RBS disposes of £1.7bn worth of real estate loans

The Royal Bank of Scotland (RBS) has disposed of £1.7bn of real estate loans made by its Irish subsidiary, Ulster Bank.

Deutsche Bank and Apollo Global Management have jointly bought a commercial real estate loan book, with a gross asset value of £1.14bn at the end of last year, for £400m.

Cerberus Capital Management purchased a portfolio of buy-to-let residential mortgages, which had a gross asset value of £549m, for £225m. And Sankaty Advisors has secured a book of business loans after paying around £80m.

All three loan books formed RBS’s Project Finn portfolio.

RBS said the carrying value of the commercial real estate loans was about £376m post writedowns. The loans generated a loss to RBS of about £70m last year and their sale is expected to return a profit of about £24m, after costs associated with the transaction are deducted.

The carrying value of the buy-to-let mortgages as at 31 December 2014 was £223m. The loans generated a loss in the region of £17m last year and their disposal is expected to generate a profit of around £1m.

All of the loans were held in RBS’s Capital Resolution bad bank, which has already disposed of £4bn of assets this year, about half of them non-performing commercial real estate loans.

It reported £11.1bn of assets in the first quarter of the year and said it would dispose of around half the remaining total by the end of 2015 – a year earlier than planned.

RBS said the disposal proceeds will be used for general corporate purposes.

In May, Sankaty Advisors and Cerberus Capital Management won two of RBS’s portfolios of distressed Northern Irish commercial property loans.

Sankaty, the US-based affiliate of Bain Capital, won Project Coney, a bundle of loans with an outstanding balance of €465m. It is believed to have paid close to the €187m market value of the properties involved.

Cerberus paid £205m for the portfolio of RBS’s subsidiary Ulster Bank’s loans in Northern Ireland, Project Rathlin, which had a face value of £1.4bn.

RBS said the sale to Cerberus was “the final material transaction for RBS Capital Resolution (RCR) in Northern Ireland”.