Banks & Funds Bid For Citi’s Real Estate Legacy
31 May 2016 – Expansión
Citi’s real estate legacy in Spain is up for auction. Two US funds, Ares Management and York Capital, have put real estate loans and foreclosed assets amounting to €180 million up for sale, and banks and opportunistic investors are bidding to acquire the portfolio.
Around half of the portfolio comprises mortgages, of which the majority are up to date (in terms of their repayments), whilst the rest are homes and other assets that the funds have acquired as a result of non-payment (by borrowers).
Ares Management and York Capital purchased these assets from Citi in Spain at the beginning of the crisis, as they took advantage of the fact that the US entity was withdrawing from certain activities. That was further reflected last year with the sale of its credit card and retail banking business to Banco Popular.
Resale of assets
The strategy to resell assets is common amongst the opportunistic funds, either because they have already obtained the expected returns or because they believe that they can obtain a higher price by selling the portfolio at a particular time.
For example, that is exactly what Fortress did recently, with the sale of Geslico, the former recoveries platform of the savings banks, to the Norwegian group Axactor. The same fund has been selling off other assets in Spain, just like other funds that arrived in Spain and purchased assets between 2011 and 2012.
The operation is being advised by N+1, under the name Project Firefox, and the first offers are expected to be received within the next few days, according to sources at the funds.
In addition to this portfolio, last year, Citi sold another portfolio to Evo Banco from the fund Apollo, containing €370 million of mortgages and 200 properties.
In parallel, the US bank sold its retail banking and credit card business to Popular for €240 million. The Spanish entity acquired a portfolio of 1.2 million clients, around €2,300 million assets under management, €2,000 million in deposits, a network of 45 bank branches and a workforce comprising 950 employees. Moreover, it acquired 1.1 million credit cards, which have a total outstanding loan balance of €1,400 million.
Project Firefox will have to compete with the avalanche of real estate asset portfolios that the Spanish banks have put on the market in the last month, with Bankia, CaixaBank, Sabadell, BBVA, Santander, Cajamar and Abanca, amongst others, all offering up assets for sale.
Original story: Expansión (by J. Zuloaga)
Translation: Carmel Drake