Starwood provides 50% impairment on Irish portfolio
Starwood European Real Estate Finance has agreed to provide for a 50% impairment on a €35.2m (£29.3m) mezzanine loan it provided in 2020 for a portfolio of 12 offices in central Dublin.
The impairment is the equivalent of €12.9m and follows a number of actions already made to reduce the debt on the portfolio.
A number of assets from the portfolio were sold in 2021 and 2022, reducing the value of the loan to €25.9m, secured against the seven properties remaining. While the loan is not in breach of its covenants, it has been reclassified as a “stage-two loan”, which means there is a “significant increase” in credit risk.
Starwood European Real Estate Finance has agreed to provide for a 50% impairment on a €35.2m (£29.3m) mezzanine loan it provided in 2020 for a portfolio of 12 offices in central Dublin.
The impairment is the equivalent of €12.9m and follows a number of actions already made to reduce the debt on the portfolio.
A number of assets from the portfolio were sold in 2021 and 2022, reducing the value of the loan to €25.9m, secured against the seven properties remaining. While the loan is not in breach of its covenants, it has been reclassified as a “stage-two loan”, which means there is a “significant increase” in credit risk.
Earlier this summer SWEF said: “The underlying assets comprise seven well located European city centre CBD buildings and are well tenanted, albeit certain assets are expected to require capital expenditure to upgrade to grade-A quality to retain existing tenants upon future lease expiry events.
“The loan remains in compliance with its third-party senior loan facility and the group’s mezzanine loan facility, however given the persisting challenging market dynamics, the group is working closely with the sponsor, a very large institutional asset manager, and a leading global valuation and advisory firm to identify future capital expenditure needs, funding sources, exit values and the business plan to exit.”
Since then, a number of business plans have been drawn up for the portfolio, however, given the uncertainty around the scenario, combined with a “challenging local office market”, SWEF said it was providing for the 50% impairment.
It added that it considered there to be a “wide range of possible outcomes whereby the loan may have a lesser or greater degree of recovery due to the ongoing uncertainty related to the various business plan scenarios”.
The portfolio is being actively managed to “maximise the opportunity for value recovery”, said SWEF.
