mary Ricks, president and CEO of Kennedy Wilson Europe.
“We are pleased to successfully employ our ‘loan-to-own’ strategy to access a high quality property in a prime location. Our ability to deliver significant value-enhancing asset management initiatives into a strong Dublin office market makes this a very attractive addition to our Dublin portfolio.”
Deutsche Bank declined to comment.