Month: January 2015

Talus To be Ortega’s Neighbour On Gran Vía

29 January 2015 – Cinco Días

Two buildings on the same street in Madrid have changed hands within just over a week of each other. The fund Talus Real Estate has agreed the acquisition of the building on Gran Vía 30 (on the corner of Calle Valverde) for €42 million. On Monday, the company Drago Real Estate announced the sale of its building on Gran Vía 32 to Pontegadea, the company that owns Inditex’s real estate assets and receives its dividends on behalf of Amancio Ortega, the founder and primary shareholder of the fashion group.

According to sources close to the negotiations, JLL and Aguirre Newman have participated in the sale of the property on Gran Vía 30, as advisory consultants. However, the companies involved did not want to confirm this information yesterday.

The same sources said that the buyer plans to refurbish the property. The fashion chain Sfera, owned by El Corte Inglés, has a store that occupies two floors of the building.

Talus Real Estate’s main executives are David Finkel and Jordi Moix and its headquarters are located in Madrid. According to the company’s website, before joining Talus, Finkel worked for Westbrook Parners, where he co-directed their business in London. Westbrook Partners is a real estate investment group that was founded in 1994, has offices in the US, London, Munich, Paris and Tokyo and has invested USD 10,000 million to date. Prior to that, he worked for the Japanese entity, Nomura and for iStar Financial, another international real estate investment group.

Moix has held senior positions in the Spanish real estate companies Reyal Urbis, Metrovacesa, Layetana and Habitat; he has also worked for IAG and Citibank. Currently, he is vice-president of FC Barcelona’s real estate business.

Gran Vía is trading up

The sale of the property on Gran Vía 30 is the latest in a series of transactions undertaken on the Madrid street that will change its appearance as it approaches its 105th birthday.

The fashion group Primark will occupy several floors of Gran Vía 32, when it opens its largest store in Spain there. Talus Real Estate will also refurbish the Gran Vía 30 building. In Plaza de España, the Chinese group Wanda will convert the Edificio España into a luxury hotel and shopping centre. Next to the building sold by Santander, the hotel chain Barceló will take over some of Torre Madrid to open another hotel.

Late last year, Axa Real Estate, a subsidiary of the insurance company Axa, acquired Gran Vía 37, where the fashion retailer H&M has its largest store in Spain and which used to house the Avenida cinema, for €80 million. Also last year, the Community of Madrid sold Gran Vía 20 for €20 million to Caja Rural de Almendralejo Sociedad Cooperativa de Crédito.

2015, another big year for real estate investment

With the sale of Gran Vía 32 and the upcoming sale of the Plenilunio shopping centre, the amount of investment in Madrid will amount to €800 million. According to sources familiar with the transaction, the sale of the shopping centre will reach a figure close to €400 million.

In 2014, investment in real estate in Spain amounted to between €6,000-€9,000 million, almost twice the figures recorded in the previous three years.

During the year ahead, Socimis, which revolutionised the sector in 2014, will continue to invest, as will investment banks, whereby replacing opportunistic funds. The liquidity injection announced by the ECB will boost the sector. The expected sale of Realia will be another major transaction. Industry experts are also drawing attention to investment in logistics platforms.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake

Sabadell Puts €250m NPL Portfolio Up For Sale

29 January 2015 – Expansión

Opportunistic funds / “Project Cadi” includes non-performing loans that the entity once granted to real estate developers

Banco Sabadell is making progress in its strategy to reduce the volume of foreclosed assets and bad debt on its books. The financial group led by Josep Oliu, which today releases its results for 2014, has just put an NPL portfolio worth €250 million up for sale.

According to market sources, the so-called Project Cadi includes non-performing loans that were once granted to real estate developers. Through Solvia, Sabadell is taking a very active role in packaging these types of loans, in the face of strong buyer interest from opportunistic funds that are now active in the Spanish market. At the beginning of the month, the bank already disposed of another portfolio worth €435 million (Project Tritón), which included 630 non-performing loans to small- and medium-sized developers, as well as 700 foreclosed assets in Valencia, Andalucía, Cataluña and the Balearic Islands. This sale was put together through a bond issue, acquired by Deutsche Bank and Hipoges. Sabadell may already be sounding out the market with a view to selling other portfolios over the next few months.

This type of transaction reflects the confidence that funds have in the recovery of the real estate market in Spain. In parallel, banks are interested in this kind of transaction because they lighten their balance sheets and allow them to generate income from assets that are no longer productive and that have already been provisioned. According to sector sources, these transactions are closed with discounts of around 75%, which means that the funds are paying the financial institutions 25% of the nominal value of the loans.

The largest transaction of this kind in Spain was closed in 2014 by Blackstone, which acquired a €6,392 million mortgage portfolio from Catalunya Banc. Lone Star and JP Morgan also bought loans from Eurohypo amounting to €4,500 million. Other funds that have acquired portfolios include Aiqon, Lindorff, Cerberus and Starwood.

Original story: Expansión (by S. Saborit and J. Zuloaga)

Translation: Carmel Drake

Lualca Sells 2% Of Its Stake In Realia Before Hispania’s Takeover Bid Is Approved

29 January 2015 – Expansión

The real estate company Lualca has reduced its stake in Realia to less than 3% (specifically, to 2.94%), after selling 2% of its capital.

The company, led by Luis Canales Burguillo, first invested in the real estate company Realia in January 2008, when it acquired a 5.02% stake. Lualca paid €88.37 million at the time, which represented a valuation of €6.35 per share.

Yesterday, the company’s share value stood at €0.605, still a long way off of the price per share (€0.49) specified in the takeover bid that Hispania launched over 100% of Realia’s capital at the end of 2014.

FCC continues to be Realia’s largest shareholder, with a 36.89% stake, followed by Bankia, with 24.95%. Grupo Prasa also holds less than 3%.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Sareb Recorded Turnover Of €5,000m In 2014

29 January 2015 – Cinco Días

Echegoyen strengthens his team with a man from Barclays

Jaime Echegoyen has made his debut as the Chairman of Sareb, following the surprise resignation of Belén Romana on Monday, by analysing the entity’s provisional accounts for 2014.

In a meeting on Wednesday, the Board of Directors estimated that Sareb will close the year will total revenues of €5,000 million and an EBITDA of €1,000 million.

The final figures will be subject to a ruling by the Bank of Spain, which has not yet published the definitive accounting regulations that will govern the bad bank’s results; it is expected to require that an extraordinary provision be applied to the company’s accounts.

Sareb’s turnover in 2014, as valued by the company itself in a statement, exceeded the amount recorded in 2013 by almost one third. This, says the company “shows the capacity” that it has “both to generate resources through the management and sale of its assets, as well as to assume the commitments of debt cancelation”.

Based on last year’s accounts, Sareb will have repaid €3,416 million of the debt issued to acquire its portfolio, i.e. more than the €3,000 million initially envisaged, of which €2,916 million has already been paid; the remainder will be paid in February. Moreover, the company has made interest payments amounting to €1,135 million on that debt.

Once this process has been completed, Sareb will have repaid €5,416 million of its debt, which has the backing of the state, in just two years.

“Sareb is fulfilling its main objective, which is to manage and sell its portfolio without generating higher costs for the taxpayer”, explained Jaime Echegoyen at the first ordinary meeting held by Sareb’s Board in 2015.

Almost €1,000 million of the total revenues related to the sale of 13 wholesale portfolios, primarily to international investors.

“Although we do not yet know the accounting framework that will be applied to our results in 2014, we can say that the company has achieved the objectives that were set for it last year, and has deepened its strategy for the generation of greater value from the portfolio”, said Echegoyen. “We have a highly skilled workforce that this year has managed more than 10,700 proposals from developers for example; furthermore, the gradual entry into operation of the new contracted servicers will allow us to improve efficiency and provide an increased commercial focus”, he added.

Echegoyen’s first appointment

In parallel, Sareb’s Board of Directors approved a proposal to strengthen its management team, which has lost six members, including Romana, in the last 14 months (in addition, three directors have been replaced).

Juan Ramón Dios Rial will now join as the company’s Director of Recoveries and Restructuring. He comes from Barclays, where Echegoyen was previously CEO.

According to Sareb, Juan Ramón has extensive experience in the management of risk and the restructuring of debt relating to the real estate business. The new director will take over the role currently held by Enrique Saiz, who will continue to collaborate with the company.

Original story: Cinco Días

Translation: Carmel Drake

Homes: New Builds Are Returning To Cataluña

28 January 2015 – Expansión

Cataluña started to construct between 4,300 and 4,500 homes last year, putting an end to seven consecutive years of decline in the number of new homes started.

At a press conference, the President of Barcelona’s Developer Association, Lluís Marsa, explained that since 2006, when 126,000 homes were built, the number of new builds has decreased year after year to a minimum of 3,036 homes in 2013.

Although the increase in the number of new builds since 2013, compared with the estimated closing figures for 2104, reveals a growth rate of 48%, Marsa recalled that in absolute terms, the number is still very modest, and so the sector “is still a long way” from what would be considered normal, he said.

The Developers’ Association estimates that Cataluña should be building between 20,000 and 25,000 new homes each year, but Marsa did not hazard a guess as to how many years it would take for the region to reach that volume, although he did say he was certain that the trend would continue to be positive in 2015.

In any case, builders understand that, gradually, the market is returning to normal, since “the price correction process has now been completed”.

One example of this is the study presented today by the entity, in collaboration with the the Housing Ministry, the Town Hall and Barcelona’s Provincial Council.

The study analysed 815 housing developments in the province of Barcelona, covering 20,165 homes and concluded that only 24.1% of the properties were pending sale, i.e. 4,859 homes.

Although this study analyses the supply of new housing only, and not the stock (of second-hand homes) accumulated in recent years, the data serves to verify that the few developments that are currently being built in Cataluña are being located only in areas with proven demand.

In this way, from the supply of 4,859 homes in the province, 924 are located in the city of Barcelona. It also highlights the current supply in cities such as Terrassa (where 377 new homes are up for sale), Sabadell (250 homes), Badalona (485 homes) and Sant Cugat de Valles (133 homes).

The price per square metre in the province of Barcelona decreased by 7% in 2014 with respect to 2013, and amounts to €3,046.

In contrast, in the city of Barcelona, where there are homes for sale in 166 developments, the average price per square metre is €5,000, down 4.1% from 2013, according to the study.

Nevertheless, there are important variations between districts, since a buyer could expect to pay €9,146 per sqm (13.1% more than in 2013) for a new build in Sarria-Sant Gervasi, versus €3,034 per sqm for one in Sant Andreu.

Meanwhile, Marsa complained about the difficulties that developers face when trying to access credit from banks to start or finish developments, and he pointed out that the restructuring of the banking sector has substantially reduced the number of entities and even more significantly decreased the number banks willing to lend.

The high level of unemployment and the strict requirements that still apply when it comes to applying for mortgages are just two of the other difficulties that individuals face when they want to buy a new home.

Likewise, Marsa said that although during the ‘boom’ years, 50% of all homes sold were new builds, they now barely account for one in three sales, and he forecasts that second-hand housing will continue to gain ground over the next few years.

Original story: Expansión

Translation: Carmel Drake

Telefónica Seeks Buyer For Buildings In Madrid And Barcelona For €60m

28 January 2015 – El Confidencial

Telefónica has begun to shed some of its real estate weight. And it is doing so at a time when investors are no longer planning their moves in the market, they are actually closing transactions. According to sector sources, the company led by César Alierta has completed the sale of five buildings for €65 million in recent months and is now looking for a buyer for four other properties, for which it expects to receive another €60 million.

The listed company has designed a real estate efficiency plan for 2014 and 2015, which includes the sale of nine buildings that will become totally obsolete in less than a decade, in the face of impending technological change. The company itself recognises that with the proceeds, it will be able to finance the investments required to adapt its business to the changing times. Telefónica will continue to lease the buildings as the tenant – known in real estate parlance as sale & leaseback – for between seven and ten years, so that once the lease contract is up, the new owners will have full use of the properties.

Currently- and although the market expects the company to put new assets up for sale – Telefónica is looking for a buyer for three buildings in Madrid (in Calle Irún; close to Plaza de Santo Domingo; and in Moratalaz) and one in Barcelona, in the La Sagrera neighbourhood.

The building in Plaza de Santo Domingo, a few metres from Madrid’s Gran Vía, is a very attractive asset due to its location, as well as for its urban classification as residential. Although Telefónica will remain as the tenant for several years, the future buyer of the property may later convert the building into homes in an area where residential property is in short supply. Similarly, the building in Calle Irun, just a ten-minute walk from Plaza de España and Principe Pío train station, could also be converted into homes in the future. The final property for sale in Madrid, measuring 5,800 square metres, is located in Moratalez and is also for residential use, just like the one in La Sagrera, Barcelona.

Indeed, seven of the nine buildings put up for sale by Telefónica are classified as residential. Only two of them are not. The first, a building in Valencia that was acquired by the owner of Embutidos Martínez, is located in the Plaza del Ayuntamiento and has seven floors and a surface area of almost 4,000 square metres. The second, Telefónica’s historical headquarters in Bilbao, on Calle Buenos Aires, was sold a few weeks ago and measures 5,500 square metres and is classified for alternative commercial use.

Investors’ appetite outside of Madrid and Barcelona

“Investors have seized the opportunity to acquire landmark assets that have great potential for future development and meanwhile, obtain very competitive rents, guaranteed by an AAA tenant. This has facilitated a very agile sales process, which has lasted less than two months, clearly demonstrating the market’s appetite for well-located buildings that have good lease contracts to guarantee yields over the medium and long term”, says Pablo Méndez, Investment Director at Aguirre Newman.

Moreover, the assets are strategically located in the centre of some of Spain’s most important cities, which has helped to boost their appeal. “It is especially striking that investors are showing interest in buildings in cities such as Bilbao, San Sebastián and Valencia. This shows that the perception of risk is continuing to decline in the real estate market and that investors are now more willing to take positions in cities that are regarded as secondary to prime markets, such as Madrid and Barcelona”, said Patricio Palomar, Director of Office Advisory and Alternative Investment at CBRE.

He adds that “for this type of product, it is also very important that domestic investors, like family offices and private firms, are more agile in their ability to take decisions and get offers on the table as this gives them a competitive advantage with respect to foreign buyers with more institutional capital, such as insurance companies, fund managers and those with more sophisticated vehicles”.

These are not the first and they certainly will not be the last non-strategic assets to be sold by the company, given that over the coming years, it will have to gradually get rid of many of them following the demise of analogue technology and the digitalisation of all equipment. “Telefónica serves as an example of good wealth management. It knows that in a few years copper cable connections are going to become completely obsolete and that in a ten years, telephone cables will no longer be used; all connections will be fibre optic”, says Patricio Palomar.

“The sale of these assets demonstrates very professional management by a corporation such as Telefónica, which has a clear strategic vision for the business. Given that the type of activity that takes place in these buildings is destined to disappear, the company ensures through these sales that its services will continue for as long as necessary, until the move happens over to the new technology. In addition, it affords it a line of financing that is cheaper than many others and it could choose to use this liquidity to grow its core business, which is much more about providing telecommunications services than investing in real estate” he concludes.

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake

Bank Of Spain: Demand For Home Loans Increases Again

28 January 2015 – Expansión

The bank loan survey carried out by the Bank of Spain and the main Spanish financial institutions shows that “requests from families for home loans increased in January, after remaining stable during the previous three months in Spain and continued their progress in the Eurozone”. The report explains that “the main drivers of this development was an improvement in the prospects of the housing marketing and an increase in consumer confidence”.

Just yesterday, INE reported that the mortgage market grew in November for the sixth consecutive month, this time by 14.2% with respect to November 2013. Specifically, 15,900 new home loans were signed in November, 10.1% fewer than the 17,687 taken out in October. The average mortgage amounted to €104,817 in November, compared with €99,866 in the previous month, representing an increase of 5%.

Management of fotocasa.es, the real estate portal, interviewed by Efe, considers that these data confirm that “the desired reactivation of mortgage financing” was achieved in 2014, as a result of “increased activity in the economy, better prospects for the real estate market and the need for banks to do business following the liquidity crisis”.

In this sense, the Bank of Spain’s survey explains that the criteria for approving new loans were “somewhat less restrictive” for home loans than for unsecured loans.

In terms of corporate loans “the growth in requests for loans by SMEs was higher than those for large companies in Spain”.

Original story: Expansión (by Y. González)

Translation: Carmel Drake

INE: Mortgages Increase By 14% In November 2014

28 January 2015 – Expansión

15,900 mortgages were taken out during the penultimate month of the year, an increase of 14.2% compared with November 2013. The statistic completes six consecutive months of double-digit increases.

The number of home mortgages recorded in the property registry amounted to 15,900 last November, up by 14.2% with respect to the same month in 2013, according to statistics published today by the National Institute of Statistics (INE). The data comes from public deeds signed during the previous months.

With the year-on-year rise in November, home mortgages have now experienced double-digit increases in each of the last six consecutive months, after the rise of almost 19% in June, 28.8% in July, 24% in August, 29% in September and 18% in October.

The average size of the home mortgages taken out amounted to €104,817 during the penultimate month of the year, which represented a decrease of 1.7% compared with the same month in 2013, whilst the total amount of capital loaned increased by 12.2% year-on-year, to exceed €1,666 million.

In monthly terms (November 2014 versus October of the same year), the number of home mortgages fell by 10.1%, the largest decline during that month since 2010, whilst the total amount loaned experienced a monthly decline of 5.6%, its greatest drop in the last five years.

During the first eleven months of 2014, the number of home mortgages decreased by 0.2% with respect to the same period in 2013, although the total amount of capital loaned increased by 5.6% and the average size of mortgages rose by 2%.

By autonomous region, the greatest number of home mortgages were reported in Andalucía (3,183), Madrid (2,565), Cataluña (2,264) and Valencia (1,743) in November. Meanwhile, the most capital was lent in the regions of Madrid (€382.9m), Andalucía (€288.7m) and Cataluña (€261.1m).

Original story: Expansión

Translation: Carmel Drake

Bank of Spain: Positive Outlook For 2015

28 January 2015 – Expansión

The Bank of Spain emphasises the “stimulation” of private consumption / It also highlights a “slight improvement” in the production of goods, car registrations and consumer confidence and acknowledges the positive trend in employment.

Although the spending power of Spanish citizens has not yet returned to its pre-crisis levels, it did improve during the last quarter of 2014. The construction sector, one of the areas hardest hit by the crisis, also experienced a revival. These are two of the conclusions of the January Bulletin issued by the Bank of Spain yesterday. One of the factors that has contributed to this progress is “an improvement in financing conditions”. That is, the depreciation of the euro, the decrease in interest rates and the collapse of oil prices. Another positive development is the “very favourable performance of the labour market”.

The supervisory body says that the construction sector experienced an “upturn” in the latter part of last year, evidenced by an increase in the number of Social Security enrolments and a rise in cement consumption. “The information indicates that the recovery in the construction sector will continue, a trend that, from the point of view of the type of work, will affect both the residential and non-residential segments”, says the report.

Furthermore, the Bank of Spain insist that “private consumption indices suggest that this component of demand experienced more dynamic behaviour during the final part of 2014”. According to the Bulletin, a “slight improvement” was observed in retail sales, car registrations (which recorded an increase of 0.2% in December following a decrease in November), the production of consumer goods and consumer confidence. The day before yesterday, the main association of car manufacturers, Anfac, reported that 2.4 million vehicles were manufactured last year, 11% more than in 2013.

Employment

According to the regulator, the improvement in the labour market also gives cause for optimism. The Bulletin states that the Labour Force Survey (LFS) for the fourth quarter of 2014 showed a quarter-on-quarter increase in employment of 0.9% in seasonally adjusted terms, with the creation of 434,000 jobs, which will benefit almost every sector (especially construction), with the exception of agriculture. In addition, the number of full-time employees grew at a similar rate to those hired on part-time contracts.

In terms of the performance of the industrial sector, the Bank of Spain said that the month-on-month decline in the industrial production index moderated in November by 0.4%, whilst the two most important indicators of progress in the sector (the European Commission’s industrial confidence index and the manufacturing PMI) remained at “levels that are consistent” with continued expansion in this area.

The report also celebrated the “dynamism” of foreign tourism. Nevertheless, it highlighted that both the export and import of goods grew at more moderate rates in November. The latter grew by 4.3% in November, compared with 9.9% in October.

Similarly, the Bulletin indicated that the evolution of prices during the last part of 2014 was greatly affected by the unstoppable decline in oil prices on international markets, which caused CPI to decrease by 1% in December, year-on-year.

Economy-wide growth

Meanwhile, the Secretary of State for the Economy, Íñigo Fernández de Mesa, also said yesterday that growth in Spain will be “much more intensive in terms of labour, because more jobs will be created with less growth, and less intensive in terms of credit” and (growth) “will be based on all of the engines that drive the economy”, both the export sector and internal demand. “We are confident that 2015 is going to be a year of consolidation”, since “for the first time in a long time, Spain is not only growing, but all of the imbalances are also being corrected”, he said.

“Spain has gone from being the problem-child of the euro zone to being the country that is generating the highest growth and helping to drive the eurozone economy in a more intense way”, he said. He also pointed out that “growth is now greater” in those countries in which “the most significant reforms have been carried out”.

Original story: Expansión (by Yago González)

Translation: Carmel Drake

Car Parks: Isolux Joins Forces With Oak Hill

28 January 2015 – Expansión

Cash inflow of €100 million / The group, which is in the middle of an IPO, has granted its new partner the option to buy its car park business from 2019.

Isolux has strengthened its car park subsidiary, one of the outstanding loose ends in its business, which will become more attractive through this transaction, as the company continues with its plans to go public in mid-February. Specifically, the Spanish group has signed an agreement with the fund Oak Hill Capital Partners to jointly develop the business.

The investment firm has injected €100 million into the company in the form of a loan, which is fully intended to increase the company’s portfolio of assets. In return, Isolux has granted Oak Hill an option to take ownership of the car park subsidiary from 2019.

The agreement transforms Isolux Infrastructure into one of the most active competitors in the Spanish parking sector. The car park business map has undergone a profound transformation in the last year, due to: the divestment processes that are underway (the sale of the market leader, Empark); the merger of companies (Mutua Madrileña and EQT have created a joint venture); and the award of large public concessions (Saba has acquired car parks from the Ayuntamiento de Barcelona, as well as some of those previously owned by Aena).

Currently, Isolux is one of the largest operators in the sector, with almost 24,000 parking spaces; it generated revenues of €14 million to September last year and a gross operating profit (EBITDA) of €8 million during the same period.

The agreement with Oak Hill, signed last year, ends a period of uncertainty for this branch of Isolux’s activity, which it had put up for sale after other attempts to form strategic alliances had fallen through. At the beginning of 2013, the Spanish group signed a preliminary agreement with the French fund Edifice Capital for the investment of €150 million between 2013 and 2014. The resources were going to be used to purchase new car parks with the aim of reaching 50,000 spaces in total. Surprisingly, the French firm did not keep to its word and withdrew from the project.

(….)

Original story: Expansión (by C. Morán)

Translation: Carmel Drake