NAB receives trio of offers on off-market £1bn Project Henrico loan portfolio

National Australia Bank (NAB) has received bids for the off-market sale of approximately half of the listed Australian bank’s remaining UK commercial real estate (CRE) loan book from the three finalists from its maiden UK loan portfolio sale process.

NAB logoCoStar News understands Cerberus Capital Management, PIMCO and CarVal Investors were exclusively invited by NAB to bid on the bank’s circa £1bn Project Henrico, as the three finalists on the Project Chestnut UK non-performing loan sale which traded to Cerberus for £485m, as revealed by CoStar News.

CoStar News understands that Cerberus, PIMCO and CarVal Investors all bid yesterday, with a winner possibly emerging before the end of the week.

The circa £1bn tranche of UK commercial property loans is almost half of NAB’s remaining £2.2bn, with a sale consistent with the Australian bank’s stated plans to accelerate its CRE exit.

CoStar News understands that NAB, advised by Morgan Stanley on the Project Henrico sale process, retained its better performing remaining loans and has parcelled together its worst performing remaining loans.

As of the end of September 2014, and following the completion of the Chestnut loan portfolio sale to Cerberus, NAB had reduced its commercial real estate (CRE) loan book by £3.4bn to £2.2bn, of which, approximately £100m is not defined as CRE for regulatory purposes.

NAB’s entire £2.1bn UK loan book – as outlined in its annual results published 30 October 2014 – is very granular and regionally spread, approximately comprised of:

  • More than 560 loans at £2m or below.  These loans are comprised of around 175 loans in the North of England, followed by 155 loans in West of England, plus just under 150 loans in the East of England and around 80 loans in the South of England.
  • Around £420m worth of loans are with an unpaid balance of between £2m and £5m, broadly evenly split between the North, East and West, and again a lower concentration in the South.
  •  Just under £550m worth of loans are above £5m.

Across the entire £2.1bn loan book, as at the end of September, the average loan size was £0.66m.

By sector, the remaining £2.1bn NAB UK commercial real estate loan is comprised as follows:

  • Residential:              £735m, or 35%;
  • Retail:                        £423m, or 23%;
  • Offices:                       £357m, or 17%;
  • Industrial:                  £210m, or 10%;
  • Tourism & leisure:    £126, or 6%;
  • Land development:   £126, or 6%;
  • Other:                          £63m, or 3%

Craig Drummond, group executive, finance and strategy at NAB, said to analysts at the presentation of its annual results on 30 October regarding the remaining CRE run-down: “We are investigating options to further accelerate the [UK CRE] run-off.  There is a bit of natural run-off, because we are seeing quite a bit of refinancing activity from other banks, but we will be looking at further accelerating the run off.”

Later in the presentation, group CEO Andrew Thorburn added: “We are going to be disciplined, methodical and with a good dose of urgency thrown in.”

The NAB UK Commercial Real Estate (NAB UK CRE) portfolio business was created on October 5, 2012 with the transfer of £5.6bn of commercial real estate loan assets from

Clydesdale Bank to National Australia Bank, managed via its London Branch.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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