Tough Target

11 October 2010 By George Hay Follow @gfhay

The bank is putting a highprofile property developer into administration, triggering cries of foul play. Lloyds can be tough, having marked down its assets aggressively last year. With the bank required to shrink its loan book, other struggling property borrowers should beware.

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Lloyds Banking Group has applied for permission from the courts to put the landlord of Centre Point, the iconic London landmark, into administration.

Targetfollow, which borrowed 700 million pounds from HBOS three years ago, needs to refinance its loans but has claimed the bank will only offer it unattractive terms over 6 percent. The Norwichbased developer's loans were inherited by Lloyds in its acquisition of HBOS's at the peak of the financial crisis.

Targetfollow believes its assets are worth 670 million pounds, based on an analysis conducted by King Sturge, the property consultant. Lloyds believes the assets are worth 405 million pounds, based on work done by Jones Lang LaSalle, its property advisor.

Targetfollow's founder, Ardeshir Naghshineh, said in a letter made public on Sept. 23 that Lloyds was being hampered by an interest rate hedge on his assets that had gone wrong due to persistent low interest rates, creating a 200 million pound liability.

Lloyds currently has 80.4 billion pounds of outstanding loans to the property sector, according to its interim report. This represents 13 percent of its total 612 billion pound loan book.

Lloyds and Targetfollow declined to comment.

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