Lazards is poring over a raft of first round single and joint venture bids for Project Octopus, the codename for Commerzbank’s sale of its legacy €4.4bn Eurohypo Spanish commercial property lending business.
CoStar News has learned that five joint venture bids were submitted to Lazards, which is running the sale process for Commerzbank, as well as four solo bids for partial interest in various assortments of Project Octopus’s four subpools.
CoStar News understands that the five joint venture bids comprise:
- Goldman Sachs with Starwood Capital;
- Cerberus Capital Management with Bank of America Merrill Lynch;
- Lone Star with JP Morgan;
- Apollo Global Management with Banco Santander; and
- Blackstone with Deutsche Bank.
In addition, four solo bids have been lodged by:
- Colony Capital, who earlier today CoStar News reported had recapitalised Patrick McKillen’s €800m Project Pebble legacy IBRC loan book;
- GE Capital Real Estate, which at the end of last year acquired Deutsche Postbank’s £1.4bn UK commercial property loan book, as first revealed by CoStar News;
- AXA Real Estate, which purchased around €800m of performing French and German property loans from Société Générale in October 2012;
- PIMCO, a diversified real estate equity and debt investor which recently acquired Central Park in Dublin with Green REIT
First round bids were submitted at 18:00 on Sunday evening.
All bidders, Commerzbank and Lazards declined to comment.
In the joint venture groups, Goldman Sachs, JP Morgan and Deutsche Bank are all thought to be interested in acquiring the performing loans at a discount to re-set the average 120 basis points margin the legacy Eurohypo loans were originated at and to subsequently refinance directly with borrowers.
With few commercial real estate financing mandates in the Spanish market, the acquisition of the performing loans for Goldman Sachs, JP Morgan and Deutsche Bank would provide these investment banks with lending opportunities in a still far from normalised lending environment which is sustaining margins at around the 400 basis points level.
BAML is understood to be solely interested in financing Cerberus’ acquisition, in the event the private equity firm wins.
In January, Banco Santander sold an 85% stake in Altamira, which manages foreclosed Spanish assets and loan recoveries, to Apollo for €664m. The two companies would divide Project Octopus up between performing and non-performing, although Apollo still needs to secure a financier.
Among the solo bidders, GE Capital and AXA Real Estate are the two most eye-catching investors with the ability to take down the entire performing sub-pools, and their decision to not align with a private equity at this stage could reflect an intentional strategy to assess the landscape and determine their best options in the weeks ahead.
Colony Capital is a distressed loan investor, while PIMCO could feasibly invest across the entire spectrum of loan quality though would not do so alone and is expected to partner up ahead of second round bids.
For CoStar News’ first detailed report on Project Octopus, please see here.
For CoStar News’ second detailed report – Inside Project Octopus – which includes a details of the four sub-pools, please click here.
Across the entire €4.4bn commercial property loan book there are between 60 to 70 borrower connections, including Hines, Alpha Real Trust Limited and Spanish property developer Bami, Sociedad De Centros Comerciales de España (SCCE), Metrovacesa, Realia, AXA REIM, Hines, CBRE / REEOF, GE Real Estate.
For a comprehensive list of all legacy Eurohypo Spanish loans in Project Octopus, please click here as published in Spanish newspaper Cinco Dias.
The €4.4bn Project Octopus is comprised of two almost evenly-split pools – a €2.2bn performing and a similarly-sized sub/non-performing pool.
The performing sub-pool is split into two tranches, reflecting Commerzbank’s expectation of capital recovery for each and provisioning levels. There are also around €1.3bn in sub-performing loans and €0.9bn non-performing loans.