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Santander Considers Selling 51% Of Popular’s RE To A Single Fund

20 July 2017 – Expansión

The process initiated by Banco Santander at the end of June to find partners willing to take on some of Popular’s portfolio of foreclosed assets and doubtful real estate debts (with a gross value of €30,000 million) is moving ahead and the entity’s preferred options are starting to emerge (…).

According to sources familiar with proceedings, one of the options that Santander is considering is the sale of 51% of this real estate business to a single buyer.

The same sources explain that the sale of a majority stake to an investment fund would allow the Cantabrian bank to deconsolidate all of the non-performing real estate risk from its balance sheet, as it would be left with a minority stake. Santander has engaged Morgan Stanley as the advisor bank for the process and has appointed independent director Pedro Pablo Villasante to supervise the entity.

Sources in the market indicate that interested parties include some of the funds specialising in these assets, such as Apollo, Blackstone and Lone Star. They add, nevertheless, that the definitive format through which these firms will enter into the operation has not been defined yet since any deal is still in a very preliminary phase.

Non-binding offers

Sources at Banco Santander acknowledge that this possible deconsolidation of the real estate business, through its sale to a partner, is just one of the options being considered. However, they maintain that the definitive decision as to whether the entity will choose a single buyer or more than one buyer has not been taken yet and is not even close to being taken.

According to sources close to the bank, the operation is still in the “attracting interest and receiving non-binding offers” phase. This period will continue until at least after the presentation of the results corresponding to the first half of the year, which is planned for Friday 28 July.

The period during which the various funds may submit their non-binding offers is expected to remain open until that same date, at least. Market sources are confident that other major investors will also express their interest, including Cerberus, Goldman Sachs, KKR, Kennedy Wilson and Värde Partners. The next phase will see the receipt of the binding offers

Following the resolution of Popular and its acquisition for €1, Santander revealed its plan to reduce its non-performing real estate assets by 50% within 18 months. The segregation of the property portfolios into a single vehicle could reduce that period even further (…).

Santander’s proposed plan may also include an additional agreement with the buyer fund to acquire 51% of the servicer Aliseda. That subsidiary, which is responsible for managing all of the real estate assets proceeding from Popular, is currently controlled in its entirety by Santander, after the entity chaired by Ana Botín repurchased the 51% stake held by Kennedy Wilson and Värde Partners on 30 June (…).

Popular’s real estate portfolio, which is located primarily in Andalucía, the Comunidad Valenciana and Cataluña, includes around €17,000 million in foreclosed properties and another €13,000 million in doubtful property developer loans. These assets include, for example, more than 25,800 homes (which are being marketed by Aliseda) and office complexes (…).

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake