Banks 'To Dispose Of Distressed Stock Slowly'

Financial institutions in the UK will sell off the assets in their distressed property loan books gradually...

Financial institutions in the UK will sell off the assets in their distressed property loan books gradually, which will reduce the impact that the introduction of additional stock has on the country's commercial property market. This is the assertion of Sarah Cockburn, property fund manager at AEGON Asset Management. She stated that it is "clear that many banks are seeking to reduce the size of their property loan books".

Ms Cockburn predicted that Lloyds Banking Group, RBS and Ireland's National Asset Management Agency are likely to be among those offloading the greatest amount of distressed property stock. However, she expects the process to be carried out over a long period of time because the organisations do not want to devalue their portfolios by flooding the market with assets.

Property investors may be interested in the opportunities open to them for buying up some of this stock, with Ms Cockburn explaining that secondary and tertiary assets will make up the bulk of the portfolios on offer. "We expect to see banks increasingly packaging up saleable assets into portfolios towards the end of this year and early 2012," she commented.

Earlier this month, the Financial Times reported that Lloyds Banking Group may enter a joint venture with Green Property in a bid to recover some of the value from its distressed Irish real estate. The news provider noted that the institution has "almost 12 billion GBP of outstanding loans that were used to buy commercial property" in the country.

According to Ms Cockburn, there is significant demand among investors for this kind of asset class and she noted that interest is "predominantly from property companies and opportunity funds who have been waiting for the chance to acquire the high returning properties". She added that investors who are happy to put their money into high-quality secondary real estate are likely to see "better performance prospects" than those who concentrate solely on prime assets.

- Wednesday 24 August 2011

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