In 2017, the brokerage firm Arctic Securities created a syndicate consisting of more than a hundred wealthy Norwegians, who bought the commercial property Lysaker Park in Bærum for NOK 2.2 billion. The building was purchased from Storebrand which has its main office there.
The purchase was financed by two bond loans of NOK 1.45 billion and NOK 223 million, respectively. In addition, preference shares – a type of shares that give preferential rights to dividends – were issued for NOK 223 million.
Lysaker Park was previously described by an Arctic broker as a “super building” with “super leverage,” but the sharp rise in interest rates has made that leverage a big problem for shareholders. And now problems loom large.
financial challenges
Last fall, the company behind the project had to take out NOK 160 million at a very high discount, which it went towards paying off the NOK 220 million bond loan, because today’s loan market made refinancing “impossible”. The 1.45 billion bond loan has been refinanced at a higher interest rate and is now due on December 10, 2023.
At the same time as the capital raise, Arctic announced that a strategic review of the project had been initiated, which could involve a sale. In a recent shareholder update, Arctic wrote that the work is being done specifically with select stakeholders, with the goal of store acceptance before summer.
“The manager is working with the Lysaker Park Board of Directors to seek to resolve the significant financial challenges at Lysaker Park. We are working on a long-term refinancing option and sale of the property.”
Arctic wrote that it had Lysaker Park valuations from Newsec and Eiendomshuset Malling & Co respectively, which gave an average property value of just over 2 billion kroner. This is two hundred million less than what the building was bought for. Last fall, the property was valued at NOK 2.3 billion by Newsec.
The latest assessment puts the loan-to-value ratio at around 71 percent. As of the first quarter, the Lysaker Park Group was in breach of the loan terms of the $1.45 billion bond loan, but the lender has agreed to waive loan-to-value ratio requirements until the loan matures in December. This is in return for a gradual increase in interest plus a pure compensation amount.
“large capital requirements”
As if the debt problems weren’t enough, there is now also the risk of the building’s most important tenant disappearing. According to the information letter, Storebrand, which leases nearly the entire building, scrutinized the market this spring for alternatives after the lease expires in June 2027.
Storebrand has an option to extend the current contract for another five years. The option expires in June 2024. The Administrator understands that Storebrand is in an exclusive operation with a tangible replacement. The Administrator is actively working to provide Storebrand with a competitive offer. Storebrand is expected to make a decision well before it expires Option “.
“At the same time as work is being done to ensure Storebrand extends the lease on all or part of the existing area, work is underway on potential development of the property, as well as a search for alternative leases. The premises are of a good standard and the rental market in Lisker is good. Even if the market is Rent and property are good, it would have a huge negative impact if Storebrand decided to vacate the premises.”
Arctic is the business manager for projects, but investors take risks. Arctic makes money from brokerage and facilitation, including debt refinancing or the acquisition of new capital. Arctic is behind a total of 40 similar real estate projects with a total gross property value of 46 billion at the end of 2022.
“The manager draws attention to the fact that Lysaker Park is likely to have a significant need for capital in the future if the sale does not proceed,” writes Arctic.
– We work to find the best possible solutions for investors. If the ongoing sale doesn’t lead to progress, the company will have to refinance during the fall and may need equity capital, Arctic communications director Sindre Fjærtoft wrote for DN.
– How likely is Storebrand to remain as a tenant?
— that’s entirely up to Storebrand, and not something we want to speculate on.
Storebrand’s Executive Vice President of Human Resources, Tove Selnes, wrote the following to DN:
– Storebrand has a lease agreement with Lysaker Park Invest that runs until 2027 and so it is only natural that we now survey and evaluate alternatives for the site when the agreement expires. We have not yet decided where we will be headquartered after 2027.
According to Arctic Securities, Storebrand is considering moving its head office to a different building from Lysaker Park. This could result in “a significant negative impact on value if Storebrand decides to vacate the premises,” according to Arctic. (Photo: Per Thrana)
Jokes for emission repair
Arvid Grundekjøn, a contributor to the project, has previously taken issue with the Arctic and Lysaker Park board of directors for what he refers to as a “lack of understanding of the market”. The former Awilhelmsen chairman and Statkraft chairman reacted strongly to the fact that he was not considered a professional investor and was therefore not allowed to participate when the company raised NOK 160 million.
Grundekjøn and other contributors were predicted to issue a fix issue totaling NOK 48 million, but now it may be a joke for that issue as well. In the letter, Arctic wrote that it had been denied a marketing request by Lysaker Park to existing non-professional investors.
The decision was appealed and the management pursued the case with the Financial Supervisory Authority. There was constructive dialogue, but since the case raises questions of principle, it is difficult to estimate when clarification can be expected. The Director will keep Lysaker Park investors informed. The reform issue has been suspended pending clarification with the Norwegian Financial Supervisory Authority.”
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Other contributors to the project are Europris founder Terje Høili, the Nille Aarskog family and business leader Svein Harald Øygard. The latter has previously criticized Arctic and its board of directors over the way Arctic has handled Lysaker Park and other real estate projects. He referred to Lysaker’s risk profile as “worse than an Argentine mutual fund”.
– The investor must, of course, evaluate the quality of the investments being considered, but for my part, I did not anticipate the influence of the facilitators’ enthusiasm, their use of power to sell everything that goes well, and their inability to understand what was ill, said Øygard.
Arctic mediator Christopher Rohn responded to Oegard’s criticisms as follows:
– It is true that the financial risks of the project were and still are high, with the associated potential for profit and loss. And it was never marketed like anything else.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For more terms see here.
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