Business Irish

Tuesday 21 November 2017

Investors are showing some faith in Battersea

REO will use funds to pay debt as Irish portfolio drops 21pc

Emmet Oliver, Deputy Business Editor

More than 10 investors have come forward to invest in London's Battersea Power Station, the largest asset owned by Real Estate Opportunities (REO), the company more than 50pc owned by Johnny Ronan's Treasury Holdings.

Meanwhile, the Irish portfolio of REO dropped in value by 20pc in the year and the company warned that plans to alter upward-only rent review rules could make things worse. The company has reported a loss for its last year.

REO, which is now owned 51pc by Treasury and 49pc by bondholders, has reached agreements with lenders on £1.5bn (€1.7bn) of debt, but a key development is whether the company can bring in an investor to the Battersea project, one of London's largest real estate sites.

Whichever investor is selected from a shortlist will get a stake in Battersea and this money will then be used to pay down debt and allow fresh development finance to be raised to actually build on the site.

Accounts for 2010 also show that Treasury earned investment fees of £2.1m from REO and project management/development fees of £13m.

NAMA has £829m of debt with REO and has agreed not to demand repayment of this amount. Instead, it has provided some working capital and also extended its loan facilities. REO now has seven or eight years to repay this money, but it is also trying to refinance its loans and remove itself from NAMA.

This is proving challenging, the company said yesterday.

Selling assets, particularly Irish assets, in the current environment is also difficult, its executives told the Irish Independent.

While NAMA has tied the company to certain milestones in terms of reducing debt, it has not stipulated specific assets that must be sold, the company said. The firm's Irish portfolio declined by 21.3pc after it did fresh valuations. Despite having more than 97pc occupancy rate, the Irish property market remained "challenging", said the company, although it was close to the bottom.

The company said planned changes by the Government to remove upward-only rent clauses from rental contracts were "unwarranted" and wouldn't help to attract fresh foreign funding into the Irish property market.

The company said it was happy to help smaller tenants with rental problems and had come to arrangements with some of these, but it said the changes planned by the Government would also help highly profitable corporate clients, which were not seeking any rental changes.

Some 75pc of REO's portfolio is investment property, but the 25pc of development land and brown-field sites are dragging down the value of its assets.

The Irish portfolio dropped in value from €743m to €585m as valuations continued to hit be hit by a lack of buyers and a lack of credit.

In contrast, the UK's property portfolio grew by 16.4pc. The company lost £45m for the year ended February 2011.

Battersea Power Plant in London, the largest asset owned by Real Estate Opportunities (REO). Below: Richard Barrett (left) and Johnny Ronan of Treasury Holdings, which owns 51pc of REO. Douglas O'Connor

Irish Independent

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