Two U.S. investment firms are set to pay up to €3.9 billion for Spanish property assets controlled by Germany’s Commerzbank, in what may be the largest real estate-related deal in Spain since the market collapsed in 2008.
Although the deal is not finalised, JP Morgan Chase and Lone Star Funds have won a bidding war for the package of loans, which are backed by shopping centers, hotels and offices, according to media reports. The bidding process was known at the bank as “Project Octopus.”
The auction was arranged by investment bank Lazard Ltd. and attracted more than a dozen bidders, including such major players as Blackstone Group and Cerberus Capital Management, which are already active in Spain property, according to published reports.
“The main parts of the agreement are already done … the final closing will be in the coming weeks,” an unnamed source told Reuters.
Texas-based Lone Star is buying the majority of the loans in the portfolio, while J.P. Morgan will acquire some loans and provide the financing for the deal, the Wall Street Journal reports.
The deal would represent the latest move into Spain by investments funds, who clearly see opportunity in the depressed market. Commercial real estate deals in Spain totaled $1.5 billion (€1.09 billion) in the first quarter of 2014, up from $410.9 million in the same quarter last year, Real Capital Analytics reports.
The Commerzbank deal is valued at somewhere between €3.7 billion and €3.9 billion, the Wall Street Journal reports.
Lone Star focuses on distressed assets, according to its Web site. The fund looks for “investment opportunities in developed markets that have suffered an economic and banking crisis, resulting in a distressed financial system.”
Commerzbank is one of several banks looking to jettison Spanish property loans. The next big deal will likely involve a €6.95 billion package of mostly residential loans offered Catalunya Banc SA, which was taken over by the government in 2011. Most of the loans in that deal have been described as “heavily delinquent.”