npl-reo News: Spanish Real Estate Intelligence

Santander Finalizes Deal to Sell 51% of Banco Popular’s Real Estate Business to Blackstone
  09 August 2017 Ana Botín, President of Banco Santander.
The deal, the largest in the history of the real estate sector in Spain, will entail the creation of a new company.  Banco Popular will transfer its problematic assets, with a gross accounting value of €30 billion, as well as 100% of Popular’s real estate management business Aliseda. The assets will then no longer be consolidated on Santander and Popular's balance sheets.
  Popular has finalized the sale of 51% of its real estate business to the asset manager Blackstone, effectively ceding control of the portfolio to the American asset manager.  The sale will also allow both Banco Popular, presided over by its chairman, Rodrigo Echenique, and Banco Santander to de-consolidate the assets from their balance sheets, positively affecting the banks’ capital ratios. This is the biggest sale of a real estate portfolio in Spain’s history. Santander estimates that the removal of the problematic assets from its balance sheet will result in an improvement of 12 basis points in its fully loaded CET1 capital ratio (including all Basel III regulatory requirements). The deal was announced shortly after the European Commission, which found no potentially negative effects on competition resulting from the sale, gave its definitive green light to the purchase of Popular by Santander.  The transaction includes Popular’s portfolio of foreclosed properties, questionable loans also tied to the real estate sector "and other real estate assets related to Banco Popular and its subsidiaries (including deferred tax assets), registered at certain specific dates (March 31 or April 30, 2017)," as Santander explained to the Spanish National Securities Market Commission (CNMV) as a material fact.
Transfer of assets
  The agreement with Blackstone will entail the creation of a new company to which Popular will transfer assets with a gross accounting value of about 30 billion euros, as well as 100% of the Aliseda real estate management business, of which Popular, which had previously owned 49%, announced in July the buyback of the remaining 51% held by the funds Värde and Kennedy Wilson. With the sale to Blackstone, the buyback will have no effect on Popular’s capital ratios.  The buyback of 51% of Aliseda would have otherwise entailed a capital consumption of more than €300 million (leading to a reduction of 5 basis points in its capital adequacy ratio). The valuation attributed to assets in Spain (real estate, credits and tax assets, not including Aliseda) amounts to about 10 billion euros. Considering this valuation, which is subject to changes depending on the volume of assets remaining at the closing date and the integration of Aliseda, the value of Blackstone’s controlling stake is estimated at approximately 5.1 billion euros. According to the bank, this valuation is "in line" with the actual value of the assets, including provisions and adjustments made to Popular's balance sheet after their purchase, so that "it does not generate a material capital gain or loss." The sale comes after a competitive selection process in which three international companies participated.  Of the three, Blackstone was chosen for "presenting the best offer" in economic terms and in terms of its strategic plan, as explained by the bank. Following the finalization of the deal, which is scheduled for the first quarter of next year, Blackstone will assume the management of the assets, which will have been incorporated into a new company, of which Popular will control 49%.
Reducing exposure to real estate
  Rodrigo Echenique, president of Popular, said that "we are very satisfied with the agreement reached with Blackstone," and that this operation will allow the bank "significantly reduce real estate exposure on its balance sheet and continue to consolidate its operations, focusing all our efforts on the bank’s commercial activities." Ever since Santander bought Popular for a nominal cost of one euro on June 7, after European authorities determined that the bank was on the brink of insolvency, one of Santander’s main priorities has been to unload Popular’s real estate assets. In fact, in early July, Popular's new management team, with Rodrigo Echenique at the helm, announced that it had initiated “a search for potential partners" for a portfolio amounting to €30 billion. The search was supervised by Pedro Pablo Villasante, an independent director of the bank, who was responsible for ensuring "transparency and management of potential conflicts of interest," while Santander was also advised by Morgan Stanley. As pointed out by Popular, the criteria for choosing partners took into account three main aspects: "price, experience in this type of operation and their capacity to manage and execute the deal.” Original Story: Expansión – J. Díaz Photo: J.M. Cadenas – Expansión Translation: Richard Turner
Voyager: Sabadell Launches Sale Of €1,000M NPL Portfolio

2 August 2017 - Expansión

Banco Sabadell is accelerating the sale of the non-performing assets accumulated on its balance sheet during the crisis. In just three years, the entity chaired by Josep Oliu has managed to cut its doubtful loan balance in half, which means that it has divested non-performing loans amounting to almost €9,000 million since 2014. In this way, in June of that year, the bank held €17,386 million in problem assets on its balance sheet, compared to the current figure of €8,541 million, according to the accounts published last Friday.

This effort has been made possible by the fact that Sabadell has been one of the most active entities in the sale of debt portfolios in recent years (…). In the last few months alone, it has managed to divest almost €2,000 million through the sale of Projects Normandy and Gregal (…). In addition, the bank has just engaged Deloitte to sound out the market as to whether an appetite exists for another €1,000 million portfolio, known as Voyager.

Gregal and Normandy

Project Gregal contained non-performing loans amounting to around €800 million and was segmented into three sub-portfolios. The last one was sold this week to the fund Grove Capital Management, which has taken over a batch of doubtful loans granted to SMEs. The other two Gregal packages were awarded to D.E. Shaw and Lindorff (…).

On the other hand, at the end of July, the bank managed to definitively close the sale of the Normandy portfolio (€950 million) to Oaktree. That portfolio comprised loans linked to real estate developments and so the amount paid was much higher and is reported to have amounted to around €300 million, which would represent a discount of around 70% (...).

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Santander Negotiates With Blackstone Re Sale Of Popular's RE

2 August 2017 - Expansión

A month after announcing that it was putting Popular’s toxic real estate up for sale, Santander has chosen the fund with which it wants to negotiate. The bank is looking to sell a portfolio of Popular’s foreclosed assets and doubtful real estate debts with a gross value of €30,000 million. It will be the largest sale of a toxic real estate portfolio in Spain in recent years. And the process is already taking shape, in the hope that Brussels will give the definitive green light to the Cantabrian bank's acquisition of Popular, due at the end of this month.

Yesterday, Santander announced that it will negotiate exclusively with Blackstone from now on to sell a majority stake in the vehicle in which it placed the toxic property inherited following the purchase of the entity wound up by the European authorities. Santander’s initial idea is to sell 51% of this vehicle, which will allow the group to deconsolidate those real estate assets from its balance sheet. The assets and doubtful loans that Blackstone plans to acquire will be managed by Aliseda. That company already administers Popular’s real estate assets and is 100% owned by Santander after the bank repurchased the 51% stake held by Kennedy Wilson and Värde Partners a month ago.

After buying Popular, whose merger will be completed over the course of the next two years, Santander has increased its exposure to real estate risk to €41,048 million, according to the latest available data. Popular’s real estate risk amounts to almost €37,000 million, including its stakes in real estate companies, which amount to around €7,000 million.

Several offers

According to a statement made to the CNMV yesterday, Santander has received binding offers from “several investors” over the last few days for one of the largest portfolios ever to go onto the market in Spain, and also in Europe. The operation sparked immediate interest amongst the large international funds when Santander announced that it was putting Popular’s real estate up for sale on 30 June. In addition to Blackstone, Apollo, TPG, GreenOak and Goldman Sachs, amongst others, approached the bank to find out more.

Financial sources indicate that Apollo and Lone Star fought hard until the end to acquire the majority of Popular’s toxic real estate. In the last few days, some of the interested funds have asked Santander, which is being advised by Morgan Stanley, for more time to conduct due diligences (…).

The rapid sale of Popular’s real estate portfolio, which is being piloted by the Deputy Director General of Santander, Javier García-Carranza, could result in revenues of €5,000 million, according to estimates in the sector. Santander has recognised provisions of €7,900 million to increase the coverage ratio of Popular’s real estate to 69%, well above the sector average (52%). This means the bank can afford to get rid of the real estate portfolio at significant discounts and thereby recognise gains (…).

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake