By Alex Frew McMillan
HONG KONG, June 1 Private equity property funds
run by Blackstone and Morgan Stanley have agreed
to pay A$640 million ($621 million) to acquire a A$1.9 billion
portfolio of distressed property loans in Australia from a unit
of Lloyds Banking Group, two sources with knowledge of
the transaction said.
The deal is the latest in a series of portfolio sales of
loans extended before the global financial crisis that then went
bad when property prices plunged. Morgan Stanley and Blackstone,
two of the largest property funds, are among a group of global
real estate investors looking to pick up loans on the cheap as
sellers seek to shed debt and store cash.
The Blackstone-Morgan Stanley consortium outbid several
high-profile rivals, one of the sources said on Friday,
including Australian investment bank the Macquarie Group
, another investor team made up of Goldman Sachs,
Brookfield and Singapore sovereign wealth fund GIC, and
the hedge funds Pacific Alliance and Elliot Associates.
The Blackstone Real Estate Property Fund VII and the Morgan
Stanley Real Estate Fund VII, backed by financing from Deutsche
Bank, are acquiring the distressed debt at around 34
cents on the dollar.
Lloyds put the Australian portfolio on the block in March,
looking to wind down its non-core assets. It had inherited the
assets when it bought HBOS in 2008, including the Bank of
Scotland and its international unit, BOS International.
The sale of this portfolio follows Lloyds's move to offload
A$1.7 billion in distressed property loans to Morgan Stanley
and Goldman Sachs in November last year.
Nearly all the loans are in default, one of the sources
said, explaining the deep discount on the purchase. The bulk of
the debt is on property in New South Wales, Victoria and
Queensland, including residential property, offices, retails,
hotels, a marina, and a retirement village.
The deal is being signed on Friday, the source said. Morgan
Stanley and Blackstone were not immediately available for