Valad Property Group, the Australian group which made a big push into Europe before the credit crunch, has restructured its European business and created a joint venture with Bank of Scotland.
The three-year 50,50 vehicle called the Diversified UK and European property joint venture provides for Valad to inject most of its UK and European assets into the partnership, while Bank of Scotland will inject some assets and associated liabilities.
In a statement, the Sydney-based firm said it would continue to manage its European funds business and will provide management services to the new joint venture.
The creation of the JV is a key part of Valad's attempts to put its business on a more secure financial footing. In the run up to the credit crunch, it dramatically increased assets under management in Europe, principally by taking over property management group, Scarborough.
Under the terms of the new JV agreement, Valad is providing £230 million of European assets (€268 million; $377 million) and £373 million of associated liabilities as well as £187 million of joint ventures and investments. Among the assets is its investment in the Crownstone European property fund, which had a value of €50 million as at December last year. A contingent liability to the German Aktiv Fund has been cancelled.
Bank of Scotland is providing a banking facility of £66 million of fresh undrawn capital to help fund activities. However, profits made by the joint venture will be used to pay debt. That would include profits should Valad choose to sell its entire European operation.
The news follows an agreement Valad struck earlier this year in the Asia Pacific region to extend a financing facility.
The firm will now concentrate on how to restructure £36 million of a deferred debt repayment relating to Scarborough, which it took over at the top of the market in 2007 for about £850 million. That debt is due to be repaid in September this year.