Blackstone Offers €3bn+ for Santander’s Ciudad Financiera HQ

10 September 2018 – El Confidencial

Santander’s Ciudad Financiera, the operating headquarters of the bank chaired by Ana Botín in Boadilla del Monte (Madrid), is being put up for auction five years after its owner, the company Marme Inversiones 2007, owned by several investment funds, filed for bankruptcy. After an arduous legal process whereby the bankruptcy administrator and the court managing the liquidation has released the asset, the central offices of Spain’s largest financial institution have been put on the market in search of a buyer.

According to financial sources close to the process, one of the most interested parties is Blackstone, the US hedge fund that has become Santander’s largest real estate partner after it purchased half of its portfolio of toxic assets last year. The US fund is negotiating the finishing touches for the presentation of its offer for the building where the bank employs almost 7,000 employees, including the office of the President, Ana Botín. According to the same sources, Blackstone is debating whether to participate in the auction by itself or to team up with the other creditors that supported the purchase of the Ciudad Financiera in 2008.

Of those, the presence of ING, HSH Nordbank, CaixaBank and Bayeriche Landesbank stand out, which 10 years ago granted a €1.575 billion loan to Propinvest to acquire Santander’s largest real estate asset on a “leaseback” basis. Other entities also participated in that loan including Deutsche Postbank, Royal Bank of Scotland and Raffeisen Zentralbank, which in 2011 started to sell its stake in the loan to vulture funds at significant discounts on the nominal value, when the owner started to realise that it could not afford to pay the debt.

One of the players that purchased that debt was Blackstone, together with other similar funds, such as Centerbridge and Avenue Capital. According to other sources, those investors are seriously considering submitting a joint offer on 17 September, the date on which the interested parties have to appear before the judge. That date is the one that has been set for the binding offers for all of the assets to be processed. If none are received, which is unlikely, then the Ciudad Financiera will have to be split up and sold off piecemeal.

According to these sources, Blackstone is now the main candidate, after two Arab groups placed tentative offers on the table that never proved successful due to legal wrangling and the lawsuits filed by some of the creditors, such as the Iranian Robert Tchenguiz. The investor, who owns several properties in London and is known for his idle lifestyle, was another person to take advantage of Propinvest’s bankruptcy to acquire debt at low prices and whereby become a significant creditor. Nevertheless, his problems with the Law – he ended up being arrested – have ruled him out of the process to take ownership of all of the Ciudad Financiera.

Arab interest

The player that came very close to acquiring Santander’s headquarters was AGC Equity Partners, a Kuwaiti fund with €3 billion under management, which received approval from Mercantile Court number 9, which was leading the bankruptcy of Marme. But its bid, which amounted to €2.5 billion, now needs to be updated, given that, according to various sources, the debt alone of the special purpose vehicle reached €2.8 billion, including senior and mezzanine. Therefore, the offers must exceed at least €3 billion, which means that this auction is going to turn into one of the largest real estate operations of the year.

The attempt by AEG, which was suspended when Ana Botín exercised the right of first refusal over Ciudad Financiera, came at the same time as the bid from Aabar, a company from Abu Dhabi, owned by IPIC, the owner of Cepsa, now renamed Mubadala. According to those sources, that fund is no longer interested in the auction and Santander has no intention of exercising its preferential right, as acknowledged by official sources at the Spanish entity.

The main attraction of Ciudad Financiera is that Santander, which financed the first operation with a loan amounting to €304.6 million to pay the VAT on the purchase, has committed to remain as the tenant of the property for the next 40 years, which means that the rental income is guaranteed.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

A Swap from ING & CaixaBank: the Last Stumbling Block in the Sale of Santander’s HQ to AGC

27 July 2018 – Voz Pópuli

The sale of the company that owns Santander’s Ciudad Financiera is closer than ever to becoming a reality. The approval of the liquidation plan by a Madrilenian court set September as the deadline for offers. Nevertheless, there are still disputes to be resolved.

The main stumbling block now is a lawsuit in London against a swap (financial derivative) granted by five entities: Royal Bank of Scotland (RBS), CaixaBank, ING, HSH Nordbank and AG Bayerische Landesbank. The lawsuit, filed years ago, is based on a claim that RBS manipulated the interbank – LIBOR and Euribor – market. The lawsuit amounts to €800 million, given that the swap has cost around €90 million per year since 2008, according to financial sources consulted by this newspaper.

The discussion in Spain focuses on the fact that some of the creditors of Santander’s headquarters fear that the new owner of the company (Marme Inversiones 2007) will decide to shelve that lawsuit. It would require an agreement between the new Marme and the five banks party to the swap in exchange for renegotiating the derivative, which expires in 2023.

AGC’s offer

Those €800 million, if the process in London proves successful, could mean that all of the creditors recover their money. In particular, the original shareholder, the Brit Glen Maud, and the company Edgeworth Capital, owned by the Iranian investor Robert Tchenguiz, who took positions during the bankruptcy.

Other sources consulted indicate that there is a commitment from the main interested party in the Ciudad Financiera, the Arab fund AGC Equity Partners, to keep the Marme litigation case open.

Currently, the only offer on the table is the one presented by AGC in 2016 for between €2.5 billion and €2.8 billion, depending on the variables that are included. A year earlier, Aabar Investments, the owner of Cepsa, and Edgeworth, also submitted bids. But they were not accepted.

As we wait to see what will happen over the next two months, AGC leads the rest of the candidates to acquire Santander’s headquarters.

One of the possible counter-offers could come from Edgeworth, which negotiated a €2 billion loan with JPMorgan to participate in the liquidation plan. It also proposed that the company exit from bankruptcy without the need to be liquidated.

This operation would generate a sale with significant gains for the funds that entered the process by buying Marme’s debt from financial institutions. They include Blackstone, Canyon and Monarch.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Santander To List 2% Of Its Socimi And Whereby Avoid CIT

6 February 2015 – El Confidencial

Desperate times call for desperate measures. That is the proverb that Banco Santander is going to apply to a problem that has arisen after it sold a network of 1,152 bank branches bearing the red flame to a group of investment funds in 2007. The entity, which had to take the branches back when the investment company that had taken ownership of them filed for bankruptcy, is going to float that company on the stock exchange as a Socimi, and whereby avoid paying Corporation Tax. Oleguer Pujol, amongst others, was involved with the original investment company.

The main objective of the transaction that Santander and the other creditors that seized control of Samos Servicios for the non-payment of a €2,000 million loan is to float the newly named Uro Properties on the Alternative Investment Market (Mercado Alternativo Bursátil or MAB). In fact, none of the current shareholders, which includes Santander itself – the largest, with a stake of almost 25% – as well as Caixabank, which entered through the back door and BNP Paribas, all primary lenders, are planning to sell or reduce their stakes in the Socimi.

The transaction will involve listing the company with the placement of a maximum of 2% of its capital, the minimum requirement. With such a small amount of floating capital or free floating capital, Uro Properties is only allowed to list on the MAB, even though its total assets are worth €1,600 million. As such, it will become the largest real estate company on the Spanish stock market. None of the other Socimis that followed the same path in 2013, such as Hispania, Lar, Axia or Merlin Properties, are equal in size.

Since the shareholders are not going to sell their old shares or proceed to offer new ones, like the other Socimis mentioned above have done, the only apparent purpose for listing Uro Properties is to benefit from the tax regimes offered to these kinds of companies. According to Law 11/2009, dated 29 October 2009, these real estate companies pay Corporation Tax at a rate of 0%.

To maximise the tax savings even further, the shareholders of Uro Properties Holding SA have created a parent company in Luxembourg, under the name Ziloti Holding SARL. The shareholders have already asked the MAB for permission to list their shares, as soon as possible, specifically, before the end of February.

From success to failure

The background to Uro Properties dates back to 2007, when Emilio Botín invented a transaction, which other large multinationals later went onto to make fashionable in Spain: the sale of properties to investment funds to obtain sizeable gains in exchange for staying as tenants and paying rent. It is what is called sale and leaseback. The purchasers of Santander’s 1,152 branches were Pearl Insurance, Sun Capital and Drago Real Estate, which were advised by Oleguer Pujol, now accused of crimes against the Treasury, and Luis Iglesias, who was arrested after his home was search, but not charged, according to an official spokesman.

The three funds paid €2,040 million and Santander generated profits of €850 million. But the collapse in the valuation of the real estate assets themselves and the loss of the bank’s credit rating led to an adjustment in the appraisal value of the branches – which were guaranteeing the loan – of more than €400 million. This meant that the purchasers were no longer able to service the loans they had taken out to finance the purchase.

Following the bankruptcy of Samos Servicers, Santander, which had borne most of the financing risk by granting mezzanine debt, had to convert that loan into capital. This meant that it went from being a creditor of the company to a shareholder in the renamed Uro Properties. BNP Paribas, Caixabank, Société General, Royal Bank of Scotland, Barclays and a group of German and Austrian banks, including Bayerische and Raiffessen, did the same thing.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake