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eric pebble

Lloyds Is Not Keen For The World To Know It Is Trying To Offload

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The size and sensitivity of the issue can be illustrated by making two points. Each bank now controls more real estate than the entire listed property sector — £150 billion between them. But the underlying assets have shrunk by at least 40% in value since many of the loans were granted.

A senior real estate banker says the “mark to market†value of these loans is under £100 billion.

If Lloyds and RBS sold today and took a £50 billion hit, they would be bankrupt. That isn't going to happen. So, what is?

Eric should have posted this little gem.

Guess who gets to foot the bill for this, and guess who now owns more real estate than the entire property sector......

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Eric should have posted this little gem.

Guess who gets to foot the bill for this, and guess who now owns more real estate than the entire property sector......

This is all part of the gubberment's plan.

Cheap commercial land gets taken over by the public sector at rock bottom prices and we start a round of public sector housing being built. The investment in jobs etc. allows the economy to recover. All the while supply increases to the residential property market and houses become cheaper for all.

You've got to hand it to GB, it's very clever.

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The bank's honour was defended by Nick Leslau of Max Properties. But, he said, “the majority of what banks have is crap. In fact it is beyond crap. This stuff is going to take years to work outâ€.

:lol::lol::lol:

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This is all part of the gubberment's plan.

Cheap commercial land gets taken over by the public sector at rock bottom prices and we start a round of public sector housing being built. The investment in jobs etc. allows the economy to recover. All the while supply increases to the residential property market and houses become cheaper for all.

You've got to hand it to GB, it's very clever.

Thank you. What's the best way to get coffee out from between the keys?

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A senior real estate banker says the “mark to market†value of these loans is under £100 billion.

If Lloyds and RBS sold today and took a £50 billion hit, they would be bankrupt. That isn't going to happen. So, what is?

so they ARE actually bankrupt...just on commercial property loans....thats why they need QE...just in case they are forced to sell for whatever reason.

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Definitely worth a read.

Grosvenor won't say. Lloyds won't say. But, rest assured, the bank is negotiating with the Duke of Westminster's property company to take over a few of the bankrupt projects that have left Lloyds with a £60 billion real-estate headache.

Grosvenor ducked for cover when asked. Lloyds came out with “not being able to comment on our relationshipsâ€. Why so shy? Because Lloyds is not keen for the world to know it is trying to offload hundreds of repossessed commercial developments.

The strain is showing. One of the UK's best known developers, Mike Slade of Helical Bar, accused Lloyds of being in a “complete shambles†at a breakfast debate at the Dorchester.

The bank's honour was defended by Nick Leslau of Max Properties. But, he said, “the majority of what banks have is crap. In fact it is beyond crap. This stuff is going to take years to work outâ€.

The Duke's business is in fact only one of dozens of property companies being asked to tow away and mend wrecked loans and their attached properties. RBS is doing much the same with many half-filled shopping centres and quarter-build development sites lying in its £90 billion loan book.

The size and sensitivity of the issue can be illustrated by making two points. Each bank now controls more real estate than the entire listed property sector — £150 billion between them. But the underlying assets have shrunk by at least 40% in value since many of the loans were granted.

A senior real estate banker says the “mark to market†value of these loans is under £100 billion.

If Lloyds and RBS sold today and took a £50 billion hit, they would be bankrupt. That isn't going to happen. So, what is?

For a start an army of property valuers, bankers and lawyers have spent seven months checking the shaky loans advanced by Lloyds and RBS. This huge exercise is part of the due diligence for the government Asset Protection Scheme, which both of the banks agreed to join in January, when their world was in peril.

This insurance scheme is not just about property; it was set up to cover £580 billion of general assets from losses incurred after 1 January 2009. At the time RBS agreed to pay a £6.5 billion premium and take the first £19.5 billion of losses. Lloyds agreed similar terms.

Now both of them are not so sure. The APS terms increase state control and set demanding lending targets. The banks smell an upturn in the air. Commercial property prices have stabilised. They may go up. If that happens, that potential £50 billion loss starts to evaporate. So why pay a multi-billion insurance premium?

So the two banks are fighting hard to soften the terms of the APS. Details were due to be announced by the end of the month. But all concerned are in the wet-towel stage of negotiating with the Treasury. One involved remarked he had a “four-hour meeting and only agreed two clausesâ€.

But the Treasury say that “as far as we are concerned the protection scheme goes onâ€.

Today's best guess is that a scaled-back APS will be announced before the end of the year.

“The APS may stabilise the market, but it will paralyse the market,†warns Nigel Hugill, former chairman of Lend Lease Europe. Hugill argues that until real-world prices rise to match the unreal values that banks currently hold property at they won't sell. “That could take years.†Lloyds and RBS will tell you they are trying to manage a delicate balancing act.

On the one hand, the sheer scale of the problem means that they need to bring in partners to take over and manage a proportion of their repossessed developments.

On the other, they dare not risk a fire sale. So, slowly, slowly — and as secretly as possible — is the strategy.

A silver lining for one of West End's worst deals

This week private-equity group Bain Capital agreed to lease 37,000 sq ft of space in Devonshire House on Piccadilly for £90 sq ft. This tale may sound like the property equivalent of “small earthquake in Chile, nobody killedâ€.

But it has perked up West End property agents no end. They will now be quoting this £90 figure endlessly to anyone who wants to rent space.

The truth is Bain was going to pay £120 sq ft before the collapse of Lehman last September. A further truth is that Bain is paying nothing for two and a half years. On top of this the landlord, American Steven Witkoff, is paying for the office space in the former home of the Dukes of Devonshire to be smartened up.

Even so, Witkoff will be relieved that Bain has signed a 15-year lease. Because the purchase of the 183,000 sq ft building for £282 million from Land Securities in March 2007 turned out to be one of the worst deals ever done in the West End. Witkoff and his partner, US group DCD, paid almost 25 times the annual rent roll of £11.5 million for the former Land Securities HQ. Today the building would be very lucky to fetch 16-17 times the annual rent.

In other words, the former Land Securities HQ is worth almost £100 million less than in 2007. Let's say £180 million. Guess what? That is about the size of a loan Lehman Brothers gave Witkoff and his partners to help buy Devonshire House: a loan due to be repaid in 2014. The one person to come out smiling is Francis Salway, chief executive of LandSecs.

Just three months after turning the company into a real estate investment trust, and thus escaping the need to pay capital gains tax, the former fund manager sold a building his company had owned since 1955 for more than a quarter of a billion pounds.

Unrepentant bankers are back on top

TO the waterfront offices of lawyers SJ Berwin hard by Southwark Bridge on Wednesday. Here a couple of hundred real estate bankers gathered after a shocking year at a conference organised by the Association of Property Bankers.

The mood of the day will come as a bit of a shock to Alistair Darling and all those who feel commercial property bankers are the central figures of blame for the Great Crash of 2007-9.

Not a single repentant came to the podium and begged forgiveness. In fact most looked rather perky. The talk was largely technical, of “switchable cap swap rates†and CMBS roll-over. (Don't ask). The mood was one of mild optimism, of business getting back to normal.

Lesley Chen-Davidson, a bank customer at property company Delancey, illustrated the return to normality with a well-argued plea for bankers to stop ticking boxes and relax loan terms a little. But Peter Denton of German bank West Immo “just didn't want to do itâ€.

Our refusnik then revealed the real reason why bankers are feeling brighter: “Isn't it wonderful to go to a meeting and say this is what I think', rather than be told by the borrower there are 20 other bankers ready to lend on our terms if you don't want to.â€

Forget about 2007-2009; remember the humiliations of 2004-2006. We are the masters again.

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Each bank now controls more real estate than the entire listed property sector

Is astounding.

And now we know why they are so desperate to prop up the residential market.

Funny form of Capitalism though - rigging the game in favour of people who have made really bad decisions, gone bankrupt, etc. If Capitalism was working then these properties would be sold off at a fraction of their perceived price - their real price - to new boys and girls coming in with cash ready to build their own empires.

From what I can see the System is merely supporting failed rich people which is not how Capitalism is supposed to work. These feckers fecked up, let them go bust, let them lose their Egoes and their riches and let new people take over.

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I've been banging on about commercial property for ages. It's always been a huge undealt with issue.

Are they having to pay full business rates on these empty properties as well ?

My guess has always been they keep the current insolvent landlords in place and leave then liable for the rates - which obviously they won't be able to pay. The banks will only officially foreclose when they have some sort of exit strategy lined up - they will internally accept the loan has gone bad though but certainly won't mark-to-market for accounting purposes. As I've posted before, they'll adopt a hear no evil see no evil approach.

Where it all goes spectacularly wrong for the government is if they own banks who own rateable property and, in effect, become the payer and receiver of their own taxes.

A senior real estate banker says the “mark to market†value of these loans is under £100 billion.

If Lloyds and RBS sold today and took a £50 billion hit, they would be bankrupt. That isn't going to happen. So, what is?

so they ARE actually bankrupt...just on commercial property loans....thats why they need QE...just in case they are forced to sell for whatever reason.

Commercial property always had the potential to upset the whole apple cart. What hasn't really been discussed by them is if the hole can be dug out of. A lot of the shopping centres will become worthless and won't ever be needed again. A large part of the market will simply never bounce back no matter how long the banks sit on the loans pretending they might eventually be worth something if they wait long enough.

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Commercial property always had the potential to upset the whole apple cart. What hasn't really been discussed by them is if the hole can be dug out of. A lot of the shopping centres will become worthless and won't ever be needed again. A large part of the market will simply never bounce back no matter how long the banks sit on the loans pretending they might eventually be worth something if they wait long enough.

In my part of the World shopping centres have been set up everywhere - you know, the usual with a Boots, a Next, a JJD Sports, some fast food chain, other clothes and shoe shops, mobile phone place, a supermarket and so on.

There are several all within 5 miles of me so I have way too much choice and surely all of these cannot survive as people stop buying. I believe this is the case right across the UK.

I did an IT contract a few years back for a water utility company and was told that their major source of income now was from buying land, developing these shopping centres and then either selling them complete or sitting back and collecting the rent. They were doing this in the UK and Eire and had begun to move into the EU. I wonder how much sh*t they are in now?

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In my part of the World shopping centres have been set up everywhere - you know, the usual with a Boots, a Next, a JJD Sports, some fast food chain, other clothes and shoe shops, mobile phone place, a supermarket and so on.

There are several all within 5 miles of me so I have way too much choice and surely all of these cannot survive as people stop buying. I believe this is the case right across the UK.

I did an IT contract a few years back for a water utility company and was told that their major source of income now was from buying land, developing these shopping centres and then either selling them complete or sitting back and collecting the rent. They were doing this in the UK and Eire and had begun to move into the EU. I wonder how much sh*t they are in now?

St. David's in Cardiff being a case in point. It's like they've just finished putting the roof on a kennel for a dog that died last year.

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The bank's honour was defended by Nick Leslau of Max Properties. But, he said, “the majority of what banks have is crap. In fact it is beyond crap. This stuff is going to take years to work outâ€.

Interestingly this chap has previously appeared on C4's Secret Millionaire (funny how so many were property millionaires) and has just turned up like a bad smell in Beeb 1/Jo Malone's High Street Dreams as some sort of business guru.

.

Edited by daiking

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