Lloyds selects four finalists for €600m Project Aberdonia loan sale

Lloyds Banking Group has selected a four-strong shortlist of private equity and hedge funds for its probable final Continental European commercial property loan portfolio sale, Project Aberdonia.

LBG logo for webCoStar News can reveal that BAML, Cerberus Capital Management, Marathon Asset Management and Starwood Capital have all been selected to progress through to the second and final round.

Project Aberdonia is comprised of one €526m senior loan and one €63m mezzanine facility extended by HBOS to Industrial Securities, the pan-European industrial investment manager and subsidiary of Marcol Group.

In addition there are two loans, originated in local Polish currency, against two properties equivalent in euro terms to approximately €10.4m for the senior loan and €0.7m for the mezzanine loan.

Project Aberdonia’s €600.1m aggregate debt is secured by 82 properties, predominantly in France and Germany, valued at €279m by CBRE immediately prior to the loan portfolio sale, implying a portfolio LTV of 215.1%.

CoStar News understands that first round pricing on Project Aberdonia came in at around €260m.

Against this, first round indicative pricing reflects a 56.7% discount to Aberdonia’s gross unpaid balance, and just a 6.8% discount relative to CBRE’s recent valuation.

The four Aberdonia finalists will be entitled to speak with the management team of Industrial Securities, with whom Lloyds agreed a pre-loan sale agreement to the effect that Industrial Securities would be part of the subsequent asset management workout of the property portfolio.

This was agreed in order to secure the consent of Industrial Securities to consent to the sale of its loan to a third party.

Talks between the four finalists and Industrial Securities will enable bidders to crystallise the nature, schedule and priorities of a consensual work out strategy. In turn, this will enable bidders to form a view on their final pricing for the portfolio, based on their targeted end returns for the investment.

Final bids, due in early March, could rise or fall depending on the outcome of those talks. UBS is selling Project Aberdonia for Lloyds.

Marathon is the notable bidder to make the shortlist, given that the hedge fund won Lloyds’ Project Chamonix, another Continental property loan portfolio, one year ago.

Around 80% of Chamonix’s property portfolio by value – for which Marathon paid €400m – was the loan security of debt facilities extended to Marcol Group, which is Industrial Securities’ parent company.

Also in the final shortlist is Cerberus which has become a serial winner of Lloyds’ commercial property loan portfolios in less than two years, having won the two major Project Hampton sub-pool, projects Bravo and Charlie, as well as projects Indie and Thames.

CoStar News reported on the details of Project Aberdonia two weeks ago, which can be seen here (which includes an overview of the real estate portfolio by geography and CBRE valuation).

Lloyds sold 10 European property loan portfolios for just under £3bn in 2013

Lloyds Banking Group sold 10 European property loan portfolios with an aggregate unpaid loan balance of £6.83bn in 2013, against which the bank recouped approximately £2.95bn, according to CoStar News’ calculations.

Lloyds, which reports its 2013 results tomorrow morning, closed the sale of five Continental European property loan portfolios, three Irish portfolios – including two which were announced in 2012 but did not close until the first quarter of 2013 – and two UK loan portfolios.

Lloyds’ European commercial property loan portfolio sales comprised projects Chamonix, Indie, Alpha, Bravo and Charlie.

These five commercial property loan portfolios approximately carried an aggregate gross unpaid balance of €2.8bn, against which Lloyds recouped around €1.8bn, according to CoStar News’ calculations based on its own compiled data.

Lloyds’ three Irish commercial property loan sales – namely, projects Pittsburgh, Lane and the single Moran hotel loan – carried a combined approximate aggregate gross unpaid balance of €2.3bn, against which Lloyds recouped approximately €317m.

Finally, the two UK commercial property loan portfolio sales – projects Thames and East – together amounted to gross unpaid balances plus swap liabilities of £714m, against which Lloyds recouped around £415m.

Aggregating these three pools together, Lloyds’ 10 European property loan portfolios – on a sterling basis and applying an average exchange rate of £1: €1.2 – amounts to £6.83bn in total property loan liabilities, against which Lloyds has recouped approximately £2.95bn.

The difference between the gross unpaid balance and the recouped cash has been written-down by Lloyds piecemeal, on a quarterly basis, as the bank has been able to afford to do so. The reduction in risk-weighted assets over the year will have been capital accretive for Lloyds’ overall balance sheet.

These calculations are entirely unofficial and primarily based on aggregating information over the course of CoStar News’ journalistic sourcing of Lloyds’ property loan portfolio disposals, including the original unpaid balances and subsequent trade prices.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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