Harcourt Developments ready to sell Davidson Kempner financed The Gateway Offices in Belfast

Harcourt Developments, the Dublin-based property developer and investor, is bringing to market The Gateway Offices in Belfast’s Titanic Quarter with a guide price of £29m.

Ulster Bank sold the loan secured against Harcourt’s two waterfront built out schemes in Titanic Quarter – The Gateway Offices and The ARC Apartments – to Davidson Kempner in September 2014.

CBRE has been instructed to sell the landmark office investment comprised of three interlocking Grade A office blocks, which span 133,205 sq ft, signaling a positive beginning to the 2016 commercial property market in Northern Ireland.

Approximately 90% of The Gateway Offices are let to Citibank. At the time of the Bank’s Project Achill NPL sale, the Citibank lease was scheduled to expire in June 2020.

Citibank is thought to be a possible buyer of the office block. The bank is paying around £14 per sq ft, while grade A office space in Belfast is now leasing for £16 to £17 per sq ft. The purchase of the office block would control its long term operating costs in the city, in which the bank is committed to remaining.

CoStar News reported at the time that Davidson Kempner paid €82m for the Pool D tranche of the €1.2bn Project Achill non-performing loan (NPL), which had an outstanding balance of €91m.  The vast majority of Project Achill was secured by commercial real estate assets in Ireland.

Harcourt Developments has been unaffected by the change in creditor as the loan has continued to perform and has not breached any covenants.  As a result, Davidson Kempner has been restricted to a back seat creditor role. 

The timing of the sale by Harcourt Developments is thought to be to take advantage of improving sentiment and liquidity in the Belfast office market and to recycle the net proceeds for the remainder of the developer’s plans in the Titanic Quarter.

Nick Doherty, finance director at Harcourt Developments, said: “Titanic Quarter has decided to sell its landmark Gateway Offices, which are fully let to Citibank, to capitalise on the current strong demand for quality office investments in Belfast.

“This will enable the Titanic Group to deleverage its existing asset base and to focus on future development opportunities within Titanic Quarter.”

Titanic Quarter is one of the world’s largest urban-waterfront regeneration projects, the former shipbuilding dock is where the famous RMS Titanic was designed and built more than 100 years ago.

For Davidson Kempner, if Harcourt Developments repay the loan in full this would crystalize an almost €10m profit, although the timing of the repayment of the debt secured by The ARC Apartments remains unclear.

CBRE – which announced the planned sale of The Gateway Offices at its annual Northern Ireland investment market briefing this morning – predicted that this year will see further positive development activity in the commercial property market in particular the office, hotels and student accommodation sectors where several new schemes are expected to lodge planning or commence construction over the course of the next 12 months. Last year, transaction volumes reached new highs of more than £400m.

Brian Lavery, managing director, CBRE Belfast commented: “The Gateway Offices is the largest office investment offered to the market in the last decade. It is one of the most prominent office buildings in Belfast and with prime rents expected to increase from £16 per sq ft to £18 per sq ft in 2016, it presents a great investment and asset management opportunity for investors to capitalise on a buoyant office sector.”

James Eyre, commercial director at Titanic Quarter added: “Titanic Quarter continues to grow with over 1.5 million sq ft of space completed and occupied to date. The development comprises major film productions, leading-edge R&D, financial services, the world’s largest Titanic visitor attraction (which has over 1 million visitors a year) and the ARC, Belfast’s most desirable waterfront apartment development.  Over 18,000 people already live, work and study in Titanic Quarter.   Gateway Offices provides an excellent investment opportunity.”

Lavery added: “The office sector is expected to see an increase in the volume of activity in 2016 from projects entering the planning stage during this year through to new speculative developments. There is only a small volume of stock due to be delivered this year and yet demand for Grade A office accommodation continues apace.

“Therefore, Belfast needs more high quality buildings similar to Gateway Offices to offer to new occupiers. As a consequence, we expect strong bidding for the Gateway Office investment and anticipate it to be the first major sale of 2016.”

Speaking at the launch of their Outlook 2016 report, Marie Hunt, Head of Research at CBRE, said: “The announcement of the lower corporation tax rate to 12.5% in April 2018, with Northern Ireland to be the only region in the UK to offer this reduced rate, is hugely significant and exciting.

“However, to see maximum benefit from this change, work needs to commence this year to ensure that the necessary buildings, infrastructure, labour force and skillsets are available by the time it is implemented in 2018. Northern Ireland’s property market is at the beginning of a new and interesting phase.”

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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