NAMA is expected to finalise the shortlist to acquire the loan portfolio which includes the 1.3m sq ft Dundrum Town Centre within the next 48 hours, in one of the bad bank’s most eagerly-awaited sales processes.
Investors spanning sovereign wealth funds, institutions, asset managers, developers, REITs from sector specialist to global, as well as private equity loan buyers have all sized up bids for Project Jewel, principally to seize Ireland’s largest shopping centre, which NAMA considers to be the ‘jewel’ in its crown.
CoStar News understands that the credible first round bidders include Abu Dhabi Investment Authority (ADIA), Allianz Real Estate and Hines. JP Morgan, which has not yet successfully acquired any Dublin offices, is also understood to have bid.
ADIA reportedly teamed up with developer Chartered Land to buy the two former Jurys and Berkeley Court hotels in Dublin from Ulster Bank for €155m, according to the Irish Independent last Wednesday.
Allianz Real Estate initially confirmed its investment appetite in Ireland’s commercial property market indirectly last September through the €140m in IPUT, Ireland’s unlisted and unleveraged property fund.
Hines tends to purchase with a joint venture partners; the two notable recent partnerships were with HSBC Alternative Investments Limited (HAIL) for the majority stake in Dublin’s Liffey Valley shopping centre in February 2014, and with King Street Capital after winning Cherrywood Business Park last December.
JP Morgan has so far this year made a number of notable first round bids, including for Facebook’s headquarters at 4 and 5 Grand Canal Square in February and Royal London’s Sovereign portfolio, which sold last month to Irish Life.
A number of anticipated bids were thought to have not materialised in the first round, particularly by Blackstone and Simon Property Group. Norges, Starwood’s REIT and Unibail-Rodamco are also believed to have not bid.
Other investors which are known to have evaluated bidding include Vornado Realty Trust, the US REIT, Land Securities, Hammerson, Davidson Kempner and Canyon Capital Advisors.
A number of the retail sector specialist REITs were believed to have been deterred by the development scheme component of Dundrum, in that the most logical development plans would be for a mixed-use scheme including high-end residential which falls outside their investment parameters.
Blackstone, thought to be keen to win the Dundrum shopping centre earlier this year, is understood to be preparing to offload a number of offices in Dublin, including Bloodstone Building and Quay Central this September for around an asking price of around €130m.
Towards the end of the year, Blackstone’s Hume House is also expected to come out for around €40m.
Project Jewel is comprised of loans extended to Joe O’Reilly’s Chartered Land which includes:
- the 1.3m sq ft Dundrum Town Centre, Ireland’s largest shopping centre, which has a value of around €1.1bn, which would equate to a net initial yield of circa 4.75%;
- a 50% stake in the Pavilions shopping centre in Swords, Irish Life and I-PUT each own a 25% stake;
- a 50% stake in the Ilac shopping centre in Dublin city centre, Irish Life owns the remaining 50% stake;
- a land site near Ilac shopping centre in central Dublin, which prior to the crash was earmarked for a large scale retail scheme anchored by John Lewis;
- a land site adjacent to Dundrum, which previously was slated as Dundrum shopping centre Phase II. The existing planning permission may need to be re-secured if the eventual winner sees value in a residential component to any future scheme.
Chartered Land only owns 40% of Dundrum Town Centre, but NAMA innovatively acquired the debt in shopping centre that it did not already own last year through buying Ulster Bank’s €129m syndicated loan from Project Button and a €108m syndicated loan from KBC Bank Ireland at par last April.
The marriage value in uniting the debt is expected to deliver a considerably improved return for NAMA.
The sale price for the €2.4bn Project Jewel loan portfolio is expected to reach between €1.6bn and €1.7bn, with Dundrum reflecting up to two-thirds of the loan portfolio’s real estate value.
The major investment banks, including BAML and Morgan Stanley, are believed to be keenly interested in lending against Dundrum Town Centre, which has implications for the equity cheque the winning bidder would have to provide.
Assuming an effective purchase price for Dundrum of €1.1bn, a 65% loan-to-cost (LTC) senior loan by an investment bank would equate to an equity cheque of €385m, which converts back to a sterling cheque of just below £275m.
Some in the market believe the asset – given the upside potential through the adjacent land site – would even command an additional mezzanine loan, shrinking the equity cheque further.
NAMA, which is being advised by Eastdil Secured on the sale of Project Jewel, is expected to settle on the finalists by Friday.
All parties declined to comment.