by Laura Board in London | Published June 6, 2012 at 10:35 AM
The U.K.'s Lloyds Banking Group plc on Wednesday, June 6, agreed to sell an £809 million ($1.25 billion) portfolio of unprofitable Australian corporate real estate loans to a joint venture of Morgan Stanley Real Estate Investing and Blackstone Group LP.
The venture, AET SPV Management Pty Ltd., will pay about £388 million for the loans, or less than half the loans' face value,
The portfolio generated a loss of £183 million in 2011 for Lloyds, which said the impact of the disposal isn't material because of write-downs already undertaken.
Lloyds has been shedding noncore assets to make its balance sheet less risky since its January 2009 bailout, which left the U.K. government with a holding of about 41%. Lloyds said last month noncore assets as of March 31 were £128.3 billion, down from £172.9 billion a year earlier, and representing 13% of total assets.
"This is a further step in reducing noncore assets and de-risking the Lloyds balance sheet," wrote Oriel Securities Ltd. analysts Mike Trippitt and Vivek Raja, who noted that Lloyds expects to have cut noncore assets to below £90 billion by the end of next year.
David Smith, who heads Australian unit Lloyds International Pty Ltd., said in a statement that the latest loans sale "results in a cumulative 92% reduction of our real estate nonperforming loan portfolio" in Australia.
Morgan Stanley Real Estate Investing has acquired $180 billion of assets in 36 countries in its roughly 20 years of existence. It is led by co-CEOs Olivier de Poulpiquet, who relocated to Singapore from London last year, and New York-based John Klopp.
Blackstone Real Estate, led by Jon Gray, has $48 billion of assets under management.