Loan sale or enforcement

LPA Appointment and/or the sale of loans

We examine the options open to Banks to take control and exit their NPL’s once the possibility of a consensual work out is no longer an option. There are two main exit routes for the originating lender and we consider both asset sales and loan sales and our experiences of each. 

The conclusion is that the best results are obtained when the preparation is the same even if the final execution varies.

Large scale loan sales have been used for a number of years as a tool for swiftly deleveraging NPLs or non core loans.  Typically these sales have been initiated as part of a wider business strategy, and the maximisation of  granular assets (and the detailed decision making and grunt work involved)  has been a secondary consideration to the speed of deal transaction.  The pricing has been based on property valuations, but with a very limited opportunity to interrogate, carry out inspections or understand the strategy for deleveraging on an individual basis.  These loans are marketed as loans and pricing is expressed as a discount to the original loan amount.

At the other end of the spectrum are those properties which are marketed as property transactions, but for a variety of reasons end up being executed as loans.  The buyers here have generally been through a bidding process, but have priced the deal on the basis of the underlying real estate.  The  ultimate pricing is then  adjusted to reflect any extra costs or savings such as SDLT.

Our team have worked on a number of loan sales in the last 12 months. We are not competing in the high volume large scale portfolios, but are looking at situations where loan sales and assets may offer similar realisation, reflecting minor variations on the value of the underlying assets. 

We are obviously looking to maximise the traditional advantages of the LPA appointment and enhance these by giving a loan purchaser the secure platform of effective economic ownership which minimises the costs of asset management and the ability to fund further improvements, whilst offering the originator the opportunity for early realisation.

We are running a workshop conference on the process and factors to consider:-

 

1. The first is on 3rd July at Savills, 33  Margaret Street London W1, when we will consider building a platform for the sale, with appropriate data e-rooms populated with Property Due Diligence for property sales, borrower refinancing / DPOs and the sale of loans secured on property assets.  We will also consider the pricing of Swaps and whether these need to be broken.

We will shortly send you an invitation.

2. In September, at a further workshop, we will be considering the marketing and the execution of the transaction, with the risks and timescales for each route. 

 

In the last 12 months we have worked on a selection of  loan sales that include:

Bristol City Centre mixed use part built workout – Two German banks sold their loans on a part built mixed use office, residential and leisure scheme in Central Bristol to a UK real estate fund manager.

High Street retail portfolio – We were appointed by a well known NPL buyer concluding their workout strategy on one of the first NPL sales, over a  nationwide portfolio of high street retail assets with a value of c£30m.  The properties were being marketed for sale jointly as individual assets as well as a larger portfolio.  The appointing party had a recovery deadline of the end of 2013.  A purchaser who had been considering an asset portfolio purchase ultimately transacted a loan purchase in a much shorter timescale. 

Retail & mixed use portfolio – A recognised property and asset management regime was put in place including regularising existing occupations, re-gears, new lettings of vacant space, repair works, rent and arrears collection and, service charge reviews.  Suitable property information was therefore created and a number of assets were sold.  The combination of good property information and a reduction in debt following the sales  enabled the borrower to refinance the remainder of the portfolio in full including all charges and penalty interest.
 
We have highlighted the main similarities and the differences between the two exit routes in the attached link.

We would be happy to elaborate in person at your offices.

 

 

 
 

Key contacts

Julian Clarke FRICS, FNARA

Julian Clarke FRICS, FNARA

Director
Development & Regeneration Recoveries and Receivership

Savills Margaret Street

+44 (0) 20 7409 8743

+44 (0) 20 7409 8743

 

Kevin Mersh FRICS, FNARA

Kevin Mersh FRICS, FNARA

Director
Recoveries and Receivership

Savills Margaret Street

+44 (0) 20 7409 8184

+44 (0) 20 7409 8184

 

Matthew Nagle MRICS, FNARA

Matthew Nagle MRICS, FNARA

Director
Recoveries and Receivership

Savills Margaret Street

+44 (0) 207 409 8898

+44 (0) 207 409 8898

 

Annabel Sutherland MRICS, RIBA

Annabel Sutherland MRICS, RIBA

Director
Recoveries and Receivership

Savills Margaret Street

+44 (0) 20 7409 9981

+44 (0) 20 7409 9981