The market has reacted with scepticism to allegations that Royal Bank of Scotland’s property division has bought properties at knock-down prices.
Sources that have worked alongside the bank’s property restructuring division, West Register, said that in their experience the bank only acquired assets through the open market.
One source said West Register had to go through the “torturous process” of commissioning ?valuations before making a bid for a property to ensure that it would be paying market value.
A series of allegations were made in a report published this week by businessman Lawrence Tomlinson, which heavily criticised activity by the bank’s global restructuring division.
The report, Banks’ Lending Practices: Treatment of Businesses in Distress, said that RBS had “forced businesses into financial trouble, only to profit from their distress… and ultimately seizing their assets to swell its own vast property empire”.
One of the main mechanisms by which the bank was accused of engineering a default and transfer to business support was through revaluations.
Tomlinson, who prepared the report for business secretary Vince Cable, said a reassessment of loan to value “appears to have been used on frequent occasions to put business in to default of their loan agreements”.
He said because valuation was “an art, not a science” it was easy for valuations to be manipulated, especially in circumstances of a quick sale, and raised concerns about conflicts of interest between valuers wanting ongoing work from banks.
He added that West Register presented an additional incentive for “these types of valuations and fire sales”, claiming there were “multiple accounts” of the division buying properties at a cut price.
bridget.o’connell@estatesgazette.com
