Their names are often unknown in Spain, but their importance is growing in our economy. In the last few months, the great distressed or vulture funds have acquired banking subsidiaries, great real estate companies, subsidized properties, emblematic buildings in the best locations in Madrid and Barcelona and even banks. And this is only the beginning. But, who are and who is behind these Apollo, Blackstone or Cerberus who will end up being Spain´s landlords?
Many investors agree that these funds should not be called vulture funds. This term has a negative meaning such as eating dead material or benefitting from the misfortune of others. They see themselves as investors that risk their capital in countries where other funds do not dare to enter. Anyhow, they do accept that their strategy is based on acquiring at bargain prices and that their objective is to obtain a yield of 20% in five years, that is, to double their investment.
These firms define their modus operandi as “to buy, to fix, to sell”, as explained by Blackstone, the greatest venture capital firm in the world. It is the first in a long list where Apollo, KKR, Guggenheim, TPG, Elliot, Centerbridge, WL Ross or Lone Star, stand out. Among them, Blackstone is not only the biggest. It has also been the biggest acquirer of real estate loans of European banks since 2011. Spain was already a target at that time. Firms such as Paulson, Cerberus, Fortress or Apollo held meetings with the savings banks to find solutions to their capital needs. But the market was not mature, according to the funds, and it was not until the end of 2012 that agreements were signed.
The keys were: the royal decrees for the restructuring sponsored by Luis de Guindos in 2012, the financial rescue and the creation of Sareb, which has achieved the agreement between banks and funds on the price to transfer assets.
These changes have been expressed in a fair amount of operations, with its peak in 2013. The year has not yet finished and the funds have already acquired real estate asset for more than 3000 million Euros and default debt for more than 6000 million Euros.
“In 2012 it already seemed that Spain was cheap, but no one believed it would not be rescued, which put an end to important operations of the great listed companies… But now it is different, as the GDP has started to grow and the phantoms of the exit from the Euro have disappeared”, the managing director of a great US fund declares.
This anonymity is one of the distinguishing traits of these investors. Discretion is the DNA of this business. If they can buy at bargain prices – discounts may reach 95% – and sell later with great interests it is thanks to their prompt arrival and their unbeatable offers that others could not see.
In general, they propose quick solutions to great problems. And they do this with repeated meetings with the companies in which they wish to invest. They enclose their customer until they propose an offer when he needs it most. One fact proves their vision: in 2009, Blackstone raised 4.000 million Dollars to buy European real estate assets anticipating that banks would be obliged to sell due to the debt crisis. This fund has just raised 10.000 million Euros to invest in Europe, half of which will go to real estate bargains, many of them in Spain.
Another example is that of Apollo, which reserved at the end of 2012 nearly 1000 million for Spain, aware that that year and the ones to come would bring great opportunities. It has already acquired Evo Banco.
Another common trait is that most of them have a US origin. They gather hundreds of millions from great fortunes, pension funds, multinationals and insurance companies with a defined target: to find opportunities and obtain a great profit.
For this reason they hire executives with a long career in the financial sector and in renowned companies. Within these funds there are main characters such as Dan Quayle (former vice-president of the United States), John Snow (former Secretary of State), the tycoon Donald Trump, the Mexican multimillionaire Carlos Slim, or George Soros, who knocked down the Sterling Pound in 1992.
These investors use their contacts to open any doors when they land in Spain. Or they hire them, as Cerberus has done, who has joined together with one of the sons of the former President, José María Aznar. Other hedge funds choose to enter the market through Javier Botín, son of the president of Santander, who has a firm exclusively created for this, Savia AM.
As well as being surrounded by influential people, they also hire a long list of counselors, managers, lawyers and credit recovery companies to ensure that their operations end successfully.
Before opening an office in Spain, many analyze the market from London. (…)