29 November 2017 – El Confidencial
Spanish financial entities have put their foot down on the accelerator to remove a decade’s worth of real estate crises from their balance sheets. The starting gun was fired by Banco Santander in the summer, when it transferred 51% of the €30 billion in toxic assets that it had inherited from Popular to Blackstone; and yesterday, another milestone was marked by the agreement announced between BBVA and Cerberus, which will allow the bank to deconsolidate more than €12 billion in foreclosed assets.
The next major step may involve CaixaBank after the entity engaged KPMG to try to accelerate the sale of a significant batch of real estate assets, with a net value of €12.1 billion. Specifically, the professional services firm is already working on organising one or more processes to allow the sale of some of the €3 billion that the bank owns in rental assets, according to sources familiar with the process.
That portfolio contains almost 40,000 units and, if it ends up being sold, will represent one of the most significant divestments made by the entity to date. Sources at CaixaBank acknowledge that they are working with KPMG and admit that one of the services that the firm is rendering “may include the sale of certain foreclosed rental assets” but they point out that it would only for a portion of the aforementioned €3 billion.
The sale to Testa of 135 homes, announced in September, fits within this strategy – a small appetiser ahead of the main course that the bank led by Gonzalo Gortázar really wants to serve. Its efforts are aimed at trying to taking advantage of the excess liquidity held by the large funds and the current attractiveness of Socimis to find an exit for its foreclosed rental assets.
Despite CaixaBank’s interest in reducing its real estate exposure, something that both the Bank of Spain and the European Central Bank are asking the entire sector to do, the entity is choosing to be cautious. It is pushing ahead one step at a time, according to market sources, who say that the bank is working to redefine the future of its whole real estate division.
New route map
CaixaBank’s real estate activity is currently divided into two large subsidiaries, Building Center, the real estate company that owns the bulk of the entity’s foreclosed assets; and Servihabitat, a platform (servicer), in which the bank holds a 49% stake, whilst the other 51% is owned by the fund TPG.
The second company, which has been given the mandate to manage the bank’s properties, but not ownership of them, has just hired Iheb Nafa as its new CEO, to replace Julián Cabanillas. It has also engaged McKinsey and Oliver Wyman to analyse all of its future options; any change would require the firm to reach an agreement with TPG; moreover, that giant may be interested in increasing its stake in Servihabitat.
CaixaBank has net real estate assets amounting to €12.1 billion according to its most recent quarterly report as at 30 September. All of this “property” is included in the area known as Non-Core Real Estate, which generated losses of €330 million during the first nine months of the year. The jewel in that crown is the real estate company Building Center, owner of the majority of the foreclosed assets, whose accounting coverage ratio stands at 49%.
Sources in the sector expect the bank to make its big move within the next year, and for it to be in line with those already made by BBVA and Santander. For the time being, the entity is limiting its expectations to the field of research, by indicating that “KPMG, Oliver Wyman and McKinsey are redefining operating processes to improve logistics and efficiency”.
Original story: El Confidencial (by Ruth Ugalde)
Translation: Carmel Drake