Nama set to make profit on money paid for €1.8bn O’Flynn loans

Nama is expected to make a profit on the sum it paid for developers O’Flynn Construction’s €1.8bn in loans in 2010, according to market sources.

“There’s a very strong international interest in the loans, with a first-stage deadline for expressions of interest in the middle of March, and they could be sold as early as a month after that. The quality of the assets, spread across Ireland, the UK and Germany has made it very appealing,” the Irish Examiner was told.

Although the O’Flynn loan book was valued at €1.8bn, Nama never revealed how much it paid to acquire it or what its “haircut” was, but it’s understood that if Nama now sells the loans for an expected €1bn-plus, it may represent a profit on what it paid four years ago.

The Cork-based company has carried out the restructuring required by Nama.

Developer Michael O’Flynn’s business (set up in 1978) was one of the Top 10 largest development loan books to go into Nama four years ago, and will be one of the first to exit.

At least a dozen international investors are expected to make Tier 1 expressions of interest by March 19, with a smaller number then invited to make firm offers in a second tier of bids. There’s a reported €75m in annual income and rent roll from the assets.

Among those said to be keen on acquiring the portfolio are Goldman Sachs, Deutsche Bank, Blackstone, Apollo, Starwood and Cerberus. Irish REITS, such as Hibernia and Green, may also partner some of the bidders to bring specific Irish market knowledge and investment to the acquisition, while O’Flynn Construction will continue to manage and develop most, if not all, of the assets.

Just over half of the assets are held outside the country, including over 6,500 student accommodation beds in British company Victoria Hall, which completed a further 450-beds in Wembley, London, after securing US investment post the move to Nama.

Other assets and sites include the Haymarket development in Edinburgh, a €200m joint office/hotel/ retail development between O’Flynn’s company, Tiger Developments, and British construction firm Interserve. Construction there is under way and a deal has been agreed with a hotel operator, whose identity hasn’t yet been divulged.

There are also assets and investments across Britain, and Germany, as well as Spain.

“The value of the German and UK assets have risen since Nama took over the loans in 2010, compensating for some of the drop in value of Irish assets,” said a market observer yesterday, and it’s understood that just over 50% of the assets are held outside of Ireland.

In Dublin, O’Flynn Construction’s largest site is the former Nissan HQ on 18 acres on the Long Mile Rd on a Luas line, acquired for €115m in 2007 to accommodate 800 housing units, and it also has a housing site in Killiney.

O’Flynn’s main developments in Ireland are in Cork, which include the country’s tallest building, the €150m Elysian building, as a well as major developments in Ballincollig on the former barracks site, Mount Oval in Rochestown and East Gate Business Park in Little Island, where it recently completed an office building sale to Eli Lilly with Nama support.

A sale of the loan portfolio will mean development finance will become available for O’Flynn Construction sites in Ballincollig, Dunkathel and East Gate.