Rehabilitated Homes on the Rental Market Gain Income Tax Benefits

27 December 2018

The Tax Authority stated that it would grant the tax benefit while the home is rented.

The Tax and Customs Authority (AT) ruled that the reduction to 5% in the IRS (personal income tax) rate has no time limit for people who renovate their homes for placement on the rental market.

The agency released a binding ruling on Thursday in which it stated that the tax benefit would be available while the home is rented.

The 5% reduction is one of several tax incentives that are currently offered to homeowners who renovate property located in Urban Rehabilitation Areas (ARU).

To gain access to the benefit, any renovations must have occurred between January 1, 2008, and December 31, 2020, and the property must have been rented, subject to renewal, in accordance with the New Urban Rental Regime (NRAU).

Having met these conditions, any rents paid to the owner will accrue a 5% personal income tax rate, as opposed to the full rate of 28% that currently applies to most property income.

Since the Tax Code does not state a specific limit on the benefit, the AT ruled that it “shall remain in force while the property is leased.”

The tax authorities’ response came as a result of a query from a taxpayer about the temporal scope of the tax advantage.

In addition to the 5% rate, rehabilitated houses in Urban Rehabilitation Areas (which, in the case of Lisbon, for example, currently coincides with practically the entire city) also allow homeowners to benefit from reductions to the IMI and the IMT and to claim deductions to the individual income tax for expenses with construction, up to 500 euros.

Capital gains resulting from the sale of rehabilitated properties located in ARUs are also subject to IRS tax at a rate of 5%.

Original Story: Renascença

Photo: Photo: Marília Freitas / RR

Translation: Richard Turner

Smart Studios, Backed by LX Partners, Invests €125 Million in 2,700 Studios

27 December 2018

The international fund LX Partners – part of the consortium that recently acquired Project Nata from Novo Banco – has just acquired a stake in the Smart Studios network. Founded three years ago by Ricardo Kendall, the real estate developer is dedicated to the market for studios and small flats for students, while also marketing co-living projects. The entrepreneur also founded the automotive chain Midas Portugal, and the fashion chain Accessorize.

Without disclosing any details of the transaction, LX Partners’ stated that its investment aims to “bolster Smart Studios’ expansion.” The goal is “to develop another 2,700 studios within the next six years,” according to Ricardo Kendall.

The 125-million-euro investment plan will focus principally on Lisbon, and also Porto.

Launched in 2015, Smart Studios now has 200 studios and is expected to add 460 out of a plan for 700 units. The firm currently has ventures in Campolide, Ajuda and the area of ​​Laranjeiras.

The largest project in the pipeline, according to the newspaper, is in Carcavelos (301 studios). The flats benefit from their proximity to the new campus of the New School of Business & Economics and the new NATO Communications School.

Another emblematic project in Lisbon is in Santa Apolónia (114 studios). The venture is the result of the rehabilitation of a former industrial building. Work will begin in early 2019.

Original Story: Idealista

Photo: Smart Studios

Translation: Richard Turner

Novo Banco Finalises Sale of €2.15 Billion in Bad Debts

27 December 2018

The bank led by António Ramalho signed an agreement with KKR and LX Investment Partners to sell a portfolio of bad debts valued at 2.15 billion. The sale is expected to conclude at some point in the first semester of 2019.

The sale is official. Novo Banco sold a portfolio of bad debts comprising 102,000 contracts with a total value of 2.15 billion euros to KKR and LX Investment Partners. The process should be completed during the first half of 2019, the bank said in a statement to the CMVM.

“Novo Banco notifies that, upon completion of a competitive sales process, Novo Banco and Best entered signed an agreement for the sale of a portfolio of non-performing loans (NPLs) and related assets (Project Nata) with a pool of funds managed by KKR and LX Investment Partners.

The portfolio comprises approximately 102,000 contracts with a total value of 2.15 billion euros, subject to the usual adjustments in these transactions up to the completion of the same,” the note reads.

The news confirms a report by ECO in mid-December, which pointed to the likelihood of the sale of the largest portfolio of NPLs ever in Portugal. However, the actual value of the portfolio is higher than the initial estimates of  €1.75 billion (+€400 million), as adjustments to the portfolio widened the scope of the portfolio of bad debts.

Given the size of the sale, the level of Novo Banco’s bad debts is expected to fall to around 6.3 billion euros, instead of 6.7 billion, as was expected until now.

The sale depends on the “verification of all necessary conditions.” For Novo Banco, “this transaction represents another important step in the process of its divestment of non-productive assets,” the bank said in the note sent to the CMVM.

In addition to Nata, Ramalho wants to sell Albatross

The bank has another portfolio of bad debts on sale, though this time in Spain. The sale of Albatross, a portfolio of NPLs valued at 400 million euros, is als0 expected to finalise by the end of the year.

In addition to the sale of bad debts, Novo Banco also sold a portfolio of 9,000 properties to the US-based Anchorage Capital Group for 716 million euros. The servicing companies Finsolutia and Hipoges will take over the management of the portfolio.

The sale of the portfolio of properties was largely responsible for the 420-million-euro loss that Novo Banco posted in the year between January and September of this year. The sale accounted for nearly 160 million euros of the losses that the bank registered in that period.

Bank has a buffer against losses

In order to clean up its balance sheet, the Portuguese state is providing Novo Banco with a sort of cushion against its losses. Portugal pledged to protect the bank of some of its potential losses when it sold 75% of the bank’s capital to the American fund Lone Star.

Since the sale of NPLs and real estate generates impairments, whenever Novo Banco’s capital ratio falls beneath 12.5%, the Contingent Capital Facility is activated. Through the facility, the Portuguese state agreed, where necessary, to provide a buffer against losses on the loans included in the sale negotiated with the Government.

In its half-yearly earnings report, the bank estimated that it would require an injection of €726 million from the contingent capital mechanism in 2019.

Original Story: Economia Online – Flávio Nunes and Paulo Moutinho

Translation: Richard Turner

Montepio Sells Portfolio of Bad Debts Valued at 239 Million Euros

29 December 2018

After Novo Banco, it was the bank led by Carlos Tavares’s turn to announce the sale of a portfolio of bad debts, this time valued at 239 million euros.

Montepio just returned to the market, selling a portfolio of bad debts. Shortly after Novo Banco concluded the largest ever sale of non-performing loans by a Portuguese bank, the institution led by Carlos Tavares announced the sale of 239 million euros in toxic loans.

“After a competitive sales process,” the bank signed a public deed for the “sale of a portfolio of non-performing loans in the form of a direct sale to Mimulus Finance, a company based in Dublin and incorporated under the laws of Ireland,” the bank announced.

In a statement to the CMVM, Montepio noted that the “gross total sold was 239 million euros, comprising a portfolio of approximately 10,000 contracts.” The bank did not mention, however, the value of the sale nor its impact on the bank’s earnings.

Earlier this month, Bloomberg reported that the bank was looking to conclude the sale before the end of the year. However, the news agency stated that the sale would be larger: €370 million, divided into two tranches, one called “Atlas” with €250 million in loans, and another called “Cascais”,  with €120 million.

“The completion of this operation is the materialisation of Caixa Económica Montepio Geral’s strategy of continually reducing its non-productive assets,” Carlos Tavares stressed.

At the end of the first nine months of the year, Montepio had a non-performing exposure (NPE) ratio of 16.2%, with 2.18 billion euros in bad debts out of a gross loan portfolio of €13.5 billion.

Original Story: Economia Online – Paulo Moutinho

Translation: Richard Turner

Demand Stemming from Tourism Now Accounts for 13.7% of GDP in Portugal

17 December 2018

The National Institute of Statistics (INE) announced that in 2017, tourism demand reached the equivalent of 13.7% of GDP, increasing by 14.5% over the previous year.

In 2017, the revenues generated by tourism also increased by 13.6% in nominal terms, after a 6.6% increase in 2016, reaching 7.5% of the GVA of the national economy. In 2016, tourism-based employment accounted for 9.4% of total domestic employment.

In the same year, Tourism Consumption in the Economic Territory (CTTE) reached a scale equivalent to 13.7% of the GDP, increasing by 14.5% over the previous year.

In 2016, receipts from inbound tourism (tourism exports, corresponding to spending by non-residents in Portugal) were the most relevant component of the CTTE (63.1%), increasing by 8.6% over 2015. Expenditures on domestic tourism and other components grew by 3.0%. Employment in tourism-related activities, measured in full-time equivalent (FTE), accounted for 9.4% of the national total. Employment in activities linked to tourism increased by 4.8%, exceeding the total employment growth in the national economy (2.1%).

The estimated CTTE growth rate for 2017 (+14.5%) is the highest in the current Tourism Satellite Account (CST) series (2014-2017). In 2016, tourism expenditure continued to be the most important component of tourist demand (63.1%), increasing by 8.6% over the previous year and reaching a series high.

The INE also noted that, considering the information available to European countries, in the various sources consulted for the years 2014 to 2016, the relative importance of tourism demand (CTTE), expressed by its relation with GDP, was highest in Portugal (12.5%).

Original Story: Diário Imobiliário

Translation: Richard Turner

EU Arrives at Agreement on Measures to Prevent Future Problems with Bad Debts

18 December 2018

The measures will oblige banks to create reserves to cover the risks associated with poorly-performing loans.

The European Parliament and the Council reached an agreement Tuesday on the European Commission’s proposal to reduce the level of bad debts in the European Union (EU), obliging banks to have set aside reserves.

The measures are part of a set of proposals presented by the Commission in March to address the problem of bad debts in the EU and is based on efforts by Member States, supervisory authorities and financial institutions to regularly decrease the number of poorly performing loans across the EU.

The measures will oblige banks to set aside reserves to cover the risks associated with bad loans, thereby avoiding the accumulation of NPLs on banks’ balance sheets.

In addition to the measure announced Tuesday, the package presented by the Commission in March contains proposals aimed at developing secondary markets for NPLs and allowing for the quick extrajudicial execution of collateralised loans, as well as a technical plan to create national asset management companies.

“Today’s agreement ensures that banks will have a decreased exposure to NPLs on their balance sheets, making those banks sounder and allowing them to continue financing businesses. We are counting on the European Parliament and the Council to reach agreement quickly on the proposals which aim to develop secondary markets for NPLs and facilitate debt collection,” said Commission Vice-President for Financial Services and Securities Markets Commissioner Valdis Dombrovskis.

Original Story: Economia Online / Lusa

Translation: Richard Turner

Bain and Waterfall Vie to Acquire Novo Banco’s Bad Debts in Spain

18 December 2018

Last week, the two firms submitted proposals for the €400-million portfolio of bad debts that Novo Banco is selling in Spain.

Bain Capital and Waterfall Asset Management are in the final stretch to buy the 400 million euro portfolio of bad debts that Novo Banco is in the process of selling in Spain and have already submitted their proposals to the bank led by António Ramalho, ECO learned from a market source.

The “Nata” project, the sale of 1.75 billion euros in NPLs (non-performing loans), is nearing its conclusion, won by the American private equity fund KKR, as ECO reported. Novo Banco has now turned its attention to the disposal of another portfolio of problematic loans in Spain, this time known as “Albatross.” Mr Ramalho has already received proposals from Bain and Waterfall, and the conclusion of sale may occur before the end of the year.

It is not Bain’s first foray into the Portuguese market for NPLs. Bain is believed to have been the buyer of a 476-million-euro portfolio of NPLs that Caixa Geral de Depósitos sold last year. Waterfall also recently acquired bad debts from Greece.

ECO contacted Novo Banco, which declined to confirm any details of the operation.

The agreement for the sale of the “Nata” project is expected to be signed by the end of this week. The Americans at KKR won the bidding, after competing with Deutsche Bank and Cerberus over the weekend. KKR will be joined by the servicers Hipoges and LX Partners, who will manage the portfolio. A source close to the process told ECO that KKR had not yet completely closed the financing structure for the operation when the winner was announced.

Both the Nata and Albatross operations are part of a policy of disinvestment that António Ramalho initiated to bring down the balance of bad debts at the bank which is 75% owned the Lone Star fund. Portugal’s Resolution Fund holds the other 25%. Recently, the bank also sold a portfolio of 9,000 properties to the Americans at the Anchorage Capital Group for 716 million euros, after also selling other non-strategic assets, including its insurance business and Véniété in France.

Novo Banco has committed itself to reduce its exposure to bad debts in the coming years, which have caused massive losses. In the year to September, Novo Banco posted losses of 420 million euros due to a loss of almost 160 million euros stemming from the banks’ disposal of its real estate portfolio. This came after losses of €1.4 billion last year, which led the Resolution Fund to inject additional funds into the institution under the Contingent Capital Facility that was created when Novo Banco was sold to the Lone Star.

According to the bank’s latest earnings report, the financial institution held about 8.5 billion euros in NPLs at the end of September of this year, down by 784 million euros since December 2017. This figure corresponded to a non-performing credit ratio of 27.7%. The bank has a coverage ratio of 63.5%.

Original Story: Economia Online – Alberto Teixeira

Translation: Richard Turner

Rental Costs Expected to Increase by 1.15% in 2019

18 December 2018

Rental costs are expected to increase by 1.15% in 2019, up from 1.12% this year, the highest level since 2013, according to inflation figures for the 12 months up to August as released by the National Statistical Institute (INE).

According to figures published by the institute, in the 12 months up to August, the price index excluding housing rose by 1.15%. The index is the Regime (NRAU). The increase would raise rental costs by 1.15 euros for every 100 euros paid in rent.

The increase in 2019, which applies to both urban and rural areas, follows the 1.12% increase in 2018, the 0.54% increase in 2017 and the 0.16% rise in 2016.

Original Story: Diário Imobiliário / Lusa

Translation: Richard Turner

DHM Hotels to Open Units in Évora and Monchique

18 December 2018

DHM (Discovery Hotel Management), the Discovery Portugal Real Estate Fund’s hotel arm, will open two new hotels in 2019 while undertaking major renovations in other units.

The highlight is the future Hotel Perdiganito, 15 kilometres from Évora, a project that was initially developed by former the goalkeeper Vítor Baía. The hotel will be built in an area of 11 hectares and will include 77 rooms and 20 villas.

The Monchique Resort & Spa, formerly operated by Macdonald Hotels & Resorts Portugal, will also open in 2019. Inaugurated in 2010, in the midst of economic crisis, the then Longevity Wellness Resort Monchique bet on what was then a new concept as Portugal’s first resort specialising in anti-aging treatments. The resort was forced to close its door during the crisis and was eventually acquired by the Discovery Portugal Real Estate Fund, which handed over its management to the British chain in the summer of 2016. The experience did not go very well, and DHM decided to assume the management of the health and wellness enterprise. The reopened unit will have 185 rooms and a new conference room.

The DHM brand is divided into three clusters: the Design Collection, Hotels & Resorts and Village & Apartments. The Design Collection includes Praia Verde, Vilamonte, Furnas Boutique Hotel, Azor, Douro 41 Hotel & Spa, Villa C, Santiago Cooking & Nature, Lousã Palace and the future Perdiganito. The Hotels & Resorts segment includes the hotel in Monchique, Éden Resort, Alpinus, Monte Real, Montado and Vale da Ribeira. The Village & Apartments segment has The Quest and Laguna.

DHM also owns the Ramada by Wyndham Lisbon hotel, a Wyndham franchise run by DHM, and the Quinta do Vale Golf Resort (in Castro Marim), a golf course that will eventually include a hotel and residences.

Original Story: Diário Imobiliário

Translation: Richard Turner

 

 

 

Meliá Hotels Invests €11 Million in a Hotel in Viana do Castelo, Its 15th in Portugal

19 December 2018

The Spanish group, Meliá Hotels International, is to invest €11 million building a hotel in Viana do Castelo, which will be the group’s 15th in Portugal.

The Spanish group Meliá Hotels International will invest 11 million euros in the construction of a new hotel in Viana do Castelo, the mayor of the city told Lusa.

José Maria Costa added that “the new four-star hotel will begin operations in the last half of 2021 and will include a congress centre, swimming pool and other services.” It will create “about a hundred jobs, attending about 130 to 142 rooms and an array of services.”

The new hotel will be the Spanish group’s 15th in Portugal, joining the others in Aveiro, Braga, Castelo Branco, Coimbra, Costa de Caparica, Covilhã, Leiria, Lisbon, Madeira, Montijo, Porto and Setúbal.

The Spanish group’s new venture, which it will develop on a roughly 7,000-m2 plot of land next to the  Viana do Castelo Ecological Park, “will be presented in the middle of 2019 and built over a period of about two years.” Mayor Costa revealed that the hotel would have an “excellent architectural project, bringing another distinctive brand to the city.”

The new facility comes in response to appeals by the socialist mayor, who has been stating that “the county needs about another three new 4-star hotels to serve its growing needs.” “This hotel will increase the accommodation capacity in Viana do Castelo, bringing a high-quality hotel that will be able to attract new events to Viana do Castelo, allowing the city to compete with other cities to host national and international events,” he said, noting that it will also “increase the visibility” of the capital of Alto Minho overseas.

Last week, José Maria Costa announced that the sale of the 30 lots of land in Parque da Cidade, a process that began 12 years ago, led to a gain of eight million euros for VianaPolis. The land is situated on the Lima River, which put of for sale by VianaPolis in 2006 for €21.6 million, but successive public auctions failed to sell the land, despite several downward revisions to the base price.

The last attempt, in 2013, saw the base price set at 7.5 million euros. Since then, the property has been on sale continuously, awaiting interested investors. The mayor justified the sale of all lots of that area of ​​the city citing “Viana do Castelo’s attractiveness to the real estate market and the growing interest on the part of investors.”

The Parque da Cidade was recovered, and infrastructure installed, by VianaPolis, which is responsible for the implementation of the Polis program in Viana do Castelo, 60% owned by the Ministries of Environment and Finance and 40% by the municipality. VianaPolis controls ​​63,199 square meters of land for the construction of luxury housing, 1,776 square meters for trade, 19,526 square meters of parking, in addition to a plot of 9,496 square meters to build a hotel.

Original Story: Economia Online / Lusa

Translation: Richard Turner