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Analysis: Dundrum loans turn out to be the Jewel Nama hoped for


The Dundrum Town Centre which is attracting overseas buyers

The Dundrum Town Centre which is attracting overseas buyers

The Dundrum Town Centre which is attracting overseas buyers

One of the more annoying aspects of the setting up of Nama and other bad banks has been the slew of absurd codenames that have been attached to major property deals in recent years.

To real estate hacks it can seem that hardly a week goes by without a sale of loans or property called "Project Something or Other".

Project Salt, Project Rock, Project Sand, Project Aran and Project Clear have all been cover names for big portfolios, as have other names such as the Acorn Portfolio.

Most of the time, the names are of no relevance whatsoever to the actual assets being sold.

It seems though that Nama got it right when it named the loans tied to the Dundrum Town Centre, Ilac Centre, and the Pavilions as "Project Jewel".

The portfolio has really been the "jewel" in the crown that is Nama's loanbook.

At €1.85bn, the sale is the single biggest deal Nama has struck to day. Considering the par value on the loans was €2.8bn that is a pretty good effort. Compare that to sales such as Project Arrow which is going on at present. Those loans were worth €7bn at par. If they fetch over €800m it will be a surprise.

Nama has meticulously prepared the sale of the Jewel loans. In April 2014, the agency bought out debt held by KBC in the centre for €108m.

That gave Nama full control over the loans behind Dundrum and the other centres.

It meant that the agency could offer a clean sale in the same way it is easier to sell a three-bedroom house in its entirety instead of just two out of the three bedrooms.

The sale had long been mooted and it was known around property circles that a number of overseas investors had toured the property.

The loans were always going to be sold to an international investor. Nobody in Ireland had the firepower to take it over on their own. The big Irish property players would all have needed significant backing from elsewhere. That is why Nama took the unusual step of hiring the US property broker Eastdil Secured to run the sale.

There were grumblings among some local property agents that Nama should have used an agent with a presence in Dublin, but Eastdil was more than able to manage the sale out of the London office.

Dundrum Town Centre itself is Ireland's only "super prime" shopping centre and it is comparable to any of the big shopping centres in the world.

Hammerson chief executive David Atkins described it as a "top 10 European asset" while industry experts bracket it in the same category as the likes of the Ala Moana Centre in Honolulu in Hawaii.

That is the 15th largest shopping mall in the United States, and while it may seem absurd to compare Dundrum to Hawaii, that is the sort of peer it is bracketed with.

The sale still has a bit of a way to go but unless there is some dramatic change, the deal should close next month. The sale of Project Jewel has turned out to be even more lucrative for Nama, and the taxpayer, than had been expected.

A back of the envelope calculation shows that Nama acquired Chartered Lands loans for €1bn in 2010. Some of those loans were sold off previously under the monikers Projects Tara and Redwood for about €400m.

Rental income from Dundrum over the last five years is estimated at €250m. Combine those figures with the yesterday's sale price of €1.85bn, and it works out at a €1.5bn profit for Nama over five years.

It really does seem that the Chartered Lands loanbook has been deserving of the title Project Jewel.

Irish Independent