Citi and Morgan Stanley are financing Lone Star’s £2.2bn purchase of Aviva’s Project Churchill, which comprises a portfolio of loans and real estate assets valued at around £2.4bn.
The two banks will each provide £750m, five-year facilities to Lone Star, which saw off Apollo Global Management and Cerberus Capital Management to win the portfolio. Both banks are expected to syndicate part of their loans.
It is the second significant financing from Citi this year for a UK portfolio containing non-performing loans. In February, it provided £500m to Cerberus for its purchase of a £1bn non-performing loan portfolio from Nationwide bank.
The Project Churchill portfolio contains more than 1021 loans made on properties such as offices, retail, industrial, car showrooms and care homes across the UK. The portfolio is made up of non-performing , sub-performing and performing loans as well as real estate assets.
Performing loans, with an average loan-to-value of 80%, make up about half the portfolio. The unpaid balance on the loans is valued at around £2.7bn.
In a statement confirming the sale, Aviva said: “In line with our focus on maintaining a disciplined capital management and investment policy, we can confirm that Aviva has today agreed to sell a portfolio of non-core commercial mortgage and real estate assets to Lone Star Real Estate Fund IV. These assets represented less than 1% of Aviva plc’s gross assets as at 30 June 2015.”
Lone Star’s purchase, made through its Real Estate Fund IV, completes Aviva’s workout of its non-core real estate division.
It follows Apollo’s purchase of Aviva’s £400m Project Moon in November 2013, Kennedy Wilson Europe’s acquisition of the £500m Project Bridgett and Tristan Capital’s purchase of the £153m Project Tree.