GE Real Estate is re-entering the UK commercial real estate debt market. The firm acquired a £2billion (€2.7 billion; $4.1 billion) portfolio of loans last month from British mortgage provider Bradford & Bingley and is eager to buy more debt. Mike Rowan, UK head of GE Real Estate, said: “We have a lot of belief in the property market.”
Though loan book investments typically offer lower returns than opportunity fund-style direct deals, a number of real estate investors are considering a drive into the debt market. This is based partly on the belief that banks and other mortgage providers will want to offload loan packages and partly because direct asset transactional activity for property investors has become more difficult. The market has become more difficult due to a number of factors such as the rising cost of debt, lower loan to value ratios being offered by lenders and a mismatch between buyers‘ and sellers’ expectations over asset prices.
Bradford & Bingley sold two thirds of its commercial real estate loan book “at a slight discount” to GE while also selling its housing association loan book to Franco-Belgian bank Dexia. According to Rowan, GE entered into two UK debt deals last year, but not on the scale of this latest acquisition. The firm started working on the acquisition in September and had secured the mandate to purchase the package late in October. The seller required a three-week timetable to close the transaction.
The package comprises more than 100 performing loans issued to “well known” UK property companies that took them in order to help finance property acquisitions rather than property development. Bradford & Bingley will continue to service the loans, though that is not a permanent arrangement, said Rowan.
For GE Real Estate it is a serious return to the British commercial property debt market after an absence of a decade. GE's entry to the UK property market was as a debt investor in 1987, but it turned to equity involvement in the mid 1990s.
Goldman Sachs' sale of Queens Moat Hotels delayed
The sale of 19 former Queens Moat Hotels by Goldman Sachs Whitehalls Fund has been delayed, according to a report. The deal with UK property fund aAIM has been delayed by the credit crunch, though the two sides were still hopeful of completing a deal, the report in The Times newspaper said on December 5. aAim is a property fund backed by Manchester United manager Sir Alex Ferguson in which some rich and famous sports stars have invested. Whitehall Funds acquired the Queens Moat hotel business in 2004 for £544 million (€752 million;$1.1 billion) at a time when it also had £670 million of debt.
Niam sells Stockholm landmark
Finnish private equity firm Niam has sold Stockholm landmark, Dagens Nyheter skyscraper, and another Stockholm city center office building, Grönlandet Södra 13), to the listed Swedish property company Fabege. The sold properties were part of a portfolio which Niam acquired from the Norwegian company Acta Kapitalförsökring in October last year. Besides Tröngkären 7 and Grönlandet Södra 13, the portfolio included three other assets, the Electrolux headquarters in Stockholm and in Lund. One of these, the headquarters of Biovitrum, was sold to PRUPIM in May this year. Johan Bergman, managing director of Niam, said: “The remaining assets in the portfolio are those that Niam can develop. We are planning to build an extension to the building in Lund, which Ericsson sublets, and to develop the Electrolux headquarters building further during 2008.”
Jelmoli takes legal action after collapsed €2bn deal
Switzerland's Jelmoli Holding has started legal proceedings to “enforce rights” which it says it has under a purchase agreement with an Israeli-led consortium. The CHF3.4 billion (€2 billion) deal with Blenheim Properties, Delek Global Real Estate and Delek Belron International collapsed in October with the buyers blaming “the change in, and continuing uncertainty of the global commercial property market.” But Jelmoli has now reacted to that decision by suing the consortium for the entire headline price plus interest due under the purchase agreement.
Harms' Global Leisure sells stake
London-based Global Leisure Partners, which originated landmark leisure deals including the $30 billion take-private of Harrah's Entertainment by TPG and Apollo Management, has agreed to sell a piece of itself to Goldman Sachs and Oaktree Capital Management. Terms of the deal were not disclosed, though GLP's co-founder and chief executive, Mark Harms, said in a statement the investment will help his firm expand globally. It will also enhance GLP's co-investment abilities, said Christopher Gagnon, president of the firm's investment affiliate, Global Leisure Capital Partners.