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Ulster Bank ready to resume lending for commercial real estate deals

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People walk past Ulster Bank headquarters in Dublin as the bank has issued information to customers on how it intends to refund fees, charges and interest accrued or missed as a result of the summer IT crisis.

People walk past Ulster Bank headquarters in Dublin as the bank has issued information to customers on how it intends to refund fees, charges and interest accrued or missed as a result of the summer IT crisis.

People walk past Ulster Bank headquarters in Dublin as the bank has issued information to customers on how it intends to refund fees, charges and interest accrued or missed as a result of the summer IT crisis.

ULSTER Bank is to re-enter the commercial property market with a limited appetite to advance new real estate loans and so-called vendor finance to bidders for the bank's own property-backed assets, the Irish Independent has learnt.

Senior figures at the country's third-biggest bank have confirmed that its UK parent RBS has signed off on allowing Ulster to make new loans for commercial real estate deals.

It is the latest sign that lenders are trying to revive the market, in part because banks themselves need an active market if they want to sell off their own boom era assets.

Its understood that Ulster Bank will follow the lead of the state-owned National Asset Management Agency (NAMA) by offering vendor finance loans to buyers of its own stock of seized boom time assets.

Vendor finance is debt provided to buyers by the seller "vendor" of an asset.

In practice it means buyers can acquire assets without paying the full cash consideration but are charged interest on the balance not paid upfront by the seller.

Offering such loans should make it easier for the bank to offload properties that the bank has taken into receivership and to sell bad loans secured on boom era properties.

Unlike many banks that have bundled up assets to sell in bulk to investors Ulster Bank is only selling assets linked to its soured boom era lending one at a time.

RISK

Ulster Bank is also prepared to advance new real estate loans to buyers of other assets, sources at the bank confirmed.

The focus for such lending is likely to be on high end commercial property in core locations. Lending will be limited in scale because the legacy of the boom era means Ulster Bank must avoid the so called "concentration risk" of having too much of its assets tied up in any one area of lending.

Management at the bank are conscious of the need to avoid any repeat of the credit splurge that saw Ulster Bank doubled its assets in four years at the height of the boom to £55bn (€65bn).

The bank has soaked up nearly a third of parent RBS's €53.6bn bailout by UK taxpayers since 2009 to cope with the impact of the boom era loans.

Losses at Ulster Bank narrowed last year thanks to a sharp decline in new loan impairment, and the bank needed the smallest capital injection from its parent since 2009 as a result.

Among its most high-profile boom era loans was a share in €326m advanced to Sean Dunne for his planned redevelopment of the Jury's hotel sites in Ballsbridge, Dublin 4.

Ulster Bank secured a judgment for €164m against Mr Dunne in the High Court in Dublin last year over the debt, and is attempting to have the developer bankrupted under Irish law, despite Mr Dunne filing for bankruptcy in the US, where he now lives.

Irish Independent