Van Lanschot, the almost 300-year old independent bank in the Netherlands, has sold its first-ever non-performing commercial real estate loan portfolio to Cerberus Capital Management.
Project Lucas, almost entirely comprised of commercial properties in the Netherlands, had an original principal balance of €400m, although the purchase price reflects a substantial discount to nominal balance.
Goldman Sachs was an underbidder.
The CRE portfolio securing the Project Lucas loans is well diversified, with more than 99% of properties located in the Netherlands.
The borrowers are largely smaller investors, operating on a local or regional basis. More that 80 percent of the Project Lucas’s property value comprises offices, residential buildings and company premises divided into production facilities and offices.
Van Lanschot completed a strategic review in May 2013 which resulted in the consolidation of business lines and the reclassification of its €3.6bn corporate banking book as non-core.
At the time, Van Lanschot targeted a 50% reduction of its corporate banking – comprised of €2.0bn real estate loans and €1.6bn in SME loans – by the end of 2017.
The €2.0bn real estate loans include €279m in impaired loans, the majority of which are thought to be included in Project Lucas. Van Lanschot had made €112m in provisions against the NPLs.
The balance of Van Lanschot’s remaining real estate loans is thought to include a larger proportion of sub performing loans as well as loans with a high probability of future default.
The sale of Project Lucas to Cerberus is Van Lanschot reflects an acceleration of the planned run-off of the corporate book.
Karl Guha, chairman of Van Lanschot’s Executive Board said: “This is a next step in the implementation of our wealth management strategy, which focuses on activities contributing to the preservation and the creation of wealth for our private and institutional clients.
“Structured as a competitive bidding process, the transaction allows us to benefit from market opportunities in this segment, and we are pleased to have found an experienced and reliable party to manage the portfolio professionally.”
As a result of this transaction, the impaired ratio of the overall loan book of Van Lanschot (5.8% at YE 2014) reduces by more than 2.5 percentage points on a pro forma basis. The transaction is expected to result in a one-off pre-tax charge of approximately €23m in the second half of 2015 and will have a marginally positive impact on Van Lanschot’s core capital position.
Van Lanschot is expected to opportunistically deleverage its remaining corporate banking book through further loan portfolio sales.
KPMG sold Project Lucas on behalf of Van Lanschot.