Apollo Global Management has agreed to buy Altamira, the real estate investment management business of Spanish bank, Santander.
The New York private equity firm is making the investment on behalf of its Apollo European Principal Finance Fund II (EPF II), said Santander, which added that it had struck an “agreement in principle” and that full details of the Altamira transaction would be disclosed in coming weeks.
Santander, which has about €9.9 billion of property loans and foreclosed Spanish homes is selling the unit in a deal worth €700 million, according to a report by Reuters.
This is not the first time Apollo’s EPF II has agreed a corporate banking-related real estate deal in Spain, because only in September it announced the purchase of Evo Banco which employs 600 staff in 80 offices across 50 towns and cities.
EPF II is a fund managed by Apollo’s private equity team, as opposed to its real estate group, and is run by former Credit Suisse nonperforming loan dealmaker, David Abrams. The vehicle targets primarily portfolios of European non-performing loans but it also buys some performing loans at discounts. In Europe, it then uses captive loan servicer and real estate asset management company, Lapithus, to work through the assets.
According to a presentation to the Pennsylvania Public School Employees’ Retirement System last February when the pension was considering an investment in the €2.5 billion fund, Apollo estimated that the current European non-performing loan market has grown to €1 trillion amid various pressures on financial institutions. Banks and financial groups are being motivated to dispose of portfolios for reasons including the regulatory requirements of Basel III, or strategic retrenchment, requirements to repay equity after a State bailout, a withdrawal of liquidity by a central bank or a combination of some of those pressures.
Some 16 professionals work on Apollo’s EPF fund including three consultants operating out of Frankfurt, London, Dublin and New York. The strategy is to pay the loans at a discount to face value, ask the borrower for the power to sell the property thus releasing the borrower from further liability, or if the borrower is only in temporary financial difficulty, arrange a monthly payment plan to bring repayments back to par and then sell the loan as a performing loan. A final option is to foreclose.
Santander’s sale of Altamira is just one of a number of corporate moves by Spanish banks. Banco Popular is said to be selling its property management business Aliseda. Reports suggest that Cerberus Capital Management, Lone Star Funds, Centerbridge and Kennedy Wilson, which is working with hedge fund Varde Partners, are among those interested.
On 3 September, Bankia announced it had transferred the exclusive management of its real estate assets and developer loans to Cerberus for the next 10 years for a payment of between €40 million and €90 million depending on the progress of a business plan. Cerberus, which does not own the assets but only the management contract as a result of the deal, will also manage the assets that BFA-Bankia markets on behalf of third parties. Some 457 employees transferred to Cerberus as part of the transaction. Cerberus also recently acquired a non-performing loan portfolio with a face value of €300 million from Santander and another €574 million from savings bank Liberbank.
In a further example of Spanish bank activity with private equity firms, Caixabank sold 51 percent of its property management unit to TPG Special Situations Partners, and Catalunya Banc sold its platform to Kennedy Wilson and Varde Partners.Sabadell has said it is examining the potential to sell its Solvia property management arm. Last year, Centerbridge bought Banesto’s Aktua property subsidiary for €100 million and Spain’s bad bank, Sareb, has embarked on a programme to realise as much value as possible from around €50 billion of assets transferred to it from Spanish institutions that became over exposed to real estate. Miami’s H.I.G. Capital struck the first portfolio deal with Sareb in August this year.