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Citi unit sale hits snag in final stages, say sources

NEW YORK/LONDON: The planned sale of Citigroup’s real estate asset management arm has hit a snag after some of the unit’s clients refused to give their blessing to a disposal, sources told Reuters.

The US government owns over a quarter of Citi after bailing it out during the credit crunch, and the firm is in the process of shedding a massive US$547 billion (RM1.86 trillion) of assets, or about a third of its balance sheet.

The bank, which put Citi Property Investors (CPI) on the market in June, is fighting to quell a last-minute backlash from several investor clients, who fear big cuts in the manpower controlling CPI’s US$12.5 billion portfolio.

“(The investors) are ill-at-ease because they are concerned about a meltdown in the team. Everyone is unhappy about that,” one source familiar with the situation said.

“They feel that they are paying Citi to sell the business as opposed to looking for new deals,” the source added. Citigroup declined to comment.

Citi is keen to announce a preferred bidder for CPI as early as this week, the source said. But the client unrest could delay those plans, and may even force Citi to consider a temporary suspension of the sale process.

The investors may have no formal powers to block a sale, but an exodus would hurt the value of the business and make it less attractive for any buyer.

Leon Black’s Apollo Management and Australia’s Macquarie Group have been widely tipped as frontrunners to land CPI, which counts the State of New York, the Los Angeles City Employees’ Retirement System and the State of Qatar among its investors.

However, last Friday, the Australian bank announced it had sold out most of its Australian real estate funds business for US$265 million as part of a strategy to refocus on traditional investment banking and broking, leaving Apollo the more likely suitor.

Apollo could not be reached for comment. — Reuters
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