26/12/2014 – El Confidencial
The growing REITs market just got a new tenant – Banif Properties fund, Santander’s historical vehicle that has just turned into a REIC (Real Estate Investment Company) as a first step towards becoming a REIT (Real Estate Investment Trust).
Hispania, managed by Azora, used the same model when it went public as an investment company, a title under which it conducted its first operations, such as the acquisition of Hotel Guadalmina. Then, later on, it developed its own REIT.
The main advantage of this formula –and one of the substantive reasons why they have convinced Santander– is its greater flexibility, as it allows the company to buy debt, an option that is prohibited to REITs. Thus, having established itself first as a real estate investment company, the new Banif may, for example, seize assets of other companies by acquiring their financial obligations, a growing business in which banks are the major players.
Subsequently, once they launch their own REIT, the now defunct real estate fund will benefit from the tax breaks that this legal framework offers property management companies and put an end to six long years of questioning over which was the most important real estate investment vehicle in Spain.
Despite the scandal this entailed back in 2009 – leaving thousands of investors locked in the background, after selling major assets such as the Plenilunio shopping mall and Edificio España in recent years and partially splitting with a monetary fund exactly a year ago – Banif Properties can still boast with assets worth €1.538 billion at the end of November, with a net asset value of €943 million.
On December 1st, just one day after the management fund, Inverco, endorsed these figures, Santander officially approved the conversion of Banif Properties into LURI 6 SII, a change that has already received the green light from Spain’s National Securities Market Commision (CNMV).
Santander Real Estate will remain the management company of the future REIT, which is currently in the process of readjusting its activities to the new corporate reality. This is a difficult task, since the new REIT will have around 10,000 properties, in addition to the assets it can acquire via debt purchasing operations; it will also have a two-year period to go public in the stock market.
With the transformation of Banif Properties into a REIT, Santander is getting ahead of its competitors that are also working on converting their old real estate funds, but with different plans. An example of this is Sabadell, which is also planning on taking advantage of this opportunity to inject liquidity into certain assets that had been left dry during the crisis and that are under the management of its affiliate, Solvia.
The formula chosen by Santander will allow Banif Properties to purchase debts, something that is prohibited to conventional REITs
BBVA is another institution that has analyzed this possibility, while BNP has been working along the lines of forming such companies as a way to provide another offer for its private banking customers. Bankia just transformed its real estate fund into a corporation, which is a step towards becoming a REIT while it sells its assets selectively, as stated by The Confidential.
The size and importance of Banif Properties, however, makes Santander’s REIT a top player in the market. The institution, chaired by Ana Botín, is proving particularly active in the budding recovery of the national real estate sector, as it was made apparent with the purchase of Metrovacesa from Bankia, for example.
Original article: El Confidencial (by Ruth Ugalde)
Translation: Aura REE