Cerberus primed for $833m UK loan deal

Cerberus Capital Management was today tipped as the preferred bidder on the £537 million (€663 million; $833 million) Project Thames loan portfolio being sold by Lloyds Banking Group in London.

The New York-based group is said by Property Week to be atop a shortlist containing Apollo Global Management and a joint bid from California’s Kennedy Wilson and Deutsche Bank.

Lloyds, which is 39 percent owned by the UK government, has been reducing its distressed UK loan book following part-nationalisation in 2009. It had around £10 billion of real estate assets at the end of the first quarter of 2013, compared to more than £20 billion three years ago.

If a deal with Cerberus does complete, it would not be the first time Lloyds had sold assets to the firm. Earlier this year, the bank sold Admiral Taverns, the pub group behind 1,100 pubs, to Cerberus for around £200 million. At the time Lee Millstein, senior managing director at the company, described the purchase as an ideal platform with which to acquire more pubs in the UK.

The Project Thames portfolio is comprised of a reported 50 separate loans from 30 borrowers. Many of the loans have already been restructured by the Lloyds Commercial Real Estate Business Support Unit, an in-house team devised to maximize value for the bank of its legacy real estate assets. Assets that are part of the loan portfolio include the Brewery, at 52 Chiswell Street in the City of London; and four offices occupied by the insurance company Aviva.

So far, Lloyds has sold three other sizeable portfolios in deals with Lone Star Funds, Oaktree Capital Management,and Kennedy Wilson in alliance with its usual jont venture partner, Deutsche Bank.

Cerberus has just been ranked 39th largest private equity real estate platform in the world in the PERE 50 global ranking published in this month’s issue of PERE magazine.

In 2010, it raised $1.25 billion of capital commitments for its second opportunistic real estate fund, Cerberus Institutional Real Estate Partners II. It is now back in the market with the follow-up fund III which is gunning for $1.2 billion. It had raised around $580 million as of last month. Its largest recent deal was the $3.3 billion acquisition of five grocery chains comprising 877 retail stores from Minneapolis-based retail giant Supervalu. Cerberus was part of a consortium for that transaction.