IBRC to test market with sale of loan books worth €8bn

Nearly €8 billion worth of loans held by the Irish Bank Resolution Corporation on properties in the United Kingdom and Germany are to be put on the market in late October, though markets doubt that they can be sold.

Minister for Finance Michael Noonan imposed a cap on the discounts that can be offered by KPMG Ireland to potential buyers – a 4.5 per cent discount in the calculation of future cash-flows, or just a 2.32 per cent discount across all loan asset valuations.

Market doubts
However, private equity funds, hedge funds and property investors, according to the London-based CoStar News, have so far expressed doubts about the planned sale, which could leave Nama having to take the loans on board if they cannot be sold.

Investors point to the failure to sell Allied Irish Bank €120 million Project Pivot book of Irish loans last year, even though it was put on the market with a 60 per cent discount. Neither of the two bids that were finally entered went above that reserve.

The loan books now due to go on sale in late October or early November include a €6 billion portfolio of British commercial loans, and a €1.5 billion mostly German portfolio, though the particular loans included have not yet been chosen.

The London property market is being buoyed by an influx of foreign investment, though lower-quality shopping centres in regional British towns and cities are regarded as not being attractive to investors, unless the price is right.

However, the UK portfolio will include some choice British properties, including a half-stake in the leasehold of the Whitgift Centre in south London, which is currently subject to a £1 billion redevelopment.

Timetable
Meanwhile, it will also include the Royal Exchange in London, which was bought by Anglo Irish Bank's private banking division in 2005 during the height of the boom.

Under the timetable set by Mr Noonan, KPMG is expected to have all its sales or transfers completed or agreed by the end of this year, though the legislation includes the caveat “or as soon as practicable thereafter”.

Nama is reluctant to take loans on board at a higher book value than the market believes, although if it subsequently does manage to do so then it may do at a price that would have attracted private buyers.

Valuation
KPMG's Kieran Wallace and Eamonn Richardson appointed Savills, Jones Lang LaSalle, Allsop & Co and CBRE last month to value the IBRC's €7.88 billion portfolio of UK commercial property loans loan book.