THREE final bids have been submitted for a collection of buildings that form what is arguably the most sought- after portfolio of Irish commercial property to come on the market since the property crash.
Competition between bidders is understood to have pushed the offers for the 16 high-end commercial properties to well in excess of the most recent valuation of €270m. Offers were being revised up even from initial approaches made earlier in the year.
The three bids were submitted by US investor and Bank of Ireland shareholder Kennedy Wilson; Britain's London & Regional; and Northwood Investors, a property fund set up by former Blackstone real-estate head John Kukral.
The original owners of the so-called 'Opera Finance CMH' properties were Johnny Ronan and Richard Barrett of Treasury Holdings.
They lost control of the prized assets earlier this year when they were unable to repay a €375m loan that fell due in January.
It left lenders holding the keys. They kicked off a sale process in February.
Kennedy Wilson and London & Regional made cash offers to buy the properties when a deadline for bids closed this week, the Irish Independent has learned.
In addition, Northwood submitted a bid that offers the current lenders a chance to stick with the assets – in exchange for increased interest rates if they agree to repay their loans over a longer period.
Northwood holds a slice of the debt with a face value of €85m secured on the assets that it bought from NAMA for as little as €100,000.
It means the bidder also has a seat at the table when it comes to weighing up all of the offers.
The bids will be assessed by Cairn Capital, which is advising lenders and Eurohypo bank, which arranged the original debt deal in 2006 and acts as a co-ordinator for a diverse group of bondholders who are the secured lenders on the deal.
The offers will then be put to a steering committee representing lenders. If a preferred offer emerges from that, it will be put to a full vote of all lenders, probably in June
The main debt secured on the properties is spilt four ways – into so-called A,B,C and D notes, or bonds.
The A notes are the best secured and commend the lowest interest payments because they are regarded as less risky. The risk of losses and, therefore, interest rises with each class and the D notes are the riskiest.
Both the A and B noteholders will expect not to suffer losses under the offers that have now been submitted – either with cash upfront or with new bonds.
It's understood the junior noteholders will see some return, because their consent would make a sale legally easier and therefore less expensive.
One crucial issue is a €52m tax liability that will fall due once the tax-efficient debt structure secured on the properties is broken up.
Tax advisers are understood to have been drafted in by each of the bidders to figure out how best to get around the bill. One option could be a roll-over of bonds so that a new owner slots into the structure without causing the tax liability to be realised.
The strong demand for the assets means the tax bill will have to be borne by the buyers, not sellers, according to sources close to the situation.
The debt is backed by 16 buildings, including the Stillorgan Shopping Centre in Dublin, Merchants Quay Shopping Centre in Cork, and a plethora of high-end office blocks that include Bank of Ireland's headquarters on Mespil Road, FAS's offices on Baggot Street, and KPMG's main Dublin offices.