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Aviva prepares £2.5bn final clean up trade of legacy UK commercial mortgages

Aviva is to launch its final clean up legacy commercial mortgage loans sale next week with the offer of a major £2.5bn UK portfolio sale, in a trade which is expected to achieve an above par sale price.

The UK commercial mortgage loan portfolio is broadly 50:50 split performing and non-performing, with all the NPLs still in loan form which are either in administration or fixed charge receivership.

The circa £1.25bn unpaid balance on the NPL component are all passed maturity, besides which, the vast majority are still meeting interest payments and a trade price at or slightly above the outstanding loan balance is thought possible.

Separately, the circa £1.25bn performing tranche is thought to average at a blended LTV of around 80% LTV, implying a real estate value of £1.56bn. Together, the portfolio could trade for between £2.8bn and £3bn, CoStar News understands.

In addition, CoStar News understands that there is north of 300 properties UK-wide, with an annual income across the portfolio in the region of £150m, which would reflect a net initial yield above 6%.

There is broadly a 40% weighting of assets in London and the South East as well as a concentration of value in the top 50 assets.

The Aviva loan portfolio – which is still unnamed and with no teaser document yet distributed – is expected to formally launch next week.

Such is the scale of capital raised by the largest commercial real estate private equity funds – the expected bidders – that the need to sell the Aviva loan portfolio in separate tranches is unlikely.

For the likely bidders, the giant loan portfolio could be seen as a combination of a straight purchase for yield; certain wholesale-to-retail exits; as well as asset management strategies to improve exit sale prices for individual assets.

Aviva is looking to complete the trade prior to the summer with first round bids likely in around five weeks.

Deloitte and JLL have been appointed to sell the Aviva loan portfolio.

All parties declined to comment.

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