AMERICAN private equity giant Cerberus has agreed to buy two portfolios of distressed property loans for £2.3bn as it looks to up its exposure to the UK and Irish markets, it emerged yesterday.
Cerberus struck deals to take on a £1.2bn portfolio of commercial property loans from National Australia Bank and a £1.1bn portfolio of Irish commercial real estate loans from RBS. The deals follow quickly on the heels of the US buyout specialist’s £680m purchase of Nationwide’s UK commercial property loan portfolio last week.
With banks looking to de-risk their loan books from the sector, private equity firms and hedge funds have become increasingly keen on the long-term recovery prospects of debt secured against regional real estate assets. Mathieu Roland-Billecart, real estate corporate finance partner at Ernst & Young, told City A.M.: “There have been quite a lot of transactions of this nature over the last four years. It’s driven by the banks trying to reduce their exposure to the real estate market.”
“There is risk to it. It’s more risky than buying property, because you’re buying the loan and therefore you need to convert to the property. So there’s more skill in it, but it’s well within the capabilities of the large private equity groups,” he added.
Along with buyout rivals Lone Star, Oaktree and Kennedy Wilson, the Steve Feinberg-founded Cerberus has been one of the biggest acquirers in the sector. “Cerberus has been one of the most active buyers of this kind of portfolio. It gives them an ability to complete quite large transactions and provide quite a strong risk-adjusted return with some good exposure to the real estate sector,” said Roland-Billecart.
Commenting on the deal, Cerberus told City A.M.: “We look forward to managing this important portfolio.”