Month: September 2013

The new taxation system attracts the real estate fund Orion.

The investment fund Orion has created a Socimi (Real Estate Investment Listed Public Limited Company) of nearly 300 million Euros with its asset the mall Plenilunio, located in Madrid. It constitutes the first great Socimi with the new favorable taxation system for the real estate investment, days before the final date to create these vehicles in 2013.

Until now, only a few small Socimis had been created, of no more than 15 million Euros, like the ones from Visionlab or El Corte Inglés. Orion is the first international fund with experience in the real estate market and in Real Estate Investment Trusts that decides to invest in Spain. The advisors of Orion have been Pablo Serrano de Haro and Alfonso Benavides, partners at Clifford Chance. Sources within the sector do not rule out the creation of new Socimis before the end of September, the final date to do it this year. They assure that the new system is very favorable and they point out that there have been no operations until now because investors have preferred to wait as much as possible.

Taxation for the company is zero, while until this year it was 19%, and it is transferred to investors. The new norm provides two years for the company to be listed. Orion is thinking of doing it on the short and medium term.

Who buys properties in Madrid?

The profile of the buyer of properties in the capital is made of couples aged between 25 and 45, which demand apartments of 2 and 4 rooms and in already known areas, as confirmed by the study carried out by the real estate company Via Célere. (…) 70% of them have higher education. The location is one of the main features taken into account when taking a decision to purchase, as well as the affection for the neighborhood, as proved by the fact that 48% are neighbors from the area. The buyers look for developments near to their current location, close to relatives and friends.

As for the motive for the purchase, the substitution of an older home for a new one is the main reason: 58% of the purchases opposite to the 33% that buy their first residence, and very far from the investor, which nowadays, means only 9,5% of the total sales.

The most demanded flats are those with two or four bedrooms, with 30,8% of the sales, followed by homes with three bedrooms with 27,8% and those with one bedroom, which concentrate 11,4% of the sales.

80% of the buyers need financing, and even though in some cases they require up to 100% of the value of the building, most people need between 50-80% of the total price of the home.

ADIF auctions 373 properties following its asset rationalization plan.

The Administrator of Rail Infrastructures has put on sale, through a public auction, 373 properties in 231 lots scattered around different provinces that include homes, trade premises, garage spots and storage rooms.

The operation is part of the asset rationalization plan carried out by the company, through which it plans to sell 1.500 properties until the end of the year. It also auctions several unused stations. The starting price ranges between 1.020 Euros for a storage room and 765.000 Euros for a trade premises.

NH Hoteles looks for an Asian buyer for its luxury development company.

It is a part of the adjustment plan designed by NH Hoteles to alleviate its burden of 700 million Euros in debt. For this new phase, the company does not rely on its subsidiary Sotogrande Inmobiliaria, the company through which it manages its vacation resort in Cadiz. According to different sources within the real estate market, the hotel group has placed its participated company, which was founded 50 years ago as the developing company of a great residential complex with luxury and leisure properties for wealthy people, on the market.

After letting the Chinese touristic group NHA, which acquired 20% of its capital for 234 million Euros, enter its capital, the Spanish hotel group is still in need of cash and of improving its financial structure. Furthermore after the opposition to its plan of sale of assets to the real estate fund Hospitality Properties Trust (HPT) by one of the creditors (Royal Bank of Scotland), a transaction  that would have allowed the group to obtain another 240 million Euros (a part as a loan and the other for the sale of hotels).

This unexpected event has forced the company led by Federico González, who landed at NH Hoteles as a managing director at the end of 2012, to prepare a plan to sell assets in order to gain the 250 million Euros it had agreed with HPT. For this reason, just before the summer, the company closed the sale of one of its better properties, the Grand Hotel Krasnapolsky in Amsterdam for 157 million Euros to the real estate fund managed by the insurance company AXA and is now looking for a buyer for Sotogrande.

The task is not easy, as it has already tried to get rid of its division without any success. The opportunity to value the mix of the subsidiary (real estate/hotels/golf) returns now, after several years of losses and labor adjustments, trying to take advantage of the existing international interest in entering the Spanish tourist sector, as confirmed by some of the more recent operations. In this sense, the first options would be the Asian investors.

For the past few weeks NH Hoteles is a clear example of this dynamics. Several funds (BlackRock and Taube Hodson) acquired the 4,3% of the hotel group that was in the hands of the former savings banks Novagalicia and BMN for 46 million Euros, a percentage that was followed by another 5% owned by Kutxabank for another 60 million Euros. These changes could have been bigger if Bankia had agreed to sell its 12,5% to these managing companies.

According to analysts, NH Hoteles offers a high reciprocity with the Spanish and European economic recovery, as the hotel group is present in several countries of the Old Continent. (…)

Popular hires KPMG to handle the sale of its real estate managing company.

Banco Popular has hired the consulting company KPMG to lead the sale process of the management of the real estate assets, properties, plots and credits that it has excluded from its balance sheet and transferred to the bad bank. Popular joins the current started by other institutions that have done the same previously. What has been place on the market is the management, not the ownership of the assets which will continue belonging to the bank.

KPMG has handed out basic information to thirty potentially interested parties, so that those who have decided may analyze in depth the conditions of the sale, so as to be able to present a non-binding offer as a first step.

The handed information refers to the volume of assets whose sale needs to be managed; the different types (apartments, offices, buildings, garages, trade premises, land, credits…) and the means offered by the bank to do so and which refer to the staff in charge of that activity and the offices where the assignment needs to be carried out.

Those who have received this information have between one month and one month and a half to analyze it and decide whether they find it interesting or not. It would be reasonable to end up with around ten firms that present a non-binding offer, so that a second round of contacts may be started with the objective of presenting a final offer. The final result should not be known before the end of December.

The approach of the sale is very open, in view of the increase in the number of companies specializing in this type of activity and the different operations already carried out by other institutions.

(…) Popular seems to be ready to study different offers as it can either get rid of all the management company with offices and staff, or it can accept, if the buyer is one of the funds that have already acquired other management companies, the cession of the company, without the transfer of staff or offices.

In this early stage it is not possible to define the approximate price of the operation and the earnings that Popular may obtain.

The Swiss bank Mirabaud, new tenant of Mutua.

The Swiss private banking institution Mirabaud has decided to change its headquarters in Madrid and move to a mansion, located in a prime location in the capital. The Swiss bank has rented more than 1.000 square meters on number six at Fortuny street in Madrid. Mirabaud will occupy the first floor of this building, whose total surface reaches 6.542 square meters. It also has 50 parking spaces. Until now, the Swiss bank was located on Castellana, 41.

Its new headquarters will be located in a building that was refurbished three years ago by Mutua Madrileña, within a refurbishment plan carried out by the insurance company that included another 11 buildings, located in Madrid. The company invested 100 million Euros in its refurbishment. Mutua has 23 rented buildings with a total surface of more than 200.000 square meters.

The new tenant, a financial and counseling group founded in Geneva in 1819, acquired in 2010 a participation in Venture Finanzas, acquiring in the end the whole capital. Mirabaud will share the building with the law firm Freshfields and the Embassy of Hungary. The operation has been advised by the consulting firm Gabinete Inmobiliario.

The amount of the operation is not public but rental prices in the area are around 24,5 Euros per square meter per month, according to Savills.

The move of Mirabaud takes place after a second quarter which has not been very active in the hiring of office spaces. Only 60.000 square meters, the lowest level in 13 years. “If we only take into account the number of operations signed, we can see clearly the weakness of the demand, with a fall of 12% in the semester”, they explain.

Kutxabank will also finance the properties from Sareb.

Kutxabank is the sixth institution to sign an agreement with the bad bank to finance the sales of its properties. It puts 1.000 million Euros at their disposal. The Basque Country and Sareb have signed this morning the agreement through which Sareb will finance individuals and companies that acquire properties from the bad bank.  In line with what Santander, Sabadell, CaixaBank, Popular and BBVA have already done, the institution born out of the merger of the Basque savings banks puts 1.000 million Euros at the disposal until December 2014, a period which could be extended. The agreement has been signed this morning by the general directors of Sareb and Kutxabank, Walter de Luna and Ignacio Sánchez Asiaín, respectively.

The mortgage Sareb-Kutxabank offers an interest rate which starts at 2,25 points over the euribor, only if the customer has contracted other products. This rate can be applied to the acquisition of principal residences, with a maximum loan to value of 80%, which means that the loan cannot exceed 80 of the valuation amount. The maximum period is 30 years.

In the case of the acquisition of a secondary residence, the interest rate is Euribor plus 3,25%. The maximum period is 25 years and the loan to value is 60%. The conditions are very similar to the ones offered by other institutions that have reached agreements with Sareb.

The revision of refinanced loans places the default rate at a new historic maximum level.

The revision of refinanced credits requested by the Bank of Spain before the end of September continues to make the hidden default rate of the Spanish financial institutions appear.

The figure, in fact, has reached a new historic peak at the end of June, according to the figures published this morning by the Bank of Spain, that place the percentage of doubtful credits at 11,6%, while the volume of awarded loans continues to fall.

This figure means a new historical peak in the default rate endured by banks which most probably will continue increasing at least until the end of September, the time limit given to banks to revise all their portfolio of refinanced loans.

The increase in the default rate registered in a period of credit contraction has a multiplying effect on this rate establishing the default rate over the previous maximum level, of 11,38% reached last November.

The volume of doubtful loans has reached at the end of June 176.420 million Euros, an increase of 6214 million Euros from the previous month, that cancels the reducing effect of the transfer of toxic assets from the nationalized banks to the bad bank.

The registered default rate decreased greatly in December 2012, when it fell from 191.468 million Euros to 167.468 million Euros thanks to the transfer of risky real estate assets from the nationalized institutions, Bankia, Novagalicia, Catalunya Banc and Banco de Valencia to Sareb. After a slight increase in January to 170.756 million Euros, the rate decreased again to 162.038 million Euros in February when the nationalized institutions Banco Ceiss, Caja 3, Liberbank and BMN sold its assets to the bad bank. From that moment on, those credits considered doubtful have been increasing in number up to the 176.420 million Euros cancelling completely the so called Sareb effect.

The total portfolio of credits in circulation has suffered a slight increase, from 1518 billion Euros to 1519 billion Euros in the first increase registered since the last month of March. The increase does not mean an inflection point in the concession of loans in Spain as these types of variations are usual in some isolated months. In fact, in the banking sector, they have already warned that the reclassification of refinanced credits and their higher penalty would force a new contraction of the awarded loans after a period of strong restructuring processes already suffered by the sector.

From June to June, the evolution of credits has dropped from the mentioned 1744 billion Euros to the 1519 billion Euros, which means approximately 13% less in a period defined by the destruction of employment.

The default rate of the credit financial institutions – institutions that award financing to buy cars, furniture, televisions and other consumer goods – remained at 9,81% for the fourth consecutive month, with a volume of doubtful loans of 3599 million Euros, slightly higher than the previous month.

In the last year, the default rate of these institutions has varied around one percentage point, as it reached 8,93% in May 2012.

The other institutions – banks, savings banks and rural savings banks – registered a volume of doubtful loans of 171.076 million Euros of a credit portfolio of 1460 billion Euros, reaching therefore a default rate of 11,71% opposite to the 9,78% reached in June 2012.

Colonial will try to refinance 3.000 million Euros.

The real estate company Colonial faces the year 2013-2014 with important changes in the horizon. After six years of financial and corporate stability, with several banks and international funds leading the company after the exit of the former president and main shareholder Luis Portillo, Colonial is working in a profound change in its structure.

Colonial´s managing director, Pere Viñolas, confirmed Expansión, at the beginning of 2013 that this year would be “problematic” for the company, and therefore a negotiation between banks and shareholders would be necessary.

The current situation of the company, as in any other Spanish real estate company, is serious due to the high debt it drags along since the years of the real estate boom. Its financial liability reached on the 30th June 4.916 million Euros.  A debt which is divided between its different business lines, as 2.100 million Euros correspond to their patrimonial activity in Spain, around 1.400 million Euros to the activity in France and 1.415 million Euros to its subsidiary Asentia, a company created to hold the more problematic residential assets, such as apartments and land, as well as the subsidiary for malls Riofisa.

Colonial established 2013 as the timeline to refinance around 3.000 million Euros of that debt, although only 139 million Euros are due in the second semester. The main problem would be the 1.800 million Euros it needs to pay in 2014, which will be impossible to return with biannual earnings of 100 million Euros.

With this situation in mind, Colonial is studying various alternatives. The first one would be to give way to new investors, with cash, in order to restructure the company. The main candidate is Villar Mir. The businessman, who controls the construction company OHL, has offered the acquisition of 30% of the capital of the company from banks. However, the negotiations which seemed well under way in March, now seem failed, and new candidates, such as Torreal and an international fund, are starting to sound.

The main hurdle for these negotiations seems to be the high debt of the group and in Asentia. For this reason Colonial would like banks to keep this subsidiary, exchanging debt for participative loans. But, in exchange creditors claim that the real estate company should give up the French company SFL, the jewel of its portfolio.

The sale of this subsidiary would mean important earnings for Colonial but would leave it without its main source of income, as 70% of its turnover comes from Paris. 70% of the values of its assets correspond to the French subsidiary. (…)

BlackRock, the greatest managing company in the world, enters NH thanks to the Spanish recovery.

The recovery of the European economy in general, and the Spanish one in particular, starts to have credit among the great international investors. Due to this Blackrock, the greatest managing company of investment funds in the world, has taken a significant acquisition of interest in NH Hoteles, joined by the fund Taube Hodson Stonex (THS), according to sources aware of the operation. Both firms are the same that acquired two participations in Sacyr Vallehermoso in June, thanks to the improvement prospects in our country. In both cases, they have carried out their investments through JB Capital, the broker from Javier Botín, son of Emilio Botín.

These participations, which have to be communicated to the National Share Market Association in the next few days, have been acquired in the last two stock market sessions. On Friday both firms, along with some smaller funds, acquired the 4,3% of the hotel chain in the hands of Novagalicia and BMN at 3,44 Euros per share, for an amount of 46 million Euros, as advanced by El Confidencial. On Monday, this continued with the acquisition of the 5% in the hands of Kutxabank at 3,85 Euros (the value rocketed on Friday thanks to the operation) for 59,32 million Euros. And it could have been much greater if Bankia had agreed to sell the 12,5% of NH to these managing companies, something which was not accepted by José Ignacio Gorigolzarri as he hopes to sell at a higher price.

BlackRock is the greatest managing company in the world based on the patrimony they manage, 3,45 billion dollars (2,6 billion Euros), while THS is a specialized boutique with a volume of 5.400 million dollars (4.401 million Euros). Its main investment bet right now is Spain, as expressed in its webpage, where it assures that ”although it is still trendy to discard Spain, right now it offers the best growth and value opportunities of the developed world.

Regarding NH, the consulted firms assure that it is a company which offers a high reciprocity with the economic recovery in Spain and Europe, as the hotel chain is present in several countries of the Old Continent. It is also a clear example of the way to leave the crisis behind: reduction of debt and sale of assets. The investors think highly of the new managers of the company lead by Rodrigo Echenique, the former “man in charge of everything” of Botin at Santander.

These two firms started their bid for Spain in June, when they joined Sacyr Vallehermoso: BlackRock acquired 3,1% of the capital and THS, 5,9%. At that time the sellers were also former savings banks, which are amid a process of sale of assets, either because they are obliged by Brussels (the nationalized ones), or because they wish to reduce their leverage (all of them).

The construction company is considered one of the companies which will benefit more from the Spanish recovery. It has its own story: it has refinanced its debt until 2015, it is possible that it will sell assets such as the real estate company Testa and Repsol- the origin of the shortfall created by Luis Del Rivero- is near 20 Euros, a level which would allow it to undo its position of 9,38% of the capital without losses and return its enormous debt to banks. (…)