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Archive for April 13th, 2011

Last September, 2010 there was an entry on here which examined the sale by Anglo of a loan in respect of 225 West Washington Street in Chicago. It seemed back then that the loan was being sold back to a subset of the original borrowers at a discount. It was unclear if the loan was NAMA-bound as it was an investment property as opposed to what might be widely considered development land but the involvement of Derek Quinlan’s Avestus group should have meant it was NAMA bound, if only as associated lending. NAMA was never challenged here at home about the sale.

And last week, there was a press report of another sale in Chicago, this time of 1-15 East Oak Street, a six-storey 112,000 sq ft retail building on a street which was described by the vendor’s agents as the “Chicago equivalent of Rodeo Drive” – Rodeo drive being an upmarket shopping street in Beverley Hills, I suppose Grafton Street would be our nearest equivalent. The building was constructed in 2009 with a USD $93m loan from Anglo to a joint venture of two Chicago developers, Mark Hunt and Fred Latsko. The building is reported to have been sold this month to Israeli conglomerate, the IDB Group. The price achieved is reported to be USD $117m, equivalent to €1,050 a sq foot – considered a top price by vendors selling agents, Jones Lang LaSalle.

It is not clear if the loan had transferred to NAMA. It is clearly a development loan and has a value over €5m, the minimum NAMA threshold for Anglo’s loan exposures, so on the face of it, it was eligible. That said, there seems to have been some agreement between Anglo and NAMA that some US loans would not be acquired. Like the sale of the loan last September to the original developers, this agreement has never been explained by NAMA.

But how might NAMA/Anglo have lost USD $20m?

Anglo is reported to have foreclosed on the property last September, 2010 on foot of its USD $93m loan to the two developers. If Anglo/NAMA owned the building in its own right then they would be expected to benefit from 100% of the sale price USD $117m, and have effectively made a profit of USD $24m on the transaction. I am not aware of any law in Illinois that would require the foreclosing company to return any excess on the sale price above the loan to the original borrower. Instead Anglo is reported to have dismissed the foreclosure case last month, according to Crains (US publishing group), citing Cook County court records. Anglo/NAMA should of course be pleased to have recouped 100% of its loan but is it a case that heads, developers win when a foreclosed property is sold at more than the loan value and tails the bank (that is, the Irish citizen) loses when a foreclosed property is sold at a loss?

At some point, it is to be hoped that NAMA or Anglo is held to account on these loans.

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The Irish Independent is today reporting that a major UK shopping centre has been sold at NAMA’s behest. The 400,000 sq ft (37,160 sq metre) Houndshill Shopping Centre in Blackpool was owned by Modus Ventures, the company most associated with Brendan Flood, the Yorkshire-born property magnate whose assets also included the Trinity Walk shopping centre in Wakefield and the Grand Arcade shopping centre in Wigan and for football fans, he is a director of Burnley Town Football Club.

Houndshill is reported to have been sold for GBP £100m (€112m) and the Independent says that the property is subject to a loan originally from Anglo said to have been €140m though it is unclear if there is accumulated interest on top now. NAMA is said to have acquired the loan at “a substantial discount”. Modus is understood to have substantial loans from Bank of Ireland also – according to the Manchester Evening News in 2008 “the deal [GBP £100m financing of 40 retail units], one of the largest seen since the credit crunch began to bite, is a positive sign that the banks are starting to fund major deals once more.”

The developer of Houndshill, Modus, got into difficulties two years ago and administrators from KPMG were then appointed to the group. Since the start of 2010, Centros has been asset-managing the Houndshill shopping centre on behalf of Anglo.

It is claimed that Houndshill is the 16th busiest in-town shopping centre in the UK and is ranked 58th (in size presumably) in the UK. It claims to have an annual footfall of 15.6m. The Blackpool catchment area has a population of 200,000 but the town benefits from 11m tourists annually. Interesting that Dundrum Town Centre with 79,000 sq metres and an annual footfall of 19m is said to be worth over €500m. The Independent reports that the Houndshill sale price represents a 7.5% yield; the buyer’s identity has not yet been revealed.

NAMA hasn’t made any announcement but at this stage you would have expected NAMA to be directly managing the loan.

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