In a statement on Wednesday, Lloyds Banking Group announced that it was selling a portfolio of Australian corporate real estate loans to AET SPV Management, a joint venture sponsored by Morgan Stanley Real Estate Investing and Blackstone, for £388 million (or $252.4 million) in cash. The distressed property loans are reportedly valued at £809 million ($526.3 million). A Zacks Investment Research summary of the deal reports that the portfolio comprises nearly 60-70 commercial property loans in Queensland, Melbourne and Canberra.
The proceeds from the portfolio, which recorded losses of £183 million in 2011, will be used to pay down Lloyd's debt. The loans were acquired by Lloyds when it purchased HBOS in 2008, including the Bank of Scotland and its international unit, BOS International.
Dave Smith, Chief Executive of Lloyds International, said in a statement: "This transaction further de-risks the Australian business, and results in a cumulative 92% reduction of our real estate non-performing loan portfolio." British taxpayers hold a 40% stake in Lloyds.
According to a Bloomberg article, European banks are trying to sell real estate assets as they seek to meet stricter capital rules. Lloyds, which has cut more than 30,000 jobs since its 20 billion-pound taxpayer rescue in 2008, last month raised its asset-reduction plan for the year by 5 billion pounds to at least 30 billion pounds and expects to meet its 2014 target a year early.
With the acquisition, Blackstone will add to its already sizable real estate portfolio, which includes Hilton Worldwide, reported the New York Times. Last year, the firm acquired roughly 600 malls across the United States for $9.4 billion from the heavily indebted Australian company Centro Properties.
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