First round bids for Nationwide’s £1bn Project Carlisle UK non-performing loan portfolio are due this afternoon, with at least half a dozen private equity funds and hedge funds expected to compete in a tight contest.
The carrying real estate market value of Project Carlisle’s underlying collateral was £683m, as at the 31 August 2014, which reflects a net initial yield of 8.3%. Since which time, Nationwide has received additional cash which takes the total value just around £701m.
The outstanding loan balance, at £1.004bn, implies a 69.8% discount to the £701m carrying market value.
Indicative first round bids are in at 5pm today, which CoStar News understands will include from Cerberus Capital Management, Oaktree Capital Management, Lone Star Apollo Global Management, Kennedy Wilson and Davidson Kempner.
Pricing for Project Carlisle is expected to come it at 6% to 8% discount on the market value plus cash received £701m figure, which would imply a trade price of between £644.9m and £658.9m.
Total recoverable value of the underlying property portfolio is estimated at £672m, although there is thought to be a claim cap at £665m.
Competition is expected to be tight, with Oaktree a logical winner given that the private equity firm won Nationwide’s Continental loan portfolio, Project Adelaide, following which a number of staff from the building society are understood to have joined Oaktree.
Project Carlisle is predominantly an NPL, with loans in default accounting for £793.2m, or 79%, and includes 36 borrower connections. The three largest borrower connections account for £256m of Project Carlisle’s unpaid balance, and the top 10 account for £542m. Overall there are 48 separate borrowers
The underlying 176-strong property portfolio, valued at £683m excluding cash, is spread geographically throughout the UK, Northern Ireland and Jersey. By carrying real estate market value £239m, or 35%, are retail properties, followed by £232.2m in offices and £116.1m in industrials.
By geography, Project Carlisle’s underlying property portfolio is comprised as follows:
- £144.2m of in the North West;
- £140.9m is in the Midlands;
- £125.6m is in the South East;
- £83.0m North East;
- £77.7m is in London;
- £49.7m is in the South West;
- £63.6m elsewhere.
Around £123m worth of Project Carlisle’s collateral pool is already being marketed or is at an advanced stage of sale.
The average property size is £3.9m, the occupancy is 87% and the weighted average unexpired lease term (WAULT) is 7.1 years. The net operating income is £57m, while the estimated rental value is £62.6m. The 40 largest leases reflect 39% of the income
A shortlist of bidders to progress to the second round is expected by Monday, with final, fully funded binding bids expected to be called for early December.
To see an earlier report on Project Carlisle, please click here. Deloitte is selling Project Carlisle for Nationwide.
Separately, binding bids on IBRC’s €1.1bn Project Quartz are due on 10 December. Final bidders include Apollo Global Management and Lone Star.
All parties declined to comment.