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BBVA Finalises Transfer of 80% of its Spanish Real Estate Business to Cerberus

11 October 2018

The bank chaired by Francisco González, who announced the operation at the end of November of last year, stated that this “will not have a significant effect” on the bank’s profits or its solvency ratios. The joint venture between BBVA and Cerberus has been dubbed Divarian.

On Wednesday, BBVA finalised the transfer of the bulk of its real estate business in Spain to the US fund Cerberus, contingent on “obtaining the necessary authorisations.”

The transaction, which the bank announced on November 29, has allowed the institution to free itself from 80% of its exposure to the property sector in a single stroke, transferring 13 of the 17.8 billion euros gross of its holdings of real estate and loans to developers to Cerberus. The bank will maintain the remaining €4.8 billion in its balance sheet.

The portfolio, which Cerberus acquired, is valued at around 5 billion euros and result in a gain of roughly four billion euros for BBVA, though the final price is subject to “the effective transfer of some real estate assets.”

The bank structured the operation through the creation of a company called Divarian Property, to which the bank transferred its real estate business in Spain. BBVA has subsequently sold 80% of Divarian to Cerberus, retaining the remaining 20%. The assets that the bank transferred to the US fund “included both the real estate assets and the employees necessary for the management of the business.”

Drastic reduction of exposure to real estate sector

The bank stressed that “this operation marks a milestone in the BBVA Group’s strategy to eliminate its exposure to the property market almost completely.” The CEO and future president of the entity, Carlos Torres, stated when the deal was announced last November, that “it significantly reduces our exposure to an activity outside our core business and allows us to undergird our process of transformation.”

In 2017, BBVA recorded losses of 501 million euros stemming from the real estate sector and expects these red numbers to be reduced by 80% this year. Likewise, it estimates that as of 2019, the contribution of this area to the financial institution’s results will not be “relevant.”

The group chaired by Francisco González added that this operation “will not have a significant effect on the attributable profit of the BBVA Group, nor on the fully loaded CET1 capital ratio.”

In the last two years, the bank has been particularly active in the divestment of assets linked to the property sector. Among the bank’s most important operations were the sale of a portfolio of almost 3,500 properties and a lot of 14 office buildings, each with a gross book value of about 300 million euros.

Original Story: Expansion – J.D.

Photo: Francisco Rodríguez / Expansión

Translation: Richard Turner