US private equity firm Cerberus has signed €3 billion debt financing with Morgan Stanley to finance the acquisition of BBVA’s bulk of property assets, according to Spanish newspaper VozPopuli.
Cerberus will use the debt facility to fund the purchase of an 80 percent stake in BBVA’s Spanish real estate assets, valued at €4 billion, which implies a loan-to-value ratio of 75 percent. Cerberus and Morgan Stanley declined to comment on the financing deal.
The transaction, in which BBVA has formed a joint venture with Cerberus, sees the bank retain non-performing loans, which consist of €2.8 billion in loans to developers and some holdings in real estate companies, while off-loading most of its non-core real estate assets.
The joint venture will operate through a newly-created entity, where BBVA’s real estate assets and its servicer Anida will be transferred. In the coming months, BBVA and Cerberus will put up for sale two portfolios valued at €600 million, VozPopuli reported, citing anonymous financial sources.
BBVA’s overall portfolio comprises around 78,000 real estate assets with a gross book value of around €13 billion, BBVA said. By type of asset, completed properties comprise 59 percent of the portfolio while land accounts for 36 percent and properties under construction account for 5 percent. The real estate assets are mostly located in Catalonia, Madrid and Valencia.
BBVA said the whole portfolio was valued at €5 billion, reflecting a 61.5 percent discount on the gross book value.
Once all regulatory authorisations are granted and the transaction is completed – expected in the second half of 2018 – BBVA will have the lowest relative real estate exposure among the main Spanish financial institutions.
The deal is the largest since US private equity group Blackstone bought in August a majority stake in the property portfolio of Santander’s Banco Popular.