Month: December 2015

Merlin Delays Hotel Portfolio Sale Until June 2016

23 December 2015 – El Economista

Merlin Properties is certain that it wants to divest the hotel portfolio that it inherited from Testa, the former real estate subsidiary of Sacyr, which it acquired in June for €1,800 million, from its balance sheet within five years. Nevertheless, the company expects that it will not begin the sales process until the second half of 2016. The reason for its decision to delay this divestment until June is a question of regulations.

The aim of the Socimi was to use the money from the sale to reduce its indebtedness, which amounted to €2,939 million at the end of the third quarter, and to undertake new investments. The problem is that according to the rules that apply to Socimis, Merlin must allocate at least 80% of its profit from the sale as extraordinary dividend, which does not fit with the company’s plans.

“We are analysing other legal options to avoid this. Our analysis and its implementation will take some time”, explain sources at the group.

One of the possible options includes the launch of a new Socimi that will be dedicated solely to the hotel business; another includes the creation of a company containing all of these assets, which would then be sold and, in that way, the hotels would be sold all together, without the need to allocate 80% of the profits to shareholder remuneration.

According to Fernando Lacedena, CEO of Testa, the Socimi is focusing on the integration of both companies at the moment, “that is our primary objective”.

In addition, Merlin has just completed the refinancing of €1,700 million of Testa’s debt with a group of ten entities and it is preparing itself for a €850 million bond issue.

Sale of Testa Residencial

The Socimi, which has just joined the Ibex 35, has also launched its divestment of Testa Residencial. In this case, the tax considerations do not apply in the same way, since the 1,519 homes and 26 retail premises that it has put up for sale all sit within a separate company.

“The residential business is very ordered within Testa, it all sits within a single entity and therefore, the operation does not involve the movement of any assets or the transfer of any shares”, says Lacadena, who says that “this makes the transaction a lot easier, since it does not involve the partial divestment of some assets to one investor and other assets to another investor”.

The completion of this operation, which could amount to €280 million and is known as Project Crete, was scheduled for this year, however, even though “there has been lots of interest”, Lacadena explains that it may be delayed until the beginning of next year.

The Director explains that the price is not a critical element in this sale, however, like in any process, there are certain details that must be agreed. In this case, the company has an associated debt, which amounts to €100 million and therefore, “we need the financial institutions to be open to changing the ownership of that debt (before we can proceed)”.

Moreover, the sale of Testa Residencial will involve the transfer of the professional team that manages the business. In total, the workforce comprises around 40 people, between the Servicers and the Residential team. In this sense, the Director was keen to highlight that the integration of the two companies will not result in any redundancies.

Original story: El Economista (by Alba Brualla and Javier Mesones)

Translation: Carmel Drake

TPG & GS Buy Loan Portfolio From Caixabank For €240M

23 December 2015 – El Confidencial

TPG and Goldman Sachs have managed to close one of the largest debt operations of 2015 just before year end. They have just acquired a portfolio of unpaid property developer loans (Project Atalaya) from Caixabank, an entity that has been particularly active in this kind of divestment during the second half of the year. It is understood that the consideration paid amounted to €240 million.

In addition to Atalaya, the bank led by Isidro Fainé (pictured above, right) has also managed to successfully close the sale of Project Tourmalet, acquired by Blackstone for almost €800 million, as well as Project More, another €700 million of non-performing loans, which sparked interest from several international funds and which ended up being acquired by Cerberus.

In total, as a result of these three operations, the Catalan entity has succeeded in transferring almost €2,300 million of debt from its balance sheet during the second half of the year alone, a figure that makes it the most active entity during the period for this type of operation. That is unless there is a last minute surprise from Bankia, which has withdrawn its plans to close the sale of Big Bang this year.

The funds that are interested in acquiring the €4,800 million that comprise the Big Bang portfolio have demanded that the bank led by José Ignacio Goirigolzarri slice it up before they can reach any agreement. This request has forced the entity to recalculate its numbers, which has delayed the completion of the operation, which was expected to be the largest in 2015.

As a result, Caixabank has been the star of the year for this type of operation, to the extent that the three portfolios that it has sold represent some of the largest banking operations closed this year. In fact, if we take the data as at the end of Q3 as the reference point (the most recent official statistics), then the bank has reduced its portfolio of loans to property developers by 30%, which has played a crucial role in enabling it to lower its default rate to 8.7%, compared with the sector average of 11%.

Atalaya is the second major operation that TPG has closed with Caixabank, given that two years ago it also acquired 51% of Servihabitat from the Catalan entity for €189 million, an operation that allowed the US fund to take over the management of the entity’s real estate services for a period of ten years.

Meanwhile, the most important operation involving Goldman Sachs in the Spanish real estate sector in recent times has been its purchase of almost 3,000 flats from IVIMA, together with Azora, in the Summer of 2013, for €201 million. But the US entity is also very active in the analysis of these kinds of operation. For example, it was on the brink of signing an agreement to acquire Procisa, the property development company behind La Finca (in Madrid), which is suffering from a significant debt problem. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Aliseda: 10 RE Trends To Watch In 2016

23 December 2015 – El Mundo

We are coming to the end of a year that has been characterised by the consolidation of a new cycle in the housing market, marking an end to the crisis that began in the third quarter of 2007 and reached its peak in 2013.

On the basis of sales data and market analysis performed by Aliseda Inmobiliaria, the real estate servicer has identified ten trends for 2016.

1- Most sales will involve second-hand homes

As a result of the reduction in the real estate stock, due to the absence of new property developments, the sale of second hand homes in Spain will gain prominence ahead of the sale of new builds.

2- Three-bedroom homes will continue to be the star product

Especially when we are talking about primary residences, buyers will continue to prefer this kind of home given that “the sensation of luxury begins with the sense of space”.

3- Foreigners will be the main buyers of secondary residences

Interest from foreigners in holiday homes has been particularly noteworthy during the years of the crisis and continues to be significant today. 65% of the secondary residences sold in our country have foreign buyers. By contrast, when we talk about primary residences, 95% of the buyers are Spanish.

4- More financing: recovery of domestic demand

Greater access to credit favours financing, and so in 2016, we expect to see a recovery in the number of homes sold, increasing by 15-20% with respect to 2015.

5- Price stabilisation

The general trend is towards stabilisation after years of decreases, but there are still provinces, those with the greatest volume of stock, where prices are still falling. Land prices, another one of the key indicators of recovery, are growing in the primary urban centres such as Madrid, Barcelona and the Costa del Sol, and these increases are beginning to spread to other areas, such as Alicante, Córdoba and País Vasco, amongst others.

6- Spain is still a country of buyers (rather than renters)

Faced with the option of renting, given the benefits that can be obtained in this regard, Spaniards will still prefer to purchase their own homes. It is possible that in the future the trend will change slightly to fall in line with European trends.

7- A home is regarded as an investment

Buying a home will continue to form part of the Spanish “philosophy of life”, in the sense that home owners are more protected by current legislation.

8- Cranes will return to the cities

In 2015, the number of construction permit approvals increased by 20%, and it is expected that this positive trend will continue into 2016, with a significant supply of potential buyers. Demand for new homes could reach 80,000-85,000 homes and demand for replacement stock could amount to 70,000-75,000 homes. Moreover, homes on the coast will continue to increase in number.

9- Property developments on the increase

Compared with the years before the real estate crisis, when the number of new build permits reached 750,000, the current figures amount to around 50,000, although this figure is expected to continue to increase with more new build permits. We could see up to 200,000 homes being constructed per year in the short term.

10- Young people will be the stars of the show

Young people have been most affected in terms of their ability to access housing in recent years, due to the economic crisis. Currently, they are the cohort that is expressing the greatest interest in acquiring a property and they are going to play a key role in the sector in the future.

Original story: El Mundo

Translation: Carmel Drake

Phalsbourg To Build Macro Shopping Centre In Torrejón

23 December 2015 – Expansión

The French group has purchased a plot of land measuring 138,000 m2 from the Town Hall of Torrejón, where it plans to develop a huge shopping centre.

The French group Compagnie de Phalsbourg, which specialises in the promotion and management of shopping centres, has chosen Spain for its first international adventure. The company, founded by Philippe Journo, has completed the purchase of a plot of land measuring 138,000 m2 in the Madrilenian suburb of Torrejón de Ardoz, where it plans to construct a huge shopping centre. “After more than 20 years of experience in France, we have decided to expand overseas. We have looked at opportunities all over the world, including in: China, Russia, Italy, Romania, etc. In the end, we have decided to invest in Spain because now is the right time here…”, explains Raphael Martin, the Director General of Compagnie de Phalsbourg.

The French group has been awarded this plot of land, which is located next to the Torrejón air base, through a public tender. It will pay €15.4 million (plus VAT) for the site. “We have just completed the land purchase and we want to begin construction at the beginning of April, so that the tenants can begin to move in during 2017 and then open their doors between April and May 2018”, says Martin.

The new shopping centre, called Open Sky, will have a retail surface area of 65,000 m2, spread across 60 stores, plus 2,500 parking spaces. “It will be an open concept containing, for the most part, fashion chains with stores of between 50m2 and 500m2, distributed along a corridor that will run for more than than 1.5km”. Compagnie de Phalsbourg will invest €110 million in the centre and will create around 450 jobs.

This is not the only project that Compagnie de Phalsbourg has underway in Spain. The company is also working on the second phase of this project, which involves the construction of an outlet centre measuring around 22,000 m2, designed by the renowned architect Philippe Starck.

“In total, we are going to invest €170 million, plus the amount that the brands will spend opening their stores. Up to 800 people will work at our complex in Torrejón”.

In addition, the French group, which owns assets worth €1,200 million, is evaluating other projects in the Spanish market. “We are looking at other locations in Madrid, Barcelona and the País Vasco”.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Baldomero Falcones Acquires 5% Stake In Renta Corporación

23 December 2015 – Efe

According to a statement made by Renta Corporación, the businessman Baldomero Falcones has acquired a 5% stake in the company. Until now that stake was owned by Sareb, the entity also known as the “bad bank”.

The CEO of Renta Corporación, David Vila, has indicated that the incorporation of Baldomero Falcones will allow the company to face the future challenges set out in its strategic plan “with a significantly reinforced capital structure”.

Falcones used to be the President of the construction company FCC, until January 2013. In addition, he has also served as the President of MasterCard Internacional and the Director General of Banco Santander, as well as a member of the board of that entity for 15 years.

Falcones has also chaired Banco Urquijo Limited in the United Kingdom; Hispano Americano Sociedade do Inestimento in Portugal; Banco Hispano Americano Benelux, Banco Urquijo Chile, Fiat Finance and Santander Seguros.

He is the founder of the private equity firm Magnum Industrial Partners and a member of the Board of Directors of Unión Fenosa, CESCE, Generali España, Seguros La Estrella, Europay International and Banif.

He served as the President and CEO of FCC for five years and received compensation amounting to €7.5 million when he left the construction group, due to the early termination of his contract.

Renta Corporación has prepared a strategic plan for the period 2016-2020, whose objectives include doubling its annual net profit to €20 million, amongst others.

Original story: Efe

Translation: Carmel Drake

INE: Mortgage Lending Rose By Just 7.1% In October

22 December 2015 – Cinco Días

The signing of new mortgages to purchase homes increased by just 7.1% YoY in October, down from 20.2% a month earlier, with 19,195 new mortgage loans constituted in total.

According to data published yesterday by Spain’s National Institute of Statistics (INE), the signing of mortgages decreased by 19.4% compared with the month of September, which affected the YoY statistics.

The total amount of mortgages granted to purchase homes in October amounted to €2,144.2 million, up by 18.7% compared with the same month in 2014 and down by 18% compared with the previous month.

Moreover, in October, 28,989 mortgages were signed for all kinds of properties, including both rural and urban buildings, up by almost 5% compared with a year earlier, but down by 19.5% compared with the previous month.

The amount of capital loaned by Spanish institutions to constitute these loans amounted to €4,040 million, 12.5% more than in October 2014 and 15.6% less than in September.

More than half of all of the mortgages constituted in October, specifically, 53.1%, involved homes, according to INE’s data, which also revealed that 90.3% of the loans had variable interest rates, versus 9.7% which had fixed interest rates.

Euribor was the preferred reference rate for the constitution of variable rate mortgages, specifically it was used in 92% of all new variable rate contracts. The average interest rate, at the beginning of the mortgage terms, for home loans was 3.30%, which was 8.2% lower than during the same period in 2014.

In total, changes to the conditions of 12,457 mortgages were recorded in the property registers, down by 18% compared with last year. For homes, the number of mortgages whose conditions were modified decreased by 19.4%. (…).

By autonomous region, the areas that recorded the highest number of new mortgage constitutions over homes in October were: Andalucía (3,551); Cataluña (3,138) and the Community of Madrid (3,033).

The autonomous regions that recorded the highest YoY rates of change were the Balearic Islands (61.8%), País Vasco (43.7%) and the Canary Islands (32.8%).

The autonomous regions that loaned the most capital for the constitution of mortgages over homes were the Community of Madrid (€513.0 million); Cataluña (€388.5 million) and Andalucía (€335.0 million).

The autonomous regions with the highest month on month positive rates of change in the number of home loan mortgages were La Rioja (19.1%); Murcia (12.1%) and the Canary Islands (9.7%).

Meanwhile, the autonomous regions that recorded the highest MoM decreases were the Community of Madrid (38.7%); Navarra (36.2%) and Aragón (30.4%).

Original story: Cinco Días

Translation: Carmel Drake

Quabit Repays 27% (€90M) Of Its Debt Balance

22 December 2015 – Efe

According to a statement issued by Quabit, its recent €45 million capital increase has allowed the company to repay its €35.6 million debt to Sareb early.

This payment to Sareb has also resulted in the release of assets with significant short-term development potential, where Quabit plans to build around 1,000 homes.

In parallel, under the framework of the refinancing agreement it signed with financial institutions in March 2014, the real estate company has made “daciones de pago” of land.

As a result of the two operations, Quabit has decreased its debt by €90 million in total, which represents a reduction of 27% with respect to its debt balance as at 30 September 2015.

In this way, the company is beginning to fulfil the objectives of its business plan for the period 2015-2020, which according to Quabit, focuses on the promotion and development of its own portfolio of assets, as well as new investments.

Original story: Efe

Translation: Carmel Drake

Real Estate Debt Decreases To €41,000M

21 December 2015 – El Economista

The clean up of the financial institutions and the reactivation of the economy are leading to marked decreases in the banks’ real estate arrears. At the end of September, loans granted to property developers had decreased to €41,621 million, a figure that has not been seen since the middle of 2010, when the process to restructure the sector began with the merger of the majority of the saving banks.

In just nine months, the volume of insolvencies relating to property has reduced by almost €13,000 million and the default rate has fallen to 30.6%.

Some of the decrease is due to the sale of unpaid loans that several entities have been carrying out to reduce their non-performing assets. These portfolios have been acquired by investment funds with significant discounts on their nominal values, with the hope of recovering the money and, thus, generating sizeable profits. Another factor that has reduced the amount of property developer debt is the exchange of debt for homes and land by the banks to lighten customer charges and to collect a portion of the loans granted.

Since the outbreak of the crisis, real estate financing has been weighing down on the Spanish financial sector. The number of insolvencies peaked in 2013, at €70,000 million, excluding the volume of loans transferred to Sareb by the entities that received state aid.

According to the data published on Friday, another one of the sectors hardest hit by the crisis, construction, has also been experiencing a significant decrease in its defaulting customers. After decreasing by €3,000 million this year, they now amount to €13,300 million, also returning to 2010 levels, and with a default rate of less than 30%.

The decrease in the default rate is happening in all of the production sectors, as well as in the mortgage sector. As a result, the total volume of unpaid loans being financed by the banks, savings banks and credit cooperatives decreased to €136,000 million in October, a volume similar to that recorded at the end of 2011. In nine months, this amount has decreased by €31,000 million. The default rate of the system as a whole has reduced to 10.6%, its lowest level since 2013, just after the European bailout.

The volume of loans granted by the banks, savings banks and credit cooperatives decreased by 3.5% between October 2014 and the same month this year, according to data published by the Bank of Spain.

The volume of financing granted to companies and families increased to just over €1.2 billion.

Original story: El Economista (by Fernando Tadeo)

Translation: Carmel Drake

25% Of Adif’s Retail Units Are Vacant

21 December 2015 – El Economista

In total, 307 retail units at Adif’s train stations in Spain are vacant. These establishments occupy a total surface area of 38,239 m2, which represents approximately 24.8% of the more than 154,000 m2 covered by all of the areas dedicated to restaurants, retail and leisure in the network of stations owned by the railway manager. In other words, almost a quarter of the retail space at train stations is currently empty.

During 2014, Adif recorded revenues of €569.5 million, of which €134.6 million related to rental income and services. Of that amount, €61.4 million was generated by the lease of buildings, shops and other properties and €71.8 million was generated by the use of fibre optics. Therefore, the contribution of rental income from retail stores, homes and plots represented around one tenth of total revenues. On the basis of the data about the uptake of retail units at Spanish train stations, that amount could increase significantly if the occupancy rates were improved.

The 307 available stores owned by Adif are spread across 75 train stations, according to the data from the body that sits under the Ministry of Development. The station in Albacete Los Llanos has the highest number of empty units, with 29 in total, covering a combined surface area of 3,953 m2. Meanwhile, the station in Córdoba has 12 stores available, with a surface area of 3,255 m2, whilst the station in Cáceres has 13 free units, covering 2,313 m2.

After Albacete, Córdoba and Cáceres, the stations with the most available space are Pontevedra and Madrid Chamartín, with 2,160 m2 (10 stores) and 1,996 m2 (5 stores), respectively. The station in the Spanish capital has various units available, where according to the website of the state-owned company, shops, a restaurant and car rental parking could be opened.

By contrast, in Madrid’s other major train station, Atocha, there is not a single square metre available for rent. At the other main train stations in Spain, Barcelona Sans has just one store available, measuring 48 m2, whilst Sevilla Santa Justa also has just one unit without a tenant, measuring 28 m2.

By contrast, at the high speed train station Valencia Joaquín Sorolla, there are seven units without a tenant, with a total surface area of 346 m2. There are six empty shops at Zaragoza Delicias, with a total surface area of 161 m2. And at María Zambrano in Málaga, one shop is available, along with two sites for ATMs.

Empty for several years

The majority of the retail spaces are available to rent immediately. Nevertheless, some of them have been empty for several years. In certain cases, that is because they need major renovations. Others will be available from early 2016, which is why Adif has now begun to market them.

The supply from the railway manager, which launched a plan two years ago to get rid of many of the homes and land under its ownership, includes units that may be used as shops, restaurants, cafeterias, kiosks, offices, bookshops, ATMs, parking and car rental. At certain train stations, Adif prohibits any new tenants from using properties to undertake activities already in operation at existing stores.

During 2015, the prices of the retail units at Adif’s train stations have ranged between €975/month, for stores measuring up to 8 m2, and €10,500/month, for stores measuring up to 30 m2. (…).

Original story: El Economista (by Javier Mesones)

Translation: Carmel Drake

Colonial Buys Another Office Building In Madrid

21 December 2015 – Inmodiario

Colonial has completed the purchase of an office building in Madrid’s CBD on Calle Santa Engracia, 120. The property houses the headquarters of several well-known, prestigious companies and has an above ground surface area of more than 13,430 m2, along with 180 parking spaces. CBRE has advised the owner exclusively throughout the sales process.

Currently, the building has an occupancy rate of 95%, which means that it will generate rental income for the Colonial Group from the get-go, at a time when the market for offices in Madrid is experiencing a positive upturn.

The acquisition of this “core” asset represents the inclusion of another high quality office building in a market where there is significant scarcity in Madrid’s CBD. It is worth noting that the morphology of the floors in the building, which measure between 1,500 m2 and 2,000 m2, is very scarce in the market and is in high demand by companies. These characteristics allow Colonial to declare that through this transaction it has acquired a unique and wide-ranging property in the business district of Madrid.

Colonial is planning to refurbish the building with the aim of strengthening its positioning and obtaining a maximum energy efficiency and sustainability rating. Moreover, the building is located in an area that has great tertiary potential over the medium term with the establishment of multinational headquarters.

Through this acquisition, Colonial has completed the purchase of 4 top quality office buildings in the business district of Madrid. The combined above ground surface area of those 4 properties amounts to 40,000 m2. Following this acquisition, the company has a portfolio of 19 office buildings in the centre of Madrid.

The consideration for this transaction amounted to €67 million, which takes Colonial’s total investment in Madrid’s CBD this year to €190 million (including its purchase of Génova, 17 and its acquisitions, including capex-related expenditure, of the Estébanez Calderón, 3-5 and Príncipe de Vergara, 112 projects).

Original story: Inmodiario

Translation: Carmel Drake