IRISH INVESTORS in a €300 million Merseyside retail park in England have been told that there is a risk that their investment could be wiped out due to a lower-than-expected valuation of the park.
Bank of Ireland Private Banking told investors that as their manager, it had challenged a valuation sought by the lenders to the New Mersey Shopping Park outside Liverpool, including Bank of Ireland.
The private bank told the investors in a recent letter that a more negative valuation in March 2012 sought by the lenders had put the property in breach of its loan agreements with German bank EuroHypo and Bank of Ireland.
This leaves the property at risk of enforcement which could wipe out £77.6 million (€97 million) of equity invested in the property.
Bank of Ireland Private Banking bought 50 per cent of the New Mersey Shopping Park, which is eight miles southeast of Liverpool, for clients in June 2007 for €309 million. It was the UK’s seventh largest retail park at that time.
Estate agents CBRE valued the retail park at £279 million (€349 million) in March 2012. The valuation by CBRE, the official valuers of the trust that holds the park, was still within the loan covenants agreed with the lenders.
However, EuroHypo, a property lending subsidiary of German bank Commerzbank, and Bank of Ireland asked a valuer of their choosing to carry out a valuation of the property as they are entitled to under the loan agreement.
Also in March, estate agents Cushman Wakefield valued the park at £235.7 million – £43.1 million less than CBRE’s valuation.
Bank of Ireland Private Banking told investors it “challenged this value vigorously” but EuroHypo and Bank of Ireland would not consider any higher valuation.
A manager at the private bank said in the letter that if the loan-to-value breach is not cured, enforcement by the lenders will follow.
“While we are working to avoid such a scenario, it is important for you to be aware [of] the risk that the value of your investment in New Mersey would be reduced to zero,” the manager wrote.
The division said it was “exploring options” on how the breach of the loan covenants could be “cured” and solutions that would let the investment run until the loans matured in December 2014.
“I know that you will find this news very concerning, but I can assure you that BOIPB will work to exhaust every possible option that may allow some recovery of your original capital,” the division said.
A spokeswoman for Bank of Ireland Private Banking declined to say how many Irish investors had put money into the property.
“Bank of Ireland Private Banking invested in property on behalf of its clients over a number of years,” said the spokeswoman.
“Results thus far for investors have been mixed, varying from solid performances to more challenging situations in a small number of transactions.
“Where we face such situations we continue to work and to exhaust every possible solution, on clients’ behalf to ensure that the maximum capital is recovered.”
