Belfast Telegraph

Thursday 25 December 2014

Ulster Bank poised to sell £1bn property loan portfolio

Massive assets disposal includes 200 apartments at Titanic Quarter

The Gateway office building in Belfast which is set to be sold by Ulster Bank
The Gateway office building in Belfast which is set to be sold by Ulster Bank

The proposed sale by Ulster Bank of a £1bn portfolio of commercial property loans is a significant step "on a par" with Nama's recent sale of its Northern Ireland borrowings, it has been claimed.

The disposal, reported on property news service CoStar, relates to a large chunk of the bank's property loan book in Britain and Ireland and includes more than 200 Titanic Quarter apartments and the area's Gateway offices, which are home to Citigroup.

The 160 assets in so-called Project Achill also include Waterfront Plaza and Exchange House, both in Belfast, Ards Shopping Centre in Newtownards and Mallusk Industrial Estate in Newtownabbey.

On a value basis, just over a quarter of the loan book relates to property within Northern Ireland.

Ulster Bank refused to comment on the report – but it's believed the sales process for many of the properties has already started, with commercial property agents appointed to sell some of the assets.

The total value of the portfolio is close to the estimated £1.3bn worth of Nama's Northern Ireland loans, which were sold to US firm Cerberus earlier this year.

Conor Devine , principal at property advisory group GDP Partnership, said Project Achill would be a catalyst for movement within the property market.

"Like the Nama sale to Cerberus, this will generate activity in the property market in Northern Ireland," he said, adding the move – which he said was "on a par with the Nama sale" – marked a series of "unprecedented developments for this part of the world".

He said there had been little progress made by the bank in dealing with the assets over the last few years.

And he claimed the loans would now be sold "at a huge discount" by Ulster Bank – part of the 82% taxpayer-owned Royal Bank of Scotland.

"Millions of debt will be written down, so clearly this is hardly good news for the people who own the bank in the short to medium term.

"From the bank's point of view it may allow them to progress with their plans for Ireland in terms of their own business models and allow them to return to more conventional banking again, by getting rid of the toxic loans."

The Titanic Quarter loans themselves have a face value of around £70m and relate to the Arc Apartments and Gateway Offices.

Around £100m of loans advanced to prominent property developer Paddy McKillen's Belfast Office Properties, which owns Ards Shopping centre, are also thought to be among the portfolio.

Other loans for sale include around £60m which had been lent to the Newry-based Murdock Group for investments in England.

The sale follow the trend among Irish banks to offload their property exposure.

Ross Davidson, principal at commercial property law firm RW Davidson, said many bank portfolios had been scooped up by big US investment firms.

And the moves towards selling its property loans demonstrated that Ulster Bank wanted to cut its property exposure "sooner rather than later", he said.

"The tactic also taps into the current strong demand in the Irish market, north and south, from major international investors for this type of deal."

And broadly speaking, the deal was good news for the property market in Northern Ireland.

"In recent years the market has suffered from stagnation with deal levels at unprecedented low levels.

"Liquidity and deal flow are critical to the successful performance of our property market and the new owners are likely to have the funds available to upgrade and redevelop the properties involved".

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