Green REIT set to spend more than €100m on assets

Green REIT, Ireland’s first property investment trust, looks set to spend well over €100 million on a range of commercial properties that should appreciate in value when the economy finally emerges from the current recession. The assets include three retail parks in Tallaght, Dublin 24; Naas, Co Kildare; and Limerick city, as well as the high-profile Fitzwilliam Hall, a modern Georgian-style building overlooking the Grand Canal at Leeson Street bridge in Dublin 2.

Green REIT raised €310 million in a share placement last July and has been trading above its launch value for much of the time since then in the expectation that it can cash in on the recovery in the commercial property market.

Project Arc portfolio
Green REIT was an early bidder for most of 12 properties in the Project Arc portfolio and though it was slightly behind in the first-round bidding it stepped up its valuations when "best and final offers" were called by selling agent DTZ Sherry FitzGerald. The new plc seems certain to end up with all the top properties, with the exception of a business and retail complex in Belfast that is producing €700,000 in rent and is valued at €7 million. In addition, some of the smaller properties in the Republic seem destined for a third bidder.

Green REIT would also have been happy to have been able to pitch for many of the commercial investments in the Ulysses Portfolio, which is about to be sold, but was precluded from going after any of them after acting as advisers to Bank of Scotland (Ireland), which originally funded most of the 25 properties involved.

Jones Lang LaSalle is believed to have received a number of offers well in excess of the €140 million guide price. Four final bidders – understood to be Lone Star, Goldman Sachs, Starwood and Delancy – are scheduled to make a final pitch for the portfolio by October 23rd. However, there were unconfirmed reports this week that Goldman Sachs would not be participating in the final round of bidding.

DTZ had a record number of offers – about 160 – for all or part of the Project Arc portfolio, which is being sold on behalf of Danske Bank.

Although the National Asset Management Agency (Nama) has mainly favoured the disposal of distressed properties through loan books, Danske has consistently signalled its belief that with so many buyers now chasing high-yielding properties it can achieve a higher capital recovery through direct sales of assets rather than bulk-selling of impaired loans. The large number chasing commercial investments may encourage Nama to put more distressed assets for sale through commercial property agents.

Danske is believed to have had an exposure of €1.8 billion in loans to the commercial property sector when the market collapsed. The carrying value is shown at €710 million with the balance – €820 million – reflecting impairments taken by the bank. Danske subsidiary National Irish Bank was one of the most aggressive players during the property boom.

Arena Centre
The highest-value segment of the Project Arc portfolio is the €40 million-plus Arena Centre in Tallaght, owned by Cavan developer P Elliott and Kildare-based agribusiness Queally Group. The partners also controlled the Globe retail park in Naas, which is valued at about €15 million despite having a number of vacant units.

The Arena is producing €4.5 million in rent from a range of retail, office and residential tenants. The 27,800sq m (nearly 300,000sq ft) complex was developed in 2007 at the junction of Whitestown Way and the Tallaght bypass, close to the town centre. The building also includes an 882-space car park and 119-bedroom Maldron Hotel, which is paying a rent of €200,000 a year. The highest rent – €1million – comes from Woodies, which operates a DIY store. Lidl is paying €620,000 for a supermarket, while Riva Bingo contributes €110,000 and Maxi Zoon pays €80,000. There are three vacant retail units. Bank of Ireland is also paying almost €1.5 million for office space, while Woodies contributes €371,000 for its head office facilities. Both are long-term leases.