(Mark Your Calendars: RealShare Distressed Assets takes place Oct. 4-5 in Grapevine, TX. RealShare New York takes place Oct. 12 at the Marriott Marquis.)
NEW YORK CITY-In an attempt to clean-up their balance sheets, reports show that Bank of America is in discussions to sell Merrill Lynch’s boom-year real estate investments to private-equity giant Blackstone for $1 billion, according to the Financial Times late Tuesday. Sources told the FT that the potential sale could be a move by the investment bank to reign in risky investments, bulk up capital, dispose of non-core assets and comply with the Volcker Rule under the Dodd-Frank Act.
The sale, while reportedly weeks away, would comprise between $800 million and $1 billion of unwanted property investments in the US, Europe and South America, and contains a hodgepodge of debt equity positions across the globe, sources told the FT. At the same time, the sources said the negotiations “could still fail to result in a deal.”
In a press conference with investors last week, BofA CEO Brian Moynihan said that "during the boom years, Merrill Lynch co-invested alongside other groups in joint ventures and property acquisitions specifically on high-leveraged and opportunistic deals," the FT said. Following the market crash of 2008, global real estate values caused large write-downs in the value of the funds and also contained capital from third party investors, according to the article.
The talks coincide with a BofA Merrill Lynch survey released yesterday that says investors believe the global economy will “slow significantly” in the coming 12 months but will avoid dipping into a recession. The survey found that cash holdings have soared to their high levels since the depths of the credit crisis, as investors have moved out equities. The FT noted that other large investment banks like Citigroup Inc. and Credit Suisse have also pulled out of private equity real estate investments within the year.
Earlier in the week, BofA announced in a company statement that it will sell its credit card business in Canada to TD Bank Group for $8.6 billion, and it will exit its credit card businesses in the UK and Ireland, both expected to close in the fourth quarter of this year.
A spokesman for BofA declined to comment to GlobeSt.com for this article, and Blackstone did not return a request for comment via e-mail.
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