Thursday, July 16, 2009

The Debts of the Spenders: British Backdoor To Hide Commercial Real Estate Losses

July 16 -- (Bloomberg) -- U.K. banks may transfer commercial property loans into real estate investment trusts to purge their balance sheets of debt and avoid future writedowns.

Banks are considering using REITs as publicly traded “exit vehicles” that could limit the losses they and their borrowers face, said Ian Marcus, head of real estate at Credit Suisse Group AG. The British Property Federation has recommended the idea to the government as a solution for state-owned banks weighed down by real estate loans, said Peter Cosmetatos, the London-based industry body’s finance director.

“It’s obviously being considered by all relevant parties because the sector needs to recapitalize and that is one methodology of doing so,” Marcus said in a telephone interview. The concept is in its early stages, he said.



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