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Blackstone in talks for Banco Popular portfolio stake

The New York-based firm reportedly beat off competing bids from Lone Star and Apollo for 51% of a near €30bn portfolio.

 Spanish bank Banco Popular has entered exclusive talks with Blackstone over the sale of a majority stake in its €30 billion property portfolio, the bank the said in a statement released on Monday.

Blackstone has agreed to acquire 51 percent of Popular's portfolio, made up of repossessed assets worth an estimated €18 billion and €12 billion of non-performing loans, while bids from competing private equity firms Lone Star and Apollo Asset Management failed, according to Spanish media.

The bid for the portfolio stake comes two months after Blackstone closed its fifth Europe-focused opportunistic real estate vehicle after collecting €7.8 billion of equity commitments from investors. The firm said the haul was the largest ever raised for a dedicated European real estate fund.

Banco Popular, recently acquired by rival Spanish bank Banco Santander, will now negotiate the terms of the deal over a period of exclusivity with the New York-based asset management giant, according to a note sent to the Spanish securities regulator Comisión Nacional del Mercado de Valores (CNMV).

Santander expects the exclusivity period to last just a few weeks, but it is dependent on the time it takes European competition authorities to approve Santander's acquisition of Popular. On June 7, Santander bought Popular for a notional consideration of €1. The deal included the acquisition of the near €30 billion portfolio of property assets and non-performing loans linked to real estate.

Following the acquisition, Santander said it planned to “significantly” sell down the property portfolio of the recently purchased Banco Popular at a discount of up to 40 percent. The bank declined to comment further.

Popular and Blackstone both declined to comment.  

According to a presentation on the bank’s website, the plan is to reduce Banco Popular real estate assets and property-backed NPLs to “non-material levels within three years”.

Santander highlighted that it has a “strong track record” in managing non-performing assets, having reduced its exposure to real estate assets by 60 percent from 2012 to Q1 2017.

The sale to Blackstone is subject to Santander receiving regulatory approval from CNMV for its acquisition of Popular.

This would not be the first time Blackstone acquired properties from a struggling Spanish bank. Back in 2014 Blackstone invested around €3.6 billion for the ‘Hercules’ portfolio of residential loans and real estate properties with a book value of €6.4 billion from the bailed out Catalunya Banc.

In recent years the Spanish property market has been awash with opportunistic firms, Apollo Global Management, Orion Capital Managers and Oaktree Capital Management, as well as Blackstone buying up distressed assets and development land in the country at significantly reduced prices.

In fact, for the past two years, the Spanish real estate market has reached record levels of investment activity. Transaction volumes for the first three months of this year hit a new high of €3.4 billion – a 50 percent increase year-on-year, according to data from global property services firm CBRE.

Additional reporting by Thomas Duffell