Actually the Battersea Power Station (BPS) isn’t in fact owned by NAMA, it is only subject to loans from NAMA (and Lloyds bank and Chinese property magnate Victor Hwang and others). And it is presently valued at between GBP 300-500m which is less than the Dundrum Town Centre, owned by Joe O’Reilly’s Chartered Land, which might be worth €600-800m today. But when developed the BPS was expected to be worth GBP 7bn.
There has been a flurry of activity involving the BPS – and its immediate owner, REO, which is controlled by Treasury Holdings which is in turn controlled by the colourful Johnny Ronan and also Richard Barrett – in the last week. Almost GBP 400m of loans are due to mature next Wednesday 31st August, 2011 and it was reported by Property Week last Friday that NAMA and Lloyds had appointed Ernst and Young to advise them on the review of those loans (Property Week’s article is available to subscriber’s but the Irish Independent’s +24 service reports the meat of the story here)
Meanwhile Britain’s Telegraph newspaper reported on Saturday last that REO had put the BPS up for sale. Or at least a 50% stake in it, though the newspaper also reported that “REO is now also considering” a 100% bid with a future profit share. Presumably if the price was right an outright sale of the property might be on the cards. It might also be significant that REO seems to have been marketing a stake in the project for some time, and indeed generated interest according to the Telegraph, but that it is “now” willing to consider a more substantial transaction.
REO had earlier said that it had signed a Memorandum of Understanding with NAMA but as the Grehan brothers, Ray and Danny, found to their cost in May 2011, a Memorandum of Understanding which was signed in December 2010 might not be worth a great deal after NAMA decided to appoint receivers and administrators to its portfolio. The view on here was that there was something aloof in the REO statement on agreement with NAMA, which hinted that REO and NAMA might not have been exactly on the same page.
“The Group submitted a comprehensive business plan in May 2010 for review by NAMA. The initial evaluation process resulted in a signed Memorandum of Understanding (“MOU”) in December 2010, the terms of which are non-binding. The terms include the consolidation and renewal of loan facilities and the provision of working capital. NAMA will monitor the Group’s subsequent performance to ensure that it adheres to targets contained in the MOU and, subject to further negotiations, binding facility agreements are expected to be entered into in the near future.” – from the REO annual report for the period ending February 2011.
Following the torturous approval of planning for the BPS site which was finalized in February 2011 when British minister Eric Pickles gave it the thumbs-up, it was expected that construction on the site would commence in 2012 and that there would be mid-decade a realized product on the site which has been derelict for three decades. Treasury Holdings was seen as one of NAMA’s pet developers. But the absence of a finalised agreement between the two, the reported appointment of Ernst and Young which according to Property Week was to advise on the review of debt and the sales process, and the report by the Telegraph, seemingly confirmed by a REO spokesperson, that a substantial interest in the site was for sale, might not augur well for Treasury. In any event, there is likely to be some development in the next seven days as the maturity of loans looms.
You might also be interested in previous reporting on the Battersea Power Station
For a company with €1bn negative shareholder equity, Treasury Holdings vehicle REO is surprisingly upbeat in its latest financial report
Treasury secures planning permission for Battersea – NAMA’s most valuable asset.
Vultures gather over NAMA assets
UPDATE: 30th September 2011. Although there is no update on debt or disposal negotiations, we are reminded in today’s London Evening Standard that Battersea will have competition in terms of development offering. About three kms up the road in Earl’s Court there is a 77-acre development wending its way through the public consultation/planning labyrinth. This article and opinion piece from former RICS president, Peter Bill also goes on to pooh-pooh the Battersea development which he correctly states is dependent on an extension to the Northern Line (part of London’s Tube or metro system). By comparison, he argues, Earl’s Court is “doable” now.
UPDATE: 2nd December, 2011. It has now been confirmed that both Lloyds and NAMA have applied to the High Court in London to have the Battersea Power Station placed in administration, something that is possible because of the creation of a special purpose vehicle Battersea Power Station Shareholder Vehicle to which the site has been transferred.
UPDATE: 12th December, 2011. RTE has reported that at the Chancery division of the High Court in London this morning, Judge Geoffrey Vos agreed to appoint Ernst and Young as administrators to REO in both the UK and Jersey (where REO is registered). Previous reporting suggested the administration was to only cover an SPV company which owned the Battersea site – RTE’s reporting suggests the administration affects the REO group generally which has a portfolio of property in the UK and Ireland.
UPDATE: 13th December, 2011. The Irish Times today carries an interesting reaction from NAMA to the administration “ The agency’s spokesman added that creditors believe that appointing an administrator represented their best chance of selling the power station and surrounding site. “We saw it as the best way of freeing up the process. The company had been given a lot of time but was making no real progress.”” Separately, it is understood the four specific companies subject to administration are : (1) REO (Powerstation) Limited (2) REO (88 Kirtling St) Limited (3) REO (8 Brooks Court) Limited and (4) REO (Site Assembly) Limited
I’ll take the opportunity to again bring up the connection between Battersea and the Command & Conquer video game fad of the late 1990s. Once again, I think there is no other reason that such a dilapidated site could ever have been valued so highly other than a fairly juvenile appeal on the part of junior (and perhaps not so junior) industry professionals.
I seriously doubt the site is worth anything now, or that development will ever take place(by Treasury at least). Derelict for three decades doesn’t begin to describe it. Here’s an extensive series of photographs of the site and the power station’s interior. It is an enormous ruin. Somewhat amusingly, there is even an abandoned tank–yes an actual tank–just lying around the site, apparently abandoned after a 2006 art exhibition(Can be seen in the above link). Apparently even the lovable London scrap dealers haven’t seen it fit to go near the place.
Again, I think Battersea is simply a super Glass Bottle site. Worse, the owner may be obliged by the UK government to maintain, repair, or pay for the upkeep of such a famous London monument. I think there’s only one thing for Nama to do with this building: Sell up and move on.
@omf make no mistake about that it’s For Sale the problem for Nama is “capital stack” and REO the BPS loan originated by B of I is NOT in first position.
“the borrowings are secured by debentures over the assets of the subsidiary companies” annual report pg 57
The bigger issue for NAMA and REO as mentioned numerous times in the annual report is :
…renewal by NAMA of bank facilities in the amount of 829,000,000 yep 829 MILLION….
..the provision of NAMA of working capital facilities …
….the provision by Nama of financial support to cover certain operating cash requirements ….
Pg 12 annual report
All this DEBT to Nama alone is supported by property income of 34,000,000 ..
Pg 8
It will be a national disgrace if NAMA continues to support this financial insanity throw the whole group and affiliates associates subsidiaries into receivership it’s smoke and mirrors….cut off the CASH….CALL TIME send the bill.
Glossy computer renderings of the BPS are to distract from the very very serious issues for the Irish taxpayer, REO and for Nama.
To recap annual rental income 34mil DEBTS to Nama 829mil which are NOT secured as first mortgages………..
Also required is the “renewal by non-Nama banks of facilities in the amount of 525 million on broadly similar terms” annual report pg 12
OMF
1) I love you C&C references – I find your taste in video games to be excellent
2) A Tank?! What on earth is a dilapidated tank doing on the grounds of the Battersea?
http://www.worldsstrangest.com/wp-content/plugins/wp-o-matic/wscache23/e6a14_6ioet576iefydjfg.jpg
unfortunately this is no GAME-quick overview of Treasury FEES keep in mind that ‘interest payments of 7.6mil and 17mil due at 28 February….were NOT made..”pg10.
26. RELATEd PARTIES
(a) Transactions with related parties by the Group
the group has related party relationships with its subsidiaries (see note 29).
treasury holdings acts as investment adviser for all of the group’s property assets. the terms upon which treasury holdings
were appointed are set out in note 19.
pursuant to the investment adviser agreement, treasury holdings earned an investment management fee of £2.1 million
(2010: £4.0m). project development and project management fees of £13 million (2010: £14.9 million) were paid to a
company within the treasury holdings group. the project development and management fees are capitalised in the period
they are incurred. unpaid fees amounted to £3.6 million at 28 february 2011 (28 february 2010: £3.8 million).
fees of £697,000 (2010: £608,000) in respect of accounting and administrative services, taxation advice, legal advice and
investor relations were payable to treasury holdings in respect of agreements with the Company. fees unpaid at 28 february
2011 amounted to £178,000 (28 february 2010 £152,000).
there was no performance fee payable during the year ended 28 february 2011 (28 february 2010: £nil)
(b) Transactions with related parties by the Company
in the year ended 28 february 2011 fees totalling £309,333 (28 february 2010: £309,333) were recharged by the Company to
group companies for various services provided.
during the year ended 28 february 2011 the Company provided a net amount of £11.3 million (28 february 2010:
£82.8 million) by way of funding to group companies. these amounts have been provided for in full at the year-end as
detailed in note 18.
Is NAMA really APPROVING these OUTRAGEOUS fees at least they did not have the audacity to charge the Irish taxpayer a ‘performance fee’ !!!
Its a absolute disgrace that Irish taxpayer is supporting this.
@OMF
Most interesting post. Pink Floyd were very big back in the 1970s.
I bet nobody listening to Pink Floyd back then thought that the flyiing pig would crash land on the auld green sod. Or sods, depending on your point of view. Via Morocco, of course.
Maybe you should give up the blogging and consider a career in graphics.
Just an aside based on the final article mentioned – “Vultures gather over NAMA assets” – which reminded me of the Tibetan tradition of Sky Burial.
Rather than seeing the vultures as circling NAMA assets, I see NAMA as being the ‘rogyapas’ (body breakers) of the celtic tiger.
BPS-’In 1993 outstanding debts of £70 million were bought from the Bank of America by a Hong Kong based development company for approximately £10 million’
http://www.batterseapowerstation.org.uk/intro.html
http://www.guardian.co.uk/uk/2002/nov/08/davidhencke.robevans
REO PP reported as Euro 595-approx £400 million
http://www.rte.ie/news/2006/1130/reo-business.html
REO purchased the shares in the companies(controversial HK based developer Victor Hwang) partially financed by the seller via notes:
“(iv) pursuant to an agreement to purchase the shares in companies owning the battersea power station on 29 december 2006
the Company issued £100 million 6.324% series a secured loan notes due for repayment in 2011 and £50million 6.324% series
b secured loan notes due for repayment in 2011. at year end the book value of these loans was £146.3 million, as a result of
principal repayments in the current and prior years.”pg 57
This is the 146million owed to the seller -who has agreed to a ‘standstill’ to allow the Irish taxpayer to step up with more CASH.
What on earth was Bank of Ireland thinking in December 2006 in funding this.
B of I ( Nama) and Bank of Scotland (Lloyds) are owed the 260mil-
” the sterling loan facility agreements with lloyds banking group and nama are for the purpose of financing the companies
owning the battersea power station and related properties. these loans are guaranteed by the Company and certain
subsidiaries of the group. the borrowings are secured by debentures over the assets of the subsidiary companies.
during the year the sterling loan facilities of £260m were extended to 31 august 2011. Currently, these facilities can be called
on demand. “pg 57
@NWL are the Nama loans ‘secured’ against BPS and rank ahead of seller notes ?
They were probably thinking of the handsome windfall of Christmas bonuses they would receive for giving the loan.
JG, my understanding is that the BOI/HBOS loans rank ahead of Victor Hwang’s vendor loan notes. Therotically NAMA should be capable of getting an ultimate recovery of all principal, however, I suspect they will only do this by rolling over their loan into a new site loan, and then waiting for about 10 years.
Trust me, while its not a good loan, both BOI and HBOS originated much worse loans.
Oliver Shah of Sunday Times reported about six weeks ago that the Qataris will take a 50% stake in it.
@Neil, thanks for that. I think it was Mira Bar-Hillel that broke that story in April – http://www.thisislondon.co.uk/standard/article-23944382-qatari-royals-poised-to-help-save-pound-55bn-battersea-scheme.do
reported here – http://namawinelake.wordpress.com/2011/04/26/middle-eastern-investors-set-to-unburden-nama-of-some-of-its-properties/
The latest development though appears to be that the entire project is up for grabs, and against a background of maturing debt, adds more than a little drama to the BPS saga.
Wow, she was way ahead on that, I must have missed your post. The 100% thing is I presume based on whether they can get a new line of credit to pay back Hwang, if not whole thing will have to go. All eyes on stock exchange next week
@DCB thanks for that hope it works out better than the Opera Finance CMBS loan to REO that is in Nama.
http://www.egi.co.uk/articles/2011/08/12/738240/Nama-set-to-lose-%C2%A374m-.htm?cp=ILC-EGI-RSS
Maybe the ST had it right all along……….
http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article1595824.ece
“Documents issued ahead of the meeting that approved the purchase show that Ronan and Barrett stand to make millions of pounds via their Treasury Holdings — whether or not any development of Battersea is a success.”
NAMA on behalf of the irish taxpayer is APPROVING these fees while debt is NOT getting serviced !
@NWL more no “news” news.
http://www.bloomberg.com/news/2011-11-24/sp-setia-offers-to-buy-london-s-battersea-power-station-debt-from-banks.html
http://www.costar.co.uk//en/assets/news/2011/November/NAMALloyds-snub-Battersea-Power-Station-bidder-/?dm_i=UQT,M81N,4KQZWH,1ST12,1
@John, this is financial headline “news” in the Irish Times today
http://www.irishtimes.com/newspaper/finance/2011/1125/1224308107733.html
So Abramovich and I’ll bet 20+ other development options are being considered by NAMA and Lloyds (and presumably Victor Hwang the original owner of the site who sold to REO but retained a debt interest) and a decision is to be made “imminently” and one low-ball offer has been rejected. Big whoop, there will be an update to the Battersea main entry on here when there is some real development.
http://namawinelake.wordpress.com/2011/08/23/for-sale-nama%e2%80%99s-most-expensive-asset/
@NWL apologies can’t resist …
” Irish developers Richard Barrett ”
Please insert ‘born” in above sentence,no other metric applies.
Unfortunately,after extensive and exhaustive review of ALL available public documents, it appears we are missing an “Irish Developers” signature.
I will leave it at that, happy thanksgiving from the “Irish” in new york!
Link above.
@NWL a new member of the official supporters club !
“The Chancellor stated that, amongst the batch of transport infrastructure mentioned, the Government will “support” the extension of the Northern Line to Battersea. Government support for the scheme was always the easy part – the difficult bit is in the detail of what exactly their involvement is to be. Almost all knowledgeable parties want this to be an undertaking to underwrite a Tax Incremental Funding (TIF) scheme, which appears the only way that the new tube line, and a fully comprehensive scheme on the 480 acres at Nine Elms,
http://www.costar.co.uk//en/assets/news/2011/November/Autumn-Statement-Battersea-tube-among-key-infrastructure-schemes-backed/?dm_i=UQT,MDZE,4KQZWH,1TA7R,1will ever take place”
@NWL regarding above post,and @Karl not forgetting you,back in office so will work on decent response.
This is from NC’s piece in Bloomberg link above
‘Irish developers Richard Barrett and John Ronan, whose Jersey-registered Real Estate Opportunities Plc (REO) owns the Battersea site, need to raise money to fund the development and meet obligations to the creditors’
After reviewing the most recent REO report,it appears that only ONE of the ‘Irish develops’ has ink on paper.NAMA perhaps,one of the lads could run upstairs and have an extra signature added.
Actually,that wont work now will it !!!
Hopefully, I’m mistaken,not having both signatures would be borderline gross negligence at this stage.
‘the bank loans on irish properties are secured by floating charges over the Castle market holdings limited group (“Cmh”)
and havenview investments limited group, fixed charges over the irish investment properties and investment properties
under development amounting to £1,094 million, a guarantee and indemnity from the Company and various other
guarantees from mr John ronan, treasury holdings and certain subsidiaries. the majority of the loans have now been
transferred from the irish guaranteed banks to the national asset management agency (nama).’
http://www.realestateopportunities.co.uk/Pics/FINAL%20RA%2021%20JUL2011.pdf
rte is running something on this,but property week had something earlier.
@John, correct Property Week’s Mike Phillips exclusively reported that NAMA and Lloyds were set to appoint administrators to the Battersea site. Sad day for Treasury for having failed to find an investor, and a sadder day for NAMA which now has a distressed asset on its hands, potentially.
http://www.propertyweek.com/news/battersea-power-station-owner-confirms-administrators-lined-up/5028700.article
And let’s not forget Tipperary/Waterford man, George Osborne, who only yesterday announced a confirmation that the Westminster govt would make funds available for the Northern Line extension to Battersea.
@NWL, Teary-eyed here,my reading of George’s statement was ‘support’ but no financial commitment , moot now.
What happens to influential Asian investor,Victor Hwang,assume if ‘capital stack’ is as described,he gets wiped out.At least we will be spared the ridiculous charade of ‘new investors’ news.Good at least for the Irish Taxpayer,on this one it hopefully has ended mission creep by NAMA.
Oh well,still plenty of assets/debts owed to Irish Taxpayer,NAMA should make it a top priority to have Richard Barrett, fly over and sign some DOCUMENTS.As an oenophile and connoisseur,I doubt this news will change what he ‘pairs’ his evening meal with, wherever he is !!!
NAMA/Lloyds originally loaned 260million on BPS-how are we progressing with the other 829,000,000 owned by REO to the TAXPAYER !!!
@patrick decent summary.
http://www.costar.co.uk//en/assets/news/2011/December/The-trouble-with-Battersea-Londons-Power-Station-set-to-come-back-to-market/?dm_i=UQT,MWTC,4KQZWH,1URGD,1
Thanks
What affect if Any does this development have on relations between NAMA and Treasury Going forward?
@Patrick, it is believed that Treasury is one of the developers working closely with NAMA. Today’s administration does not apparently affect any part of REO’s portfolio except Battersea. So the extensive Irish REO portfolio is unaffected. All signs currently are that REO/Treasury is continuing to work with NAMA, so I wouldn’t expect any change in relations.
@patrick when there is some ‘news’ NWL will do a piece,we can discuss it then,in the meantime Bloomberg will keep you updated with breaking news and speculation !!!
Would someone do an analysis of REO holdings and connected companies. It looks like all their bad stuff has gone in to NAMA. The Irish taxpayer deserves at least a whiff of the stuff that is producing high rent like the NAMA head office, the convention centre, Bewleys, Stillorgan shopping centre, Marks &Spencers Cork and many others. NAMA have been very understanding and given them lots of time to ensure their properties with good income are out of reach. They are notorious landlords so tenants will not shed any tears for their difficulties. In any event they are not to worried about the demise of Battersea as thay have long ago given up on it, having managed to draw out its demise by spinning stories, with the help of lazy/incompetent journalists, about Arab and Chinese buyers and laterly Chelsea football club. Abramovich’s denial that he was interested did not prevent the fantasy football stories spiriling out of control.
O P E R A
Is in first the OM is on here.
@Despero, NAMA does not provide an analysis of properties subject to its loans and rarely comments on individual cases. So any analysis would come from leaks and more professionally from company accounts and documentation where REO/Treasury deigned to make reference to NAMA.
REO didn’t get a choice about what loans went to NAMA, in the sense that NAMA acquired all connected loans in the five NAMA financial institutions. But if REO or another Treasury unit had assets subject solely to non-NAMA bank loans, eg Bank of Scotland (Ireland), then NAMA did not acquire them.
So if all of REO/Treasury’s “bad stuff” has gone to NAMA, then that is hardly by design.
@despero here is ‘opera’ in first on most above mentioned deals,NWL will do a piece at appropriate time.
http://www.sfmlimited.com/files/prospectus/Opera%20Finanace%20II/Opera%20final%20OC.pdf
“Knight Frank to sell Battersea Power Station
http://new.egi.co.uk/news/article.aspx?id=744343
Knight Frank is set to be appointed as the agent to sell Battersea Power Station by administrators Ernst & Young.”
@David, many thanks. What a potentially juicy commission. REO seemingly valued the site at approximately €500m.
NAMA/Lloyds acquisition loan was 260,000,000,its reported the loan is now 324,000,000,must be a typo or something.
Unless,the Irish Taxpayer was funding this folly on a ongoing basis,that could not be right,no way they would do that.
An extra 64,000,000 since purchase was this a Joint Venture or something,it was represented as an acquisition loan.Probably,Lloyds advanced the funds or its penalties,unpaid interest,but still an extra 64 MILLION.
NAMA must have gotten additional collateral from the founders of Treasury,probably some personal guarantees or security on any unencumbered assets.Hope the Irish Taxpayer get’s out whole,poor old Victor is going to get wiped out here,oh well at least NAMA improved their collateral.It would be grossly negligent of them if they did not.They granted two loan extensions plenty of opportunity and time to enhance the security,what with REO desperate for cash.
Regarding,KF assume REO is co-operating,after all any proceeds over the 500,000,000 would be theirs,can they not just forward the lists of JV partners/buyers that was the basis for the two loan extensions and the additional 64,000,000 of funding.
@NWL guess who is having a few extra pints tonight.
IT report,linked,looks like its REO interesting “capital stack” here.
http://www.irishtimes.com/newspaper/frontpage/2012/0112/1224310143684.html