Spain’s Banks Take Advantage of The Expansive RE Cycle to Sell Properties

21 January 2018 – Efe Empresas

According to Joaquín Robles, analyst at XTB, speaking in an interview with Efe, the banks have waited “for several years for a recovery in house prices” to reduce their exposure to property.

The good health that the real estate sector is currently enjoying is reflected in a study from BBVA Research, which shows that new home prices are expected to rise by 4.9% in 2018. The banking institutions have also decided to reduce their real estate weight due to the changes that have been introduced to international and Spanish accounting legislation.

The new regulations require entities to increase their provisions using own funds to strengthen their capital ratios, with the aim of being more solvent in the event of another possible market crash in the future.

These modifications “will translate into an increase in provisions of 13% on average for the large European banks”, said Robles.

Real estate sales is a correct strategy for the banks

The sale of real estate assets is “a correct strategy from the point of view of banking management”, says the Partner responsible for the Financial Sector at KPMG in EMA and the Head Partner of KPMG Abogados, Javier Uría.

In fact, “the divestment of real estate assets that is happening will result in the strengthening of the sector”, he added.

Spanish banks have reduced their real estate assets in a greater proportion than other European banks, as a result of the effects of the economic crisis and the evolution of the economy.

One example of that is BBVA, which decided to reduce its exposure to property to a minimum, with the sale in November of its Spanish real estate arm to the investment fund Cerberus for €4 billion.

That operation was “hugely important” for BBVA, since it reduced its exposure “to an activity that is unrelated to its core business”, according to comments made at the time by the CEO of the entity, Carlos Torres Vila.

Uría said that Sareb has made an important contribution to this process.

That company, also known as the “bad bank”, was created with the objective of reducing the risks of the financial institutions and orderly liquidating the problem real estate assets within a maximum period of 15 years.

Sareb received almost 200,000 assets worth €50.781 billion, of which 80% were financial assets and 20% were real estate assets.

The income statements of the banking entities will be affected by their real estate divestments in a positive way, since they will result in lower requirements in terms of capital and provisions, as well as in a “reduction in the costs associated with the ownership of these types of assets”, concluded Uría.

Original story: Efe Empresas (by Javier Melguizo)

Translation: Carmel Drake


Telefónica To Lease Out 1 Building At Its Las Tablas HQ In Madrid

30 April 2017 – El Confidencial

A year after taking over the Presidency at Telefónica, José María Álvarez-Pallete (pictured above) now has the telecoms operator’s first major real estate operation on his desk: the rental of one of the 13 buildings at the entity’s Madrid headquarters, specifically, the complex known as District C.

The company has launched a tender process with the country’s main real estate consultancy firms, with the aim of selecting one of them to find a new tenant for the North 3 Building. All interested parties should submit their bids within the next few days, given that the operator has asked for them to submit their projects after Easter. (…).

With this tender, Telefónica confirmed the rumours that have been circling for a while, which were further fuelled when the operator’s employees vacated the North 2 and 3 Buildings. The properties are located in one of the corners of the main face of the complex. Almost 10,000 people work at the headquarters on a daily basis.

In the end, after considering various options – ranging from organising a kind of small Silicon Valley for startups to selling the building – the team led by Álvarez-Pallete has opted to rent out at least one of its properties. And this option promises to receive interest in the market, given that in the past, commentators have speculated about the possibility of companies such as L’Oreal and Huawei being interested in moving their headquarters there, and which moves the group away from the possibility of selling the entire complex.

The option of Telefónica selling District C has been on the cards for several years – the idea was that it would remain as the tenant with a long-term contract, in order to obtain a sizeable cheque with which to reduce its significant debt balance. In fact, many funds have called at its door, but with offers that have always fallen well below the company’s €3,000 million asking price.

In addition, the new accounting legislation that, from 1 January 2019 onwards, will oblige firms to account for rental commitments as debt, means that any kind of “sale & leaseback” operations that the firm may have been considering under the prism of reducing its financial commitments would be significantly less attractive.

Located in the Madrilenian neighbourhood of Las Tablas, District C opened its doors a decade ago, after Telefónica took the decision to bring together all of its employees in Madrid in a single headquarters. Previously, they had been distributed across around thirty buildings.

Although the option of building a skyscraper was initially proposed, in the end, a horizontal design was chosen by the architect Rafael de la Hoz, with independent, but perfectly connected buildings within a single district. From there emerged what is popularly known as District C – the Communications District – although its official name has been the Telefónica District for over six years.

The complex has a total constructed surface area of 370,000 m2 and more than half, 180,000 m2, corresponds to the 13 existing office buildings: four of those, located at the corners have ten storeys each; another four have four storeys; four more have three storeys, whilst the main building, in the centre, has a surface area of 16,480 m2.

In addition, District C has 20,000 m2 of space dedicated to all types of auxiliary services, from a children’s nursery to shops; 130,000 m2 of space comprising open areas and gardens; and 5,000 parking spaces.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Sareb To Invest €45M In RE Asset Appraisals

18 January 2016 – El Economista

Sareb, also known as the “bad bank” has set aside €45 million to spend between now and 2018 on the appraisal and revaluation of all of the real estate assets that it owns, in accordance with the new accounting legislation issued by the Bank of Spain.

The President of Sareb, Jaime Echeogyen (pictured above), has said, in an interview with Idealista News, that the entity had appraised 60% of its registered properties by the end of 2015.

Echegoyen, who will celebrate his one year anniversary at the helm of Sareb in February after he replaced Belén Romana, said that 40% of the remaining properties will be valued by “cloning the results that have already been obtained on the basis of similar properties located in the same area”.

In this way, Sareb will comply with the Bank of Spain’s accounting legislation, which establishes up to three methods for estimating possible corrections to the value of these properties in order to ensure that they reflect market price.

According to the legislation, Sareb must value at least 50% of the assets it has acquired that are still on its balance sheet at year-end 2015 and all of them by 31 December 2016.

Echegoyen is optimistic about the (expected) performance of the real estate market this year and believes that the entity is now starting a “second phase”, in which it will consolidate the sale of its assets as well as recover loans from borrowers.

“We think that 2016 is going to be a very positive year, but we must do things in a calm fashion”, said Echegoyen after highlighting that the entity’s work over the last three years has involved classifying and valuing almost 200,000 assets, of which around half were homes, land, commercial premises, industrial warehouses and hotels.

The objective of Sareb’s President is to find buyers for those developments that were left unfinished and those that have been finished but have been left empty and he asserts that it is still too soon to talk about demolition.

Moreover, he has faith in the four agencies (Altamira, Haya, Servihabitat and Solvia), which are responsible for managing the portfolio sale of Sareb’s homes.

Echegoyen thinks that “there is a lot of interest in land” and he says that “in the current environment, it is likely that many savers will invest in a home to rent it out”.

In this sense, he indicates Sareb’s goals in the social sphere, which include: to provide commercial premises to self-employed people and entrepreneurs at “reasonable rents” and to offer land that does not have development potential “for the cultivation of allotments in exchange for a rustic farm income”.

Original story: El Economista

Translation: Carmel Drake