Commerzbank’s sale of the legacy €5bn Eurohypo Spanish commercial property loan book begins in earnest next month, within which time appointed advisors Lazards is expected to sign up interested bidders to non-disclosure agreements, CoStar News understands.
The start of the loan book and platform sell off, so far still an unnamed process but likely to one of the largest Continental European legacy property loan portfolio disposals this year, paves the way for a sale before the year end.
Lazards were appointed at the end of last month to run the sales process, as reported by Real Estate Capital last month, and have sounding out interest from among the current active investors in distressed Spanish loan portfolio and assets, as Commerzbank seeks to hasten its permanent exit from commercial real estate lending.
Commerzbank’s legacy Spanish commercial property loan exposure was €5.0bn at the end of September 2013, comprised of €3.3bn in performing loans and €1.7bn in non-performing loans as recorded in Commerzbank’s third-quarter results.
However, these internal loan quality performance classifications could be seen differently in the eyes of potential bidding private equity funds, investment banks and potentially book-building bilateral lenders, such as insurance companies.
Likely bidders on Commerzbank’s legacy €5bn Spanish commercial property of Eurohypo, which rebranded as Hypothekenbank Frankfurt in August 2012, comprises the market’s loan and direct property portfolio winners to date.
These include Deutsche Bank, Fortress Investment Group, HIG Capital, Kennedy Wilson, Varde Partners, Anchorage Capital, Cerberus Capital Management, Lone Star, Apollo Global Management, Goldman Sachs, Centrebridge, Colony Capital, Blackstone as well as new entrants, such as Kildare Partners.
Lazards’ mandate is to structure a platform sale, similar to Commerzbank’s sale of the £4bn UK loan book which traded to Wells Fargo and Lone Star.
The sheer size of the loan book, and the quality spectrum of loan performance and underlying real estate, suggests that the legacy Eurohypo loan book could trade in sub-pools accordingly, while joint venture and consortium bids is also expected.
Commerzbank will seek to capitalise on the end of fears that Spain may have to leave the single currency, which underpins the modestly improving economic picture which, in turn, has aided an improvement in investor sentiment and normalising bank lending market.
Against this backdrop, the European real estate market is awash with equity capital raised by the world’s largest private equity markets, as well as investment banks.
The planned sale of the loan book revives Commerzbank’s efforts to speed up its Spanish exit after the sell-off of €400m Project Copernicus to Anchorage Capital and the aborted sale of the €370m Project Sol, due to low bids, and which is secured by six shopping malls and two land bank portfolios.
Project Sol’s debt was comprised of loans partially syndicated and all in default which makes the process of attracting investors even harder because the reduce control rights over the underlying collateral. Pre-credit crisis, Eurohypo also lent heavily to Inmobiliaria Colonial, which acquired offices throughout Barcelona and Madrid.
All parties declined to comment.
Major Spanish property loan portfolio sales in 2013
Deutsche Bank closed the purchase of the nominally-valued €100m Project Walls with SAREB yesterday, which caps the third sale to the investment bank in the last three months and underlines the acceleration in legacy real estate loan deleveraging by Spain’s bad bank.
Project Walls, which Deutsche Bank bought on an all-cash basis as the majority equity partner in a joint venture acquisition with Spanish asset manager Magic Real Estate, is comprised five loans originally extended to separate borrowers and secured by office buildings and hotels located in Madrid, Barcelona and Valencia.
In mid-November, Deutsche Bank won the nominally-valued €233m Project Abacus from SAREB, a singular portfolio comprising loans and loans secured by commercial real estate with over half related to Abacus are located in prime areas of Madrid and Catalonia.
Deutsche Bank beat Apollo, Cerberus, Centerbridge, Fortress and Lone Star. On the same day, 14 November, Deutsche Bank also won two non-performing Metrovacesa syndicated loans nominally valued at €90m within Project Bermuda from SAREB.
Within Project Bermuda, the process to sell off SAREB’s exposure to listed Spanish property companies, Davidson Kempner Capital, through its Burlington Loan Management subsidiary, bought the nominally-valued €245m loan portfolio, while HIG Capital won a €100m residential tranche, according to Real Estate Capital.
Also last November Bank of America Merrill Lynch (BAML) bought two additional Metrovacesa loans with nominal value of €80.5m, in a separate process dubbed Project Fado, which itself is part of the Bermuda process.
Assets within the Fado portfolio include the Alvia Business Park in the Pinar de las Rozas district of Madrid as well as the same city’s Paseo del Arte Hotel Barceló and Manoteras.
Last October, the Project Corona commercial property portfolio failed after bids secured did not reach SAREB’s reserve pricing, according to Bloomberg.
In August, SAREB sold a 51% stake in the direct residential Project Bull portfolio, comprised of 939 homes, to HIG Capital, in a structure similar to RBS’ £1.36bn Project Isobel and NAMA’s €810m Project Aspen.
HIG Capital’s acquisition valued Project Bull at €100m, with the joint venture structure allowing Spain’s bad bank to share in the upside.