Cerberus Capital Management has snapped up two large portfolios of UK and Irish commercial real estate loans for a total of £2.3 bn (€2.9 bn).
Cerberus Capital Management has snapped up two large portfolios of UK and Irish commercial real estate loans for a total of £2.3 bn (€2.9 bn).
Betting on the recovery of the Irish property market, the New York-based private equity firm agreed to acquire Ulster Bank's Aran loan portfolio from the RBS Group for £1.1 bn.
While the carrying value of the loans is about £1 bn, the gross assets are valued at £4.8 bn and generated a loss of £800 mln, principally impairment provisions, in the year to 31 December 2013. Completion is expected in the first quarter of 2015.
For RBS Group, the transaction is important for its Irish banking business, which it plans to continue operating, albeit in a slimmed-down form free of property debt. The move also means a significant reduction in the assets held by its RBS Capital Resolution division. 'And, it is in line with the bank's plan to strengthen its capital position and reduce higher risk exposures,' RBS said in a statement.
Also on Tuesday, National Australia Bank (NAB) revealed it is selling an additional £1.2 bn parcel of higher risk loans from its UK commercial real estate portfolio to Cerberus. The transaction follows on from Cerberus buying £625 mln of property loans from NAB last July amid a wide-ranging recovery in UK real estate.
NAB operates in the UK through its subsidiaries Yorkshire Bank and Clydesdale Bank. The under-performance of its UK business has weighed heavily on the group.
Following the latest sale, the balance of the high-risk portfolio of UK property loans will be reduced to £836 mln, compared to the original balance of £5.6 bn in October 2012 when the run-off portfolio was first established.
'This is an important step forward, effectively bringing closure to one of our legacy positions. The sale of these higher-risk loans in the NAB UK CRE portfolio is another important milestone in our strategy of reducing our low returning legacy assets and sharpening our focus on our core Australian and New Zealand franchises,' the bank's CEO Andrew Thorburn said.
'Pleasingly the remaining NAB UK CRE loans are largely strong performing loans, and we will look at other options to manage this small remaining portfolio.'