Cerberus beats Apollo to win Project Arrow for around €800m

Cerberus Capital Management has won the last major NAMA non-performing loan portfolio of the year, Project Arrow, believed to be paying around €800m for the pool of Irish real estate loans.

Cerberus logoNAMA confirmed Cerberus’ selection as the preferred bidder today after a detailed due diligence period following the receipt of the two final binding bids on 12 October. There was considerable speculation that underbidder Apollo would not submit a binding bid but this proved false.

NAMA said the decision to select Cerberus was “based on the strong and clear recommendation of Cushman & Wakefield”, the loan sale adviser.

For Cerberus, the Project Arrow win cements its position as the largest NPL winner across Europe this year.

Wins for Cerberus this year include: the nominally-valued €3.5bn Capital Home Loans’ loan book; RBS’ £1.4bn Project Rathlin loan portfolio; the Project Lucas Netherlands NPL from Van Lanschot in August, the residential tranche of Project Finn. In addition, Cerberus is also understood to be close to winning the slimmed down Project Aurora NPL from Helaba.

While NAMA has not confirmed the price paid for Project Arrow, Frank Daly, NAMA’s chairman said “the price achieved for this challenged portfolio…. meets the NAMA Board’s expectation of the proceeds that could have been realised from the management and sale of over 1,900 individual assets if NAMA had worked them out over a three-to five-year workout period.”

Daly added that just 2.5% of the Project Arrow loans are performing and that the sale follows “extensive preparatory work and a robust, professionally managed and competitive sales process”.

The nominal balance of Project Arrow reduced since its launch in February this year. Initially launched with gross liabilities of €8.4bn, this fell in July to €7.2bn, before falling again to €6.25bn prior to the final binding bids just under two weeks ago.

This circa 40% fall from the original nominal balance reflects substantial asset sales and loan refinancings. Also, in cases where local authorities indicated that certain residential units were suitable for social housing, the loans concerned were withdrawn from the sale.

In addition, NAMA decided to retain a number of loans secured by residential development sites in order to facilitate its objective of funding the delivery of 20,000 residential units by 2020. 

The final Project Arrow portfolio was comprised of 302 debtor connections and secured against 1,906 assets.

NAMA stated in its release this afternoon that there has been “significant deterioration in the value of these assets since acquisition” which was acquired by NAMA in 2010 and 2011.

This asset level deterioration, combined with macro volatility and receding liquidity in real estate – particularly for loan-on-loan financing, all contributed to a difficult environment to dispose of the non-performing loan portfolio, which was reflected in Goldman Sachs and CarVal Investors decision to pull out of the race in September, as revealed by CoStar News.

NAMA states in its release a bidder pulled out on 11 September, the day following CoStar News exclusive report.

Project Arrow’s underlying 1,906-strong granular property portfolio is 90% comprised of assets in Ireland, of which two-thirds (67%) are outside Dublin and 23% are in Dublin.

Some 43% of the assets, by value, are residential properties, the majority of which are currently let or occupied. Many of the units are in locations where there is limited housing demand. 

Frank Daly, Chairman of NAMA, added: “We consider that the Project Arrow loan sale has obtained the best achievable return for the State from these assets, in line with the Board’s obligations under Section 10 of the NAMA Act.

Mr. Brendan McDonagh, CEO of NAMA, said: “The sale of Project Arrow represents another significant deleveraging and risk mitigation milestone in NAMA’s progress towards fulfilling its key strategic objectives. The cash proceeds raised from the sale will be applied towards redeeming NAMA’s senior debt and towards funding our planned investment programme in housing and commercial office space.

Project Arrow is the sixth NPL portfolio sold by NAMA this year. In total, the six NPL’s had an aggregate nominal balance of €10.8bn, which generated approximate cash proceeds for NAMA of €3.16bn, according to CoStar News’ calculations.

The Project Jewel NPL reflects 58% of the total cash proceeds received by NAMA in 2015 from loan portfolio sales so far.

NAMA’s 2015 loan portfolio sales comprise:

  • the €287m Project Boyne sold to Deutsche Bank for €95m in January, the loans were secured by property developer Willie Smyth’s assets, see story here;
  • the €785m Project Maeve sold to Deutsche Bank for around €97m in July, the loans were secured by property developer Gerry Barrett’s assets, see story here;
  • the £226m Project Albion multi-borrower NPL sold to Oaktree Capital Management in July for circa £115m, secured by predominantly UK commercial properties, see story here;
  • the €608m Project Arch five-borrower NPL sold to Deutsche Bank in July for €164m, with the bulk of real estate value formerly owned by by property developers Jerry O’Reilly and Terry Sweeney as well as investor Ronan O’Caoimh, see story here;
  • the €2.57bn Project Jewel – anchored by Dundrum Towne Centre – sold to a Hammerson and Allianz Real Estate joint venture for €1.85bn in September.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
Gallery | This entry was posted in Banks, Lenders, Market Trends, NAMA, Private equity real estate, Real estate advisors, Refinancings and tagged , , , . Bookmark the permalink.

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