Suncorp In Talks To Sell LJ Hooker Unit

Post by Sharat on September 24, 2009 · Under Australian Economy, Business News, Capital Markets, Company News, Mergers & Acquistions, banking · Comment

Bancassurance group Suncorp-Metway is said to be in talks to divest its real estate unit LJ Hooker for an as yet undisclosed sum, to a Private Equity group run by the founder of the unit’s grandson Janusz Hooker, according to a report in The Australian.

Customers of Suncorp, which is in the process of implementing a strategy of exiting the commercial real estate lending segment, have been told to renegotiate their commercial property loans by 2011.

Mr. Hooker runs the Asian operations of US Private Equity group WP Carey, and it is thought that once the deal completes, the company will expand the business throughout the rest of Asia.

On Wednesday Suncorp confirmed it was exclusively negotiating with WP Carey for the sale of the real estate chain, which analysts suggest could fetch the bancassurer approximately $67 million.

The deal is part of Suncorp’s strategy of exiting the commercial real estate lending sector, and may set of a rush by property developers to seek refinance from boutique investment banks as the Suncorp ceases extending further loans.

Some Suncorp clients, engaged in residential property development have said that the lender has actively encouraged them to seek alternative source of finance.

Australia’s Big Four lenders are still reluctant to make loans to new clients, whilst smaller regional lenders on their own do not have large enough balance sheets to accommodate an entire new portfolio that needs to be refinanced, and are extremely fussy over whom they are prepared to extend loans too.

The last three months have been extremely busy, with developers looking for sources of finance according to Tim Johansen, head of property investment banking at Investec.

Mr. Johansen said that Investec had been approached by a number of developers who had been caught flat footed by lenders who were refusing to roll over loans or lend any further. Investec said it was considering high net worth private investors and selected corporate as new clients.

“We also concentrate on the middle market — transactions below $50m,” Mr Johansen said.

Mr. Johansen added that because two lenders, Macquarie and Suncorp were refusing to make loans, further consolidation in Australian banking through merger activity and international lenders tending to existing portfolio’s, the market for property finance was extremely tight.

“There is a severe shortage of funding, but banks are constrained by current portfolio limits, It is a problem in the marketplace. Suncorp has a lot of clients that will be asked to refinance and there are limited options for them.” he said.

A Suncorp spokesperson on Wednesday re-emphasised remarks that the group made back in May, that it was seeking to exit large-scale commercial property lending because wholesale funding costs were higher because of the global financial crisis.

The spokesperson said the move was in line with decisions by other banks.

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