UBS fund sells DoLy to ADIA for €672m at a near 10% discount

Source : CoStar - 17 12 2013

Abu Dhabi Investment Authority (ADIA) has completed the acquisition of Docks Lyonnais S.A. (DoLy), the former French REIT owned by a UBS Wealth Management fund, for €672m, in a deal which closed last Thursday, CoStar News understands.

The sale of the DoLy French office portfolio – which includes 6-8 Boulevard Haussmann in Paris, Le Capitole in Nanterre and Antony Parc, 15km south of Paris – reflects a 9.7% discount on the €744m carrying value of the entire property portfolio, as last recorded by a BNP Paribas Real Estate and Levallois et FCC valuation dated to the end of January.

UBS Wealth Management’s €1.34bn Continental Europe Property Fund, which had fully-owned DoLy after acquiring the minority share stake it did not own in February, is part-way through an up to five-year asset disposal programme, which began in 2009, as the fund seeks to return capital to investors.

ADIA, which had been in a period of exclusivity since tabling a second offer on 6 August, closed the deal last Thursday, after registering its interest prior to the summer.

DoLy includes five major French assets, as well as a small number of granular assets, each of the large assets require substantial re-letting with some offering an asset repositioning investment play.

The 266,169 sq ft Haussmann office block in Paris the largest asset in DoLy, and prior to ADIA’s interest in the entire portfolio, the property was on Lone Star’s radar, given the building’s distress.

The asset has a vacancy rate of 56% and the remaining tenant in the Haussmann has a lease expiry at 31 December 2013, which DoLy already having spent €3.3m to refurbish the property to accommodate and attract new tenants.

The Haussmann asset was secured by a legacy Lehman Brothers loan which was spun into the fallen investment bank’s last ever European securitisation, Windermere XIV.

Lone Star acquired and retained all junior securitised bonds, as well as the B-note below Windermere XIV CMBS, through its January 2012 acquisition of the Carlyle loan in the first tranche of the Excalibur collateralised debt obligation (CDO) from Germany’s Bundesbank.

Lone Star fought twice at the turn of the year to unseat Hatfield Philips on the primary and special loan servicing mandates across Windermere XIV to instigate its own work out strategy.

But ADIA’s emergence over the summer to acquire the entire DoLy portfolio ended Lone Star’s pursuit.
ADIA’s acquisition of DoLy has triggered the repayment of this €254.2m securitised loan as well as the €52.1m Antony Parc loan, secured by the eight-storey office building, in the Morgan Stanley ELoC 25 CMBS.

Separately, DoLy managed to extend the maturing legacy Hypo Real Estate loan securing the 701,268 sq ft Le Capitole by 12-month with successor lending institution, Deutsche Pfandbriefbank, agreeing a €199m to 30 June 2014, in exchange for an €4m equity injection by DoLy to re-balance the loan to value.

Hatfield Philips ran a concurrent strategy of seeking to extent the maturing CMBS loan, in the event that the DoLy sale to ADIA collapsed.

Hatfield, owned by Starwood Capital after its parent LNR Partners Europe was acquired by the global private equity firmin April 2013, negotiated a contingency two-year loan extension, with DoLy, which was advised by First Growth Real Estate Finance.