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6 May 2015 – Expansión
Project Big Bang / The financial entity has put a batch of homes, land and commercial buildings up for sale, with the objective of disposing of all of the foreclosed assets left on its balance sheet.
Bankia has decided to accelerate the process to divest its real estate assets with a ‘macro-transaction’ involving a large block sale. The financial institution has launched so-called Project Big Bang, which includes a portfolio of residential and commercial assets (including offices and shops), as well as land, worth €4,800 million.
The transaction is still in its very early stages, involving initial meetings with investors, but it will represent the largest asset sale process seen to date (excluding transfers of debt with real estate collateral).
The properties up for sale include assets that Bankia did not transfer to Sareb following its nationalisation, as well as foreclosed assets resulting from subsequent defaulted payments. Most of the portfolio corresponds to residential assets. Thus, of the €4,800 million assets that Bankia has included in the batch, €3,300 million related to residential properties at 31 March 2015. In total, the bank will transfer 38,545 residential units (flats, chalets, parking spaces and storage rooms), with a total constructed surface area of 3.6 million square metres.
Along with the €3,300 million of residential assets, Bankia is selling 4,938 commercial units worth €1,100 million.
Land at zero cost
The portfolio also includes 2,589 plots of land with a total surface area of 4.6 million square metres. This land has a value of zero, according to Bankia, having been fully provisioned.
The sale is being coordinated by Credit Suisse and KPMG. The transaction may be closed as a single deal or through the sale of several blocks. The sale value may also decrease from €4,800 million to a smaller amount, say sources close to the process.
Many of the large funds, including Blackstone, Lone Star and Apollo, have already expressed their interest in the portfolio. These investors will have to compete with Cerberus, which has a preferential right to examine Bankia’s real estate portfolio. This “preferential” arrangement forms part of the negotiations that the US fund has held with the Spanish entity in recent years. In 2014, Bankia transferred its Bankia Habitat business unit to Cerberus for a consideration of between €40 million and €90 million, together with the 400 professionals who work for the platform.
Last September, Cerberus joined forces with the Norwegian fund Lindorff to acquire some of the doubtful and substandard loans, plus those that had doubtful or substandard outlooks, worth €900 million, which the entity chaired by José Ignacio Goirigolzarri (pictured above) was selling, as part of the Somo transaction. In February, Bankia launched a campaign to accelerate the sale of its remaining properties.
The clean up
Project Big Bang represents the largest divestment initiated by Bankia to date in the foreclosed asset and doubtful debt segment. The entity chaired by José Ignacio Goirigolzarri has been one of the most active in this market, having transferred almost 80 portfolios containing problematic loans since 2013, with a nominal value of €10,000 million.
Initially, Bankia undertook these types of transactions due to necessity, since the restructuring plan agreed with Brussels compelled it to divest non-strategic assets amounting to €50,000 million.
Although it has now almost completed this plan, the entity has decided to ‘step on the divestment accelerator’ in 2015 in order to reduce its default rate and focus its resources on new productive assets that improve its financial results. As well as the foreclosed assets, Bankia is also currently negotiating the sale of problematic mortgages, property developer loans and hotel debt.
If it closes all of these transactions, the nationalised group would become the first entity to withdraw from the segments considered by the market as a burden to the sector.
Original story: Expansión (by R. Ruiz and J. Zuloaga)
Translation: Carmel Drake