The sale of Citi Property Investors, the Citibank’s (NYSE: C) real estate asset management arm, has hit a major setback after some of the unit’s clients refused to give their blessing to a sale.
Currently the U.S. federal government owns a 27% stake in Citibank after providing it billions of dollars worth of bailout funds as part of the Troubled Asset Relief Program. In an ongoing effort to pay off its federal debt, Citi is trying to sell about $547 billion worth of assets, which represents about one-third of its balance sheet.
Citigroup put Citi Property Investors (CPI) up for sale in June of 2009, but is fighting a last-minute backlash from several of its top investor clients that fear there will be a major cut in talent that is controlling CPI’s $12.5 billion portfolio.
Citigroup, who has so far declined to comment to the media about the situation, will likely announce a preferred bidder for Citi Property Investors as early as this week, said the source. Although, unrest from clients could delay those plans and even force Citigroup to consider a temporary delay in the sale process.
Investors in CPI have no formal grounds to block a potential sale, but an exodus of investors would hurt the value of the business and make it much less attractive to potential buyers.
Leon Black’s Apollo Management and Australia’s Macquarie Group have been reported by the press as the two frontrunners to purchase CPI, which has the State of New York, the Los Angeles City Employees’ Retirement Plan and the State of Qatar among its investors.
It was announced on Friday that Macquarie Group had sold most of its Austrailian real-estate business for $265 million as part of a strategy to refocus on more traditional investment banking, making Apollo Management a more likely candidate to purchase CPI.
