New Pawns on the Real Estate Chessboard

1/04/2014 – El Pais

Spain returns to the monopoly game where every investor wants to gain a piece for themselves. In less than a year two large transactions have taken place: the sale of Edificio España in Madrid and of Torre Agbar in Barcelona. But the pawns changed the players. After seven years of stagnation, the new business board is being formed, in majority on basis of foreign funds, both opportunistic and the U.S. ones, accompanied by collapsed real estate firms declared insolvent.

The new companies might be accounted into one of three groups: banking management platforms (acquired by the foreign investors), patrimony firms and a little group of developers.

During the boom times, the sector repeated such names as Bañuelos, Portillo, Figueras, Martín or Santamaría. But many of these end up falling. According to the National Institute of Statistics, since the beginning of the recession, 9.000 companies related to property market were forced to declare insolvency. All the assets, together with houses of evicted residents, found way into banks´hands. At the end of 2013, the top 7 entities possessed REO assets worth of €72 billion, by 10.7% more than in 2012. If developer´s credit added, the amount rises to nearly €135.3 billion.

Four banking groups decided to sell their real estate branches to foreign funds. Thus, Apollo Global Management acquired 85% of Altamira from Banco Santander for €664 million, Banco Popular sold 51% of Aliseda to Kennedy Wilson & Värde Partners for €400 million, CaixaBank also sold 51% of Servihabitat to TPG for €188.7 million, while BFA said goodbye to Bankia Habitat, today belonging to Cerberus, for €90 million. The sector believes that CatalunyaCaixa will sell its branch to Magic Real Estate and Blackstone, and so will do BMN, Liberbank and Cajamar.

(…) Each purchase of a management platform results in obligation to administer REO assets of Sareb as well (…).

Funds take advantage of the banking asset sell-out and in fact their offers are not competitive at all. They often buy at auctions that originally were unattended. (…) For example, Apollo Global Management´s executive Andrés Rubio reckons that “Spanish property seems tempting due to three reasons: firstly, stable prices. Secondly, 50% of banks sell without financing that means residents prefer to invest in an asset rather than in bank. Thirdly, the biggest number of purchases is registered in Andalusia and Levante, where the stock is abudant.” Apollo plans to invest €1 billion in Spain.

Real estate platforms will also manage delinquent credits as servicing companies. (…) In the future, unfortunately, many of them will end up shutdown or listed on the stock market. The odds-on favourite is Sabadell´s Solvia. (…).

In parallel, the Spanish stock markets welcomed so-called Socimis (REIT companies). Last year, two of them floated on the Alternative Stock Market (known as MAB): Promorent and Entrecampos Cuatro and another on the continuous market, Lar España Real Estate. The last one, worth €400 million, attracted such investors as Pimco, Cohen & Steers, Franklon Templeton or UBS. No wonder that around 20 companies are pondering creation of a Socimi. (…)

Another firm that debiuted this year is Hispania, held by George Soros and John Paulson, among others.  Hispania, managed by Azora, is not a Socimi. (…)

The property market knows well names of Amancio Ortega and his Pontegadea, Colonial that is currently struggling to overcome debt and held by Villar Mir, Santos and Banca Mora from Andorra. Goldman Sachs and Fidelity joined the stake. Realia and Metrovacesa raise more concern, let alone Martinsa Fadesa and Reyal Urbis, presently under insolvency process.

The last part of the players, developers, laggs behind. By now they do not show signs of revival. (…) However, some companies do, like Vía Célere from Grupo Lar or Monthisa. Now the emphasis is put on already finished large buildings offered to thirsty funds.

Original article: El País (Lluís Pellicer)

Translation: AURA REE