Bank ponders whether to sell or hold on to inherited properties

Published on Friday 1 October 2010 14:25

Following the takeover of HBOS last year, one of the biggest issues to face Lloyds chief executive Eric Daniels was how to deal with the vast property loan book.

A string of HBOS-backed companies including Kenmore, Kilmartin, Heritor's and now Elphinstone have been placed into administration but the bank is also considering holding on to some of the assets itself.

Earlier this year, Lloyds directors sanctioned a plan to create a special vehicle that would house property assets against which the bank had previously extended loans.

That vehicle, called Tennyson, is now understood to be up and running under the management of Mark Collins, the former chief operating officer of Land Securities who was drafted in to sort out the mixed bag of loans inherited from the takeover.

It is believed that Collins, who is based in London, will consider transferring assets to Tennyson when a restructuring deal cannot be agreed.

However, sources say the bank will only pursue this option if it believes it can unlock greater value from the assets at a later date rather than selling them at current market prices.

Property agents predict Collins and his property solutions team are likely to assess interests south of the Border first.

A spokesman for Lloyds Banking Group confirmed the vehicle had been given approval by directors but could not say it if was now active in the market.

Royal Bank of Scotland already has a similar property vehicle, named West Register.

A string of HBOS-backed interests have recently been put on the market as Lloyds accelerates its disposal of property assets. Last month it emerged that 100 million worth of luxury rental flats previously owned by Heritor's were put up for sale.

It is understood the flats, situated in some of Scotland's most sought-after addresses such as Edinburgh's India Street, have attracted strong interest from potential buyers.