The Homes & Communities Agency has admitted that Space Northwest, its joint venture with Ashtenne Industrial Fund charged with disposing of a portfolio of former North West Development Agency assets, fell short of its repayment targets.
The fund was closed prematurely earlier this year following the takeover of Ashtenne by Aviva Investors.
Neil Pickering, area manager at the HCA, told Place North West that "in capital terms the joint venture didn't raise the values that it set out to do." He explained this was, however, inevitable given years of declining values; the £136m valuation of the portfolio dated from 2006.
Space Northwest was formed in 2006 with a £102m loan note from the NWDA and equity from Ashtenne Industrial Fund. By the time it closed in March 2014, the HCA had received £68.2m in loan repayments and an additional £22.5m in interest.
The HCA has also taken over two remaining assets from the dissolved JV which it claims are worth £24.85m; the 193,000 sq ft Exchange Station in Liverpool, valued at £13.65m, and the 480,000 sq ft Liverpool Innovation Park, £11.2m.
By March 2013, seven years into the JV, only 20 of the 42 assets had been sold raising a total of £45.03m. In the financial results for 2013 the JV directors announced that the partnership would be closed prematurely. In November 2013, a portfolio of 18 industrial assets was sold by Space Northwest to its asset manager, Hansteen Holdings, for £14.14m. There were write-offs on the value of the properties of £37.8m in 2012 and £7.1m in 2013.
When the JV was set up, Ashtenne Industrial Fund was owned by Warner Estate. When Warner went into administration in August 2013, the fund was taken over by Aviva Investors. Hansteen then took a 26.3% stake in the AIF fund and was also appointed asset manager by Aviva.
The 10-year partnership was due to continue operating until March 2016. The initial agreement was that the government loan had to be paid off during the course of the partnership at a rate of £10m a year.
Deborah McLaughlin, executive director of the HCA in the North West, said: "Following the transfer, we intend to prudently invest in both properties [Exchange Station and Liverpool Innovation Park] and prepare them for sale back to the private sector as soon as it's practical.
"In the meantime, we'll continue to provide high-quality space for tenants. We'll ensure there is minimal impact on them at both locations and we'll respect existing leases and deals for new leases agreed by the partnership. We hope to increase tenancy levels prior to selling the properties."