Oaktree says it just owns debt on threatened Limerick complex

Oaktree Capital, the US fund which owns the debt secured on a Limerick development where tenants face eviction, has a similar interest in more than 900 apartments around the Republic.

A number of tenants in the Strand apartment complex on Limerick’s Ennis Road have been told they must leave their homes by mid-April, a move that has sparked an angry response from residents and local politicians.

However, Oaktree said on Thursday it only owned the debt secured on the development and it neither owned nor managed the complex.

“As a result, we have no direct relationship with any tenant in this case, nor do we have the right to give instructions to any tenant with respect to lease agreements,” the company said.

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The apartments are owned by Lalco, a property company whose directors are developers John Lally and Paul Higgins. One of its subsidiaries, Sova Properties, issued the notices to quit to the Strand’s tenants.

Sova confirmed Oaktree owned the debt and security attached to the complex. “Despite being owners of the apartment complex, Sova Ltd has no economic interest in the apartments as the value of the debt and security attaching substantially exceeds the value of the apartments,” it said.

“Sova has no authority to take any actions regarding ownership of apartments in the complex without Oaktree’s express approval.”

State agency

Oaktree bought the debt owed against the Strand from State agency Nama in July last year as part of an overall package where it acquired liabilities secured on about 950 apartments and a large number of commercial buildings across the country. The debt was acquired for a reported €800 million.

The apartments are in Cork, Dublin, Galway and Limerick and include liabilities secured against the Strand complex and apartments in Kilmainham built by Lalco.

More than 600 of the apartments whose debts Oaktree bought were occupied at the time that the US investment fund did the deal with Nama. Buying the debt entitled Oaktree to seek full repayment of the liabilities or appoint receivers to properties to recover money.

Lalco ended up owing about €500 million when the property market crashed almost 10 years ago, most of it to the now defunct Anglo Irish Bank. Nama subsequently took over that debt and sold it to Oaktree last year.

The transaction meant Oaktree replaced Nama as creditor of Lalco and subsidiaries such as Sova, but the Irish group kept ownership of the properties, including the Strand complex in Limerick.

A third company, Fitzwilliam Loan Management, collects repayments and interest on Oaktree’s behalf. However, neither it nor Oaktree has any dealings with the Strand tenants.

Regulations

Oaktree’s statement said the company and “its servicing partners are committed to ensuring to the greatest extent possible that all of its borrowers abide by all Irish laws and regulations to protect tenants”.

The US company manages about $100 billion (€94 billion) for its investors. It was one of the first to express interest in investing in the Republic following the crash. In 2011, it backed a lengthy but ultimately unsuccessful High Court case to save house builder McInerney, which owed its banks €113 million.

Mr Lally and Mr Higgins recently joined forces with US billionaire John Malone, with whom they have purchased a number of hotels around the Republic, including the Intercontinental – formerly the Four Seasons – in Ballsbridge.

In the closing months of last year, the trio bought three hotels in Dublin, the Spencer on Excise Walk, the Morgan in Temple Bar and the Beacon in Sandyford, for a reported €150 million.