Cerberus beats Oaktree to win Nationwide’s Project Carlisle

Cerberus Capital Management has won Nationwide’s Project Carlisle paying just above £680m for the UK commercial property loan portfolio, fending off Oaktree Capital Management in a tightly-contested blind bidding process.   

Cerberus logo

Nationwide, advised by Deloitte on the Project Carlisle sale process, signed the deal with Cerberus yesterday.

On Tuesday, Nationwide narrowed the finalists down to Cerberus and Oaktree, which both submitted final binding bids above £680m, before signing contracts with Cerberus yesterday.  Lone Star and Kennedy Wilson also bid.

Yesterday, Cerberus also signed a contract to acquire a portfolio of Denmark non-performing loans – dubbed Project Mermaid – with a face value of DKK 7.5bn (circa €1bn) from Finansiel Stabilitet, the country’s bad bank.

Project Carlisle has an unpaid balance of £1.0bn, comprised of 115 loans which are secured by 176 properties throughout the United Kingdom and Northern Ireland and Jersey.

The carrying real estate market value of Project Carlisle’s underlying collateral was £683m, as at the 31 August 2014, reflecting a net initial yield of 8.3% and implying that Cerberus is paying virtually par to the current valuation of the real estate.

Since which time, Nationwide has recouped additional cash which takes the total value to around £701m.  The discount to nominal outstanding balance is circa 32%.

CoStar News reported the details of the Project Carlisle portfolio in early November, which can be seen here, and also on the launch of the NPL back in October, which can be seen here.

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.

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.

In April, Oaktree acquired Nationwide’s entire Continental European loan portfolio, in a process dubbed Project Adelaide, paying £694m.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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