Ireland’s booming property asset management business; Lloyds and Green Property tie-up

It’s been long recognised that there are winners and losers in the present downturn/recession/depression; whilst the majority of the population is suffering from reduced employment, unemployment, lower gross wages, higher taxes, some sectors have been doing okay, the old defensives like the public sector for example and the so-called sheltered professions of doctors, lawyers, pharmacists. Some sectors are booming, receivership obviously, but property asset management is coming of age in the country as well.

NAMA is the biggest specialist property asset manager operating in the country, though arguably all of the banks are managing their loan assets and seeking to maximise the value of those loans against the backdrop of a property market that has tanked – 64% down from peak for commercial real estate, 30-60%+ for residential property depending on what source you consult and 75-90%+ for development land. With such a collapse in property values, many loans are inevitably distressed and require “active management” so as to avoid fire sales.

After NAMA which has to manage loans of €73bn at par value – for which it paid €31bn – is Certus the asset management company initially set up to manage loans left behind by the Lloyds banking group, or more specifically the local brands within that group of Bank of Scotland (Ireland) and the Halifax. Certus is understood to be managing some €27bn of loans. Lloyds seems to have been acting as a pathfinder in seeking current price discovery in the present Irish market through high profile sales through the two Allsop/Space auctions.

Lloyds itself however is also managing a residue of Irish commercial real estate loans and Property Week today reports that it has engaged Green Property Group to manage a portfolio of (presumably foreclosed) property. A figure of €1bn is cited by Property Week but it is not clear what this exactly represents. Nor is it clear what specific assets will be managed by Green, though Property Week does refer to “retail, office and industrial assets”.

Last year Green announced a tie-up with US investment group, David Bonderman’s TPG Capital which was said at the time would make available nearly €1bn for investment purposes. Green was subsequently at an advanced stage of negotiations to acquire the €100m+ Royal Liver portfolio of properties in central Dublin late last year when negotiations broke down, apparently as a result of the IMF bailout of the country.

In 2009, Green acquired a major portfolio of property from AIB following the uncovering of a fraud in loans that AIB had previously advanced to Achilleas Kallakis.

Green Property was established in 1965. The company engages in property investment and development. It was floated in 1985 and listed on both the Dublin & London Stock Exchanges. In 1993 the company had a market capitalisation of only €10m. In 2002 the company was taken private in a management buyout led by Englishman, Stephen Vernon and backed by Merrill Lynch and Bank of Scotland. At the time of the buyout the market capitalisation was over €1bn. Pat Gunne is its present managing director. Its most prominent asset inIrelandis Blanchardstown Town Centre shopping precinct.

According to Property Week, “It is expected that retail, office and industrial assets will all fall under Green’s “active asset management” remit to “to improve the assets’ cashflow, improve rental levels and maximise sale proceeds in the medium term”” That sector of the economy devoted to improving asset cashflow, rental levels and maximizing sale proceeds in the medium term is set to become quite crowded, especially as NAMA begins its own “active asset management”.

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