Spain’s BBVA (BBVA.MC) said on Wednesday it had agreed to sell 80 percent of its real estate business to U.S. fund Cerberus for 4 billion euros ($5 billion), showing how investor enthusiasm for Spanish property is reviving.
A burst property bubble in 2008 sent Spain into a downturn that lasted nearly five years, causing mass unemployment and prompting a more-than 40-billion-euro bailout for the country’s banks.
The economy returned to growth in 2013 and has outperformed the rest of Europe since then, helping to revive residential construction as house prices pick up, which has started to attract foreign investors back into the market.
The BBVA real estate assets included in the deal have a gross book value of some 13 billion euros, Spain’s second largest bank said in a statement.
BBVA said the whole portfolio was valued at 5 billion euros, with the price involving a discount of 61.5 percent, in line with its coverage ratio for its foreclosed assets.
As of end-September, BBVA had non-core real estate property portfolio with a gross value worth around 17.8 billion, of which the bulk were foreclosed assets worth around 11.9 billion euros.
The deal is the largest since Santander (SAN.MC) sold control of property worth 30 billion euros to U.S. investor Blackstone Group (BX.N) in August.
Santander sold its portfolio at a net value of 10 billion euros after a discount of around 66 percent.
The rebound in the property market has also allowed Spanish banks to tackle toxic balance sheets faster than rivals in Italy. Banks in Europe are under pressure to reduce soured loans after new guidelines on this from the European Central Bank announced last month.
Analysts at broker Keefe, Bruyette Woods viewed the transaction as a positive step towards reducing BBVA’s non-performing assets ratio (non-performing loans and foreclosed assets) from 7.2 percent to 4.5 percent.
BBVA’s shares were up 1.94 percent at 1150 GMT, compared with a rise of 1.6 percent in the European STOXX banking index .SX7P.
At a group level, BBVA has non-performing assets worth around 33 billion euros on its balance sheet – of which around 25 billion euros are in Spain.
Since 2015, BBVA’s real estate business has generated losses of 1.37 billion euros.
BBVA said it would retain control of 20 percent of the real estate portfolio, which it said would be exclusively managed by Cerberus’s Haya Real Estate.
The bank said the deal was not expected to have a significant impact on profits and would have a slightly positive impact on the fully loaded core tier 1 capital ratio (CET1), a measure of financial strength.
It also said that once the transaction was completed in the second half of 2018, BBVA would have the lowest relative real estate exposure among the main Spanish financial institutions.