* Commerzbank selling 4 bln euro portfolio of property loans
* Debts backed by Spanish offices, shopping centres
* At least 10 funds and banks bidding for assets - sources
* Huge deal could clear way for more sales - sources
By Arno Schuetze, Sarah White and Alexander Hübner
FRANKFURT/MADRID, March 4 Banks such as Deutsche
Bank and JPMorgan are teaming up with
international funds to bid for a multi-billion-euro portfolio of
Spanish property loans as the country's real estate market
thaws, sources close to the process said.
The loan package of over 4 billion euros ($5.5 billion),
from Germany's Commerzbank, is one of the biggest of
its kind to be auctioned in Spain's six-year real estate slump
as lenders burned in the crisis clean up their books.
It is made up of some soured debts and other performing
loans backed by office blocks and shopping centres, rather than
debts related to residential homes which have more commonly been
offered to investors.
That is helping the portfolio attract buyers, the sources
familiar with the process said, though funds have also been
flocking to Spain recently as the country emerges from recession
and property prices come closer to hitting bottom after falling
around 40 percent since 2007.
Banks have been joining up with funds to bid together for
the Commerzbank portfolio, and would most likely split the
assets afterwards, with banks keeping the performing ones.
U.S. private equity firm Lone Star is bidding with JPMorgan
for the loans, while Blackstone is working with Deutsche Bank,
two sources familiar with those offers said. Apollo Global
Managament has put in a joint offer with Spain's
Santander, a third source said.
U.S. private equity firm Cerberus has also put in a bid, two
other people said, as has Oaktree Capital Group, according to a
sixth source, though it was unclear whether these investors had
Commerzbank, and the banks and funds declined to comment, as
did Lazard which is handling the auction. Over 10 parties have
put in bids, which were due at the end of last week, the sources
said. Another round of bids is scheduled for April.
"Bidders can put in offers for the whole package, or just
the parts they're interested in, such as the non-performing
loans for example," said a real estate adviser close to the
auction, which is known as "Project Octopus."
The portfolio includes 3.3 billion euros in performing loans
and roughly 1 billion in non-performing loans, people familiar
with the transaction have previously said.
A lawyer familiar with the process added that the deal could
come with a small real estate management platform and a team of
people to handle the debts.
International funds have been chasing these kinds of assets
in Spain so they can build up credit management units and buy
more loan portfolios. Apollo recently bought 85 percent of
Santander's property management division, while bailed-out
lender Bankia transferred the management of its
platform to Cerberus for the next 10 years.
Commerzbank, which was rescued by the state during the
financial crisis, has been one of the biggest bank sellers of
soured debts in recent months, in part as it gets ready for a
Europe review of banking assets this year and frees up capital.
It is winding down a mortgage unit previously known as
Eurohypo, and last July it sold British property loans worth 5
billion euros to U.S. lender Wells Fargo and Lone Star.
In February it already sold around $1 billion in bad Spanish
Real estate experts and other people close to "Project
Octopus" said the sale could clear the way for more foreign
lenders to offload Spanish real estate loans they were lumbered
with after the 2008 market crash.
"The Commerzbank deal is so big that other banks keen to
sell portfolios have been holding off, waiting for this to get
done, as the bidders can't really focus on anything else right
now," the lawyer familiar with the process said.
The prices paid for such assets vary enormously. Investors
sometimes bid as little as five to 10 percent of the face value
of distressed property loans, while better assets might be sold
for 80 or 90 percent of face value.
Spanish lenders and foreign banks operating in the country
had been slow to shed property portfolios until recently because
the bid and ask price gap was very wide.
But the improving economy is encouraging investors to raise
offers while banks have also taken hefty writedowns on the value
of their loans and properties.
International funds, including big name investors such as
U.S. billionaire financier George Soros, have also started to
put money into other recovering sectors in Spain.
Soros took part in Spain's sell-down of a stake in Bankia,
and also bought shares in builder FCC.