The amount Blackstone will pay to buy a majority stake in the property portfolio of Santander-owned Banco Popular is understood to be about €5 billion.
The New York-based private equity real estate giant will fund the acquisition mostly through debt, alongside equity from its Blackstone Real Estate Partners Europe Fund V. The firm is thought to be funding about 25 percent of the acquisition with fund equity, approximately €1.2 billion.
Blackstone Real Estate Partners Europe Fund V was closed in June with €7.8 billion of commitments from investors representing a regional private real estate fundraising record. About 20 percent of the fund has already been deployed.
Following the EU regulators’ approval of the rescue takeover of Spain’s Banco Popular by Spanish rival lender Santander, Blackstone will take a 51 percent position in a newly created company that will include a property portfolio with a gross book value of €30 billion transferred from Banco Popular, well as 100 percent of the share capital of Banco Popular’s servicer, Aliseda.
Banco Popular, for its part, will own the remaining 49 percent stake in the joint venture. As a result, the property assets will no longer be consolidated on Banco Popular’s balance sheet, which will have a positive effect of 12 basis points on the core capital ratio, also known as the CET 1 ratio, of Santander.
“The agreement significantly reduces our real estate exposures and further strengthens our balance sheet,” said Rodrigo Echenique, chairman of Santander.
The portfolio, which will be managed by Blackstone, is comprised of real estate assets worth about €18 billion and non-performing loans of €12 billion. By type of asset, land accounts for €12.6 billion of the portfolio while residential property accounts for €8 billion and retail €2.1 billion (see image below).
The real estate assets of the portfolio, excluding Aliseda, have been written down to approximately €10 billion, with a final valuation subject to the closure of the transaction and the final integration of Aliseda. The deal, subject to regulatory approvals, is expected to close in Q1 2018.
“This significant investment reflects our continued confidence in the robust recovery of the Spanish economy,” Jon Gray, global head of real estate at Blackstone, said.
Last week, it emerged that Blackstone had entered exclusive talks with Santander-owned Banco Popular over the sale of a majority stake in its property portfolio.
The private equity firm won an auction process in which Apollo and Lone Star were also competing. Blackstone submitted “the best offer in terms of both its value and management plan”, Santander said.
In addition to Aliseda, Blackstone-owned servicer Anticipa will be involved in managing the properties of the portfolio. According to Spanish newspaper El Confidencial, Blackstone will use Anticipa to sell the NPLs, while it will also take advantage of its SOCIMIs to manage some assets from Banco Popular’s portfolio. Blackstone’s management plan also contemplates the possibility of create a vehicle specifically for the portfolio’s hotels, while offices will be managed by Blackstone’s SOCIMI Corona Patrimonial.
The process was supervised by Pedro Pablo Villasante, independent director of Banco Popular, with Morgan Stanley acting as advisor to Santander. JLL acted as advisor to Blackstone.
Blackstone and Santander both declined to comment further than their announcements.