Author: Richard Turner

Blackstone’s Real Estate Empire in Spain

6 August 2017

The US giant controls at least 100,000 real estate assets in Spain through dozens of companies. Most of the properties are in Catalonia. When it finally completes the purchase of the Popular’s real estate portfolio, Blackstone will become the largest property development company in Spain, ahead of Sareb.

Few ordinary people have heard of Blackstone. Even when asked about it, this firm sounds more like a private mercenary company (Blackwater) than what it is: one of the largest asset managers in the world and the largest foreign investor in Spanish property.

The fund is a silent giant, with dozens of companies linked to the real estate market, of which three are publicly traded. It manages around 100,000 real estate assets, of which at least 10,000 are flats for rent and social housing (VPOs). Blackstone has also has just agreed to one of the largest real estate acquisitions in history: 51% of Banco Popular’s property portfolio. If this deal goes through, it will control the same amount of assets as Sareb, the company created by the Spanish government in 2012 to manage the property of troubled banks.

Blackstone realized that it had to have a presence in Spain in 2013. It saw clear signs that the economy was bottoming out and decided to bet on the real estate sector. That summer it finalized one of the fund’s first major deals in Spain, the purchase of public housing from the Municipal Company of Housing and Land (EMVS), which has subsequently given Blackstone a serious headache. However, this deal (along with two others involving Goldman and Sareb) signalled the beginning of a real estate recovery in Spain.

The American fund came to Spain through Magic Real Estate, a company created by, among others, Ismael Clemente, the current Managing Director of one of Ibex’s real estate companies, Merlin Properties. After purchasing some small portfolios, Blackstone realized that it had to take a stronger position in Spain.

Key moment

Its first step came in 2014 with the acquisition of Catalunya Caixa Inmobiliaria, a real estate platform renamed Anticipa. Blackstone then tried to buy Eurohypo for 3.5 billion euros, which was eventually acquired by Lone Star. It got its way with Project Hércules, in which it acquired 6.4 billion euros in problematic mortgages from Catalunya Banc.

These deals were completed by the same team that conducts all of Blackstone’s major deals in Spain: the two brains behind the deals are Diego San Jose, who has twelve years of experience in the fund; and Eduard Mendiluce, ex-director of Catalunya Banc, who has detailed knowledge of the nationalized bank’s entire portfolio and of the banking/real estate sector in general.

The Fidere (Blackstone) real estate development in Soto de Henares (Madrid).

Jean-Christophe Dubois, who oversees investments from London, and Jean-François Bossy, a financier specializing in complex operations, taxation and legal issues, also take part in all of Blackstone’s major deals.

So far, a large part of the interests of this fund in Spain are in a securitization fund, which controls the Catalunya Banc’s problematic mortgages. According to the latest official figures, the mortgage package has already been reduced from 6.4 to 4.4 billion euros. Loan delinquency stands at 64%, with Blackstone co-investing with the state-run bank restructuring fund FROB. They are investing, however, under different conditions: Blackstone has a guaranteed profitability of 13% and the public fund will only profit under a series of complex scenarios.

Blackstone is cooperating with the FROB on Catalunya Banc’s toxic mortgages, where the US fund has a guaranteed return of 13%

In addition to the securitization fund, the American fund has three companies listed in Spain (Spanish REITs): Albirana Properties Socimi, with about 5,000 rental flats valued at €500 million; Corona Patrimonial Socimi, with more than €100 million in investments in office buildings; and Fidere Patrimonio, with rental flats (of which many are social housing) valued at €300 million.

Beyond these few listed companies, there are dozens of Blackstone companies registered in Spain. And few are less asset-laden, as some combine real estate assets and debt worth several hundred million euros: Tourmalet Propco Investment 2015 manages assets worth €800 million acquired from CaixaBank; Empire Real State Spain, flats acquired from Sabadell worth €500 million; and Patriot Propco, holding debt transferred by Popular at the end of last year, with an initial valuation of €418 million.

Geographical location of Banco Popular’s properties

All these investments will almost be small details when Blackstone takes control of 51% of Popular’s bank bad, with assets worth 30 billion euros. With this, the fund will be able to diversify its portfolio, which is currently highly exposed to Catalonia.

So far, Blackstone has done well with the strategy of betting hard on property while maintaining a low profile. From now on its bet will be double or nothing, and being on the bad end of the bet will be costlier than having remained in the background.

Original Story: voxpopuli – Jorge Zuloaga

Translation: Richard Turner

 

Testa to Increase Capital by 341 Million Euros to Merge Acciona’s Home Rental Business

08 August 2017

Acciona will integrate its residential assets into Testa in exchange for 21% of the REIT’s capital

The combined company will thus be the first home rental REIT in Spain. The non-cash deal will be approved at the extraordinary shareholders’ meeting convened for next September 14.

The REIT Testa Residencial will increase its capital by €341.19 million to complete the merger of Acciona’s home rental portfolio, a deal agreed to last July, thereby creating the country’s first home rental.

The non-cash deal will be approved in the extraordinary meeting of shareholders that the company has called for next September 14.

Specifically, Acciona will exchange its portfolio of 1,058 rental homes for Testa shares equivalent to 21% of its capital. Acciona will then become the company’s third largest shareholder behind Santander (35.7%) and BBVA (26.9%). Other shareholders include Merlin Properties (12.7%) and, Banco Popular (3.1%).

Testa’s extraordinary shareholders meeting will also include the appointment of new directors to its board of directors, chaired by CEO José Manuel Entrecanales.

The operation will give rise to a new real estate ‘giant’, unprecedented in Spain, since it will create the first home rental company in Spain, coinciding with the growth of the country’s residential rental market.

Once this merger is concluded, Testa Residencial will have a portfolio of 9,041 homes in 118 buildings. More than half of them (51%) are in Madrid.

Testa’s new portfolio, valued at about 1.816 billion euros, will generate gross annual rental revenues in excess of 70 million euros per year.

The operation gives new impetus to the company’s growth strategy, less than a year after its adoption in October 2016.

Second growth operation

Testa Residencial is the result of last year’s merger of Merlin Properties with the equity arm of Metrovacesa, in a deal in which the companies agreed to segregate the housing portfolio into a specific company to be constituted as a REIT.

The current deal, where Acciona’s housing stock will be merged into Testa’s operations is the second major growth operation undertaken by the firm as part of its growth policy, which does not rule out going public.

The first one was concluded at the beginning of this year, when its three shareholder banks (Santander, Popular and BBVA) transferred a portfolio of 3,300 homes to the company, also through a non-cash capital increase.

However, the two transactions resulted in a dilution of Merlin’s initial 46.2% stake in Testa at the time of its incorporation, to the current 12.7%. The transfer of the homes from the banks had already reduced the holdings of the company run by Ismael Clemente to 34.2%, which is centred on office and commercial and logistic centres, and which did not consider the housing segment as strategic.

Original Story: Expansión – EP

Translation: Richard Turner

 

Roig’s Son-In-Law Buys Formula 1 Valencia

8 August 2017

Atitlan, a firm headed by Roberto Centeno, son-in-law of the president of Mercadona, and a group of investors have bought the land at for next to nothing, which also received several ‘ghost’ offers. The plot of land was sold by a subsidiary of the failed bank Bankia, which paid €300 million for it a decade ago.

 

Most of the land belonging to what was once the urban circuit of Formula 1 Valencia just changed hands. The investment firm Atitlan, founded and directed by Roberto Centeno – the son of Mercadona’s president Juan Roig, and Aritza Rodero, have joined together with a group of investors to buy the land, which has been abandoned for years.

Just a decade ago, those same properties broke all records in the Valencia real estate market, when the land, with ​​103,000 square meters of surface area, sold for 300 million euros.

That figure was what Acinelav Inversiones paid at the end of 2006 to Compañía Logística de Hidrocarburos (CLH) for its old warehouses close to the port of Valencia. The buyer’s primary shareholder was Bancaja, holding slightly more than 25%, together with several well-known real estate developers from Valencia: Lubasa, Valencia Valencia Constitución, Salvador Vila, and the Ferrando and Quesada families.

From jewel to toxic asset

That plot of land was considered one of the jewels of new Valencia, located halfway between the City of Arts and the new marina. In addition, an announcement was made shortly after the sale heralding the arrival of Formula 1. Rita Barbera, the mayor of Valencia at the time, had convened an international competition of ideas for that area, which finally gave birth to an ambitious urban program, PAI del Grao. The project was to include some 3,000 dwellings and create several water channels to recover part of the original course of the mouth of the Turia river. Like many large-scale projects that were drawn up before the crisis, it still exists only in virtual models and images. Today the area is a huge, very degraded and partially asphalted esplanade in which there are still fences and concrete blocks that belonged to the old circuit.

Given the lack of land development and income, Acinelav was declared bankrupt in 2014, drowned by €270 million in debt, as reported by EXPANSIÓN. In addition, the government was claiming part of the urban development fees due for the cost of the circuit layout.

The main creditor was a syndicate of several banks, in which BBVA is listed as an agent. In addition, Sareb was also affected, having assumed the more than 68 million in equity loans that Bankia, in turn, had inherited from Bancaja.

During the judicial proceedings, the designated bankruptcy administrator, the law firm Rossaud Costas, initiated a private auction of the company’s greatest asset, those same 103,000 square meters, according to El Confidencial.

It was during those proceedings that Atitlan and its partners managed to acquire the land, according to sources confirmed by the investment firm, without disclosing more details. However, the offer made by the investment group led by Centeno and Rodero was by no means the highest.

According to Valenciaplaza, the amount offered is less than 30 million euros. Two other offers were for 40 and 35 million euros. However, these proposals were led by intermediaries who, despite the supposed support of funds from Dubai and other countries, in turn sought to reposition the land among other investors. When it came time to deposit the funds required finalize the purchase, they were unable to even cover the required advance.

In the end, the guarantees that Atitlan offered the financial institutions, which had kept the toxic assets on their books for years, seem to have been decisive. And this is even though the price they accepted was 10 times lower than the bankrupt Acinelav paid for it.

Even if the commercial court that handles the bankruptcy of Acinelav were to approve of the sale, the the imminent development of the land is not seen as likely. The current municipal authority has determined that the PAI shall be reviewed and processed again. Considering the size of the property, the buyer had many parties interested in acting as the developer, but the City Council, currently chaired by Joan Ribó, prefers it to be the municipal company Aumsa.

New Real Estate Actor

This benchmark deal confirms the turnaround in Atitlan’s investment strategy and its commitment to real estate. The investment firm created in 2006, which initially specialized in companies that supply Mercadona, has closed several purchases and alliances in the Valencian real estate sector in the last year.

Thus, it supported the Ferrando family’s bid to acquire the percentage that Bankia had in NAU, one of the largest owners of tertiary assets and land in the city. The group has shopping malls, hotels and the Cirsa casino building.

The new purchase is a clear sign that Atitlan believes that the housing crisis in Valencia has already ended and is now in full recovery.

Original Story: Expansión / A.C.A. Valencia

Translation: Richard Turner

Sale of Office Complex in Madrid Finalized

31 July 2017

UBS expands its Spanish portfolio with the purchase of an office complex more than 11,000 square meters in size.

Real Estate & Private Markets (REPM), the investment arm of the Swiss bank, has finalized the purchase of the business complex located on Ribera del Loira 56-58 in the Campo de las Naciones office area, near the Ifema fairgrounds.

According to Expansión, the complex houses the headquarters of the Accor hotel group and the company that runs the Dentix dental clinics. The UBS real estate fund paid 38.5 million euros.

It should be noted that UBS total holdings on the Iberian peninsula are valued at 772 million euros, with office buildings accounting for around 50% of the portfolio.

Original Story: misoficinas.es

Translation: Richard Turner

Balearic Islands Will Force “Large Landholders” to Give up Their Empty Houses

08/08/2017

This measure will not affect owners who have these homes as part of their assets, unless they are active entrepreneurs in the residential real estate market

The government of the Balearic Islands approved an executive order this Friday, modifying its previous executive order on tourist rental accommodations in the Balearic Islands. The intent is to regulate and order the business of renting tourist apartments in the archipelago, an area which has been highly successful in recent years.

One of the main changes is that the regional executive will, by law, oblige the “large holders” of housing – companies, not individuals – to cede them if they have been vacant for two years to relieve existing difficulty of access to social housing, the minister of the Territory, Energy and Mobility informed today.

The law considers that “large holders” are natural and legal entities who, directly or indirectly through corporations, actively participate in the market and who own, rent or have beneficial ownership of ten or more houses. They will be required to develop an economic activity for the dwellings, that is, mere possession will not be enough.

The order will not affect owners who have such housing as part of their holdings, but only active entrepreneurs in the housing market. The law provides for an inspection body, both to detect empty dwellings and irregular uses of public housing and other violations.

The minister stressed that the Balearic Islands Consultative Council has endorsed one of the main measures included in the law: the obligatory temporary reassignment of those properties held by the “large holders.”

The affected entities will receive adequate financial compensation, which also establishes the obligation of the “large holders” to register empty houses in the Register of Unoccupied Homes, where failure to comply will expose the holders to a fine of 3,000 to 30,000 euros.

The law will “protect” citizens so that they can access rentals or continue in their homes in conditions of “dignity”, with essential services.

It also aims to boost social rentals, increasing the supply of public housing for social rental, and to implement controls to avoid fraud in the use of this type of housing. In addition, universal housing accompanying services, free of charge, was created for all citizens.

In addition, it is very possible that in the Balearic capital, legal holiday rentals of primary residences will be limited to a maximum of 2 months, following the example of Amsterdam, while the rentals may be completely banned on the island of Ibiza.

Intended for habitual residence

The function of the housing accompanying service, which will be under the purview of the Balearic Institute of Housing (IBAVI), will be to guide citizens in situations where there is a risk of loss of housing – because they cannot pay rent or the mortgage – and to assist them with any information that they may require in during a purchase, rental or financing of a home, while also helping individuals understand their rights as consumers.

On the other hand, in order to guarantee sufficient social housing (VPOs) in the Balearic Islands, all new developments will be classified as VPOs, where they will not be able to be sold above an established price. This measure will not affect current VPOs.

Finally, the executive order details the conditions of use of official social housing, which has to be used as primary residences.

Official social housing cannot be rented, except in certain specific cases, such as change of address for work, health, family, cases of gender violence, terrorism and other situations that are justified and authorized by the regional administration.

Original Story: ABC / EFE – Palma

Translation: Richard Turner