Banco Popular Sells Loan Portfolio

Banco Popular de Puerto Rico has sold a $148 million loan portfolio to a joint venture that includes Goldman Sachs.

Banco Popular says the portfolio includes a mix of construction and commercial real-estate loans, nearly all of which were nonperforming. The bank said in a statement Friday that the portfolio had an unpaid principal balance of $358 million and a net value of about $148 million.

The new joint venture agreed to pay 45 percent of the unpaid principal balance for the portfolio.

Besides Goldman, the venture includes Caribbean Property Group LLC and East Rock Capital LLC. Popular said it will not recognize any significant gain or loss on the sale.

Analysis

I'm gonna have to chalk this one up to creative accounting, because I'm not really sure how to explain exactly what is going on here. One of the golden rules of real estate is that a property is only worth as much as someone is willing to pay you for it. Of course a property is typically valued by an appraiser, but that's only the estimated value. What someone is willing to pay for it can be something completely different.

Theoretically, this should "help" Banco Popular. Like many banks that went belly up in 2008, Banco Popular got caught with a lot of toxic assets. Toxic assets are loans where the appraisal value is lower than the principal owed. This group of loans appear to be toxic. Their value is $148 million, but customers owe $358 million. That's what consumers call "being under water." In business terms, it means you're losing money, which is very bad for Banco Popular.

If the joint venture paid %45, that means they paid BPPR $161.1 million to take the loans, "as is." The joint venture is hoping that the properties gain value and turn the loans profitable, before the owners of the loans default or declare bankruptcy. Or both!

In the end, it's good business for BPPR, they are able to get the toxic assets off their books, and give them a better chance of growing profits. I wonder though, who owns this Caribbean Property Group LLC?

From Associated Press
Flickr Creative Commons Contributor: gordon2208

1 comments:

Gil C. Schmidt

3 de octubre de 2011, 09:47
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1

dijo...

Here's the URL: http://www.cpgroup-pr.com/

A New York City office for real estate developers in Puerto Rico, primarily hotels. From the Company Overview: "CPG is the operating partner of the Caribbean Real Estate Opportunity Fund 2005, L.P., a $472 million real estate fund closed in 2006 and sponsored by CPG, Whitehall (a Goldman Sachs affiliate), and Perry Capital."

Could be another case of "circle-screwing the little people," a banksters specialty. Or it could be a truly legitimate capitalist investment. My money's on--and dragged into--the former.