Blackstone is set to take control of 100 million euros worth of commercial property loans owned by Société Générale as the French bank pushes to shed its exposure to global real estate.
The private equity group has entered exclusive talks with SocGen over the sale of the loan portfolio, which is backed by good quality offices and retail developments in the US.
The deal, which, according to people involved, is likely to close within weeks, looks set to be the first significant disposal SocGen makes as it battles to shed its property exposure.
In November, SocGen launched plans to dispose of 500 million euros of distressed debt tied to commercial property in continental Europe. The sale had attracted interest from a range of European and US private equity funds and banks. However, SocGen is understood to have narrowed the process to two bidders, Lone Star, the private equity group, and Deutsche Bank.
As well as offloading its bad loans, the bank, which announced a moratorium on lending to the property sector last year, is also in the early stages of trying to sell 1.8 billion euros of performing loans in Europe.
SocGen’s aggressive strategy of cutting its exposure to the beleaguered property sector mirrors efforts by banks across Europe. Impending regulatory changes, which will increase the amount of capital they have to hold against property-secured debt, have put pressure on banks to scale back their lending to the sector.
Last week, Lloyds announced it was selling 1 billion pounds worth of property loans made to Australian property developers in the run-up to the financial crisis. Meanwhile, Irish lenders Allied Irish Bank and Anglo are both understood to be close to putting distressed debt portfolios on the block.
The move to buy the SocGen portfolio – a departure from its recent focus on distressed property loans – also underscores Blackstone’s appetite to grow its real estate business. Earlier this year, the group confirmed it had raised $10 billion in less than 12 months for its seventh property fund.
Blackstone has been active in Europe as well as the US. In December, Blackstone took control of 1.4 billion worth of distressed loans from Royal Bank of Scotland , the UK government-owned lender. The group also recently acquired a 214 million pounds warehouse portfolio from ProLogis, the UK industrial property specialist.
Both Blackstone and SocGen declined to comment.