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18 May 2015 – El Confidencial
The building located at number 68 Gran Via, which used to belong to Carlyle, has a new owner: the ‘German bad bank’, FMS Wertmanagement, the equivalent of Sareb in Spain.
The building located at number 68 on the coveted avenue in Madrid has a new owner. FMS Wertmanagement, more commonly known as the ‘German bad bank’ – the equivalent of Sareb in Spain – has acquired the property, which was the first acquisition made by the private equity firm Carlyle in Spain at the end of 2005.
This asset used to belong to the real estate fund Carlyle Europe Real Estate Partners II (CEREP), which filed for bankruptcy in March 2012. It is estimated that the fund paid €45 million and so had to obtain a loan from the German entity Hypo Real Estate to finance the transaction – Hypo was taken over by the German Government in 2009 – and the debt has ended up in the hands of FMS. According to sources close to the transaction, this asset, which is currently worth around €21-23 million, has had lots of suitors.
In fact, in addition to FMS, the holding company that owns the investments of the businessman Manuel Jove (Inveravante) and the US fund, Autonomy, which has an opportunistic profile and arrived in Spain in 2013, both submitted bids.
In the context of the bankruptcy, the sale has been conducted by the bankruptcy administrator; and all indications suggest that FMS could have acquired the building for the amount of the debt, around €40 million. The sources consulted by this newspaper say that the German bad bank intends to seek a buyer for the property, at a time when the Spanish real estate market has taken off (again), and in an area (Madrid’s Gran Via) that has sparked so much interest and activity over the last year and a half.
Carlyle’s real estate ‘troubles’ in Spain
We have to go back almost ten years to see Carlyle’s first foray into the real estate sector in our country. At the end of 2005, the firm bought this property, which dates back to the beginning of the 20th century, from the Urconsa group – it was formerly owned by La Unión and Fénix Español – with a view to renovating it and turning it into luxury apartments. With a surface area of 7,600 m2, comprising three retail floors and eleven additional floors for residential use, it is totally empty at the moment.
Carlyle had intended to build 75 luxury apartments, preserving the original façade of the iconic building in the centre of Madrid. Its commitment to the real estate sector in Spain was clear and it expected to have the renovation completed within two years. However, its plans took a turn for the worse.
The Town Hall of Madrid did not grant the construction licence until April 2008, according to Cinco Días, and by 31 October 2010, only one of the commercial premises was leased out.
“We are delighted to have made our first investment in Spain. The residential market in Madrid is buoyant and we think that there will be strong demand for these new apartments in a building as impressive as this. We hope that this will be the first of many investments in Spain”, said Rachel Lupiani, Director of Carlyle Real Estate, after the deal was announced. She was responsible for closing the transaction, which was advised by the consultancy firm CB Richard Ellis and the law firm Clifford Chance.
In Spain, Carlyle also acquired land on Calle Alcalá in Madrid and the Telefónica headquarters in Barcelona – for which it paid €219 million in 2007.
The German bad bank is now looking for a buyer
The German bad bank, which operates in a similar way to Sareb, was created in 2010 with assets from the nationalised bank Hypo Real Estate. These included almost €900 million of non-performing assets and loans, including the debt relating to Gran Via, 68.
Just like in the case of Sareb in Spain, FMS is now looking for buyers for many of its non-performing assets and loans. In fact, at the beginning of this month, it sold the Gaudí debt package, which it had also inherited form the nationalised Hypo Real Estate, to the Californian fund Oaktree. That portfolio included debt relating to the Hotel Arts de Barcelona, a five-star property managed by Ritz-Cartlon, as well as another luxury hotel located in the Portuguese town of Cascais, five shopping centres, four office buildings, 17 storeooms and other residential and industrial assets.
Original story: El Confidencial (by E. Sanz and R. Ugalde)
Translation: Carmel Drake