The “bad bank”set up by the Irish Treasury could provide much-needed prime assets for the supply-starved UK markets, experts said this week.
Irish finance minister Brian Lenihan revealed on Wednesday that the National Asset Management Agency would buy €77bn (£69bn) of property development and investment loans for around €54bn – €7bn more than the underlying property’s current market value.
Around 20% of the loans are secured against UK property, which would give NAMA a portfolio of UK property valued at around €9.4bn, or £8.3bn -about the same as British Land.
Some believe that the UK loans, which are thought to be secured against better-quality assets than their Irish equivalent, could be sold quickly to lock in profits for NAMA.
The agency could take on loans backed by high-profile UK developments such as Real Estate Opportunities’ Battersea Power Station. The developer said last month that it was preparing for loans to be transferred to the agency.
Investment banks could team up with equity partners to buy loans, providing a combination of equity, debt and structuring advice.
Goldman Sachs recently restructured its real estate investment division to focus on buying debt, and private equity firms such as Blackstone, Fortress and KKR all have cash available to buy distressed debt.
“I think there will be a lot of international interest in the UK loan book,” said Conor Downey, partner at law firm Paul Hastings. “We believe that the majority of the UK loans are concentrated in London and the South East.
“For NAMA, this could be easy money,” Downey added. “If itcan sell theUK loanor property for slightly more than it paid,there will be a big temptation to book that profit.”
The loans will be bought at an average 30% discount.Around 36% will be secured against land, 28% against development schemes, and 36% against investment property. Allied IrishBank will sell €24bn of loans to NAMA; AngloIrish Bank, €28bn; Bankof Ireland, €16bn; EBS Building Society, €1bn; and Irish Nationwide Building Society, €8bn.
