How an American private equity group became a real estate giant in Spain.

The U.S.-based financial services company Blackstone seems like a pretty straightforward deal at first glance: it buys struggling companies and assets in order to maximize returns as quickly as possible.

Following this unyielding logic, a US investment fund entered the Spanish real estate market in 2013, buying public housing from Madrid City Hall, which was then in need of liquidity.

But this time they pulled off an even bigger deal when they bought half of a portfolio of toxic real estate assets from Spanish insolvent bank Popular. The deal was struck with Spain's Banco Santander, which bought the ailing Banco Popular for just one euro in June to prevent its collapse. On this deal alone, Blackstone became the largest privately owned real estate in Spain. Through the deal with Popular, Blackstone acquired assets worth €5 billion, which added to the €7 billion they already had in Spain after the 2013 operation. In total, the company's assets in the country now total just over €12 billion. Critics see the move as the final arrival of one of the world's biggest predatory funds in Spain. Nevertheless, Blackstone is positioning this investment as a medium-term bet on the country's economy, which has already enjoyed four years of growth.

Big presence in the Spanish market

Blackstone, with a deal in 2013, has already become one of the biggest players in the Spanish real estate market, controlling nearly 100,000 assets owned by dozens of companies. The deal, struck in the summer of 2013, allowed Blackstone to acquire 1,860 social housing units, parking lots and storage units from Madrid City Hall, which was run by Popular Party member Ana Botella. The company paid €127.5 million for the deal.

Blackstone is a big player in the real estate market.

Blackstone is one of the giants in the wealth management industry with assets exceeding €370 billion worldwide. Real estate is gaining ground in their investment portfolio, already making up almost a third of their assets. The total value of their real estate business is 104 billion euros, making them the largest real estate owners in the world.

Positioning in the Spanish market

Although Blackstone has become a symbol of excessive capitalism and its chairman and CEO Stephen Schwarzman has been portrayed as a representative of Wall Street villains, sources close to the company believe its entry into Spain should be seen as a boost for a real estate sector that needs good news. The same company argues that if it has been able to come in and manage a pool of land and housing that has so far been frozen, it's because it offers something the banks don't: flexibility. "Blackstone offers three things: management, management and management," conclude sources close to the company.

Litigation

Four years on, the sale of Madrid City Hall's 1860 sheltered social housing units to Blackstone continues to generate controversy. The municipal housing company is pursuing the invalidity of the deal in court, citing a "serious weakening" of the council's assets as the €127.5m received by the fund is "well below market value". However, courts have twice ruled the sale legal.