RBS has taken its time in dealing with its legacy of bad property debt. In stark contrast to Lloyds, which was the dominant seller of loans for much of 2011-2013, RBS only really got started towards the end of last year.
While its deleveraging strategy has come in for fierce criticism from all sides, the bank is finally basking in the glow of selling into a rapidly rising market.
Its preliminary half-year results, issued at the end of last week, showed a surprise doubling in projected pre-tax profits to £2.6bn. The announcement did not break down full divisional performance, but it is clear that real estate had a sizeable role to play in the better-than-expected results.
The group’s bad bank, RBS Capital Resolution, which was handed more than £10bn in bad real estate loans at the start of this year as well as billions in corporate loans, has sold off £8bn of assets so far and expects to have shrunk from £29bn to £15bn by the end of the year.
It even achieved a ‘profit’ of £128m in the second quarter of this year after selling some properties that had been heavily written down for more than the value at which they were being held on its balance sheet.
The overall cost of RCR’s sell-off is now expected to be more like £2.5bn between 2014 and 2016, instead of the £4.5bn originally budgeted.
The sell-off also includes all the assets held by West Register, which RCR plans to wind down completely by 2016.
The £2.6bn division, which bought properties in the open market that were being sold by receivers or administrators to underwater RBS borrowers, has already worked through a significant portion of its £900m UK portfolio.
So although chief executive Ross McEwan warned that the latest positive results would be followed by more “bumps in ?the road”, there is every reason for the property teams to be feeling cheerful.
Here Estates Gazette pieces together the biggest property sales achieved by RBS in the year to date.
On the market
Project Mansell, Project Achill, Project Herald, Silverbird What are they? Mansell is expected to come to market this summer comprising €600m (£475m) of Ulster Bank loans. Achill is already on the market and comprises €1.1bn of Ulster Bank loans. Herald is 550 shared-ownership flats in 14 UK buildings owned by AHL subsidiaries that went into administration early this year. Silverbird is 26 UK regional properties put together by West Register which are being marketed for £87.7m.
January 2014
PROJECT SAPPHIRE
What was it? An industrial portfolio bought by West Register from multiple borrowers that comprised 28 single-let sheds.
Who bought it? US hedge fund Varde Partners went under offer to buy the portfolio for £65m at the end of last year, completing the deal in January.
January 2014
HEARTLANDS
What was it? A seven-acre site with planning permission for 88 new homes between Glasgow and Edinburgh.
Who bought it? RBS Real Estate Asset Management sold the site to Bellway at the start of this year and is now working on plans for a further 90 acres of development at Heartlands. The remaining parcels of residential and commercial land will be brought forward for development by RBS before being sold to commercial developers and housebuilders.
May 2014
BANKSIDE HOUSE
What was it? Bankside House, 107 Leadenhall Street, EC3, is a 1930s art deco City of London office block that was bought by RBS Real Estate Asset Management from receivers to City Site Estates subsidiary Woodvale for £37.5m in 2012 and subjected to extensive asset management initiatives to boost its value.
Who bought it? London Oriental paid close to £60m for the building, beating the £55m guide price set by Knight Frank.
May 2014
PROJECT BUTTON
What was it? A €715m (£565m) portfolio of Ulster Bank loans to borrowers including the Cosgrave Group, Corbo Properties, Monahan, Cleveland Investments and James Stanley.
Who bought it? US hedge fund Davidson Kempner has bought the €370m of loans held by the Cosgrave Group, as well as the £77m of loans issued to Belfast-based Corbo Properties which it bought in conjunction with Kennedy Wilson and Deutsche Bank.
June 2014
SPINNINGFIELDS
What was it? RBS’s 500,000 sq ft Manchester office campus, owned by four SPVs controlled by Matrix Securities, before their administration in April. RBS financed the buildings on behalf of the SPVs.
Who bought it? M&G Real Estate was selected as preferred bidder by EY in June after agreeing to pay £320m for the buildings.
July 2014
PROJECT BLADE
What was it? Working with Delancey, RBS has begun selling the remaining assets from Glenn Maud’s 12-strong Blade portfolio, including the East Kilbride shopping centre, the Mander Centre in Wolverhampton, the Brooklands retail park near Cardiff and three Total Fitness gyms in Bootle, Huddersfield and Whitefield. The original portfolio was financed with a £900m RBS loan.
Who bought it? Orion Capital Managers is under offer for the £180m East Kilbride centre and Benson Elliot is under offer to buy the Mander Centre for £50m.
July 2014
PROJECT SWALLOWTAIL
What was it? RBS led the sale of eight retail properties it had financed for John McGuckian’s and Ken Cheevers’ Abbey Group and Foyleside Group. The process raised £735m, recouping around £550m in loans written by Ulster Bank.
Who bought it? The Crown Estate paid £350m for Fosse Park; NewRiver Retail and PIMCO paid £140m for Priory Meadow, the Abbeycentre, and The Avenue; Kildare Partners paid £130m for Foyleside and Forestside; Standard Life paid £72m for Palace Exchange; and Kennedy Wilson Europe Real Estate paid £44m for The Marshes centre.
jack.sidders@estatesgazette.com
