FMS WM launches c.€750m Project Gaudi in maiden European loan portfolio sale

FMS Wertmanagement (FMS WM) has launched the sale of its first European commercial real estate (CRE) loan portfolio four years after the bad bank was established to wind-up legacy Hypo Real Estate assets and derivatives.

FMS WM logoCushman & Wakefield’s Corporate Finance team in London has been mandated to sell FMS’s entire remaining Spanish and Portuguese commercial real estate loan exposure, in the sale of the circa €750m Project Gaudi, named after the legendary Catalan architect.

The step-change in strategy for FMS WM, which has rundown an inherited €27.2bn of predominantly European CRE loans to €13.4bn in just over three years to the end of 2013 through restructurings, repayment at maturity and asset disposals, reflects improved sentiment and the level of capital seeking deployment in, principally, Spain.

Project Gaudi is comprised of 18 loans – which are broadly split one-third performing, sub-performing and non-performing – and is secured by:

  • two five-star hotels in Barcelona and Cascais;
  • five shopping centre and leisure centres;
  • four business parks in Madrid and Barcelona;
  • a portfolio of 17 self-storage assets; and
  • several residential and industrial development sites.

One of the marquee assets in Project Gaudi is the 483-bed Hotel Arts in Barcelona (pictured left), managed by Ritz-Carlton. 

A consortium comprised of Host Hotels & Resorts, Dutch pension fund Stichting Pensioenfonds ABP and Jasmine Hotels Pte, an affiliate of Singapore sovereign wealth fund’s GIC Real Estate paid €417m in July 2006 for Hotel Arts, which at the time was the largest ever single-asset real estate transaction in Spain.

Other assets suspected as part of Project Gaudi include:

  • the five-star 194-bed Penha Longa Hotel & Golf Resort, formerly owned by Deutsche Bank Real Estate Iberian Value Added I before the fund spun off into Magic Real Estate.  Hypo refinanced the hotel, managed by Ritz-Carlton, with €46m in June 2008;
  • a portfolio of 17 self-storage properties to Blue Self Storage (which trades as Bluespace).  Hypo extended a €125m combined investment, development and VAT financing facility in July 2007, which the refinanced 13 existing self-storage properties in Barcelona, Madrid and Valencia for the expanding company;
  • the 74, 000 sq ft San Fernando Business Park, near the main Madrid Airport in Barajas, which is now part of Goodman European Business Park Fund (GEBPF).  Hypo extended a combined investment and VAT facility financing Arlington Europe’s €180m acquisition in January 2005, which was refinanced in April 2012 with a fresh €106m senior loan priced at 115 bps to December 2014, based on a December 2011-issued €150m valuation.  This is likely to be among Project Gaudi’s performing loans;
  • the 35,895 sq m Barrio Art Decó leisure centre in Madrid, formerly owned by Grupo GMR.  Hypo refinanced with a €42m senior facility and a €3.4m VAT facility in May 2007.

CoStar News understands that 16 of the 18 loans are secured by Spanish assets.

A limited number of international loan buyers have already been invited to sign NDAs, thought to be less than 15, with the phase one data room to be open on Monday (27 October). 

First round bids are called three weeks later on Friday 14 November, with final binding bids expected a couple of weeks thereafter.

FMS WM, whose commercial real estate division is headed by Norbert Kickum, is seeking to close the Project Gaudi sale before the year end.

Earlier this year, in June, FMS WM sold 15 US CRE loans nominally-valued in aggregate at $1.2bn to Deutsche Bank.  The loan portfolio was secured by offices, shopping centres and hotels in various US cities.

At the time, Christian Bluhm, executive board spokesman of FMS WM said in a prepared statement that the bad bank sold the loans to leverage the “favourable market window”, adding: “We want to continue to take advantage of opportunities like this when they present themselves to accomplish our mission of winding up this portfolio while maximising value.”

According to FMS WM’s last published breakdown of its remaining CRE loan book, the bad bank has €13.4bn remaining. 

Of this, €5.8bn, or 43.3%, is secured by German CRE; €1.8bn, or 13.4% is secured by US CRE; €1.7bn, or 12.6% is secured by UK CRE; while there is €0.8bn and €0.6bn left secured against France and Netherlands, respectively.  

The unwinding of the CRE portfolio is expected to be largely competed by 2020.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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