Lloyds Banking Group has shortlisted Cerberus Capital Management, Apollo Global Management, Goldman Sachs Special Situations Fund and Morgan Stanley Real Estate Funds to acquire the €850m Project Chamonix non-performing loan (NPL) portfolio, CoStar News can reveal.
Project Chamonix is comprised of 18 loans, from 11 borrowers, secured by around 250 properties made up of largely discounted supermarkets in regional towns in Germany as well as DIY stores. The annual rental income from Project Chamonix is around €60m, while there is a concentration of properties from one individual borrower.
Bidders are likely to put the yield on the underlying real estate portfolio at between 12% to 15%, such is the nature of Chamonix’s distress. On a 12% yield, this would value the property portfolio at around €500m, while a 15% yield would put the value at nearer €400m.
Project Chamonix is likely to trade at a discount to the €400m to €500m valuation, with most expecting a steeper than 50 cents in the euro bid on the outstanding €850m loan balance.
Eastdil Secured is selling Project Chamonix on behalf of Lloyds. Final bids are due in early February.
HBOS financed the German grocery stores between 2005 and 2007, typically on five-year loan durations, while tenants where signed up with 12-year leases, which implies the unexpired lease term ranges between four and six years.
The nature of distress in the Chamonix NPL is due to a number of factors – there is a lumpy lease expiry profile in the coming years and many tenants are unlikely to re-gear their leases as demand for such mini-supermarkets declines.
As a result of the structural change in the supermarket sector in the years since these leases were signed, the current terms are significantly over-rented with tenants requiring capex in addition to lower rents, for those which choose to re-let.
Project Chamonix is the first Continental NPL which Lloyds has assembled, with the bank expected to close two Irish NPLs in the coming weeks: the €380m Project Pittsbourgh NPL which is to trade to CarVal Investors for around €95m; and the circa €1.8bn (£1.46bn) Project Lane which Apollo Global Management’s Risali Limited is to buy for €184m (£149m).
All parties declined to comment.