Sunday 25 February 2018

Colony chief expects Dublin to see major boost from Brexit

Amazon's new offices at the Vertium are the product of a joint venture between Colony Capital, U+I, and developers Johnny Ronan and Paddy McKillen
Amazon's new offices at the Vertium are the product of a joint venture between Colony Capital, U+I, and developers Johnny Ronan and Paddy McKillen
Ronald Quinlan

Ronald Quinlan

The head of Colony NorthStar, one of the world's leading real estate investment trusts (Reits) has described his company's acquisition of Nama's €1.5bn par value Project Tolka loan book and other Irish investments as "being really great for us", and said that he believes Dublin could "disproportionately benefit" from the outcome of Brexit.

Responding to questions from analysts at the recent JMP Securities Financial Services and Real Estate conference, Colony NorthStar chief Richard B Salzman expressed satisfaction with the company's decision to buy into Ireland and elsewhere in Europe, notwithstanding the political risk posed by the UK's departure from the EU.

Commenting on its involvement in the Irish market specifically, he said: "More recently we've been doing a lot in Ireland, which has been a combination of taking advantage of some of the distress that occurred during the financial crisis in Ireland, but also… perhaps playing offence relative to what the world could look like in a post-Brexit scenario, where Dublin, which is a relatively small city, could disproportionately benefit."

While Colony Northstar -formed from the merger of Colony Capital, NorthStar Asset Management Group and NorthStar Realty Finance - is backing the delivery of several new offices in Dublin, including developer Johnny Ronan's construction of the Vertium Building on Burlington Road and U+I's redevelopment of Donnybrook House, Mr Salzman was particularly positive on the opportunities presented by Project Tolka.

He said: "This is a portfolio that primarily is backed by Class A office assets in Dublin, where we're working through getting the ownership of those assets and that would be ripe and primed for our co-investment opportunity. So places like Ireland, places like Germany, Spain have been really great for us in Europe. These have been the places that we like," he added.

Project Tolka, which consisted of loans mainly linked to developers John Flynn, Paddy Kelly and the Dublin-based McCormack family, who control the property investment vehicle Alanis, was acquired last January by Colony Capital for a sum in the region of €455m. The price paid by Colony represented a discount of approximately 70 cent in the euro based on the portfolio's €1.5bn par value.

Among Project Tolka's most significant assets is the Burlington Plaza office complex on Dublin's Burlington Road. With an estimated value of €250m, it has high-profile tenants including Sky Ireland, Amazon and Bank of Ireland.

Other valuable assets tied to Project Tolka include the Clarion Hotel in Dublin's Liffey Valley, the Belfield headquarters of betting giants Paddy Power Betfair and the former Harcourt Street children's hospital, which is occupied by Dublin law firm BCM Hanby Wallace.

While the luxurious Carton House Hotel, Golf and Spa Resort in Kildare had originally formed part of the Project Tolka portfolio, its potential to realise a significant price in its own right saw its owners, the Mallaghan family, Mr Kelly and the McCormacks reach an agreement with Nama to sell it separately.

The 668-acre resort was brought to the market last month for a guide price of €60m by joint agents CBRE and Savills.

A large number of hotel operators and investors from both at home and abroad are expected to submit competing bids for the property, the origins of which date all the way back to the establishment of the Carton Demesne in the 11th century.

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