4 December 2015 – Expansión
The fund Sankaty is finalising the purchase of a large package of real estate subsidiaries from Banco Sabadell, which the entity inherited from CAM. The US investor, which is itself a subsidiary of Bain Capital, has won a competitive auction held as part of Project Chloe, which will be signed before the end of the year, according to market sources.
The operation includes stakes in the companies’ shares, as well as debt, together worth €800 million. According to various sources, the sales price will range between €200 million and €250 million, which represents a discount over the nominal value of around 30%.
By purchasing the companies’ shares and debt, the fund will exert direct control over their real estate assets: land, work-in-progress property developments and finished properties.
This is Sankaty’s second major operation in Spain in 2015. In May, the fund acquired 40 large real estate loans from Bankia, worth €500 million.
Like many other overseas investors, Sankaty is committing itself to the acquisition of land and work-in-progress property developments in the hope of benefitting from the recovery of the Spanish economy, with an improvement that is already taking shape in the real estate market. These funds are joining forces with local property developers and, by purchasing at deep discounts, are hoping to obtain returns on their investments of up to 20%.
For Project Chloe, Sankaty will delegate the management of the assets to Altamira Inmuebles, the management platform owned by Apollo (85%) and Santander (15%), which has advised the fund during the process.
For Sabadell, this divestment is the latest in a series of similar deals undertaken in recent months, such as Project Cadi, which involved the transfer of €240 million of property developer loans to the US giant Pimco and the platform Finsolutia. In addition, it sold a portfolio of written-off receivables worth €800 million to the Malaysian fund Aiqon and it is negotiating the transfer of 3,000 rental homes, as part of Project Empire.
Exposure to real estate
Just like the rest of the Spanish financial sector, Sabadell is trying to reduce its exposure to real estate by combining the sale of homes through its network – its subsidiary Solvia is responsible for this – with the sale of portfolios to large international funds.
The bank, led by Josep Oliu, has one of the highest degrees of exposure to the real estate sector, due, in large part, to its purchase of CAM in 2011, although that was partially covered by an asset protection scheme (un ‘esquema de protección de activos’ or EPA) of up to €14,000 million. The entity has been working for several quarters now to reduce its volume of problem assets, which amounted to €22,350 million in September, and in recent months it has managed to stabilise its balance of foreclosed assets at €9,200 million, i.e. it has reached the point where the amount of (newly foreclosed) properties being incorporated onto its balance sheet is lower than the amount (of previously foreclosed properties) it is selling.
As the entity explained when it presented its results for the third quarter, it sold 7,654 foreclosed assets between January and September 2015, which represented an increase of 6% compared with the same period in 2014, and it achieved this even though it offered lower discounts on those properties compared with prior year.
Original story: Expansión (by J. Zuloaga)
Translation: Carmel Drake