Sareb Puts Spain’s Largest Ever NPL Portfolio Up For Sale

7 November 2017 – Voz Pópuli

Sareb wants to star in the largest sale to date of non-performing loans in Spain. The company chaired by Jaime Echegoyen has put a portfolio of unpaid loans worth €2,600 million up for sale, according to financial sources consulted by Vozpópuli. It hopes to sell the portfolio before the end of the year and since it contains NPLs that are recognised off-balance sheet, all of the consideration paid will correspond to profits.

This operation has been baptised as Project Dune and is being advised by KPMG. Until now, the largest sale of an unsecured non-performing loan portfolio was completed by BBVA in 2014, when it sold a portfolio worth €1,700 million to Deutsche Bank.

Non-performing loans are credits that have been written off by the banks, which remove them from their balance sheets after recognising 100% provisions against them. In the case of Sareb, they are what is known in the market as mortgage tails: essentially, they are loans that remained uncollected following the execution of a real estate loan. These loans are purchased by opportunistic funds at significant discounts, of between 95% and 97%, which try to recover the maximum amount by taking the debtors to court. Since they are fully provisioned, the entire amount that Sareb receives from this sale will be recognised as profits.

Project Dune actually comprises two sub-portfolios: Pilat, containing 2,261 unsecured non-performing loans to 1,500 small- and medium-sized property developers, worth €2,442 million; and Kirbus, containing 115 loans secured by real estate, with a combined nominal value of €176 million.

In this way, the second sub-portfolio has almost 1,000 properties as collateral, of which around half are apartments, located primarily in Barcelona, A Corñua and Madrid. Half of the Dune portfolio is located in Cataluña, the Community of Valencia and Aragón.

On the basis of the prices that tend to be paid in this market, Sareb could end up generating revenues/gross profits of between €125 million and €175 million from this sale, depending on the degree of interest that the portfolio sparks amongst the funds and the level of competition between them.

Project Dune is not the only deal that Sareb has underway since it also has other portfolios worth more than €1,000 million on the market. The largest process currently in progress is known as Project Inés, containing €400 million, whose purchase is being finalised by Deutsche Bank. The bad bank typically uses these types of operations towards the end of the year to balance its budget and generate higher revenues to allow it to pay off some of its debt.

This sale is being coordinated by the prestigious portfolio team at KPMG, led by Carlos Rubí. Most of the team came from PwC and joined the firm in 2014.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

SVP Global Buys Defaulted Mortgage Associated With In Tempo Skyscraper

7 November 2017 – Expansión

The investment fund SVP Global has reached an agreement with Sareb to buy the defaulted debt associated with the In Tempo skyscraper, the largest residential building in Benidorm. According to financial sources consulted, SVP Global has purchased a package of debt worth around €110 million, secured by the second tallest residential property in the EU, whose property developer, Olga Urbana, has filed for creditors’ bankruptcy.

It is one of the largest debt operations associated with a single real estate asset in Spain. SVP Global is a fund specialising in this type of operation and has around $6,900 million under management through its various vehicles. The In Tempo building is an unfinished project (although more than 90% of the construction work has been completed) measuring 192m tall and containing 47 floors for residential use.

The construction of In Tempo has given rise to a long-standing legal dispute. After launching the development of the tallest residential property in Europe in 2006, its property developer Olga Urbana had planned to finish the work in the middle of 2009. But, with the outbreak of the real estate crisis, the building work ended up being subjected to continuous delays and obstacles due to problems with the construction companies and suppliers. Although the construction work continued, in a fashion, under the control of Caixa Galicia, which financed the development with a €100 million loan, the financial crisis put an end to the construction work, which was never finished.

In 2012, the loan from the former savings back was transferred to Sareb, which at the end of 2014 and in the absence of an agreement between Olga Urbana’s shareholders, decided to enforce the creditors’ bankruptcy, with a total debt of €137 million. As part of that process, the judge approved the auction of the almost-finished building with a value of just over €90 million. Nevertheless, the offers were very low and so Sareb decided to exercise its preferential right to take ownership of the property.

Original story: Expansión (by C. Morán and A. C. Álvarez)

Translation: Carmel Drake

Aedas, Testa and Vía Célere, After the ‘Neinor Effect’: The Stock Market Opens its Arms to Real Estate in 2018

27 October 2017

U.S. funds are seeing gold in Spain’s residential real estate market and are planning on taking their presence in the country to the next level. Castlelake, Värde and Lone Star are the leading this new moment in Spanish real estate.

What will the new real estate cycle bring that that everyone is looking to invest in it? Not only is Spain a target market for large international funds, but it is also a playground for these groups to grow their businesses and create a new corporate reality within the sector. Castlelake’s Aedas, Värde’s Vía Célere and Aelca and even Spain’s own Testa and Sareb are seeking to take advantage of the Neinor effect by preparing their IPOs for the coming months. If 2017 was the year in which the residential real estate market in Spain quickly recovered, 2018 is expected to be the year when developers give an emphatic ‘yes’ to the market.

The Värde fund has had the clearest intentions regarding the future of its business in Spain. The company will list two of the developers that it controls in the country: Vía Célere and Aelca. The U.S. fund plans to list 60% of the first company on the stock market.

Värde hired Credit Suisse and Jefferies-Arcano to manage contacts with investors for the Vía Célere IPO, while CaixaBank will act as the placement bank. Last February, Värde paid ninety million euros for control of the Madrid-based developer Vía Célere, with the aim of merging it with its real estate company DosPuntos.

Värde had initially planned for Vía Célere’s IPO to take place at the beginning of 2018, but the move could take place before the end of 2017, after considering the excellent performance the real estate sector is experiencing on the stock exchange.

The stock exchange is one of funds’ alternatives to finance their growth plans in Spain

The U.S. fund has similar plans for Aelca, which has a portfolio of assets valued at 650 million euros and which could also start trading in the coming months. The fund has invited the main investment banks and advisory firms to present their proposals to list the developer on the stock market. Aelca was founded in 2012 by Javier Gómez and José Juan Martín and Värde acquired 75% of the company’s capital in 2016. The remaining 25% is in the hands of the two founding partners, who lead the developer’s management.

Castlelake and Aedas

Another principal actor in Spain’s new real estate cycle is the developer Aedas Homes, owned by the U.S. fund Castlelake, which is also considering a jump to the stock market soon. The firm has already publicly declared its plans to list its shares on the Madrid, Barcelona, Bilbao and Valencia stock exchanges and its inclusion into the Stock Exchange Interconnection System (Continuous Market).

Its objective is the same as that of Värde’s Vía Célere: placing up to 60% of the company’s capital through an initial offer that expects to raise funds amounting to 100 million euros. Aedas Homes will invest these funds in future growth opportunities and to partially finance the planned expansion of the group and, principally, to pay for buildable land under the housing development plan, up to 2023. The share offer will be composed of the issuance of new shares and an offer of existing shares by the sole shareholder, Hipoteca 43 Lux.

Developers and socimis take their business in the country to the next level, moving to the continuous market

Neinor Homes paved the way for the new wave of developers that are betting on stock market listings, hoping to gain the financial strength to ensure their growth plans for their businesses in Spain. Lone Star’s company was the star of the most significant IPO of a real estate developer in the country. The company made its leap to the market last March with an initial capitalisation of around 1.3 billion euros.

The value of the group’s shares has been increasing in the stock market in recent months. At the close of yesterday’s session, the company’s shares were valued at 17.97 euros each, with a total market capitalisation of 1.419 billion euros, an increase of 9.15% since its debut in the continuous market in the first quarter of this year.

Testa to Sareb: also heading to the stock market

Thus, the Basque company has facilitated the path for other real estate developers who are looking to make the leap to the stock market. An example is Testa Residencial, which is also preparing for a listing next year.

The apartment rental socimi, owned by Santander, BBVA and Acciona, is expected to debut on the stock market sometime between April and May of next year. The company will be listed on the stock exchange after becoming the first company focused on rentals in the country after its merger with Acciona’s home rental business.

Through this operation, the group presided by José Manuel Entrecanales will take a 21% stake in Testa’s capital, which makes it the second largest shareholder of the socimi, behind Santander (38.8%), in exchange for supplying the combined company with one thousand additional properties, according to Europa Press.

The transaction is part of the growth strategy that Testa delineated after its incorporation in October 2016, a result of a merger between Merlin and Metrovacesa. This approach has as its ultimate goal the firm’s IPO, as established by its status as a socimi. Under the socimi’s legal structure, the firm has September 30, 2018, as a deadline for a stock market listing.

Sareb prepares to launch its socimi Témpore Properties and its immediate jump to the stock market

Sareb has also been caught up in the rush to a listing, this time with its socimi Témpore Properties. While it is still in the process of incorporation, the bad bank says it will take the company public before the end of this year. To this end, it has chosen Azora, which was behind the creation of Hispania, one of the largest socimis in Spain, to manage the firm.

Témpore Properties will have its pick of more than 1,500 of Sareb’s best rental properties, with a volume of assets valued at over 200 million euros, with the aim of attracting the highest number of investors.

Sareb continues to plan to list Témpore Properties on the stock exchange through the Alternative Stock Market (MAB), which saw the debut of a large number of socimis last year. But it intends to make the leap to the continuous market, where companies with higher visibility are listed, in the future.

Original Story: Eje Prime – C. Pareja

Translation: Richard Turner

Liberbank’s RE Clean-Up Exercise Echoes Santander’s Deal For Popular

30 October 2017 – Expansión

Liberbank has learned the lesson that Santander taught the market a few months ago when it teamed up with Blackstone to divest almost all of the damaged real estate risk that Popular had held. The bank led by Manuel Menéndez has now also joined the trend of selling most of the capital of a new company, but retaining a stake in it so as to benefit from the future recovery in real estate prices.

The entity, which has just launched a capital increase amounting to €500 million, has also announced that it has created a company using real estate assets that have a book value of €602 million; Bain Capital will own the majority stake (80%), and the remaining 20% will be shared between the bank itself, with a 9.9% stake, and Oceanwood, with a 10.1% stake. Oceanwood is an investment fund that is the largest individual shareholder in Liberbank, with a stake of just over 12%, after the stakes held by banking foundations that gave rise to the entity.

Under pressure

The European supervisory authorities and the main international investment funds are putting pressure on the European banks to divest their toxic assets as soon as possible in order to recover the profitability lost in recent years, having overcome the worst of the financial crisis (…).

When Santander purchased Popular for €1, the first decision that it made public was that of putting all of Popular’s problematic real estate assets up for sale.

To that end, it decided to increase the coverage ratio of those assets to more than 60%, charging it against Popular’s reserves, to allow it to find a buyer more easily. In the end, it decided to accept Blackstone’s offer, which valued the entire real estate portfolio at €10,000 million and which saw the investment fund acquire 51% of the new company and Santander hold onto the remaining 49%. For Santander, the operation was attractive because it allowed it to immediately recover €5,100 million, it removed Popular’s real estate risk from the balance sheet and it left the door open for the entity to recover more money in the future to the extent that Blackstone proceeds to sell the new company’s assets.

Liberbank has done the same, although in a smaller proportion. In its case, the volume of assets is substantially smaller, €602 million compared to €30,000 million in Popular’s portfolio; moreover, its share of the new real estate company is also much smaller; it will be left with a 9.9% stake, whilst Santander owns 49% of its company.

But the result is similar. Liberbank is removing a very significant percentage of the damaged real estate risk from its balance sheet by the same means as Santander did. Raising the coverage ratio of these assets to a sufficient percentage so that an investment fund like Bain Capital Credit, and also Oceanwood, are willing to invest a not inconsiderable amount of money.

Investment

If the valuation of Liberbank’s assets is the same as those of Popular, Bain and Oceanwood will have invested just over €230 million in the operation.

A notable difference with respect to Popular’s operation is that there is a third player in Liberbank’s case. The fund Oceanwood, the bank’s largest shareholder after the banking foundations, which has also committed to participating in the capital increase in an even higher proportion to the amount that corresponds to it based on its current stake, has also decided to form part of the new real estate company, which will be constituted as a Socimi. Those two decisions may be interpreted as a clear commitment that the entity will be worth more in the future than it is at the moment and as a clear vote in favour of the current management team (…)

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Santander Wants To Sell RE Assets Worth €6,000M In 1 Year

30 October 2017 – Voz Pópuli

Banco Santander does not want to stand idly by following the sale of Banco Popular’s real estate. After the completion of that operation (the largest ever real estate transfer in Spain), the entity chaired by Ana Botín wants to continue accelerating its real estate clean up. In this way, it plans to reduce its real estate exposure by more than €6,000 million over the next year.

That would mean that Santander’s real estate balance would decrease by half, given that it currently amounts to around €12,300 million in gross terms (excluding provisions).

According to the bank’s CEO, José Antonio Álvarez, speaking at the results presentation, the objective is for the entity’s real estate exposure “to be immaterial” by the end of 2018.

This immateriality means having a net balance of between €1,000 million and €2,000 million left on the balance sheet within 14 months, besides the rental properties, explained the banker. That, in turn, means selling around €6,000 million (in gross terms) and leaving around €6,000 million on the balance sheet.

The numbers

In this way, Santander España’s net exposure to the real estate market is €5,900 million. The entity has an average coverage ratio of 52% over these assets, which means that their gross value is €12,300 million.

Of those €5,900 million, €3,372 million are foreclosed assets, €1,203 million are rental properties and €1,325 million are delinquent real estate loans.

In August, Santander agreed to transfer almost €30,000 million (in gross terms) of Popular’s property to Blackstone. Specifically, the bank sold 51% of a new real estate company, for €5,100 million and retained ownership of the remaining stake.

In terms of the rest of the real estate assets on its balance sheet, Santander could undertake similar operations, although it will also continue to analyse sales through the retail network and the option of putting properties on the market through Socimis. Both the Spanish bank and its competitors are under pressure from the ECB to get rid of the real estate on their balance sheets as soon as possible.

Meanwhile, Santander is negotiating with Värde Partners, owner of 51% of WiZink, to repurchase Banco Popular’s customer card business and to sell it Barclays and Citi’s business in return.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Link Financial Acquires Aiqon Capital Espana

27 October 2017 – Newswire

Yesterday, the Link Financial Group announced that it had bought a specialist loan servicing platform, Aiqon Capital Espana. Based in Madrid, the one hundred and ten people strong team will add further capacity to Link’s existing Spanish business, Link Finanzas. The team will continue to service the €6 billion portfolio of loans bought by the Group’s Investment Manager, LCM Partners.

“Link Financial has been active in the Spanish market since 2004 when it established Link Finanzas. This announcement demonstrates the breadth and depth of opportunity we continue to see in Spain and underscores our commitment to this vibrant market. With a strong, full-service platform in place, we are confident that both businesses, operating under the Link Financial banner, will together grow and build on each other’s strengths. We are proud to welcome our new colleagues to the firm and are excited by the opportunities that this acquisition will offer Link Financial in the Spanish market.” – Selina Burdell, Link Financial Group Chief Operating Officer.

“The acquisition of the Aiqon business has been part of a wider transaction and portfolio purchase concluded by LCM Partners. The Aiqon team bring a depth of expertise in servicing Small to Medium Enterprise receivables and this means they are a seamless addition to our existing business and operation in Spain.

The Spanish market offers a lot of opportunity for businesses such as Link and Aiqon and together we will be stronger and able to offer our banking partners an exceptional proposition in the servicing of loan portfolios.” – Pablo de la Viña, Managing Director, Link Finanzas.

Established in 1998, Link Financial Group is a leading specialist outsourcing firm, providing European financial institutions, investors and other credit providers with outsourced loan management, debt purchase and standby servicing solutions. Today, it manages more than 2.5 million customer accounts, employs 700 people across 10 European offices and manages €25 billion of Gross Book Value.

Link was one of the founding members of the industry and has been at the forefront of innovation ever since. Link’s proprietary operational platform allows its businesses to service a range of asset types from within and outside the financial services industry.

Original story: Newswire 

Edited by: Carmel Drake

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Fitch: Banks Will Continue To Discount Their Foreclosed Assets For 2+ Years

24 October 2017 – Expansión

Fitch report / Financial institutions are selling their real estate portfolios at discounts of between 50% and 70%; those levels are expected to be maintained for at least the next two years.

“We do not expect to see a close correlation between the improvement in the macroeconomic situation and lower discounts on the sale of portfolios of foreclosed real estate assets by the banks. In fact, we expect those discounts to remain at their current levels for at least the next two years”, said Alberto Faraco and Juan David García, analysts at the ratings agency Fitch.

Spain’s banks still hold significant volumes of real estate, inherited from the crisis, which they must get rid of by order of the supervisor. To accelerate the process, entities are selling portfolios of foreclosed real estate assets to international funds and, in exchange, they are demanding significant discounts with respect to the initial value of the properties.

According to Fitch, these discounts amount to between 50% and 70% of their value and the probability that they will continue for a while yet is high. “It is likely that not even the better tone of the Spanish real estate sector will lead to an increase in the prices at which the banks are selling their portfolios of foreclosed assets, given that there is a significant over-supply, which is exercising considerable pressure”, said Faraco and García, authors of the most recent report published by Fitch.

“The foreclosed properties are competing against a stock of around 500,000 recently built homes, which are ready for sale. Moreover, they are suffering from downwards pressure in terms of prices due to the profitability premiums that buyers require of the banks to cover uncertainties in the process”, said the analysts. The entities’ real estate portfolios carry a series of risks that can detract from the profitability obtained by a potential buyer, such as the fact that the dwelling cannot be accessed until the inhabitant is evicted.

Homes that the banks are responsible for placing directly with end buyers are treated differently. Such properties are sold with lower discounts but require much more time and resources go shift, something that the entities, under pressure from the supervisor to decrease their share of non-performing assets, cannot afford.

What Fitch does expect is a reduction in the number of new assets being foreclosed by the banks, in line with the improvement in the macroeconomic situation in Spain. “In this environment, it is also fundamental that the banks adopt a new strategy that favours handling doubtful loans through debt restructurings rather than as foreclosures”, said the experts.

Localised bubbles

Besides the banks’ assets, Fitch is observing an overall improvement in the fundamentals of the Spanish real estate market, with prices on the rise. “Despite the recovery, we do not see the risk of a new real estate bubble in Spain arising anytime soon. There is a large supply of homes that still needs to be absorbed. Nevertheless, we are seeing very localised bubbles in premium areas of certain neighbourhoods of Madrid, Barcelona and the Balearic Islands”, they explained.

Original story: Expansión (by Andrés Stumpf)

Translation: Carmel Drake

KKR Finalises Its Purchase Of Hipoges & The Pepper Group

24 October 2017 – Voz Pópuli

The investment giant KKR is multiplying its commitment to Spain. The US fund is on the verge of signing two operations, which will see it obtain real influence in the property and financial sectors. Moreover, it is participating in other major processes to purchase portfolios of banking assets, such as Project Invictus, although Bain Capital is expected to be victorious in that case.

The next operation to be signed in the market is the deal involving Hipoges. And according to financial sources consulted by Vozpópuli, KKR has imposed itself in the sales process of that recovery and real estate asset management platform, which was founded in 2008 by former directors of Lehman Brothers.

KKR’s offer has convinced the vendors – comprising the main directors and the fund Cerberus, which holds a 40% stake – ahead of the bid submitted by the British group Cabot. Sources in the market estimate that the price will amount to €25 million – €30 million in the end.

With the purchase of Hipoges, KKR will be able to compete on equal terms to acquire large portfolios of problem assets from the banks. In this regard, four large funds dominate the market: Blackstone, owner of the platform Anticipa and now Aliseda; Apollo, which controls Altamira; Cerberus, a shareholder of Haya Real Estate; and Lone Star, the main investor in Neinor. KKR is led in Spain by Jesús Olmos and Alejo Vidal-Quadras (pictured above).

Other funds in this league include TPG, which owns 51% of Servihabitat, although it has maintained a rather low profile in recent months; and Oaktree, which manages its assets through Sabal Financial.

What is Hipoges?

Hipoges is one of the main independent servicers, alongside Finsolutia, TDX Indigo and Copernicus. It has 200 employees across four countries and it manages loans and properties worth €8,000 million.

On the other hand, KKR is currently finalising the takeover of the Australian firm, the Pepper Group. That consumer financing institution has a lot of activity in Spain, through 300 employees, and has just made the leap into traditional banking with the acquisition of a small Portuguese entity, which also has a branch in Madrid: Banco Primus. As such, Pepper will soon start to grant mortgages in Spain.

Pepper was one of Banco Popular’s partners, in one of the last alliances to be signed by Ángel Ron; however, it only lasted for a few months until Emilio Saracho broke off the agreement.

The group will be an investee company and so the executives of KKR are not expected to get involved in the management of the company beyond sitting on the Board of Directors of the holding company in Australia. Even so, Vidal-Quadras has participated in the operation to value the business in Spain, and so his opinion will be taken into account when determining the financial entity’s strategy.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Bain Establishes Joint Venture To Manage Real Estate Asset Portfolio From Liberbank

24 October 2017 – Bain Capital Credit

Bain Capital Credit, LP announced today that it has entered into a binding agreement to establish a joint venture company, which will own and manage a portfolio of repossessed real estate assets from Liberbank. Bain Capital will control and manage the JV with an 80% stake; the two other shareholders are Liberbank and Oceanwood. Bain Capital Credit now owns and manages ten loan and real estate portfolios in Spain.

The portfolio has an appraisal value of more than €600 million and primarily comprises residential units, land and work-in-progress (WIP) assets across Spain. Bain Capital Credit will actively manage the portfolio, including developing some of the land and WIPs.

“We are excited to expand our position in the Spanish real estate market and to control the majority of this JV alongside Liberbank and Oceanwood,” said Alon Avner, a Managing Director and Head of Bain Capital Credit’s European business.

“We continue to consider Spain one of the most attractive real estate markets in Europe and this portfolio’s concentration in central and northern Spain provides a great degree of diversification for our portfolio,” said Fabio Longo, a Managing Director and Head of Bain Capital Credit’s European non-performing loan & real estate business. “This is a great opportunity to participate in Spain’s recovery and to further expand our footprint in the Spanish residential development sector. Furthermore, this investment showcases our expertise in executing complex transactions that require close collaboration with the seller under compressed timelines,” added Mr Longo.

The support in executing this deal was provided by Altamira Asset Management, as real estate servicing specialists; Aura REE and Basico, as real estate valuation specialists; and Cuatrecasas, as legal counsel.

Original story: Bain Capital Credit

Edited by: Carmel Drake

 

Cajamar Puts €200M Debt Portfolio Up For Sale

23 October 2017 – Expansión

Cajamar, the largest credit cooperative in Spain, with €39,943 million in assets, has placed a package of 1,450 delinquent loans on the market worth €200 million. The majority of the loans have been granted to small- and medium-sized companies and are secured by mortgage guarantees.

By autonomous region, 75% of the portfolio is located in the Community of Valencia and Andalucía; and the remaining 25% is situated in Murcia, Cataluña, the Community of Madrid and Castilla y León.

It is the first package of non-performing assets that Cajamar has put up for sale this year. In 2016, the entity completed two divestments of this kind. The first, closed during the second quarter, comprised doubtful and non-performing loans, as well as foreclosed properties, amounting to €524 million in total. The second, sold during the fourth quarter, contained non-performing loans only, amounting to €206 million.

As at 30 June, Cajamar held €3,885 million in doubtful loans and had a default rate of 12.38%. It had €3,776 million in real estate assets on its balance sheet. Of those, 50% are finished homes and 25% correspond to land. The group has prioritised sales through the retail channel, for which it enlists the support of its assets sales platform, Haya Real Estate.

The entity has just launched a commercial campaign that offers more than 4,000 properties with discounts of up to 40%. They include one-bedroom apartments in Alhaurín el Grande (Granada) with prices starting at €46,000.

Operating range

Cajamar has 1,090 branches across Spain, a workforce of 5,743 employees and 3.5 million clients. During the first half of the year, it earned €44.29 million. It holds an agreement in insurance with Generali, another in investment funds with Trea and it sells consumer loans from Cetelem.

Above all, the entity is dedicated to meeting the financing needs of small and medium-sized companies in the agri-food sector.

Original story: Expansión (by R. Lander)

Translation: Carmel Drake