Oaktree Capital Management, the Los-Angeles-based investment management firm, has been picked as the preferred bidder for a £625 million (€794.4 million; $975 million) UK distressed real estate loan book being sold by Lloyds Banking Group, according to reports by the UK property press.
CoStar reported that Oaktree was understood to have beaten bids from rival US private equity investors Cerberus Capital Management, Lone Star Funds and a joint bid by Kennedy Wilson and Deutsche Bank.
Property Week reported that Oaktree is expected to pay approximately £260 million for the portfolio which would reflect a discount of about 60 percent to the face value of the loans. The price would also reflect a discount on the underlying properties latest valuation of about £310 million.
For its bid, Oaktree has teamed up with Capital & Regional, with which it has previously joined for acquisitions. The London-listed property company could provide asset management services to Oaktree in addition to assisting the firm with its bid.
According to the reports, the loan book, codenamed Harrogate, comprises between 57 and 70 loans borrowed by between 32 and 25 borrowers. The underlying properties are spread across the UK and in many regional markets where values have dropped off sharply. One of the properties, for example, is an office building on the Isle of Man, an island in the Irish Sea between Britain and Ireland.
A completed sale at £260 million would reflect a greater discount than that achieved by a private equity buyer the first time part-nationalised Lloyds offloaded a loan book – a book with a £900 million face value sold last year to Lone Star Funds at a 40 percent discount. This time around, however the assets are more distressed with some in receivership and others at unsustainable loan to value ratios currently.