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Värde Buys Up Reyal Urbis’ Debt To Exchange For Its Assets

22 May 2017 – Expansión

The American fund Värde Partners, which owns the property developers Vía Célere and Aelca, has become one of the main creditors of the real estate company Reyal Urbis. It is negotiating to take over more loans, which it plans to exchange for land.

The fund Värde Partners is competing with Lone Star to become the largest residential investor in Spain. The fund, which first entered the Spanish market in 2013, is progressing with its investments in the country and has placed its focus on one of the most important property developers from the previous boom: Reyal Urbis.

The real estate company emerged from the fusion between the construction company Reyal, owned by Rafael Santamaría, and Urbis, the real estate arm of Banesto, and it filed for creditor bankruptcy in 2013. With a liability of €4,660 million and negative own funds of €3,449 million, the company is negotiating against the clock to obtain support for its proposed agreement, which will allow it to avoid liquidation. The deadline to secure the backing of at least 75% of the creditor mass expires on 31 May.

In this process, which affects large banks such as Santander, Sareb (which is owed €1,000 million) and the Tax Authorities (which are owed more than €400 million), a new player has emerged: the fund Värde Partners. According to sources close to the operation, the fund has acquired a significant amount of Reyal’s debt, to place itself amongst the real estate company’s largest creditors. (…).

The purchase of this debt, which is backed by mortgage guarantees, allows Värde to have rights of Reyal’s real estate portfolio that, according to the latest appraisal, has a market value of €1,170 million. Of that figure, €863 million corresponds to land and finished assets (it owns 217 homes in stock).

After four years of bankruptcy and more than five years of losses, Reyal Urbis’ main asset is its land portfolio. The company owns plots of land spread across 30 cities, the majority of which is buildable (planning permission has been granted for it). This type of asset fits perfectly with the US fund’s investment profile, which owns two of the most active property developers in the country at the moment: Vía Célere and Aelca. (…).

Proposal

Reyal Urbis is currently proposing a series of discounts to the outstanding debt that it owes (…), but its creditors are not convinced by the high level of those discounts and according to sources close to the process, they are currently leaning towards rejecting the proposal, which would mean that company would end up filing for liquidation. (…).

However, the company’s entry into liquidation would not put a brake on Värde’s plans, given that it could acquire the assets that it is interested in a subsequent process. If Reyal does not obtain the support of its creditors, it will follow in the wake of its former competitor Martinsa Fadesa, which is in the process of liquidation and which is selling off its assets through periodic auctions.

During the first quarter of 2017, Reyal Urbis recorded revenues of €8.9 million, of which €45,000 came from its residential department (which, in turn, generated expenses of €421,000). These revenues are 2% higher than those obtained during the same period in 2016. During 2017, Reyal has so far recorded losses of €34.35 million. Since 2013, when the company filed for bankruptcy, it has accumulated losses amounting to €1,847 million.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake