Bank-led debt trading markets begin to thaw

The permafrost that had settled over the property debt markets is beginning to thaw, according to Gerry Mulholland, head of real estate finance at UK law firm Pinsent Masons. Mulholland made the comment following news that Royal Bank of Scotland is selling a portfolio of Irish assets worth EUR 250 mln at the top of the market for around EUR 75 mln.

The state-owned bank has appointed London-based adviser Savills to sell the Gemini Portfolio. The loans were made by Ulster Bank, Royal Bank of Scotland’s Irish division. The EUR 75 mln sales price would mark a 70% discount to their value at the top of the market.

'This is the latest of a slew of portfolio sales coming to the market,' Mulholland said. 'The size and nature of these is changing as the lenders look to broaden and deepen the market by giving the propcos a chance, as well as the US private equity houses. We are seeing the beginnings of the thawing of the permafrost which has settled over the market these last four years.'

He added that 'slotting' coupled with the need or commitment to deleverage means that buying debt as a means of accessing underlying real estate is a skill the market needs to master. Under the new 'slotting' regime in the UK, bank must apply an annually reviewed risk-weighted model to their property loans, in addition to the European Banking Authority’s imposition of higher tier one capital ratios for all banks.

Earlier this year, Savills warned that UK banks’ ability and appetite to lend to domestic property would be dramatically curbed by their requirement to hold additional capital against loans under the new slotting regime.

RBS has been mulling the sale of around EUR 2 bn of assets from Ulster Bank, and has been weighing whether to sell assets or loans. Lloyds Banking Group is preparing to sell its third UK non-performing loan (NPL) portfolio, the £700 mln (EUR 879 mln) nominally-valued, Project Forth. Across the three deals traded this year to date, Lloyds has disposed of Australian, Irish and UK loans with a nominal value of £1.72 bn and received £696.95 mln net.

Click on the link below to read: 'Slotting' will further depress UK property market: IPD