KKR Considers Buying One Third Of Acciona’s RE Subsidiary

18 March 2015 – El Confidencial

The group owned by the Entrecanales family is looking for a partner to allow it to ‘ride the wave’ of the real estate recovery and has invited the US fund to be its travel companion.

KKR. The acronym of Kohlberg Kravis Roberts has become Acciona’s most important partner in recent times. Last June, the private equity giant purchased a third of the international renewable energy business owned by the Entrecanales family’s group for €417 million, and in a stroke, that allowed the Spanish group to clean up its accounts, fulfil its divestment plan six months early and rethink other sales that it had on the table, such as Bestinver and Acciona Inmobiliaria.

The sale of the latter became more attractive after the company was strengthened through the hiring of Walter de Luna, who was until then the number two at Sareb, as the CEO, and Luis Moreno, who was his right hand man at the bad bank; they joined the company with the clear challenge of designing a plan for growth. Nevertheless, that plan requires resources and, once again, Acciona’s American friend seems to be willing to help out.

According to knowledgeable sources, KKR is considering buying share capital in Acciona Inmobiliaria; and if the negotiations between the two parties go well, they will culminate in a third large transaction between the fund and the Spanish group, because, as well as having acquired the international renewable energy business from the construction company, KKR has also created a joint venture with the Spanish group, containing wind assets, the famous ‘yieldco’, which it expects to list on the Nasdaq soon.

In recent official presentations, Acciona itself has formally acknowledged the badly-kept secret that it is looking for a partner to inject the money it needs to reinvigorate its real estate subsidiary and thus be in a position to benefit from the recovery that is emerging in the sector, now that it has managed to sort out the direction of the parent company.

The book value of Acciona Inmobiliaria amounts to c. €1,500 million and market sources indicate that the goal of the Entrecanales family would be for the new partner to take ownership of around one third of its share capital. Nevertheless, other alternatives have also been put on the table (in the discussions with KKR), such as tackling projects together, since the Spanish group has (lots of) projects (in the pipeline) and the American fund has cash.

KKR’s commitment to Spain

Spain has become a priority market for KKR in Europe, where its Operations Director, the Spaniard Jesús Olmos, has been the main driver behind the firm’s growth in our country in recent years. He has led the investment of more than 2,400 million dollars in companies such as Saba, Telepizza, Uralita, Grupo Alfonso Gallardo, Port Aventura, T-Solar and, of course, Acciona. These transactions have been strengthened by the fund’s decision to open an office in Madrid and recruit Alejo Vidal-Quadras, who was the CEO of 3i España until last December.

Now, one of KKR’s next goals in our country is to position itself as a player of reference in the real estate sector, as well as to open its sphere of operation to investments in credit and to continue its growth in infrastructure.

Meanwhile, after seven years of crisis and various failed sale attempts, Acciona Inmobiliaria managed to recover in 2014 to record positive results; it closed last December with an EBITDA – earnings before interest, tax, depreciation and amortisation – of €3 million, compared with losses of €2 million a year earlier.

The group owned by the Entrecanales family values its subsidiary at €1,529 million, of which it considers around 70% (€1,199 million) to be gross gains by the group. By geographical region, 87% of the subsidiaries’ assets are located in Spain and only 13% are overseas; whereas if we analyse the subsidiary in terms of turnover, 45% relates to property (primarily residential), 37% corresponds to land in Spain, 8% is land overseas and development activity accounts for the remaining 10%.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake

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