DB and Apollo secure CRE tranche of Ulster Bank’s Project Finn for £400m as same finalists prepare binding Lloyds’ Poisedon bids (Updated)

Royal Bank of Scotland has sold the largest tranche of the circa €2.6bn Project Finn non-performing Irish real estate loans from its Ulster Bank subsidiary to a joint venture comprised of Deutsche Bank and Apollo Global Management for £400m.

CoStar News understands that the non-performing loans (NPL) acquired by Deutsche Bank and Apollo represents the commercial real estate (CRE) tranche of €2.6bn Project Finn NPL. 

The CRE tranche was secured by around 1,200 commercial properties from around 290 borrower connections.

Underbidders on the first tranche comprised a joint CarVal Investors and Goldman Sachs bid and Cerberus Capital Management, which bid solo across the entire NPL.

RBS confirmed in a statement this morning that the gross unpaid balance was £1.137bn, as at the end of last year, with a carrying value post loan provisions of £376m, implying the bank had already booked write-downs against the loan pool of 70% of the gross value.

As a result of the sale, RBS will be able to claw back approximately £24m of previously taken provisions, after costs associated with the sale.  

The net post provisions discount to original unpaid balance on the trade with Deutsche Bank and Apollo is approximately 64.8%.

RBS is in talks today to close the sale of the second largest tranche, comprised of around 2,000 buy-to-let residential mortgages in Ireland with an unpaid balance of circa £530m (€750m). The real estate value is thought to be around the (£280m) €400m mark.

Separately, Sankaty Advisors has agreed to acquire the third – and smallest tranche – comprised of around €300m of SME loans in Ireland, CoStar News understands. This tranche was comprised of loans extended to operating companies which own retail units, car parks and nursing homes with Sankaty paying around €100m to €120m. 

The two joint venture bids of CarVal Investors and Goldman Sachs and Deutsche Bank and Apollo – as well as the solo bid by Cerberus – are all thought to still be in the hunt for the €750m buy-to-let residential mortgages tranche of Project Finn, with an regulatory update expected soon.

KPMG sold Project Finn on behalf of RBS.

The sale of the first Project Finn NPL spoils to Deutsche Bank and Apollo Global Management has implications for two immediately successive Irish non-performing loan portfolios, comprised of similar underlaying collateral, Lloyds Banking Group’s €4.2bn Project Poseidon and NAMA’s €7.2bn Project Arrow.

CoStar News understands that the underbidders and the joint venture winners of Project Finn are the identical finalists which are planning to submit binding bids on Lloyds’ Project Poseidon on Monday.

It has been speculated within the Irish commercial property market that whichever investors failed to win Project Finn would more aggressively pursue the Project Poseidon portfolio, with whoever fails to win in this next instance expected to in turn strongly pursue NAMA’s Project Arrow portfolio. 

First round indicative bids on Project Arrow, the gross loan balance of which has been reduced by €1.2bn to €7.2bn, have been called for mid-August.  Please see here for CoStar News’ previous report on Project Arrow.


About CoStar News

Finance Editor, CoStar News
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