Park Street Advisors, the private equity firm founded by former RBS banker Pradeep Pattem (pictured), has formed a joint venture with value-add real estate specialist Around Town to buy the remaining properties which secured a loan within the legacy DECO 15 – Pan Europe 6 CMBS.
The two firms have bought the portfolio of 28 German properties for €39.2 million, following a tender process which began in Q4 2015. The portfolio contains the remaining properties from within the Main Loan, originated by Deutsche Bank in 2007.
DECO 15 – Pan Europe 6 was originally the securitisation of 10 loans totalling €1.45bn made by Deutsche Bank to borrowers of assets in Germany, Switzerland and Austria. The deal attracted publicity last year when it was subject to a court case in which the junior noteholder unsuccessfully tried to have the special servicer replaced.
Deutsche Bank originated the €86.7 million Main Loan to a consortium including EOS Partners, the Reuben family and Deutsche Bank’s special situations group. The loan was transferred into special servicing in July 2011 after it defaulted at maturity. Special servicer Hatfield Philips International managed the disposal of the underlying properties in a process known as Project Lucinda.
Park Street is now in talks with lenders in order to secure fresh senior financing for the portfolio.
The outstanding loan balance has fallen to €64.9 million following repayments and the disposal of properties between 2013 and 2015 for €5 million.
The portfolio purchased by the JV comprises 28 mainly retail properties located in Germany. The portfolio comprises retail properties, aside from two offices leased to the Federal Agency Job Centre. The gross rent is around €5.4 million per year and the occupancy rate is 96 percent.
The purchase price was below the most recent property valuation of €44.6 million. The CMBS issuer attributed the discount to limited investor interest in a portfolio with a short remaining lease length, and assets largely located in eastern Germany. The issuer added that negotiations of expected lease extensions during 2015 had failed due to tenants requesting improvements and new construction at the properties. The issuer added that there was low demand for the two office buildings in the portfolio.
Park Street Asset Management is the asset manager for the portfolio. It is understood the business plan will be to re-gear leases and work with tenants to reinvest and modernise the properties.
DECO 15 – Pan Europe 6 was subject to legal proceedings after junior noteholder Cheyne Capital Management attempted to have Hatfield Philips replaced as special servicer by Solutus Advisors. Last August, the High Court in the UK ruled that replacing the special servicer on the deal would require the approval of all noteholders by extraordinary resolution. The Court of Appeal ruled against Cheyne earlier this month.