BBVA Sells Majority Stake in its Real Estate Portfolio to Cerberus for More Than €5bn

28 November 2018 – Voz Pópuli

BBVA has closed a real estate mega operation. The entity chaired by Francisco González has agreed to sell the majority of its problem assets to Cerberus, in a deal worth between €5 billion and €6 billion, according to financial sources consulted by Vozpópuli. The Spanish group will receive a cheque for between €3.5 billion and €4 billion for the majority stake in a new company that will be controlled by the US fund. After months of intense negotiations, the bank and the fund decided to seal the deal at the beginning of this week. Whilst we wait for the official figures to be made public, financial sources indicate that the real estate package for sale amounts to between €13 billion and €14 billion (as this newspaper revealed) and comprise around 70,000 properties. The assets sold are valued with a discount of around 60%. The parties involved all declined to comment.

The discount is lower than that agreed for the sale of Popular’s property, which amounted to 67%. Santander sold €30 billion with a valuation of €10 billion. Blackstone paid €5.1 billion for 51% of that company.

After signing the agreement, the two parties will request time to review the small print of the contract and to obtain the necessary authorisations. In this case, approval must be given by the Deposit Guarantee Fund (FGD).

According to the latest figures, BBVA has real estate exposure amounting to €17.8 billion on its balance sheet. Of that amount, foreclosed assets (€11.9 billion) and doubtful loans (€3.4 billion) account for €15.3 billion. Those loans and properties have a coverage ratio of more than 61%.

A sale like the one that Cerberus has agreed will leave BBVA as one of the largest groups with the smallest real estate exposure in Spain, something that investors and regulators have been demanding for years.

This agreement arose as a result of a meeting between González and the President of Cerberus worldwide, John W. Snow, at the beginning of July. The US banker – and former US Treasury Secretary, under the presidency of George Bush junior – proposed this operation to the President of BBVA after his firm was left out of the sale of Popular’s property.

The operation has been managed by the operations team at PwC, led by Jaime Bergaz. The law firms Linklaters and Ashurst have worked alongside him, and on the buy side, the consultancy firm Deloitte. All of the parties involved have been working on this operation non-stop for several months. The deal only came close to dying during the worst moments of the Catalan crisis, given that a lot of BBVA’s real estate assets are located in that region.

Following this acquisition, Cerberus consolidates its position as one of the largest real estate investors in Spain, alongside Blackstone. The fund controls Haya Real Estate, which manages assets on behalf of Sareb, Bankia, Cajamar and Liberbank. With BBVA’s assets, it takes on one of the most sought-after portfolios in the sector.

Original story: Voz Pópuli (by Jorge Zuloaga and Miguel Alba)

Translation: Carmel Drake

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