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Archive for August 23rd, 2011

(UPDATE: 22nd September, 2011. There is a more up-to-date preview of the 23rd September auction here)

This afternoon, the Allsop/Space auctioneering joint venture has published its catalogue for the third auction which will be held again in the Shelbourne Hotel on 23rd September. The catalogue is available here free of charge (might take a few seconds to load, the PDF is 10mb), if you want your personal printed copy it will cost you €5 and is available here. This entry takes a look at the catalogue and assesses the maximum reserves.

There are 74 lots comprising the usual range of geographically dispersed, residential and commercial property – these auctions are certainly giving a taste of property throughout the country. To my eye at least, the maximum reserves – the minimum amount of money to secure the property but which may be reduced on the day of the auction – seem generally lower than the previous two auctions. Where property is subject to an existing tenancy the implied yields are generally – there’s the odd exception at 6% or 24% but generally – 10-17% on residential and up to 20% on commercial. This auction has only 74 lots which is less than the 80+ in each of the previous two auctions. There’s no trophy home or trophy address and to my eye, the range of property is more limited than previously. Many of the properties are foreclosed but there’s a fair smattering that appear to be owner-vendor sales. There appears to have been quite a lot of last minute finalisation of details and there are a number of errors in the catalogue.

Highlights

a 2-bedroom, 700-sq ft apartment in the holiday town of Bundoran in Co Donegal is the cheapest property on offer with a max reserve of €20,000

Michael Daly’s Foundmount Group’s development at River Point in Limerick City has a few apartments on offer

A 5-storey Georgian mid-terrace on Gardiner Street with a max reserve of €225,000

Chapman’s Garage in Kildare with a max reserve of €365,000

A single block of 5 flats at Synge Place, in Dublin8 (central Dublin) with a max reserve of €425,000

Len Woodbyrne & Joe O’Reilly development at95-97 Francis Street, Dublin8 (central Dublin) has a range of apartments on offer

64-65 Prussia Street in Dublin7 (central Dublin) with 14 apartments and four commercial units is the most expensive property on offer and has a max reserve of €850.000 and is presently generating €111,720 in rent.

The maiden Allsop/Space auction was held in Dublin on 15th April, 2011 and saw pandemonium on the streets with the culmination of a frenzy of anticipation and is reviewed here.

The second auction was held on 7th July, 2011 and was a more businessman-like affair and is reviewed here.

I would expect a lot of interest in this auction also as the reserves seem low and would expect most of the lots to be sold.

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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

UPDATE (1): 4th May 2012. The closing deadline for bids is today at 12 midday. We know about one bid for the princely sum of GBP 1 (€1.23) from a local community group. Will there be better offers?

UPDATE (2): 4th May, 2012. Chelsea Football Club has released a statement in which it confirms that it is bidding for the site with the intention of creating a 60,000 seat stadium and new home for one of the Premiership’s top clubs. The statement acknowledges that there are competing bids and it may be some  months before the sales process is complete. The Club plans to build the world’s biggest single tier stand if successful.

UPDATE: 14th May, 2012. Reuters reports that there were “about 15” bids for the site submitted by 4th May including Chelsea’s. The bids are said to include SP Setia which had been engaged in discussions on the site last year. It is said that if the chimneys on the site could be demolished, the development would be worth a staggering GBP 470m more, but because the chimneys are protected, they need be incorporated into the development. The 15 bids are said to be in the GBP 300-400m range and Reuters says that there is GBP 400m outstanding in loans on the site.

UPDATE: 28th May, 2012. In what looks like a mixed blessing for NAMA, it has been reported in Britain’s PropertyWeek that the highest bidder for the Battersea site is Malaysian fund, SP Setia which is reportedly bidding GBP 400m (€500m). This may clear most of the outstanding loans to NAMA, but Treasury Holdings may feel its legal case against NAMA is bolstered as SP Setia was the bidder late last year before NAMA and Lloyds put the site into administration. The administrator is reportedly legally obliged to examine and progress the highest bid, though it may also progress other bids. It is reported that Chelsea has bid GBP330-340m and that the billionaire Reuben brothers have withdrawn interest in the project.

UPDATE: 7th June, 2012. NAMA has issued a comment today as follows “Comment re Battersea exclusivity deal announced today. Brendan McDonagh, Chief Executive of NAMA, has welcomed the confirmation by the Joint Administrators and Joint Receivers of the companies that own the land contained and adjacent to Battersea Power Station that they have now entered into an exclusivity agreement with SP Setia and Sime Darby on the purchase of the asset which should lead to a full repayment of all NAMA’s debt on this asset.”

UPDATE: 5th July, 2012. Well done to NAMA! Costar is reporting that the sale of the Battersea site to the consortium of the Employees’ Pension Fund of Malaysia, SP Setia and Sime Darby has completed. The sale price was €GBP 400m (€500m). NAMA has no further comment on the sale, but has previously made clear that it is recovering 100% of loans linked to the property.

UPDATE: 5th September 2012. Property Week is today reporting that the buyer of Battersea is confirming the purchase and has also announced the appointment of the former Treasury Holdings managing director Robert Tincknell to head up the development of the site.

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