Private Equity Giant Buys Bad UK Property Loans
U.S. private equity group Cerberus has bought a £325 million ($498.8 million) portfolio of underperforming commercial property loans from Lloyds Banking Group, as British banks try to shed bad property deals.
The bank acknowledged a £200 million loss on the original value of the portfolio. The loans are reportedly tied to 50 loans, from 30 separate borrowers, secured against 180 properties in secondary locations throughout the U.K., the Financial Times reports.
Cerberus is one of several private equity groups picking up property loans. Apollo and Kennedy Wilson also bid on the Lloyd's portfolio.
"The competition has been fierce as banks have not been selling many of those assets because they simply could not afford to crystalize the losses, preferring to offload their better assets instead," the FT reports.
Lloyds and Royal Bank of Scotland have been active selling bad commercial property loans. Lloyds inherited billions in underperforming loans when it took over HBOS in 2009.
European banks are expected to sell off €15 billion worth of commercial real estate loans in 2013, up from €12.5 billion last year, PricewaterhouseCoopers predicts.
With more than $20 billion in assets, Cerberus specializes in distressed and turnaround assets. It is perhaps best known for acquiring the Chrysler car company in 2007.
"Germany, the United Kingdom, Spain, Italy and Ireland are all markets with significant levels of distressed real estate-related loans," Lee Millstein, senior managing director at Cerberus, said in a recent statement. "We think that the latter half of 2013 could be very interesting in Spain for distressed buyers with real estate expertise."