6 August 2017
The US giant controls at least 100,000 real estate assets in Spain through dozens of companies. Most of the properties are in Catalonia. When it finally completes the purchase of the Popular’s real estate portfolio, Blackstone will become the largest property development company in Spain, ahead of Sareb.
Few ordinary people have heard of Blackstone. Even when asked about it, this firm sounds more like a private mercenary company (Blackwater) than what it is: one of the largest asset managers in the world and the largest foreign investor in Spanish property.
The fund is a silent giant, with dozens of companies linked to the real estate market, of which three are publicly traded. It manages around 100,000 real estate assets, of which at least 10,000 are flats for rent and social housing (VPOs). Blackstone has also has just agreed to one of the largest real estate acquisitions in history: 51% of Banco Popular’s property portfolio. If this deal goes through, it will control the same amount of assets as Sareb, the company created by the Spanish government in 2012 to manage the property of troubled banks.
Blackstone realized that it had to have a presence in Spain in 2013. It saw clear signs that the economy was bottoming out and decided to bet on the real estate sector. That summer it finalized one of the fund’s first major deals in Spain, the purchase of public housing from the Municipal Company of Housing and Land (EMVS), which has subsequently given Blackstone a serious headache. However, this deal (along with two others involving Goldman and Sareb) signalled the beginning of a real estate recovery in Spain.
The American fund came to Spain through Magic Real Estate, a company created by, among others, Ismael Clemente, the current Managing Director of one of Ibex’s real estate companies, Merlin Properties. After purchasing some small portfolios, Blackstone realized that it had to take a stronger position in Spain.
Its first step came in 2014 with the acquisition of Catalunya Caixa Inmobiliaria, a real estate platform renamed Anticipa. Blackstone then tried to buy Eurohypo for 3.5 billion euros, which was eventually acquired by Lone Star. It got its way with Project Hércules, in which it acquired 6.4 billion euros in problematic mortgages from Catalunya Banc.
These deals were completed by the same team that conducts all of Blackstone’s major deals in Spain: the two brains behind the deals are Diego San Jose, who has twelve years of experience in the fund; and Eduard Mendiluce, ex-director of Catalunya Banc, who has detailed knowledge of the nationalized bank’s entire portfolio and of the banking/real estate sector in general.
Jean-Christophe Dubois, who oversees investments from London, and Jean-François Bossy, a financier specializing in complex operations, taxation and legal issues, also take part in all of Blackstone’s major deals.
So far, a large part of the interests of this fund in Spain are in a securitization fund, which controls the Catalunya Banc’s problematic mortgages. According to the latest official figures, the mortgage package has already been reduced from 6.4 to 4.4 billion euros. Loan delinquency stands at 64%, with Blackstone co-investing with the state-run bank restructuring fund FROB. They are investing, however, under different conditions: Blackstone has a guaranteed profitability of 13% and the public fund will only profit under a series of complex scenarios.
Blackstone is cooperating with the FROB on Catalunya Banc’s toxic mortgages, where the US fund has a guaranteed return of 13%
In addition to the securitization fund, the American fund has three companies listed in Spain (Spanish REITs): Albirana Properties Socimi, with about 5,000 rental flats valued at €500 million; Corona Patrimonial Socimi, with more than €100 million in investments in office buildings; and Fidere Patrimonio, with rental flats (of which many are social housing) valued at €300 million.
Beyond these few listed companies, there are dozens of Blackstone companies registered in Spain. And few are less asset-laden, as some combine real estate assets and debt worth several hundred million euros: Tourmalet Propco Investment 2015 manages assets worth €800 million acquired from CaixaBank; Empire Real State Spain, flats acquired from Sabadell worth €500 million; and Patriot Propco, holding debt transferred by Popular at the end of last year, with an initial valuation of €418 million.
All these investments will almost be small details when Blackstone takes control of 51% of Popular’s bank bad, with assets worth 30 billion euros. With this, the fund will be able to diversify its portfolio, which is currently highly exposed to Catalonia.
So far, Blackstone has done well with the strategy of betting hard on property while maintaining a low profile. From now on its bet will be double or nothing, and being on the bad end of the bet will be costlier than having remained in the background.
Original Story: voxpopuli – Jorge Zuloaga
Translation: Richard Turner