Merchant Hotel group debt for sale
Loans on the luxury five star Merchant Hotel in Belfast along with 15 pubs belonging to the entrepreneur Bill Wolsey and his company Beannchor are being offloaded by Ulster Bank, the Belfast Telegraph can reveal.
Ulster Bank is selling a portfolio of loans on eight hotels and two hostels north and south of the border under Project Nadal – usually loans which were entered into when property prices were at their highest.
The portfolio has an estimated total worth of €200m (£159m) and could be sold to a single owner, such as an international fund, or broken up and sold to several buyers.
Ulster Bank is under pressure from its 82% taxpayer-owned parent company Royal Bank of Scotland to clean up its balance sheet by getting rid of its debt on property.
Mr Wolsey, who has built up a considerable empire of more than 50 pubs, restaurants and hotels, now faces an uncertain future as his long-term relationship with Ulster Bank draws to a close.
The bank is not selling the properties themselves but the loans secured on them – in Mr Wolsey's case, at least £25m.
The hotel and pubs will be funded by another institution, with the company vowing that it was "business as usual".
Ulster Bank yesterday refused to confirm that the Merchant Hotel, which dominates the historic Cathedral Quarter in the city, and other pubs belonging to Beannchor, were in its Project Nadal loan sale.
However, the Belfast Telegraph understands that The Merchant is included in the proposed sale, along with seven high profile hotels in the Republic including Whites in Wexford.
Borrowings by Mr Wolsey's company on 15 other pubs – one of which houses nightclub Love & Death on the upper floors, and a branch of his group's pizza business Little Wing on the lower floor – are also in Project Nadal.
The best-known pubs of the 15 are The Spaniard, The Garrick and Whites Tavern in Belfast, while the remainder are scattered in other parts of Co Down, with a number in Bangor.
But many of his other ventures are not included – such as The Dirty Onion and chicken restaurant Yardbird, The National, cake shop Patisserie Mimi, the Portaferry Hotel and the Hillside in Hillsborough.
A Beannchor spokesman said yesterday: "This process is part of a well-publicised strategy by Ulster Bank to reduce its debt book, north and south.
"For Beannchor, it means we will have a new funder but other than that, it is very much business as usual for The Merchant and the pubs in this portfolio.
"Our focus on the successful running of these high-performing assets continues unabated."
Mr Wolsey has had a close working relationship with Ulster Bank, which has included taking over distressed pubs from other Ulster Bank clients.
Ross Davidson, principal at commercial property law firm RW Davidson, said Irish banks had been selling off their hotel loan books. He said: "The sale of this hotel loan book is likely to have very little impact on the day-to-day running of hotels like The Merchant.
"Any purchaser, particularly in what is a very specialised sector, will recognise that, where a hotel is trading well, its investment is best protected by leaving the day-to-day running to the existing management team who understand best the market in which they are operating."
Future uncertain after Beannchor and its trusted backer part ways
The prospect of a sale of loans of 15 pubs in the Beannchor group of businesses is one of the biggest developments in the Northern Ireland pub industry in recent times.
Bill Wolsey and his Beannchor outfit have come to dominate the pub scene, and to influence the style of their competitors.
The Project Nadal portfolio is made up of eight hotels north and south of the border, and two hostels – and of the 'ancillary' businesses of Mr Wolsey's 15 pubs.
The majority of the pubs in the portfolio are rented out to tenants – and for all of them, and for the Merchant, it is business as usual.
A buyer could come forward to buy the entire portfolio – or more likely, a number are expected to come forward, as operating pubs is wildly different from operating hotels.
Mr Wolsey has made a name in both pubs and hotels, often stepping in to troubled businesses at the behest of Ulster Bank and administrators.
For example, difficulties in part of the empire of MAR Properties in 2011 led to Mr Wolsey and his staff running 15 of the pubs in the MAR group on behalf of the administrators, later buying them outright.
Six of those pubs had been sold to MAR for £12.5m in 2006 – but it's understood Beannchor bought 15 for no more than £10m.
Speaking at the time of the MAR deal, Mr Wolsey said good relationships with banks were helping him expand.
"We have relationships with various banks where they are supportive of us and we work hard and are a professional outfit," he said.
However, economist John Simpson said that accounts for Beannchor Limited to June 2013, filed earlier this year, note that funding arrangements with Ulster Bank had expired. The jewel in the crown of Beannchor – the Irish word for Bangor – has always been the Merchant Hotel in Belfast.
Beannchor bought the old Ulster Bank in Waring Street for £1.3m, spent £10m on doing it up and opened for business in 2006.
In 2010, it opened the hotel's extension at a cost of £16.5m, funded by Ulster Bank to be repaid over 10 years.
Beannchor also had plans for a four star, 68-bedroomed hotel in the old National Bank building on High Street in Belfast.
But plans for that hotel were abandoned, and instead Mr Wolsey opened The National Grande Cafe Bar in September last year.
The company also opened a high-end patisserie, Patisserie Mimi, next door, in a total investment of £700,000.
Another venue, the Dirty Onion, followed in November – but neither it nor the National are included in Project Nadal.
The premises of the Dirty Onion were restored in a project which the company said at the time cost around £1.25m.
The building dated back to around 1780, and had been used as a bonded spirit warehouse from 1921.
Grand hotel acquisition put entrepreneur on the map
Bill Wolsey has become a dominant figure in the pub and hospitality scene in Northern Ireland, with interests ranging from the luxury Merchant Hotel to bars like the Spaniard and Pretty Mary's in Moira.
But the entrepreneur began his empire building from an unlikely point, growing up the child of trade unionists in a working-class family in north Belfast.
He worked in the newspaper trade before going on to open his first pub, now known as Wolsey's in Bangor, which is still being run by his brother Martin.
But it was his purchase of the old Ulster Bank in Belfast's Waring Street, and subsequent conversion into an opulent five star hotel, which really brought him into the public eye.
The hotel was, and remains, a game changer in the hospitality sector in Northern Ireland, and received a major renovation in 2010.
Such ventures have always been funded and supported by Ulster Bank, and the relationship has been harmonious.
The expansion continued in 2011, when he acquired pubs which had been formerly in the portfolio held by another Co Down-based group, Mar Properties.
Around four of those were sold on by Mr Wolsey.
Meanwhile, his most high-profile expansion in a while came last winter, with the unveiling of the National in September and Dirty Onion in November, in High Street and Hill Street respectively.
Those newer properties are held separately to the 15 which now form part of the Project Nadal process.
Project Nadal small part of £8.7bn loan fire sale
Project Nadal is the latest multi-million loan sale to be launched by Ulster Bank as it continues to offload the troublesome debt which it accumulated on both sides of the border during the property boom.
Two weeks ago, details emerged of the separate sale by Ulster Bank of a £1bn portfolio of commercial property loans under Project Achill.
Those loans included around 200 properties at the Titanic Quarter, and properties backed by Belfast-born developer Paddy McKillen and his firm, Belfast Office Properties, which owns Ards Shopping Centre.
Almost 83% of the portfolio by value is Irish, with English and Scottish loans making up the balance.
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 past few years.
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.
Altogether, the bank is expected to dispose of around €11bn (£8.7bn) of assets – of which Project Nadal will ultimately form just a small part.