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GE scoops £2bn in UK debt deal

After a decade, the real estate division of GE has new ‘belief’ in Uk property debt.

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.

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