BILBAO, SPAIN-Spanish banking group BBVA, in a similar move to its main competitor Banco Santander in the last 18 months, is near to closing the sale and leaseback of 1,350 bank branches to Deutsche Bank's RREEF Alternative Investment group.

Media reports said the largest part of the operation, valued at €1.2 billion and covering 80% of the branch network, is expected to close this week although industry sources say it could take longer. The remaining 20% of the network, valued at a proportionally higher €400 million, is expected to take a further two or three weeks to complete. RREEF's minority partner in the operation will be the US private equity fund, Area, which renamed last year from Apollo Real Estate.

The total transaction, amounting to €1.6 billion, represents a spread of yields of between 6% and 7%. The operation will produce a capital gain of €1.2 billion for BBVA books since most of its branches were purchased many years ago and written down. The portfolio has been on the market for around one year. PIE understands that the lease periods will vary up to 30 years with an extension and buy-back option at term. One innovation is the possibility for BBVA to change some branches on the basis that this complies with a previously agreed set of conditions. This will add flexibility to BBVA's operation and allow restructuring of the branch network as the bank deems necessary.

Of the portfolio of properties originally offered a limited number are not included in the transaction. PFE information indicates that RREEF was not interested in the purchase of the remaining office buildings including regional HQ's and additional bank branches. In Madrid, BBVA is unlikely to remain in most existing office buildings for more than four years due to the planned move to a new office complex in the Las Tablas area on the periphery of Madrid which has just received approval.

BBVA has been advised by CB Richard Ellis and RREEF was advised by Savills. CBRE Ellis was involved in Spain's largest real estate operation just over one year ago involving Santander's property portfolio for €1.9 billion including the Financial City in Boadilla del Monte, close to Madrid. Savills also advised the purchasers on the Financial City transaction