Lehman's European property portfolio only worth $1 bn, says PwC

PricewaterhouseCoopers has slashed the value of bankrupt US investment bank Lehman Brothers' European property portfolio to $1 bn, down from an earlier estimate of $15 bn, citing external debt and falling property values, it told PropertyEU today.

According to PwC, which is marketing the portfolio, most of the assets are held in joint ventures, with different partners, and many of those joint ventures have significant external debt.

With the exception of a small number of high-profile assets, such as the Coeur de La Défense office building in Paris, the large majority of the properties are not worth more than EUR100 mln each, said PwC. ‘In addition, falling property values across the globe are placing many property assets under stress and the Lehman portfolio is no different, meaning the value of the real estate assets is actually less than $1 bn,’ said Dan Schwarzmann, a partner at PwC in the UK and joint administrator of LB UK RE holdings. The figure of $1 bn excludes non-performing loans in the portfolio, the value of which PwC has not disclosed.

However, the size of the write-down is likely to send shock waves through the industry. ‘I’m shocked by those figures,’ said Alessandro Bronda, head of investment strategy at Aberdeen Property Investors in Brussels. 'Given the climate of falling prices, a write-down was to be expected, just not on this scale. However, it’s hard to say more without having a full list of assets in the portfolio.’

The portfolio, which comprises both existing buildings and development projects, includes assets in the UK, Germany, Spain and France. The first batch of properties is likely to come to market in January, said Schwarzmann, although PwC has yet to announce which properties will be put up for sale first.

´There are currently more than 300 expressions of interest in the real estate assets on our register. The PwC team is still reviewing the approach to be taken. We will make further announcements as and when assets are to be marketed, which we expect to be in the New Year,’ said Schwarzmann.

Commercial properties in the eurozone have seen their value tumble by 9% on average this year, according to Bronda, compared with a 19% drop in the UK. Aberdeen Property Investors is currently putting together its forecasts for next year, although prices are likely to fall more in the eurozone than the UK next year, as much of the UK correction has already been priced in, he said.