Madrid-based Banco Popular SA said it approved the sale of a majority stake in its real estate portfolio to private equity fund Blackstone Real Estate Partners Europe V. Under the deal, Banco Popular will create a new company to which it will transfer assets with a book value of €30 billion, as well as 100% of the equity of Banco Popular’s real estate management company, Aliseda. The valuation attributed to the Spanish assets, not including Aliseda, is €10 billion.
Blackstone will own a majority 51% stake in the new company while also assuming management responsibilities, while Banco Popular will own the remaining 49% stake. As a result, the assets will no longer be consolidated on Popular’s balance sheet.
The move came after European Union Directorate General for Competition approved the acquisition of Popular by Banco Santander SA (BMAD/NYSE: SAN; LSE: BNC) with no restrictions. Banco Popular Español was the sixth largest banking group in Spain before it was bought by Santander as part of a rescue package in June 2017.
“We are very pleased to enter into this partnership with Blackstone,” said Santander Spain’s Chairrman Rodrigo Echenique. “The agreement significantly reduces our real estate exposures and further strengthens our balance sheet, allowing us to focus all our efforts on supporting customers. It is an important step in the integration process and demonstrates the quality of our execution capabilities.”
Jon Gray, Global Head of Real Estate at Blackstone, said: “This significant investment reflects our continued confidence in the robust recovery of the Spanish economy.”
The spinoff will have a positive impact on Santander’s CET1 fully loaded capital ratio of 12 basis points. Moreover, five basis points of capital consumption which resulted from the acquisition of 51% of Aliseda by Banco Popular will be released.
The deal, which is subject to regulatory approvals and other customary closing conditions, is expected to close in the first quarter of 2018. The process has been supervised by Pedro Pablo Villasante, Independent Director of Banco Popular. Morgan Stanley acted as advisor to the seller.
Banco Santander is a leading retail and commercial bank, founded in 1857 and headquartered in Spain. It has a meaningful market share in 10 core countries in Europe and the Americas, and is among the world’s top banks by market capitalization. At the end of June 2017, Banco Santander had EUR 1.65 trillion in managed funds, 131 million customers, 13,800 branches and 200,000 employees. Banco Santander made attributable profit of EUR 3.6 billion in the first half of 2017, an increase of 24% compared to the same period last year.
New York-based Blackstone Group LP (NYSE: BX) is a global leader in real estate investing. Blackstone’s real estate business was founded in 1991 and has approximately $104 billion in investor capital under management. Blackstone’s real estate portfolio includes hotel, office, retail, industrial and residential properties in the US, Europe, Asia and Latin America. Major holdings include Hilton Worldwide, Invitation Homes (single family homes) and prime office buildings in the world’s major cities. Blackstone real estate also operates one of the leading real estate finance platforms, including management of the publicly traded Blackstone Mortgage Trust.