THE sale of loan portfolios, a growing trend for the last two years in Ireland, continued in 2013. Ireland is one of the most active markets in Europe, along with the UK, Germany and Spain. Research by Lisney’s international-alliance partner, Cushman & Wakefield, shows that 90% of all transactions (by volume) occurred in these four countries in the first half of 2013.
US investors consider Ireland and the UK as the first-stop markets for loan acquisitions in Europe. However, these investors are now starting to look at the Netherlands, Italy, Finland and France. Cushman & Wakefield estimate that total sales in 2013, in Europe, will be between €25bn and €30bn. This compares to, approximately, €22.5bn in 2012.
It is often difficult to confirm full sales details about Ireland and much of the information is not confirmed by the purchasers or vendors.
2013 started with Lloyds, reportedly, selling a €140m senior loan relating to some of the debts surrounding the Moran Hotel Group. The purchaser was Canyon Capital advisors (a US hedge fund), and it was reported that a 70% discount was obtained.
In July, Hypothekenbank Frankfurt, a servicer of the debt, sold Project Opera to Kennedy Wilson (a Californian investment company, seen on this week’s Who’s Buying Ireland RT… documentary) and Varde (a Minneapolis-based asset-management company).
The real estate behind this comprised assets formerly owned by a Treasury Holdings subsidiary, with assets including the Stillorgan Shopping Centre, Dublin, and Marks & Spencers, Patrick Street, Cork, as well as the Bank of Ireland head office in Mespill Road, Dublin, and KPMG’s head office, Dublin.
It was reported that the outstanding balance was €368m and the sale price was €306m. Prior to this, and in a separate transaction, Nama sold a junior loan it held on the debt to Northwood Investors, in January.
Nama was also involved in other sales. In April, a consortium led by Starwood Capital, a US-based private investment company, with a focus on property, purchased an 80% stake in the Project Aspen SPV (special-purpose vehicle), loans associated with developer, David Courtney. Nama retained the 20% balance and also provided 60% of the finance. While neither party confirmed a price, it was reported that a 75% discount was applied.
In December, Nama reportedly sold Project Club to CarVal. This related to the €250m non-performing loans of Eamon Duignan, including Navan Shopping Centre, Meath, and Fairgreen Shopping Centre Mullingar, which attracted a reported discount of 70%.
Nama is involved in another ongoing active sale, Project Holly, which is a mixed-use portfolio.
Also this month, Bank of Ireland reportedly sold its senior loan on its 50% stake in the Shelbourne Hotel, to Kennedy Wilson.
IBRC’s €22bn worth of loans also went up for sale in the second-half of the year, by way of four portfolios, Projects Evergreen, Sand, Stone and Rock. The loans were valued by KPMG earlier this year and we understand that the portfolios must be sold at, or above, this valuation. If the portfolios fail to sell, the loans will be transferred to Nama.
It is reported that Project Evergreen comprises corporate loans originated in Ireland and includes debt related to Arnotts, Topaz, TV3 and Davy Stockbrokers, among others.
Project Sand, we understand, comprises approximately 13,500 Irish Nationwide residential loans.
Project Stone, reportedly, comprises loans secured on commercial real estate, predominantly in Ireland and in the UK, and Project Rock is reported to comprise commercial real-estate loans originating in the UK, but with underlying collateral in the UK, Germany and the US. The assets are mainly hotels, mixed-use and leisure properties and include, for example, the Stadium of Light, the football grounds of Sunderland.
An additional portfolio, Project Salt, was also reportedly brought to the market, but is not subject to the valuation restrictions of the other portfolios, because the majority of loans were originated in the UK, with two IBRC’s subsidiaries that are not part of the liquidation proceedings. The underlying properties are primarily mixed-use and retail assets in Germany and the UK.
Looking to 2014, the outlook is that there will be further, discounted loan sales from banks exiting the Irish market, and Nama are expected to be particularly active in this sector also.
It would appear that there is somewhat more of an appetite for risk by perspective purchasers than recently seen, and this is likely to result in the discounts previously obtainable by these purchasers not being as dramatic.
Margaret Kelleher is director of Lisneys Cork offices