Santander will sell Spanish property assets for €4 billion to help fund its participation in a bid for Dutch bank ABN AMRO, an official at the Spanish bank said today.
The official, confirming a report in El Paisnewspaper, said Santander, one of Europe's biggest banks, would make capital gains of €1.4 billion from the sales and wanted to go ahead with them even if the ABN deal fell through.
"This is a slice of the financing for Santander's participation in the ABN AMRO bid, but even if Santander weren't involved we'd be doing this anyway," the official said.
Santander's planned sale-and-leaseback of its offices comes amid worries that Spain's pricey commercial property sector may be close to peaking and as the country's long-booming housing market starts to cool, hurting property shares.
But a property market agent said Santander's timing was good, because there were still significant amounts of Spanish and international capital on the lookout for well located assets with prime tenants on strong and long leases.
"There is no doubt that the pricing is perceived as expensive in central Madrid offices, but the way the capital is still there and the sentiment is still there, means this is as good a time as any," said Roger Cooke, head of Spain for property services firm Cushman & Wakefield.
Yields on office property - a key valuation measure that tracks rent in proportion to capital values - have fallen to as low as 3.5 percent in central Madrid and are comparable with the best prices achieved in central London, Mr Cooke said.
The average office vacancy rate across Madrid is 7 per cent but is less than 3 per cent in some central areas, with little new supply expected until 2008/2009, he said.
El Paissaid the information had been given to investors and analysts in a series of meetings related to the ABN bid, a three-pronged offer with Britain's Royal Bank of Scotland and Dutch-Belgian group Fortis to rival an earlier bid from Barclays .
Meanwhile the Financial Timessaid today Barclays has drawn up contingency plans for a big cash sweetener to strengthen its all-share offer for ABN AMRO.
The newspaper said Barclays recognised that unless legal disputes ran in its favour it needed to improve its €65 billion offer if it was to have a chance of beating a consortium led by the Royal Bank of Scotland.
Barclays is looking at reducing the number of shares it would issue for ABN and replacing them with cash, said the newspaper, quoting people familiar with the situation.