Credit Suisse has today funded a three-year €90m property loan to finance Apollo Global Management’s Project Lane Irish loan portfolio from Lloyds Banking Group, CoStar News can reveal.
Risali Limited, the special purpose vehicle established by Apollo to buy Project Lane, issued notes worth €90m, which Credit Suisse purchased, reflecting approximately a 51% loan-to-cost (LTC) for Apollo’s circa €175m (£149m) purchase of the Irish non-performing loan (NPL) portfolio.
CoStar News understands that this loan has some recourse to Apollo.
Project Lane, which comprises around 700 senior and junior loans as well as capex facilities secured by more than 500 properties, was the larger of two sub-pools – together called Project Pittlane – brought to market by Lloyd’s appointed sales broker, Deloitte, at the end of last autumn.
Apollo and Credit Suisse are understood to have negotiated a margin of considerably below 600 basis points over three-month EURIBOR for the fast-amortising loan.
Credit Suisse’s European securitised products team was responsible for the loan, which is one of a number of similar low-profile loans by the Swiss investment bank in recent months to leverage real estate loan portfolio buyers’ acquisitions from de-leveraging banks.
After a fiercely-contested blind auction, Lloyds agreed to sell Project Lane to Apollo last November for £149m which had a nominal unpaid balance of £1.46bn (circa €1.8bn as at last November), reflecting an 89.8% discount.
Apollo’s workout strategy for the underlying loans and assets within Project Lane is expected to ensure the notes amortise fast over the three-year term.
CoStar News understands that the recent loans by Credit Suisse is unlikely to herald a substantive return to real estate lending in Europe in the near-term and instead is part of a wider relationship between the Swiss investment bank and Apollo, a long-standing client.
Any significant return to European property lending is only probable after the re-establishment of a US real estate lending operation.
Indeed, Credit Suisse sold the last of its European commercial real estate loans to Apollo in July 2010, a €900m non-performing loan portfolio for which the private equity firm paid around €540m, secured with vendor financing from the Swiss investment bank.
The previous year, Lone Star acquired a pool of €2bn commercial property loans and in 2008 GE Real Estate bought a €642m portfolio of loans secured against offices and retail assets across Germany, Switzerland, the UK and Spain.
The final trade of Credit Suisse’s European commercial real estate loan legacy – as high as circa $16bn in 2008 – prompted the departure of the remaining senior management, headed by Todd Hirsch, who returned to the US almost two years ago.
The initially combined Project Pittlane was brought to market last autumn, inviting bidders to bid either individually across the two – the €1.8bn Project Lane and the €380m Project Pittsburgh.
Apollo is understood to have bid for both NPL pools, and while winning Project Lane, the private equity firm lost out on Project Pittsburgh to CarVal Investors, which paid €95m – including a €3m from minority equity partner, Pepper Asset Servicing – reflecting a 75% discount.
Underbidders included Lone Star, which bid purely for the Lane portfolio, and Marathon, which only bid for Project Pittsburgh.
A four-strong consortium comprised of Kennedy Wilson, Deutsche Bank, Och-Ziff and Varde Partners also bid across the whole Pittlane portfolio.
All parties declined to comment.