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RBS, Lloyds To Take Equity Stakes In JVs With Property Firms

To prevent huge losses they would face if they were to sell repossessed sites on the open market

Royal Bank of Scotland and Lloyds Banking Group, the two UK-based government funded banks, are set to acquire equity stakes in joint ventures with property firms on re-possessed development projects and buildings that require renovation – reported Business Times Online.

According to Investment Property Databank, a UK-based performance analysis firm for the owners, investors, managers and occupiers of real estate, RBS and Lloyds have huge outstanding commercial property loans in their books, due to a steep fall in capital values across the commercial property market, reported the newspaper.

They are reportedly in talks with several property firms about co-owning sites that are in default on their loans, to prevent crystallising huge losses they would face if they were to sell the repossessed properties on the open market. Helical Bar, the property investment group and Great Portland Estates are also reported to be in talks with both the banks.

Mike Slade, chief executive of Helical Bar, said: “Banks have been putting an Elastoplast on the mess of bad debts and damaging the economy in the process. They need to start lending again. Why not face up to the losses now, which they will have to face eventually anyway, so that they are freed up to start making good lending decisions again,” reported the newspaper.

Industry anlaysts opine that the banks’ plans to acquire stakes in properties, as the property values are beginning to stabilise, can be a hurdle to the government’s asset ptotection scheme. Lloyds is already reducing its involvement in the scheme.