RBS today announced that West Register, the real estate business which is part of it's Global Restructuring Group, known simply as GRG, is to be wound up.
West Register has attracted an army of critics, but remains an obscure arm of which little is really known externally. Even within the bank there are contradictions, as RBS has consistently maintained that West Register's sole function is to own properties, and not the loans behind them.
However a damming report for Vince Cable by Dr Lawrence Tomlinson last November made the status quo untenable. Today's announcement coincided with the publication of Clifford Chance’s review into allegations made by the Tominson report, made on behalf of the bank.
In a statement published at midday today, RBS said: “Under the previous capital regime property purchases were a viable option when resolving some corporate restructures.
“Clifford Chance has found that the banks vehicle for bidding on property, known as West Register, operated largely in an open market process and with strict internal controls.
“However, RBS acknowledge there was a damaging perception that the bank had a conflict of interest when it purchased a property as part of a restructuring process, despite the fact that West Register has only successfully bid for property owned by 166 SMEs in the last five years.
“The bank has taken the decision to wind down and sell any assets in West Register.”
The Tomlinson Report – entitled Banks’ Lending Practices: Treatment of Businesses in distress – alleged that RBS was, through GRG, guilty of “systematic and institutional” behaviour in artificially distressing otherwise viable businesses, putting its customers “on a journey towards administration, receivership and liquidation”.
In addition, The Tomlinson Report also alleged RBS operates a “process by which businesses are assessed for their potential value” in order to select viable SME customers as targets.
Furthermore, the bank’s actions “artificially distress” borrowers and even “engineer” loan defaults through the manipulation of property valuations, the withdrawal or failure to renew existing facilities.
The Clifford Chance review, paid for by RBS, has not really pointed the finger at dishonesty at all, as might be expected, but the fact that RBS is winding this business up is tantamount to an admission of guilt.
The 13 subsidiaries that make up West Register control rights to a string of the bad loans, assets worth a total of £1.17billion at the end of last year, the latest period for which figures are available.
The 1300 strong residential portfolio includes ownership or rights to loans on properties such as:
• The luxury apartment block Charters, a Sunningdale home famous for entertaining the Duke and Duchess of Windsor.
• A bling £2 million house called Water Music located in Sandbanks, Poole, and once the home of former Bournemouth football club owner Eddie Mitchell.
• A St Andrews student house next door to the digs occupied by Prince William and the then Kate Middleton during their university days.
• Large numbers of new-build housing estates and apartment blocks built during the last boom and located across the country.
• Streets of old properties dotted around the UK's provincial cities, often repossessed from failed buy-to-let landlords.
The commercial portfolio has included 10 Fleet Place, a City office block that is in the process of being sold for £115million; Drayton Manor theme park in Staffordshire; Harleyford Golf Club, part of the luxury Harleyford Estate and marina complex in Buckinghamshire; and Sloane Square House, a large office and apartment block in one of the most prestigious and expensive areas of London. Much of the commercial property has been disposed of and included a portfolio of pubs sold to Heineken for £412million in 2011, including the Punch Bowl in Mayfair where the lease is part-owned by the film director Guy Ritchie.