Royal Bank of Scotland has again widened its pool of property expertise this week with the appointment of former Savills chief executive Aubrey Adams as the new head of property within its global restructuring group.
The 61-year-old, who begins his new role on 1 November, will take responsibility for the group’s £84.6bn global property portfolio, including West Register, the vehicle that buys assets from distressed situations, adds value and then looks for an exit.
“The global restructuring group plays a fundamental role in achieving the bank’s overall objectives. I am very excited by both the challenge and scope of this role,” says Adams.
Mark Young, who is a partner at Oriel Securities, says: “I would describe the appointment as inspired. Aubrey is organised, very good at pulling together a team and has the authority and gravitas to get things done.”
It is the bank’s second high-profile property appointment after Helen Gordon was poached from Legal & General in July to head West Register.
Adams’ appointment was read by the market that RBS is expecting to dramatically step up its property activities.
Speaking at the Estates Gazette Distressed Property Summit last week, James Rowney, the bank’s head of West Register Property, said he was expecting an increasing number of assets to be transferred to his division over the next two years.
“Looking at smaller assets, a lot of covenant-light loans were written which will be coming to the term end over the next few years and it will be time to have discussions with borrowers to see if they can do X, Y and Z,” he told delegates.
Rowney said that if borrowers were unable to perform, the assets could be bought by West Register, where the bad bank would “decide how to deal with them”. Options would include “pooling them, asset-managing them or bringing in external capital”, he said.
Lorna Brown, the bank’s head of real estate restructuring group, who also spoke at the EG summit, said that, in general, the bank’s focus has been on reducing its exposure to real estate through sales. “It is our job to tap into pockets of equity and decide if it’s the right time to exit,” said Brown.
What is more, the bank, which is led by former British Land boss Stephen Hester, has made more progress than its rival, Lloyds, in reducing its property exposure. It has wiped £26bn from its real estate loan book since early 2009.
At RBS’s half-year results for the year to June, Hester told analysts the bank had reduced its real estate exposure by 41% in two-and-a-half years and claimed it was “on track”.
This has been achieved in a number of ways. After setting up a non-core division in 2008 to sell off or run down loans and assets that were no longer considered central to its business, the bank ploughed ahead with the sale of balance sheet assets, including its Hilton hotels and 1,000 pubs.
Receivers were appointed to high-profile portfolios such as Dunedin’s 10m sq ft Industrious, which was bought by Nick Lelau’s opportunistic vehicle Max Property Group for £232m.
It also formed relationships with other opportunistic investors, notably Delancey, which took over management of a portfolio backed by a £900m RBS loan from Glenn Maud’s Propinvest. This year, Delancey also teamed up with Oakmayne to buy the £200m Elephant and Castle site.
RBS was also the first UK bank to test investor appetite for loan books after scaling back a £3bn Project Monaco portfolio to the £1.4bn Project Isobel, which has been put into a jv with Blackstone.
This deal – yet to complete – is viewed with scepticism by many in the market. “The appointment of Blackstone effectively acknowledges that they are better than the bank at property workout,” says one critic.
Others see it as a long-term play that over time enables the bank to take the loans off its balance sheet into the fund, in which it holds a 75% stake, enabling it to still benefit from any valuation uplifts.
As at the end of June, the bank’s overall global real estate book stood at £84.6bn, with £46.9bn against UK property loans or direct assets and land. Of the total real estate loan book, £42.7bn remains in its non-core portfolio.
Yet many in the market continue to begrudge a lack of transparency from both West Register and the bank in general.
And, despite many high-profile deals by both RBS and Lloyds, sceptics maintain that the deal flow does not reflect the progress that the banks say they have made and they still emanate a sense of “chaos”. Perhaps Adams’ appointment can address these criticisms.
