Blackstone to pay €1.1bn for O’Flynn loans

Private equity fund sees off four other bidders to snap up portfolio

Michael O’Flynn in front of Cork’s Elysian Tower. Photograph: Daragh Mac Sweeney

Michael O’Flynn in front of Cork’s Elysian Tower. Photograph: Daragh Mac Sweeney

Sat, Apr 26, 2014, 01:01

Private equity giant Blackstone is poised to buy €1.8 billion worth of property loans given to companies controlled by developer Michael O’Flynn for a reported €1.1 billion from the National Asset Management Agency (Nama).

Five potential buyers have been circling loans given to the O’Flynn group of companies and secured on developments in Ireland, Britain and Germany, which Nama put up for sale late last year.

New York-based Blackstone is understood to have emerged as the preferred bidder for the portfolio, with an offer in the region of €1.1 billion, which is one of the best returns that Nama has achieved on any such sale to date.

The Elysian Tower, a high-rise residential development in the centre of Cork city, is one of the properties included. The deal also encompasses a number of office and commercial building in the Haymarket district of the Scottish capital Edinburgh and in Frankfurt, Germany. Some of the loans are secured against a number of student accommodation blocks the group developed, most of which are in Britain, with some in Ireland, Spain and Germany.

The group has its headquarters in the Cork, where Mr O’Flynn established the business in 1976. The companies involved are O’Flynn Construction, mainly responsible for its Irish activities, Tiger Developments, the company behind projects in Edinburgh and London, and Victoria Hall, which owns and operates the student accommodation.

The loans are secured against the properties owned and developed by the companies. Mr O’Flynn did not give any personal guarantees over any of the debts.

Blackstone has seen off four other bidders, including Deutsche Bank, specialist investor Apollo, which bought credit card company MBNA’s Irish business last year, and US- based Lone Star.

The offer is pitched at just over 61 per cent of the loans’ original value. The agency has sold loan portfolios for as little as 25 per cent of the original amounts borrowed.

Nama paid an average discount of 57 per cent when it bought property developers’ debts from the Republic’s banks in 2010. However, it is likely that in the case of the O’Flynn group-related loans, the haircut was not as severe.

Last month Blackstone said it had raised $7 billion to establish Europe’s largest real estate investment fund to date.

The private equity house has been an active player in the commercial property market here since its recovery began late in 2012. Earlier this year, it spent €100 million on three office blocks in Dublin – Hume House in Ballsbridge and the Riverside IV and the Bloodstone building in the Grand Canal Dock area.