REO in race against time over €260m loan on Battersea site
Last-minute talks with three parties in bid to fund giant London project
Real Estate Opportunities (REO), majority owned by Treasury Holdings, is in last-minute talks with three parties about funding the giant Battersea Power station project as Ernst & Young is brought in to represent lenders, including NAMA.
A €260m loan with NAMA and Lloyds Banking Group, taken out by REO, matures on Wednesday week, leaving REO in danger of a default, an event that would force the company to make a statement to the markets and potentially triggering penalty interest rates.
REO is hoping to bring in fresh investment into the Battersea project and three parties are left in the process. British Land and Blackstone are both believed to have held discussions about Battersea.
REO and the three parties continue to differ over the valuation of the Battersea site. There are also intense discussions about what kind of structure the fresh investors would agree to.
Major companies like British Land are unlikely to simply act as passive partners and would press for management control of the project, sources said yesterday.
Asked about the progress of discussions, REO said in a statement: "A number of offers have now been received and final discussions to conclude the investment process are currently taking place.
"The lending banks, Lloyds and NAMA, are currently supporting this process. Ernst & Young are advising the lending banks in regard to Battersea, including specific advice in respect of the investment process.''
'Property Week', the UK title, this week said the site was now worth about £300m, but the company insists the last valuation put the value at £500m.
One potential outcome is that REO gets pushed aside after the loan defaults and interested parties open discussions with the banks, including NAMA, directly. NAMA declined to comment yesterday.
If REO loses control of the project it would come as a major blow as the firm has secured planning permission for the site and is working on plans to get the London Underground to build a tube stop at the site.
The REO negotiation team are hoping to sign a deal with a partner that covers up to 10 years. However, as a listed company, the talks are happening in the public domain, which heaps further pressure on REO.
One property source said securing a joint venture partner was very close, but others were more sceptical, suggesting that the bigger players like British Land were now cold on buying into the project.