24 July 2017 – Expansión
Santander is heading into the home stretch of its initiative to get rid of Popular’s toxic real estate assets. The process will be accelerated next week when the entity closes the first phase. According to financial sources, Santander is open to receiving non-binding offers until the end of July.
The bank wants to sell a portfolio of foreclosed assets and doubtful real estate loans from Popular for a gross amount of €30,000 million. Santander is planning to sell 51% of this portfolio to a single buyer. The real estate risk of the bank that was resolved by the European authorities amounts to almost €37,000 million, including the stakes in real estate companies, which amount to around €7,000 million.
On 7 June, on the same day that she announced the purchase, Ana Botín revealed a plan to cut Popular’s non-performing assets in half within 18 months. But the segregation of the portfolios of property into a single vehicle could shorten that period. The agency Reuters said on Friday that the bank expects to receive its first non-binding offers by today, Monday 24 July.
Sources in the market take it for granted that the interested parties bidding for Popular’s toxic real estate will include Apollo, Lone Star and Blackstone. Other sources say that one of those funds has already decided to withdraw and they do not rule out others joining, such as Cerberus. In the pools, Apollo and Lone Star are starting off as favourites.
Santander’s plan also involves selling the majority of the servicer Aliseda to the winner of the bid. That company is responsible for managing Popular’s real estate assets and is fully controlled by Santander, after the entity repurchased the 51% stake controlled by Kennedy Wilson and Värde Partners on 30 June 2017.
By also purchasing the servicer Aliseda, Apollo, for example, would achieve important synergies, say sources in the sector, given that the fund already controls 85% of Altamira, which manages Santander’s real estate assets. Meanwhile, Lone Star has strong a strong interest in Popular’s portfolio, which was put up for sale at the end of June, and has an aggressive plan for absorbing real estate assets in Spain. However, the fund controls 39.6% of the real estate company Neinor, a competitor of Metrovacesa, in which Santander and Popular together hold a 70% stake; which may go against it in the bidding.
The rapid sale of 51% of the portfolio of Popular’s toxic assets would allow Santander to deconsolidate the real estate weight from its balance sheet, one of the main factors that triggered the resolution of the until now sixth largest bank by asset volume. Popular’s real estate portfolio contains €10,500 million in land and hotels, plus more than 25,000 homes, according to the latest available data. Half of the properties are located in Andalucía and Valencia.
Santander has recognised provisions amounting to €7,900 million to increase the coverage ratio of Popular’s real estate to 69%. The average in the sector is 52%, which will allow it to offer significant discounts.
Market sources estimate that Santander may record revenues of almost €5,000 million from the sale of 51% of Popular’s real estate portfolio. The bank could also earn up to €630 million from selling some of Popular’s property, according to a recent report from Citi.
Original story: Expansión (by R. Sampedro and N. Sarriés)
Translation: Carmel Drake