Santander completes sale and leaseback series

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Banco Santander has completed the sale of its Spanish corporate property portfolio through a series of sale-and-leaseback transactions. The deals, executed over seven months, brought more than €4.3 billion into the bank’s coffers, €1.681 billion of which was a capital gain. The sale of the bank’s Madrid headquarters, Boadilla del Monte, to Propinvest was worth €1.9 billion on its own, making it one of the largest deals to be done in Spain.

Originally, the idea was to use some of the cash raised as part of Santander’s war chest as it pursued ABN Amro. Santander bought the Latin America assets of the Dutch bank. Its 1,156 Spanish properties were divided up into five lots and sold to investors. The first sale closed in October 2007 and the last was wrapped up at the end of January with the sale of the Madrid headquarters. The lots were made up of the retail branch network, 11 regional headquarters across Spain as well as the Boadilla del Monte campus.

"They got the best out of the market – if you look at the terms on the transaction I think it reflects a yield in the region of 4.4%. That’s incredible taking into consideration that it’s an out-of-town location," says Javier Kindelan, national director of institutional investments at CB Richard Ellis, of the Boadilla del Monte sale. CBRE advised Santander on all the sale-and-leaseback transactions.

Overall, Kindelan attributes the bank’s successful disposals to the fact that investors would have Santander as a long-term tenant. "It was more like a financial transaction in that sense," he says. "They managed to close the deal at the top end of the market. Like in the UK we’re seeing readjustments in yields and more so for assets that have higher-risk components. However, all of these transactions were closed at prime yields."

The length of the leasebacks varied from lot to lot. For the Boadilla del Monte campus and the retail branches, there is a 40-year lease in place, while those on the regional headquarters vary from 10 to 15 years. Santander has built some flexibility into the deals, in some cases having the option to buy back the properties at the end of the lease. For example, it has the option to buy back the Madrid headquarters and the retail branches.

"We will continue to see a trend of corporates exiting real estate. It makes sense," says Kindelan. "They need to dedicate those resources to their core businesses. If they’re investing in real estate it might yield 4% to 5% depending on the asset class, where it’s located and many other factors. It makes a lot of sense that they use these resources to run their own business, to expand, to reduce debt or whatever makes sense. It also helps reduce costs."