The private equity property funds that are managed by
The Blackstone Group LP
) have formed a joint venture (JV) - AET SPV Management Pty Limited
- to acquire a portfolio of troubled property loans in Australia
from a unit of UK-based
Lloyds Banking Group plc
The distressed property loans would be bought by the JV for £388
million ($252.4 million), though the actual value is pegged at £809
million ($526.3 million).
The portfolio being sold to Morgan Stanley and Blackstone
comprise nearly 60-70 commercial property loans in Queensland,
Melbourne and Canberra. The deal is expected to close by the end of
the third quarter and is still subject to the consent of the
With the sale of this loan portfolio, majority of Lloyds'
nonperforming loans in Australia would be disposed of. These
portfolios were acquired by Lloyds when it purchased HBOS in 2008,
including the Bank of Scotland and its international unit, BOS
Apart from Morgan Stanley and Blackstone, other bidders in this
deal were The Macquarie Group, an investor consortium that included
The Goldman Sachs Group Inc.
), Brookfield Asset Management and Singapore sovereign wealth fund
- GIC Real Estate, and the hedge funds Pacific Alliance and Elliot
Llyods will utilize the cash received from the divestiture to
pay off its debt. Similar to all the major banks across the globe,
the sale is a part of the company's strategy to remove non-core
operations and strengthen the balance sheet. The loan portfolio had
reported a loss of £183 million in 2011.
This is not the first distressed loan portfolio sale by Lloyds.
In 2011, it had sold Australian and New Zealand property loan
portfolio worth £1.08 billion in two separate deals to Goldman
Sachs and Morgan Stanley.
Many banks sell their distressed and troubled real estate
mortgages in order to get rid of these loss-making investments and
concentrate more on their core businesses. Investors, who purchase
these loans at a discount, often foreclose these principal
properties for sale or redevelopment.
With the European economy reeling under debt crisis and
recessionary pressures, many European companies have been disposing
off their non-core operations to stabilize their balance sheet and
meet stringent capital regulations. At the same time, the companies
buying these loan portfolios see this as an opportunity to enter
the real estate market, which is bound to grow once the economy
Currently, both Blackstone and Morgan Stanley retain a Zacks #3
Rank, which translates into a short-term Hold rating.
BLACKSTONE GRP (BX): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
LLOYDS BANK GRP (LYG): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis Report
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