Apollo Global buys Irish loans

Lloyds Banking Group has sold a portfolio of distressed property loans for £149m as interest in Ireland’s real estate increases.

Apollo Global Management, the New York private equity, credit and real estate firm, has agreed to buy a package of distressed Irish property loans from Lloyds Banking Group for £149 million (€185 million; $237 million).

The agreement comes at a time when several private equity firms are beginning to invest in real estate-related assets in the country which is showing signs of recovery following an €85 billion International Monetary Fund bailout package in November 2010.

In a short statement, Lloyds Banking Group, which is headquartered in London, announced to the London Stock Exchange that it had agreed the sale with the US firm and that the gross assets of the loans were £1.4 billion.

It explained it was in line with a strategy to “de-risk” its balance sheet and reduce its exposure to non-core assets. The bank did not reveal which part of Apollo’s business was making the investment – the real estate, credit or private equity division. Apollo was not immediately available to comment at press time, but the deal is expected to close in the first quarter of 2013 and is understood to be made on behalf of its European Principal Finance Fund (EPF).

Financial details of the transactions suggest that the loans have been bought at a sharp discount of nearly 90 percent, though Lloyds itself pre-emptied any concerns about the transaction affecting its own stability. It said the transaction was not expected to have a material impact due to the significant impairment provisions held against the portfolio. The sale proceeds will be used for general corporate purposes,” it added.

The sale was dubbed Project Lane by Lloyds and underbidders reportedly included Dallas-based private equity real estate firm Lone Star Funds. There was also an auction of a sub-portfolio dubbed Project Pittsburgh, which attracted a successful from CarVal Investors and Centerbridge Partners with a face value of around €350 million.

Just last week, PERE reported how interest in Ireland’s economic stability was driving real estate deals. Kohlberg Kravis Roberts & Co (KKR), the New York firm,  has reportedly joined forces with London’s Delancey Estates to buy the headquarters of financial services giant State Street and an adjoining site in an area of south Dublin.

Meanwhile, The Blackstone Group is seeking to acquire Dublin’s Burlington Hotel for around €65 million.

In addition to the €271 million of commercial investments in the first nine months of this year, there is more than €700 million of property on the market or under offer, CBRE says.