iNVEZZ.com, Friday, November 29: New York-based private equity house Apollo Global Management has been named the preferred bidder this week for a £400 million portfolio of non-performing UK real estate assets which were brought to the market six weeks ago by British insurer Aviva (LON:AV), the Financial Times has reported.
Aviva’s share price has been marginally higher in early morning trading today in London.
The portfolio that Aviva has decided to sell comprises some 135 assets, largely commercial and retail-related property, according to Property Week. The assets are either in administration or receivership and are held by several different borrowers. It is double the size of the set of industrial property assets brought to market last month by the Royal Bank of Scotland. Currently, around 47 percent of the insurer's £8.4 billion UK property portfolio is underperforming, forcing the company to set aside £1.5 billion of provisions for losses on it.
A potential sale would be the second big deal between the FTSE 100 insurer and Apollo in recent months. Athene Holding, controlled by Apollo, last month wrapped up the purchase of Aviva’s US life and annuities business for £1.7 billion (Aviva share price: FTSE 100 insurer reaps $2.6bn from sale of US business).
Aviva has appointed Jones Lang LaSalle to advise on the sale of its portfolio of distressed property holdings, known as Project Moon. It is the first time since the financial crisis that Aviva has brought such assets to market. “The sale is the latest sign that investor demand for high-yielding assets is helping banks and insurance companies unwind previous real estate losses,” the FT commented in its article.
Over the past couple of years, several UK lenders, including RBS, Lloyds Banking Group and Co-operative Bank, have been disposing of parts of their distressed property portfolios but this is the first time since the crisis that Aviva has brought such assets to market.
Seeking to appease investors, Aviva’s Chief Executive Officer Mark Wilson is selling assets and cutting costs to rebuild capital depleted by the financial crisis and shrink a £5.1 billion internal loan.
The UK’s second-largest insurer by market value said in a statement that it will use the proceeds from the sale for general corporate purposes, and added that “the agreement represents further progress in its strategy to focus its Italian business on more profitable, capital-efficient products.”
As of 8:36 UTC buy Aviva shares at 434.10p
As of 8:36 UTC sell Aviva shares at 433.60p
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