Cerberus Capital Management has won the blind auction to buy the outstanding €440m Lloyds Banking Group senior loan secured by the Valad Europe-managed German Aktiv Property Fund Limited Partnership (GAF), paying an all-cash price of €312m.
Lloyds announced the winner directly on the Stock Exchange within an hour ago.
Cerberus’ €312m (£263m) price for the loan, codenamed Project Indie, reflects a 29.1% discount to the gross assets of €440m (£371m) – which include a circa €15m mark-to-market swap – of the GAF portfolio.
Valad Europe will remain in place as the asset manager for the GAF portfolio – which comprises 47 industrial and office German commercial properties valued at €406m in April this year – and will seek to execute a business plan with Cerberus of improving the value of the underlying properties with sales when stabilised.
The cover bid came in from Deutsche Bank, while earlier second-round finalists also included Angelo Gordon and Abu Dhabi Investment Corporation, both of which dropped out over a week ago.
Cerberus will buy the Project Indie portfolio through a special purpose vehicle called Promontoria Holding 76 B.V.
Lloyds said in the Stock Market announcement that the Project Indie loan portfolio generated profits of €4.7m (£4m) in the year to 31 December 2012, with the latest commercial property loan disposal capital accretive on a Basel 3 basis.
Cerberus and Lloyds are expected to close the transactions during the fourth quarter.
Project Indie was sold by UBS.
For Cerberus, this is the second major loan portfolio win from Lloyds, after paying £325m for Project Thames in May, which included around 50 loans and secured by around 180 secondary properties throughout the UK.
Cerberus financed Project Thames with £195m in senior notes from Nomura, reflecting a 60% loan-to cost.
GAF portfolio background
GAF was assembled by Scarborough Group, a real estate firm formerly majority-owned by Kevin McCabe, the part-owner of Sheffield United football club, and Bank of Scotland (BoS), through Uberior Europe, during 2005 and 2006 for around €790m.
The legacy GAF portfolio forms part of the wider Diversified UK and European (DUKE) fund, which was assembled in July 2009, as a 50/50 joint venture between Valad Europe, through Valad Capital Limited, and Lloyds Banking Group, through Uberior Europe, a subsidiary of Uberior Investments, Lloyds’ legacy HBOS private equity arm.
Since GAF’s acquisition of the 57-strong seed portfolio for €790m in April 2007, 10 assets have been sold, including several in the last 12 months.
Six years later, the portfolio has dramatically fallen in value, which asset disposals fail to disguise.