One billion euros
Andreas Ridder, the Managing Director of real estate service provider CBRE Austria, suggests that due to a time crunch, a package sale of properties may be a possibility. However, he also indicates that such a sale may not fetch the best price. Ridder estimates the value of the package to be in excess of one billion euros.
Finding buyers for these properties, however, may not be very easy. According to real estate expert, Thomas Malloth, the demand for such properties is quite limited. Perhaps 30 to 40 international business people, mainly from Asia and the near East, may be interested. Ridder adds that foreign funds and billionaire families could be potential buyers, depending on their interest in investing in Vienna.
Malloth also suggests that potential buyers could be found within Austria. However, it remains uncertain whether they would be willing to invest at such a scale or whether these properties would fit into their portfolio. Malloth is confident that a sale will occur: “Some of the properties are so good that people who have the money will be very interested.”
Loss of value
Malloth believes that the value of the real estate has decreased by 10 to 20 percent over the last two years due to a generally unstable economic situation. He also suggests that this is particularly noticeable in the luxury segment and therefore, the properties’ attractiveness is not currently increasing.
In the Golden Quarter, the value of the properties can best be quantified due to their earning power. However, it is uncertain whether future rents will be sustainable. According to Malloth, rents in prime locations have at most remained stable or slightly decreased over the past year.
An exception is the Tyrol department store in Innsbruck, which has transformed a previously quiet Maria-Theresien-Strasse into a bustling shopping street. Malloth believes this property will be less affected by the loss of value and could attract Austrian or German investors.
Ridder estimates that the sale process will take a minimum of three months, but could extend to six months, which would exceed the restructuring plan’s deadlines. The creditors are expected to vote on the plan on March 18th.
Liens
Complicating matters, the properties are encumbered with mortgages. Therefore, it is uncertain if the sales will significantly contribute to the success of the restructuring plan. Creditor advocate Weinhofer explains that a price higher than the liens must be achieved for the proceeds to flow to the masses, which may not be easy.
The liens are substantial: the property owned by the Constitutional Court has a maximum lien of 120 million euros pledged to Erste Group. Park Hyatt Am Hof has a lien of 186 million euros in favor of several Bavarian pension funds. There are a total of five liens amounting to 344 million euros from UniCredit Bank Austria, and the Tyrol department store has liens amounting to 180 million euros from Bavarian pension funds.
