Distress got a lot of attention at CEDEM today, with panelists discussing its conspicuous absence. For a bit of perspective, here’s a story in the UK that’s just starting to make headlines.
Targetfellow, which owns Centre Point tower in London, owes Llyoyds GBP 700m on a loan taken out in 2007. Lloyds filed a formal warning with the developer that it could place the company in receivership after receiving a valuation that said its assets were worth just GBP 450m. Targetfellow offered a five year turnaround plan, but the bank appears to get what it can through a sell-off of the assets.
It’s interesting to see what developers will do now to save themselves. Over the summer Targetfellow CEO Ardeshir Naghshineh enlisted MPs from the company’s hometown Norwich to try to intervene and ensure an “orderly process.” In a post entitled “The legacy of fat bloke finance” Alphaville is reporting that Naghshineh has gone public with his anger towards Lloyds.
Of course, we understand that Lloyds is under pressure from the government to raise the funds to pay back its bail-out, and we want to do what we can to help and maintain a positive relationship with our bankers. But the way they are handling this makes no sense to me. The bank’s insistence on immediate sales of assets, under the permanent threat of administration, has naturally driven down their value, whereas a fair and orderly sale process, with a reasonable amount of time to market the properties, would maximise the value and be far better not just for us but also for the bank and ultimately the taxpayer.The whole UK property industry is watching the situation very closely because Lloyds has in excess of £80bn of property assets on its books and any indication that it is starting a process of offloading them at fire-sale prices will hit the property market very hard indeed, just as the recovery is underway.