In an effort to rid itself of the less attractive parts of its real estate book, Lloyds Banking Group has put an extensive portfolio of commercial properties on the market.
The portfolio, which carries a price tag of around £60 million, consists of 38 varied usage British properties, which include office, leisure and retail premises. The properties were all previously owned by investors before they were placed into receivership.
This sale will be the first time that such properties, from different owners and in receivership, have been grouped together. However, the practice of ‘offloading’ less favourable assets from companies’ books is somewhat more common.
Rob Lankey, Managing Director of Commercial Mortgages at Aldermore, said: “This is becoming an increasingly common practice in the industry. Many of the banks that have required governmental support in the UK and Europe have been quietly disposing of properties at a discount, in order to repay the funding they received during the credit crunch. We have provided finance to a number of our clients to enable them to purchase such properties.”
Industry views on the practice are somewhat mixed, with some perceiving the sale as a positive addition to the property market and others commenting that the scale of this latest ‘distressed’ portfolio highlights the significant level of ‘bad’ loans that were made in the past.
When asked whether he thought the offloading was ‘responsible’, Rob Lankey commented: “This depends how it is done. Some lenders are giving borrowers reasonable notice that loans will not be renewed. In some circumstances they are offering customers a discount to redeem the loan; a practice which is termed 'debt forgiveness'. However, in other circumstances we have seen lenders place properties into LPA Receivership just because a loan has expired, or a loan to value covenant breach has occurred. This has even happened when loan payments have been up to date!
“There is no sensible explanation for this action, other than desperation. We are of the opinion that a responsible lender should run with such a loan, as long as payments are being made. It certainly isn't 'treating customers fairly.”
Yet whilst the customers may not benefit from their properties being placed in receivership, Stephen Johnson, New Business Director at Whiteaway Laidlaw Bank, noted that the addition of such properties to the market may provide investors with key opportunities.
“The type of people buying these properties will be professionals and will only pay a fair and reasonable price. I don’t think that there will be any way for Lloyds to quietly dispose of ‘bad’ properties for more than their worth,”he said.
Lloyds' head of corporate real estate business support, Richard Dakin, told Business-Sale: "This latest initiative is another example of the work we are doing to manage our property book and deleverage our balance sheet.
"Having the assets under the control of common LPA receivers makes it possible for a portfolio transaction of this nature to happen and we are now advised that the market is likely to view such a portfolio sale very positively."
"Having the assets under the control of common LPA receivers makes it possible for a portfolio transaction of this nature to happen and we are now advised that the market is likely to view such a portfolio sale very positively."
Business-Sale noted that Lloyds instigated around £4 billion of property disposals in 2010 by either demanding an administration process or encouraging an investor exit. It has roughly £30 billion of bad real estate loans.
By Katie-Jill Rowland
Leave a comment