A joint venture between US private equity firm Lone Star Funds and JPMorgan Chase & Co. has agreed to buy the Dutch state-owned bad bank Propertize for around €895 mln.
As part of the deal, which is expected to close in September, the Dutch state will take over the outstanding guaranteed debt of Propertize, a bond with a value of €2.35 bn, with Propertize transferring the same amount to the State, plus accrued interest.
To make the payment Propertize will use available equity as well as a financing from the buyers, if necessary, a spokesperson for Propertize's previous owner NLFI said. As such, the transaction ends the state guarantee on Propertize's financing.
The deal marks a discount of just over 30% to the gross value of the Propertize assets.
This is the second major joint investment by Lone Star and JP Morgan. Last year the two partners won Commerzbank’s €2.2 bn European commercial real estate loan portfolio in one of the biggest deals of the year. In that deal, Lone Star and JP Morgan split the portfolio in performing and non-performing units with Lone Star taking on the NPL assets and JP Morgan the performing portfolio.
More than 40 buyers expressed interest in Propertize and two bidders eventually submitted binding offers, with the other party reportedly being a venture between Goldman Sachs Group and Cerberus Capital Management.
Mix of residential, retail and offices
According to Propertize's 2015 annual report, the unit owns €1.17 bn of residential assets, €875 mln of retail properties, €1.15 bn of offices and the rest in other asset classes including €587 mln of commercial assets. Nearly €3 bn of the loans, or 63%, are non-performing while the performing ones represent 37% of the portfolio.
The portfolio had a net value of €3.4 bn at year-end 2015, €2.8 bn of which in the Netherlands and the rest largely in the rest of Europe.
Propertize was set up in 2014 to dispose of soured real estate assets after SNS Reaal was nationalized and was put on the market in October last year by NLFI, the institution which manages nationalized financial companies on behalf of the Dutch government.
The Dutch Finance Ministry decided to privatize Propertize although the bad bank was given a period of 10 years to dispose of its assets, which involved gross loans with a value of €4.7 bn at the end of December 2015.
About €22.5 mln of the purchase price is conditional, according to a statement by NLFI.
