How a US private-equity group just became Spain’s new real estate giant

https://elpais.com/elpais/2017/08/10/inenglish/1502382393_471618.html

The business of US financial services group Blackstone would, at first glance, appear to be pretty simple: it buys up companies and assets that are in difficulties, in search of the biggest capital gain in the shortest time possible. With this implacable logic, the US investment fund entered the Spanish real estate market in 2013, acquiring protected housing stock from Madrid City Hall, which at the time was in need of liquidity. But it pulled off an even bigger deal on Tuesday, when it bought up half of the toxic real estate portfolio from failed Spanish lender Popular.

The purchase was made from Spain’s Banco Santander, which in June bought the struggling Banco Popular for one euro in order to prevent its collapse. Like many other Spanish lenders, Popular had suffered from exposure to bad loans following the slump in the property market after a decade-long boom that ended in early 2008.

Thanks to the deal, overnight Blackstone became the biggest completely private real estate firm in Spain. Founded in the 1980s with seed capital of $400,000, the company has just added €5 billion of assets from Popular to the €7 billion it already had in Spain from its 2013 operation. The company’s total assets in the country now total just over €12 billion.

Spain’s so-called “bad bank” – known as SAREB, and which was set up to absorb the toxic assets of a number of nationalized Spanish lenders – beats out Blackstone with assets of nearly €40 billion. But while its stakeholders are mostly private, it still counts on 45% of public capital via Spain’s bank rescue fund, known as FROB.

Blackstone has positioned this investment as a medium-term bet on the economy of a country that has seen four years of growth, but critics see the move as the definitive arrival in Spain of one of the biggest vulture funds in the world. “This important investment reflects our confidence in the robust recovery of the Spanish economy,” read a statement from Jonathan Gray, the head of the ever-more-important real estate department of Blackstone. “It’s a bold bet on one of Europe’s best turnaround stories,” wrote Tom Buerkle in an analysis article published on Breaking Views.

The net book value of the real estate business of Popular was €30 billion. But after a number of depreciations and amortizations executed first by Popular and later by Santander, the value of this portfolio of land, housing, commercial units and other assets fell to €10 billion. For the 51% of this stock Blackstone has paid just over €5 billion.

But even before this deal, the US fund was one of the biggest players in the sector in Spain, with nearly 100,000 real estate assets controlled via dozens of companies. The deal that was closed in the summer of 2013 saw Blackstone buy up 1,860 social housing units, parking garages and storerooms from Madrid City Hall, which was then controlled by Popular Party Mayor Ana Botella. The firm paid €127.5 million for the deal. The following year, the fund bought up the toxic mortgages on the books of Catalan lender Catalunya Banc. Valued at €6.4 billion, the package was snapped up by Blackstone for a little over half that amount, around €3.6 billion.

With some €370 billion of assets under management around the world, Blackstone is one of the giants of capital risk. Real estate is gaining more and more ground in its investment portfolio, now accounting for nearly a third of its assets. The total value of its real estate business is €104 billion, making it the biggest owner of bricks and mortar in the world.

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thanks to intrigued for the link..

picking them up for pennies on the dollar..

this is how equity groups and huge investor funds will end up owning the vast majority of real esate..its all tied up neatly in “toxic” bad bank bundles so they get them for free basically..

what a plan..

“overnight Blackstone became the biggest completely private real estate firm in Spain. Founded in the 1980s with seed capital of $400,000, the company has just added €5 billion of assets from Popular to the €7 billion it already had in Spain from its 2013 operation. The company’s total assets in the country now total just over €12 billion.”

rapid growth..

“With some €370 billion of assets under management around the world, Blackstone is one of the giants of capital risk. Real estate is gaining more and more ground in its investment portfolio, now accounting for nearly a third of its assets.”

401

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~ by seeker401 on October 10, 2017.

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