REO hit by £872m loss but vows to power ahead at Battersea
Real Estate Opportunities (REO) - the company controlled by property magnates Johnny Ronan and Richard Barrett, said its Irish property lost half its value in little over a year -- but it still plans to create a new listed company to develop London's Battersea Power Station.
REO said it would "probably" need permission from the National Asset Management Agency (NAMA) to spin off the power station, Europe's largest brick building, after NAMA bought some of the company's debts earlier this year. REO plans to transfer the landmark building into a new, publicly traded company which will be separate from its Irish property within six months.
"There are investors who are very keen on real estate deals in London, and a very different group sniffing around investments in Ireland," Rob Tincknell, a director of the company, said. "Any future partner won't want to mix up the two." REO also reported a loss of £872m (€1.1bn) after its Irish properties lost half their value. The loss, one of the biggest ever reported by an organisation with links to NAMA, caused REO's shares to plunge 47pc -- the most since the shares first traded nine years ago.
REO wants to sell half the power station, a building on a 38-acre site on the River Thames that the company aims to convert into homes, offices and shops. Two previous owners tried and failed to revive the London landmark in the past 25 years and REO calculates that it will cost around £6bn to develop. REO plans to build 3,700 homes and 2.3m sq ft of offices and shops on the derelict site. Wandsworth Council has yet to grant permission for the project.
"This is the evolution of a plan," REO finance director Peter Byers said. "It's an absolutely gigantic project and we were always going to need help." Mr Byers said the losses related to the writedowns in property values were due almost entirely to the company's Irish operations which saw values fall 51pc over a 14-month period to the end of 2009. However, land values in the UK have seen a rebound lately. "Two thousand and nine was an awful year," he said. "In essence the Irish property market went into freefall."
REO -- which includes the National Treasury Management Agency, Vodafone and Merrill Lynch among its clients in Dublin -- saw rents rise last year despite the property crash, Mr Byers said. Smaller retailers renting shops from the company, which owns Stillorgan Shopping Centre and is building another in Ballymun, have struggled, however, he added.
NAMA is still considering REO's plans, which were submitted earlier this year. The agency did not return the plans for further information, Mr Byers said.
NAMA has said previously that it returned many of the plans because they lacked detail.