Private equity funds prepare final bids for €740m Project Gaudi

A trio of private equity funds are among four finalists which will submit binding bids next week for a €740m portfolio of predominantly Spanish commercial real estate loans, secured by a raft of prized assets including the Hotel Arts in Barcelona, amid rising investor appetite in Iberia.

FMS WM logoCoStar News understands that Cerberus Capital Management, Oaktree Capital Management and Orion Capital Managers all made it through to the final round of FMS Wertmanagement’s maiden European CRE loan portfolio sale, dubbed Project Gaudi, named after the legendary Catalan architect.

There is also understood to be a fourth as yet unidentified final bidder.  The Project Gaudi finalists all submitted first round offers at or above 60 cents in the euro, which reflects a price of €444m or above.

Project Gaudi loan portfolio, which is being sold by Cushman & Wakefield’s Corporate Finance team in London, is comprised of 18 loans with broadly an equal split of performing, sub-performing and non-performing loans,

FMS Wertmanagement, founded in 2010 after the German government nationalised Hypo Real Estate, brought the Project Gaudi loan portfolio for sale in October, with the scale of interest evident in the long list of bidders which failed to make it past the first round.

Among the many bidders which bid up to and including the high 50 cents range was Davidson Kempner in a joint venture with Värde Partners, Blackstone, Deutsche Bank, Marathon Asset Management, Sankaty Advisors, BAML, Colony Capital, Starwood Capital, Apollo Global Management and Lone Star.  

CoStar News understands Project Gaudi, for which final bids have been called for next week, is expected to trade in the high 60 cents in the euro range which would reflect a circa €500m sale price, which would reflect approximately a discount of one-third compared to the unpaid total loan balance.

However, FMS Wertmanagement will have made provisions against the non-performing and, to a lesser extent, the sub-performing loans in recent years which will insulate the loss crystallised by the sale of Project Gaudi.

Project Gaudi, comprised of 16 loans secured by Spanish assets and two loans secured by Portuguese commercial properties, includes:

  • 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.

The marquee asset in Project Gaudi is the 483-bed Hotel Arts in Barcelona, 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.

For a more detailed report on the assets within Project Gaudi, please click CoStar News’ exclusive story from last October.

FMS Wertmanagement had as much as €13.4bn in remaining commercial real estate loans, as at the end of 2013, including €5.8bn of German loans, €1.8bn of US loans, €1.7bn worth of UK commercial real estate loans and €0.8bn and €0.6bn of loans secured by assets in France and Netherlands, respectively. 

Spain has returned to economic growth in 2014 following seven difficult years of rising unemployment, salary deflation and depressed consumer spending.

But an increase in business activity has led to unemployment reducing and consumer confidence has reached its highest level since 2001 with improvements in disposable income and recovering house prices reinforcing this optimism.

Spanish commercial real estate transaction volumes are predicted to exceed €10bn in 2014, higher than in 2007. “In number of closed deals and in volumes transacted, last year was probably the record due to the capital value adjustment that has taken place in 2014, compared with 2007,” explains Patricio Palomar Murillo, director at CBRE Spain.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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