Thursday 22 March 2018

Kennedy Wilson teams up with Varde for key property portfolio

Donal O'Donovan

Donal O'Donovan

Kennedy Wilson has teamed up with asset manager Varde in its €306m bid for the "Opera CMH" portfolio of Irish commercial property being sold by creditors of the former Treasury Holdings.

Papers filed with the Irish Stock Exchange show that the Kennedy Wilson offer for the 16 high-end buildings, shortlisted last month as preferred bidder for the property, is in fact a joint offer alongside Minneapolis-based Varde.

The deal will be among the biggest investments in Irish property since the crash.

It is to buy a portfolio of 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.

Kennedy Wilson's partnership with Varde emerged in a notice to bondholders who have been asked to vote on the offer at a meeting in London on June 26 at the offices of law firm Allen & Overy.

The bondholders are owed €375m and are selling the assets after the borrower, a unit of Treasury Holdings, defaulted on its loans.

Under the Kennedy Wilson offer the most well-secured "Class A" lenders will be repaid in full from the proceeds of the sale.

More junior Class B lenders will get 96.5pc back, Class C lenders will receive 20.6pc while the junior Class D lenders will get 7.4pc or €2.6m.


The detailed offer does not offer any guidance to the sellers about whether they will be liable for Capital Gains Tax (CGT) when the proceeds are paid over.

A bill could arise because a €52m CGT liability was "embedded" into the Opera CMH bond structure when the deal was put together in 2006. It resulted from earlier increases in property value under the old owners.

The overall value of the assets has dropped since then and it is not clear how much if anything will be owed when the structure is dismantled.

If lenders approve the deal they will appoint Luke Charlton and David Hughes of Ernst & Young as receivers to execute the sale. The joint bid has been recommended by a subcommittee of lenders.

Even if lenders do not approve the offer the bond issuer Eurohypo, which arranged the complex debt structure and sold the bonds on to investors, can push ahead with the sale and receivership itself, the notice says.


That would slow down the return of the proceeds to the lenders, however.

If the sale falls through and the assets go to an outside bidder Kennedy Wilson and Varde will be paid €625,000, plus any VAT, to cover their costs under an "abort reimbursement" or "break fee".

Meanwhile, Kennedy Wilson is also understood to have agreed a separate €80m deal to buy a development of 420 apartments on the site of the former Clancy Barracks overlooking the River Liffey at Islandbridge from receivers Stephen Tennant and Paul McCann of Grant Thornton, which were appointed by Lloyds Bank.

Irish Independent

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