A subsidiary of Real Estate Opportunities (REO), the listed property vehicle controlled by Johnny Ronan and Richard Barrett's Treasury Holdings, has breached the junior loan-to-value covenant relating to a portfolio of its properties.
The breach on the €50m junior loan, which is being transferred to Nama later this month, relates to the value of a convertible mortgage backed security (CMBS) issued by REO subsidiary Castle Market Holdings (CMH). The breach is not related to repayments and the loan is still being serviced in full.
"The Eurohypo loan continues to perform and is serviced by a strong income flow generated from a broad range of well-located, blue-chip tenants mainly in Dublin. Interest cover remains stable as highlighted in the report," the CMH spokesman said.
The CMH portfolio was valued at nearly €570.3m in December 2008 but has since been valued at €342.2m, a reduction of 40%. "The LTV has increased to 110% from 70% based on the recent valuation required by the junior lender as a prospective participating institution in Nama," the investors' quarterly report states.
REO raised €375m by issuing the bonds, which are backed by 16 of its properties in Ireland, in 2006.
"Occupancy levels remain above 90% with the majority of the portfolio single-let office properties… and there are no material tenant defaults," the spokesman said.
There was a rent review in the quarter for Bank of Ireland Asset Management's building on Dublin's Mespil Road, which is part of the portfolio, which resulted in a 9% increase on the passing rent. The bank's main management is relocating to the office building from its headquarters on Baggot Street.
The most significant asset owned by REO is Battersea power station in London; however, this is not part of the CMBS.
REO plans to redevelop the 38-acre site to include 3,700 homes and apartments and 2.3 million square feet of offices in a £5.5bn redevelopment. Wandsworth council is expected to make its ruling on the planning application by August.
REO's new plans have received the support of English Heritage, the influential conservation group. The development group is currently trying to find a joint venture partner to help develop the site.
REO is also involved in plans to develop a new port at Bremore and to redevelop Ballymun shopping centre, which it owns, in north Dublin.