Nama sells off O’Reilly’s property debt to UK and German investors

Four months after his loans were put up for sale by the National Asset Management Agency, Irish property developer Joe O’Reilly now knows the identity of his new lenders.

UK-listed property group Hammerson and Allianz Real Estate, an arm of the German financial services giant, have secured ownership of his loans by paying Nama close to €1.9 billion.

It is probably a bittersweet moment for O’Reilly. On the one hand, it effectively marks his exit from Nama, having repaid the €2 billion par value of his loans, but it might also signal the end of his involvement with the portfolio of assets.

The expectation is that Hammerson and Allianz will seek to take charge of the underlying assets, most likely by way of a consensual agreement with O’Reilly, who is unlikely to be able to repay or refinance the loans.

Dundrum is the prized asset. It was O’Reilly’s creation, opening in March 2005 with big-name brands such as House of Fraser, Harvey Nichols and Hamleys. Covering 1.3 million sq metres of retail space, it generates €58 million in rent annually. There is also the potential for a second phase of the development at the nearby village centre, which currently has 20 dated retail outlets.

It is understood that Allianz had circled the Dundrum asset for more than three years and sought to buy it off market from Nama in the early days of the agency.

Buy out loans

Wisely for taxpayers, Nama chose to hold on to its interest in Dundrum and to buy out the loans held by Ulster Bank and KBC giving it a stronger hand in negotiations with interested buyers.

Hammerson is a retail centre operator with a successful track record in the UK and France. It will want to manage and develop the assets being purchased, lessening the chances of O’Reilly having a role going forward.

Hammerson and Allianz already own and operate two shopping centres in France – the Espace St Quentin and the Nicetoile.

It is understood that the sum paid by Hammerson and Allianz, includes about €350 million for the non-Dundrum pieces of the Chartered Land portfolio. This includes 50 per cent stakes in the Ilac and Pavilions shopping centres in Dublin.

A large site bounded by O’Connell Street and Moore Street, called Dublin Central, is also included. This has rich development potential.

Securing the assets from O’Reilly could trigger pre-emption rights for the Ilac and the Pavilions centres. Irish Life owns the other half of the Ilac and a 25 per cent share of the Pavilions, with the other quarter share in the Pavilions held by IPUT, an Irish property fund. It is understood that both Irish Life and IPUT would be interested in exercising their pre-emption rights.

Insurance business

Allianz has operated in Ireland since 1902. Best known for its insurance business, the company employs about 1,450 staff and has more than 1 million customers here. It has also invested €140 million in IPUT’s property fund.

Hammerson is an investor in Value Retail, which owns the Kildare Village outlet centre and the Abbey Retail Park outside Belfast.

Both parties are expected to be long-term holders of the assets. This is welcome news for the Irish economy if not for Joe O’Reilly, who spent years assembling this top-class portfolio of fine retail centres.