Lone Star has won the much anticipated £2.7bn Aviva Churchill Portfolio.
The US private equity giant won the portfolio despite stiff competition from rival Apollo, which had reached the final two after Cerberus dropped out of the process following second round bids on 24 August.
Lone Star is being supported by Citi and Morgan Stanley’s real estate finance businesses in its pursuit of the portfolio of loans from the insurer, and both will probably look to syndicate the loan in the coming months.
Losing bidder Apollo was being backed by JP Morgan’s finance team.
The final price the firm paid for Churchill is estimated to be close to £2.2bn, only a slight discount on the £2.4bn book value of the assets that underpin the loans.
Lone Star’s winning bid bought it a substantial portfolio of loans secured against assets around the UK, including Manchester’s House of Fraser Store and a Rolls-Royce depot in Derby.
The loans in the portfolio were originally made against a diverse set of commercial properties, including care homes and offices. About 50% are performing loans with an average loan-to-value ratio of 80%. This means the underlying value of the assets in this part of the portfolio alone are in excess of £1.5bn.
The non-performing portfolio has an unpaid balance of around £1.25bn of loans that are past their expected maturity.
Deloitte and JLL are acting for Aviva; EY is acting for Apollo.
