State-owned bank braced to lose £20m on property deal

State-owned bank braced to lose £20m on property deal


A High Street banking giant is set to be the latest lender to lose a hefty sum on a commercial property deal, dating back to 2007.

Lloyds Banking Group is likely to lose at least £20 million due to the sale of a Birmingham business park to property firm Hansteen Holdings.


Lloyds TSB lent £46 million of the original £58.4 million needed for the purchase of Saltley Business Park by property funds Europa Capital and Opus Land. Europa Sapphire – the Luxembourg-based company that originally owned the park before the 2007 sale – had already gone into receivership before talks over a refinancing broke down last year and Hansteen stepped in.


The recession has meant that Saltley’s annual rents have plunged from £4 million to £2.35 million and it now has a 30% vacancy rate.


Jonathan Rubins, joint managing director of commercial lender

Alternative Bridging Corporation, said that Lloyds TSB has been doubley hit by a two per cent shift in yields and the loss in rental income on the business park.


Mr Rubins said: “Although this probably didn’t seem like a bad deal for Lloyds in 2007, now that rents have fallen from £4 million to £2.35 million and the yield has dropped it’s a double whammy.


“Nothing could have been done by Lloyds about the erosion of yield, as yield is mainly perception, but the fact that rental income has dropped by nearly £1.6 million is a big problem and appears that the management of asset recovery has been poor – if occupancy rates have been allowed to slip to 30 per cent this was always going to be the outcome.”


Dozens of property firms are busy raising hundreds of millions of pounds to purchase cut-price properties that are coming onto the market from bailed-out banks. Lloyds is also bracing itself for a fresh £2.7 billion hit on its Irish loans following the nation’s financial rescue by the IMF and the World Bank.


This latest loss for Lloyds Banking Group follows their £200 million loss at the start of 2010 when the Scottish property company Kilmartin Holdings went into receivership.


By Frank Burbage.


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