Month: May 2015

Fotocasa: Second-Hand House Prices Increase In 15 CCAA

6 May 2015 – Expansión

The price of second-hand homes increased by 1.1% in April compared to March, after seven months of continuous inter-monthly decreases. The increases were widespread: they were recorded in no less than 43 provinces and 15 autonomous communities, according to statistics from Fotocasa and the IE Business School.

Moreover, house prices increased in April in 460 of the 733 municipalities analysed in this report – 63% of the total, i.e. two thirds. Meanwhile, prices remained stable in 17 municipalities and decreased in 256.

The average cost per square metre of second-hand homes amounted to €1,636 last month. In terms of the quarterly variation, the price of second-hand homes (those aged more than two years old) increased by 0.4% with respect to January 2015.

Second-hand homes got more expensive last month in 15 autonomous communities, i.e. everywhere except for the País Vasco (-0.2%) and Navarra (-0.6%). The greatest increases were recorded in the Canary Islands (up by 3% in just one month) and the Balearic Islands (+2.3%).

This index shows the stabilisation of house prices in Spain. The fact that prices are continuing to increase month after month is an indicator of a trend towards recovery.

The quarterly variation was 0.4%, something not seen since February 2010, a rate that exceeds the variation recorded 12 months ago by 1.8 percentage points.

In terms of the evolution of house prices by province, of the 43 provinces in which price rises were recorded in monthly terms, the highest growth was seen in Toledo (7.4%). Prices decreased in just three provinces: Vizcaya (-0.1%), Navarra (-0.6%) and Palencia (-0.7%). House prices did not vary in four autonomous communities.

Unsellable stock

Meanwhile, BBVA Real Estate’s Research Department said yesterday that the stock of unsold homes is going to decrease significantly, although around 300,000 homes are practically “unsellable”. Despite that, the sector’s contribution to GDP will amount to around 5% in 2015.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Merlin, Hispania And Axia Could Raise More Than €1,340M

5 May 2015 – Expansión

The real estate investment companies are trading at record highs, and (their share prices) still have potential (to increase), say analysts.

The real estate sector is back in fashion. The current liquidity surplus, together with the scarcity of alternative investments, minimum interest rates and low financing costs have led to the resurgence of properties. In this way, the (share prices of the) 4 real estate companies (Socimis) that are listed on the stock exchange (another 5 are listed on the Alternative Investment Market or MAB) have risen by 20% on average during the year and are trading close to record highs. And yet, all of them have “buy” recommendations from the majority of the analysis firms that follow them.

Gaining in size

In this context, Merlin Properties, Hispania (which is not strictly a Socimi, but which has a similar profile) and Axia Real Estate are seeking to raise capital to fully benefit from their investment opportunities. The three entities could raise more than €1,340 million.

The first one to take the plunge was Merlin, which announced a capital increase of 64.6 million shares (50% of the volume in circulation) on 15 April amounting to a value of €613.8 million. The new shares are being issued at €9.50, which represents a discount of 27% on the trading price on the day before the announcement. The subscription period ended on 2 May. The new shares from the capital increase, which are underwritten by UBS, Credit Suisse and Goldman Sachs, amongst other entities, will begin to trade on 12 May. “The transaction makes sense because we believe that the current upwards cycle in terms of revenue and ratings may last for 2 or 3 more years”, say sources at Banco Sabadell. The analysis firm advises investors to “buy” these shares, as do the other five analysts that cover this security. “We believe in the experience and know-how of the management team at Merlin to “play” the upwards property cycle and gain a profit”, they add.

One of Merlin’s main strengths is its size. Analysts calculate that the company may have almost €1,400 million to invest. “It is able to access large transactions that other companies cannot, such as the purchase of Testa”, says Juan Moreno, analyst at Ahorro Corporación. That transaction that would have the blessing of the market if, as it being discussed, the acquisition of 30% of the company is agreed for €500 million, without the payment of a premium over the NAV (net asset value).

Meanwhile, last week Hispania increased its capital by €337 million through an accelerated placement amongst institutions, without the right to preferential subscriptions.

The company, in which George Soros holds a stake, tried to lead the purchase of Realia last March. In the end, Carlos Slim was the “cat that got the cream”, through FCC, but experts liked the design of the operation. “Hispania is innovative in the transactions it proposes. For example, it seeks to enter (companies) by purchasing debt, restructuring that debt and then buying the company at a lower price”, says Moreno. The expert also highlights the recent alliance signed between Hispania and Barceló to create a Socimi to invest in the hotel sector.

Three of the four analyst firms that follow the security advise investors to “buy”. In terms of Axia, the Socimi has announced its intention to increase its capital by 36 million shares (100% of its capital) for a value of €396 million. For the time being, the market does not know whether the current shareholders will have preferential subscription rights. But, in any case, the experts like the security, which has increased in value by 10.77% during the year. Two of the three firms that follow it advise investors to ”buy” and the third advise investors to “hold”. The share price may increase by 8.7% to €13.10.

Original story: Expansión (by C. Sekulits)

Translation: Carmel Drake

Barceló Acquires 42.5% Stake In Occidental Hoteles

5 May 2015 – Expansión

42.5% shareholding / The tourism group acquires the stakes held by Amancio Ortega, owner of Inditex, and several minority shareholders, and continues to negotiate with BBVA to take control of the chain.

The sale of Occidental Hoteles has been unblocked with Barceló’s purchase of a share of its capital. The tourist group has acquired a 42.5% stake from Amancio Ortega, owner of the textile empire Inditex, and several minority shareholders. In parallel, it is also negotiating with BBVA, which controls the remaining 57.5%, to gain control of 100% of Occidental and strengthen its position in the Caribbean.

Although the exact amount of the transaction is unknown, it has been closed with a discount of between 40% and 50% with respect to the €700 million that BBVA and Ortega paid in 2007. That was the figure that the shareholders hoped to obtain through the divestment process launched in 2013, which was thwarted last December, with Barceló as the favourite, due to differences over price.

Then, Barceló was bidding together with the fund Caribbean Property Group (CPG). Now, the tourism group is going to single-handedly undertake the purchase of the shares held by Ortega (who holds 23.63% through his company Partler 2006), Gregorio de Diego (who controls 13.5% through Tamar International) and the Miarnau family (whose company Iosa Inmuebles holds 5.26%).

Competition

The transaction, which is pending approval by the Mexican competition authorities, will be structured as a financial investment, and so Barceló will not take over the management of Occidental’s hotels. The chain operates 13 properties in the Caribbean and owns the majority of those establishments.

Nevertheless, sources in the sector are convinced that BBVA will end up selling a non-strategic stake. In fact, that is the joint position that the entity chaired by Francisco González and Amancio Ortega held until the end of 2014. The only thing that has separated them has been the timing (of their respective exits).

The textile businessman wanted to accelerate his exit from Occidental before the company looses value, since there is no growth plan on the table. In contrast, BBVA was keen to wait for a better offer and set a limit below which it was not willing to divest. In the end, the partners have broken their shareholders’ agreement, which has opened the door to Occidental for Barceló.

In terms of convincing BBVA, the close ties that unite the companies work in the tourism group’s favour. Barceló, BBVA and FCC created an asset company Grubarges in 1998, with the aim of channelling its surplus investors and growing in the hotel sector. Grubarges was dissolved in 2004 due to strategic differences between the partners, but the relationship is still strong.

If Barceló acquires 100% of Occidental, it will strengthen its position in the Caribbean, one of the priorities on its roadmap to become the world leader in the holiday hotel sector. Through the integration, Barceló would obtain a presence in new countries – Colombia, Aruba and Haití – and would strengthen its position in the Dominican Republic, Mexico and Costa Rica. Furthermore, the transaction would involve an investment plan to reposition Occidental’s properties.

Barceló currently operates 94 hotels and 30,000 rooms in 16 countries. In 2014, the company generated profits of €46.4 million, up 85.6% and turnover of €2,056.6 million, up 6.2%.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

País Vasco Will Tax Empty Homes And May Expropriate Properties From Banks

5 May 2015 – Expansión

The Socialist Party, EH Bildu and UPyD are going to add their votes together in the Basque Parliament to push through a new housing law in Euskadi, which recognises the subjective right to have access to a home. The law will result in the forced and temporary expropriation of the use of homes owned by banks, as well as the introduction of a fee for homes that have been empty for two years.

This initiative – which stems from when Patxi López was the Basque regional president – has been rejected by the PP and the PNV, which governs the País Vasco. Nevertheless, the support of the three opposition groups guarantees 38 votes against the 37 of the nationalist and popular parties.

Through this law, Euskadi will become the first autonomous community to recognise the subjective right to housing, in addition to (the subjective right to) health and education, according to the socialists.

The text provides for the possibility of expropriating empty homes, and those with tenants that cannot afford to pay the rent, from banks for a maximum period of three years, even though this measure has been suspended by the Constitutional Court in other autonomous communities. Within five years, all public housing will be put up for rent. The fee for empty homes will be €10 per square metre per year, an amount that will increase by 10% per year, up to triple the initial fee.

Original story: Expansión

Translation: Carmel Drake

Cohen & Steers Increase Stake In Hispania To 5%

5 May 2015 – Expansión

The US fund Cohen & Steers has increased its stake in Hispania to 5% after participating in the €323 million capital increase conducted by the real estate company last week. Hispania’s other shareholders include John Paulson and George Soros.

Original story: Expansión

Translation: Carmel Drake

The Banks Are Setting The Pace For The New Real Estate Era

4 May 2015 – ABC

Financial institutions still have 65,000 homes for sale and are developing land and housing projects.

The banks were the “stars” of the real estate crisis. And although they are now reneging on this business – “it is not our vocation”, say the senior directors in the sector – the same banks are forming the cornerstone of the recovery once more. The financial sector, ranging from banks to investment funds, is playing a leading role in the revival of the sale and purchase of homes. They are the financiers, marketers and even the developers. Currently, and after having recovered from the real estate “hangover”, the main (financial) institutions in our country still have more than 65,000 homes on their balances sheets, as well as other assets such as shops, garages and offices.

The banks are still the primary real estate companies in the country and their behaviour is determining the speed of transactions and, above all, the prices at which transactions are being closed. Sales made by the so-called bad bank, Sareb, have lost steam in 2015, although it continues to be a key player. According to a recent announcement by its Chairman, Jaime Echegoyen, the company that manages assets from the bank restructuring sold 2,800 properties during the first three months of this year, which represents around 26 units per day, versus the 32 properties it sold per day during the same period in 2014. “We are one of the top five players in the market”, said the senior executive.

Bad banks

On the other side of the majority of the sales made by the bad bank are the banks and “vulture” funds that go hand in hand with this business. CaixaBank leads the ranking of the financial entities, through its real estate company Servihabitat, which is controlled by the US fund TPG. The entity manages assets with a value of close to €60,000 million, after it was awarded some of the most substantial portfolios auctioned by Sareb and whereby gained strength. Next in the ranking is Haya Real Estate, the brand that Cerberus gave to Bankia Habitat after its purchase, which manages (assets worth) more than €52,000 million; and then Altamira (owned by the fund Apollo, which was purchased from Santander at the beginning of 2014) with €45,500 million (of AuM).

The real estate arm of Sabadell, Solvia, is also ranked among the top five most active (managers) in the market, despite having followed a different strategy from that of its peers. The bank chaired by José Oliu was the only one that did not sell its real estate arm to investment funds and its decision, to develop and make a profit for itself, has generated good results (so far). After the recent transfer of a portfolio from Sareb for €34,000 million, the managers of the company want Solvia to lead the process of consolidation that is expected to take place in the so-called “servicer” sector in the near future.

The funds seek out the “servicers”

The funds, which are experts in managing these types of assets, have found a stroke of luck in this business. However, to make it more profitable, they are looking for volume, i.e. to add more portfolios and benefit from scale. This explains the interest that many of these funds have shown in the auction processes held in recent months, including in Catalunya Banc’s portfolio of problematic mortgages, which was eventually awarded to Blackstone; (the US fund) also purchased the Catalan bank’s (real estate) platform (in a previous transaction).

Nevertheless, the experts consulted believe that it is still early days for talk of M&A activity and that no deals will take place until 2016, i.e. until the market is more saturated. Regardless, the consolidation of this new sales channel is already a reality. “The wholesale channel has consolidated as a divestment channel”, assured Francisco Gómez, the CEO of Banco Popular, last Friday, when he presented this group’s latest results.

New developers

Another way to “recover from the hangover” is through development. Banco Santander is a clear example of this: the entity chaired by Ana Botín is currently developing around 300 real estate developments across Spain. It is a formula for trying to recover the investments it made in land during the boom years. Santander is constructing on land that ended up on its balance sheet after non-payments by developers and against which the entity has had to make significant provisions. Sareb is also developing land and completing the unfinished developments acquired that it thinks may be profitable.

As the CEO of Santander, José Antonio Álvarez, explained at the presentation of the bank’s results, that to ensure that there is demand for developments, the entity is more selective in terms of the circumstances of a projects (it invests in) and it only begins construction once 30% of the properties have been sold (off-plan). Santander sold 2,500 real estate assets (during the 3 months to) March 2015, a reduction on the volumes recorded during the first quarter last year. Specifically, the entity sold 12,000 properties in 2014.

Other entities, such as BBVA and Popular, are also now selling foreclosed properties at prices that exceed the value at which they are accounted for on their (respective) balance sheets.

Original story: ABC (by María Cuesta and Moncho Veloso)

Translation: Carmel Drake

International Funds And Socimis Hire First-Rate Executives

4 May 2015 – Expansión

Director appointments in Spain / Large international investors and Socimis have been recruiting senior Spanish executives to design their strategies in the country and identify real estate opportunities.

Large overseas investors are hiring first-rate advisors to lead the businesses that they have acquired in Spain. Over the last six months, funds such as Cerberus, Apollo and Lone Star have hired former directors of Ibex companies to support them (execute) their strategies in Spain.

Some of the Spanish Socimis have also hired first-rate executives, including Uro Property and the listed real estate company Hispania, owned by Azora.

Through these appointments, investors are taking the third step in a process to strengthen their strategies to conquer the Spanish real estate sector. To begin with, they put certain Spanish-speaking executives in charge of entering the market. Such was the case of Andrés Rubio (Apollo), Juan Pepa (Lone Star) and Michael Abel (TPG).

The next step was the acquisition of real estate platforms, such as Altamira, purchased by Apollo; Bankia Habitat – now Haya Real Estate – acquired by Cerberus; and Neinor, which was awarded by Kutxabank to Lone Star.

Following these purchases, the funds have sought advice from top executives. “Some of the funds’ foreign directors have made successful acquisitions, but they now need highly skilled, top-level, local professionals to implement their business plans”, says Patricio Palomar, Director of Alternative Investment at CBRE.

“The hardest thing in the real estate sector is finding and accessing opportunities, but these experienced professionals have the skills to achieve that”, adds Carlos Ruiz-Garma, Director of Business Development at Aguirre Newman.

New hires

The most active fund in terms of new recruits has been Cerberus, which has hired two senior bankers for its Spanish subsidiaries in the last few months. Franciso Luzón, former board member and Vice President at Santander, is now a board member at Haya Real Estate, the real estate company that inherited Bankia Habitat’s business; and Manuel González Cid, the former Finance Director at BBVA, has joined the board of directors at Gescobro, the firm that specialises in debt collection.

Another big name signing was that of Oscar Fanjul, as a board member of Altamira, the real estate company owned by Apollo. Fanjul is Vice President at Omega Capital and used to be the Chairman of Repsol.

The fund Lone Star has also drawn on the market for former directors of listed companies to strengthen its strategy. This investor, which purchased Kutxabank’s property developer for €930 million at the end of last year, has hired Juan Velayos to lead the project; he used to be a Partner at PwC and who was the CEO of Renta Corporación until 2011. Lone Star will reveal its strategy for Neinor over the next few weeks.

In the face of all of these new signings, one of the largest funds to show its commitment to Spain, TPG – which is the majority shareholder in Servihabitat – substituted the former banker Rodrigo Rato last April.

Socimis

The Socimis, (many of) which are in turn owned by international investors, are also committed to hiring experienced directors. In this sense, the real estate manager Azora, which controls Hispania, hired Juan María Nin as a board member at the end of last year; until June 2014, he was the CEO of CaixaBank.

The Socimi Uro Property has also followed in the same footsteps; Uro owns some of Santander’s (branch) network and it has appointed Carlos Martínez Campos as its Chairman; he was formerly the Chairman of Barclays España until its sale to CaixaBank. The banker also used to chair Prosegur.

In addition to the signings of former directors of Ibex companies, the opportunistic funds have also hired at least a dozen other executives in recent months. For example, Gonzalo Gómez Navarro, from the Empark Group, has joined Altamira; and the former directors of Sareb, Walter de Luna and Juan Barba, joined Acciona Inmobiliaria and Meridia Capital, respectively.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake