Liberbank, Sabadell & Bankia Lead Sales Of Non-Performing Assets

4 November 2016 – Expansión

Significant reductions / the three entities’ doubtful loan and foreclosed real estate asset balances decreased by between 15% and 19% during the first half of the year.

Spain’s banks are beginning to heed the recommendations of the ECB, which has turned the divestment of non-productive assets into its battle horse. To this end, the European banking supervisor has urged those entities with the worst default ratios to present clear and defined strategies for reducing the perimeters of their balance sheets. The body has even advised the entities to link the bonuses of their managers to decreases in non-performing loan balances.

The pace of divestment of these assets, which generate high costs and zero revenues, is picking up speed. A recent report about the banking sector, published by the broker Ahorro Corporación, reveals the names of the leading entities in this regard: Liberbank, Sabadell and Bankia. According to the data compiled between January and June, they decreased their problem assets by 19.2%, 15.7% and 15%, respectively. Not all of the entities supply this information to the market and it is hard to make comparisons between entities. “All of the listed entities reported that negative net inflows of non-performing debt are widespread, although they are all in different stages of the process to normalise the cost of the risk”, explained the firm.

The impact of the Bank of Spain’s new accounting circular, which has just entered into force, is aimed precisely at strengthening provisions against foreclosed properties and plots of land following the burst of the property bubble. It mainly affects Sabadell and Liberbank.

The Bank of Spain’s Financial Stability Report, published yesterday, reveals some success in the sector in this regard. According to its data, doubtful assets in domestic banking businesses decreased by 18.2% between June 2015 and June 2016. The cumulative decrease since December 2013 amounts to 38%.

Despite the dynamism in the real estate market, foreclosed assets (properties handed over to pay off debt, premises, land, etc.) have recently experienced a slow down in the rate of sales. Between 2011 and 2013, the decrease was boosted by bulky sales from Sareb, the bad bank. That entity has now taken over the baton in the segment of portfolio sales.

Overall, the perimeter of non-performing assets decreased by 12% YoY and now amounts to €199,000 million. Refinanced and restructured loans decreased by 12.1% in one year and by 26% since March 2014.

Nevertheless, non-performing assets still account for 15% of Spanish banks’ balance sheets, whereas in the UK and Germany, they account for just 3%, according to a study by AFI. If they were all sold at once, the additional return would allow them to cover the cost of capital, which is what shareholders want the most.

The average ROE of Spain’s banks is 6.1%, according to data from the Bank of Spain as at 30 June 2016. That figure is slightly higher than the European average. Nevertheless, the cost of capital stands at around 8%-9%. (…).

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

Ibercaja Completes Sale Of Caja 3’s Industrial Portfolio

13 September 2016 – Expansión

Ibercaja is still putting the shine on its balance sheet ahead of its IPO, which is expected to take place at the end of next year or the beginning of 2018. Having transferred the administration and sale of 14,000 real estate assets to the platform Aktua in February, it is now on the verge of getting rid of all of its non-strategic holdings.

According to sources at the group, the bank has divested more than 200 business projects since 2012, which has allowed it to reduce its volume of portfolio investments by approximately €285 million. But the most important achievement is that it has now managed to finalise the investment plan inherited from Caja 3, as defined by Brussels, when that entity received public aid in 2012. 129 companies from the former savings banks were identified with an investment volume of €153 million, which means that Ibercaja is fulfilling all the requirements.

Nevertheless, it still needs to return that aid. Caja 3 received €386 million in contingent convertible bonds (CoCos) signed by the FROB, of which Ibercaja returned €20 million in March. The remaining balance has to be repaid between March and December 2017.

These divestments represent one of the pillars of Ibercaja’s strategic plan for 2015-17, together with the repayment of the aid; the issue of €500 million in subordinated debt from last year; the sale of problem debt to property developers; the transfer of its real estate assets to Aktua; and this year, its growth plan in Madrid; and its digitalisation plan, for which it has signed a strategic agreement with Microsoft.

In fact, within its specific divestment plan for 2015-2017, approximately 100 companies were identified as possible divestment targets, whereby reducing the volume of its investment portfolio by approximately €180 million. Currently, according to sources at the group, it has divested 53 companies, including total and partial sales. In total, it has decreased its investment in corporate projects by €68 million, with a positive contribution to the group’s consolidated result of €10 million. Its profits amount to €23 million since 2012. Meanwhile, sources at the group added that capital amounting to €27 million has also been freed up. In total, own funds have increased by €50 million.

The companies

In addition to the sale of Gestión de Inmuebles Salduvia, which was included in the agreement reached with Aktua in February this year, Ibercaja’s other major divestments include, by order of importance: the divestment of the Naturiber Group (specialising in the meat sector), Portobelio and Ahorro Corporación Infraestructuras (private equity funds), Ahorro Corporación Gestión (the fund manager), Titulización de Activos, Imaginarium (the toy retailer) and ATCA (a technology development company).

Over the next few years, Ibercaja plans to continue executing its divestment plan, which involves more than 50 additional sales, which will allow it to reduce its portfolio by approximately €112 million more, with the resulting positive impact on the income statement and an efficient allocation of capital.

Ibercaja reported profits of €72.3 million during the first six months of 2016, up by 3.7% compared to a year earlier, thanks to the sale of its real estate arm, as well as sales of debt.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake

Four Investors Compete In CaixaBank’s Nursing Home Sale

20 May 2016 – Expansión

There are four players in the race to purchase the Amma residences. The private equity giant Pai Partners and the Maison de Famille, Emera and Armonea groups are the candidates that have made the first cut in the acquisition process and, therefore, will battle the critical bid to acquire the nursing homes and day centres controlled until now by CaixaBank, according to sources familiar with the process.

The four investors have already performed detailed due diligence of the assets with a view to presenting a binding offer, say sources in the market, and they have until “next week” to submit their final proposals. The initial prices valued the nursing homes at around €200 million.

This amount represents just over ten times the company’s EBITDA in 2015, which amounted to €18 million, according to industry estimates. Meanwhile, its total revenues amounted to almost €100 million. Although CaixaBank is the owner of almost 70% of the shares, the sale affects 100% of the capital, because the minority owners (the Caja Duero corporate business group, Grupo Norte, Inverduero, Kintoa, Uve, Bella Castilla and Horizontes de Castilla) are also willing to transfer their stakes, according to financial sources.

Given the identity of the potential investors, industrial players are prevailing in the transaction, which was launched at the beginning of the year. The majority of the candidates of a financial nature who participated in the sales process – which included the fund Permira, amongst others – have been excluded, and all of the parties involved in the final round of bidding have prior experience in the sector. (…).

Consolidation in the sector

The sale of the Amma Group, which is scheduled to be closed before the summer, is another sign that the effervescence of transactions in the nursing home sector in Spain is continuing to peak.

Last year, three significant operations were closed: as well as the sale of Geriatros (to Pai Partners), SARquavitae purchased Novaire and the Spanish private equity fund Portobello took control of Vitalia Plus. So far in 2016, BBVA is immersed in a process to sell off Sanyres. And financial sources confirm that Gala Capital has begun the divestment of Geroresidencias La Saleta, a company that it inherited from the portfolio of Ahorro Corporación’s private equity manager.

The appeal of the nursing home sector, whose total turnover amounts to €4,000 million per year, is due to the rosy forecast for revenue growth that the accelerated aging population is causing and the shortage of available places in care centres for the elderly. The possibilities for consolidation that results from the fragmentation of this market is another significant factor that is stirring up the industry.

The Amma Group, with a staff of 2,800 professionals, manages 30 nursing homes and 27 day centres in Spain, with the capacity to serve more than 5,500 users across eight autonomous regions: Madrid, Cataluña, Navarra, Castilla y León, Castilla-La Mancha, the Canary Islands, Cantabria and Murcia.

Original story: Expansión (by Mamen Ponce de León)

Translation: Carmel Drake

Cerberus Sees Five More Years Of Portfolio Sales In Europe

9 May 2016 – Expansión

The largest opportunistic fund thinks that the market will remain active in Europe for another five years. That was the view, expressed last week, by the Head of the US fund Cerberus, the investor that has acquired the most toxic debt from banks and governments in Europe.

“I expect the opportunity to buy doubtful loans to last for at least another five years. In baseball terms, we are still in the early innings”, said John Snow (pictured above), the co-founder and CEO of Cerberus.

Last year, according to Bloomberg, the fund invested €28,000 million in debt in Europe, including Northern Rock mortgages, which were sold by the British Government.

Cerberus is also one of the most active international investors in Spain.

In recent years, it has acquired two platforms, which themselves buy problem assets from banks: Haya Real Estate, the former Bankia Habitat, for the management of real estate assets; and Gescobro, for the management of unsecured debt.

In Spain in recent years, besides these two platforms, Cerberus has also acquired AyT, the securitisation fund manager owned by Ahorro Corporación and Cecabank; Cimenta2, the real estate arm of Cajamar; and the firm Patron Properties.

Advisors

The fund relies on several high profile advisors for its strategy in Spain, including Juan Hoyos Martínez de Irujo, the former President of McKinsey España; Francisco Luzón, the former CEO of Santander; Manuel González Cid, the former Financial Director of BBVA; Francisco Lamas, a former Director at McKinsey; and José María Aznar Botella, the son of the former President of the Government.

Cerberus came close to signing one of the largest deals in Spain last year. The US fund offered Bankia just over €2,000 million for a 75% stake in its foreclosed assets, as part of Project Big Bang, which was eventually suspended by the entity chaired by José Ignacio Goirigolzarri.

Original story: Expansión (by J. Z.)

Translation: Carmel Drake

The Asset Management Company Of Aznar´s Son Earns 146 Million With SAREB Properties

8 February 2016 – El Economista

Haya Real Estate, the real estate asset management company of which Jose Maria Aznar´s son is a director and which Jose Maria Aznar´s son is a director and which it is partially owned by US fund Cerberus, but operates with its own autonomy, obtained in 2014 – its first full year, a net turnover of EUR 146.05 million.

According to the accounts just submitted to the Madrid Mercantile Registry, the company where the son of former Prime Minister José María Aznar works achieved EUR 96.5 million in commissions for its activity; EUR 47.6 million for asset management and EUR 1.8 million for other services.

Haya Real Estate was incorporated on May 28th, 2013 and its purpose is the provision of financial advice and real estate assets management and marketing.

Contarct with Bankia

On September 3rd, 2013, the Company signed an agreement to acquire certain assets and development loans in the brick industry owned by Bankia and Sareb groups (the Asset Management Company arising from the Bank Restructuring).

The contract ended on December 31st, 2014, but later – after the announcement of a public tender, the company returned to take over the management of assets, in this case of debt with real estate collateral, initiating the provision of services just over one year ago, on January 1st, 2015.

According to the company accounts, “in order to ensure a certain performance level and volume in the provision of services on the part of Sareb, it has established a guarantee by delivering EUR 235.1 million to Sareb, whose return will take place throughout the duration of the contract “, which has been signed for a period of five years.

To finance this operation, Beech Real Estate signed a loan with Bawwag Bank amounting to 170 million, also receiving financial support from its shareholder through a new loan of 45 million and a capital increase for another 30 million. Until December 31st, 2014, the Management invoiced the totality of its services to Bankia group, this entity being in turn the one invoicing to Sareb for asset management services. However, from January 1st, 2015 and according to the accounts, Haya Real Estate invoices to Sareb directly.

Purchase from Cajamar

Apart from these assets, in June 2014 the company also signed a contract to acquire Cimenta2, the real estate assets management platform of Cajamar, the first cooperative financial credit group in Spain. In addition to purchasing the platform, it took a contract to manage property assets, credits – both mortgage and non-mortgage and securitized loans amounting to EUR 7,300 million, with 10-year marketing exclusivity.

In this case, for the financing of this operation, the company entered into a new loan with BAWAG Bank amounting to EUR 135 million, its shareholder taking another loan for EUR 45 million and carrying out an increase with issue premium for other EUR 54 million. On the other hand, the company also strengthened by incorporating securitization to its offering of services and products through the purchase of “Ahorro y Titulización” (AyT) owned 50/50 by Cecabank and “Ahorro Corporación“.

By December 31st, 2014, the Management Company at which Aznar’s son works as a Director, achieved total assets for EUR 604.6 million and earned a net profit of 4.8 million.

Always in accordance with the accounts filed with the Registry, the firm accumulates debt maturities over the next few years for a total amount of 357.6 million. Having faced during the last year maturities for 97.7 million, this year has payment commitments amounting to other 55.8 million.

Original story: El Economista (by Javier Romera and Alba Brualla)

Translation: Aura Ree

Hispania Acquires ‘Holiday Inn Bernabéu’ Hotel

14 October 2015 – El Confidencial

Hispania now has its own flagship building in Azca. The financial heart of Madrid has been one of the main battlegrounds for the large real estate companies in recent months, and their appetite means that there are now barely any opportunities left in the area. Nevertheless, the Socimi led by Concha Osácar and Fernando Gumuzio has managed to find a way in. (…).

The company has taken advantage of the voluntary bankruptcy filed in February by Leading Hospitality, owner of the Holiday Inn Bernabéu Hotel in Madrid and the Maza Hotel in Zaragoza, to take control of the company and, as a result, take over the reins of the only four-star hotel in Azca.

In reality, this transaction confers the Socimi ownership of just 52% of the establishment, since that is the stake held by Leading Hospitality in the property that houses the hotel. However, it has taken over 100% of the management of the property, which signed a 25-year franchise contract with IHG (InterContinental Hotel Group), an agreement that is still valid.

By sheer coincidence, the former owner of Leading Hospitality and the man who purchased the Holiday Inn Bernabéu, is an old acquaintance of Azora, the management company of Hispania. He is César Losada, the hotel businessman who also created the fund Losan Hotels World, now called Carey Value Added, which had the backing of the savings banks through Ahorro Corporación.

This investment vehicle ended up owning 14 hotels and 2,000 rooms, spread across the world’s main capital cities. The operation of these establishments was granted to brands such as Marriot, Steigenberger, NH Hoteles, Hotusa and Barceló. But the plans did not evolve as expected and in 2011, Azora received a mandate from Ahorro Corporación to take over the management of Carey and restructure it. (…).

Since its creation, Hispania has been clearly focused on the hotel sector and, in fact, it was a pioneer in the market with the creation of Bay, the first 100% hotel Socimi, which it launched together with Barceló back in February.

But, the entity managed by Azora also has its own hotel portfolio that sits outside of this vehicle; in fact, the first operation that it closed following its debut was the purchase of Hotel Guadalmina, another well known name in the tourism market, which it acquired through the back door and, on this occasion, by purchasing its debt.

That was only the starting point. Hispania is now the owner of NH Pacífico and NH San Sebastián de los Reyes in Madrid, Hotel Hesperia in Las Ramblas, in Barcelona, Gran Hotel Bahía Real and the Suite Hotel Atlantis Resort in Fuerteventura, Meliá Jardines del Teide in Tenerife, and Vincci Málaga.

In total, hotels account for 31% of the gross value of the Socimi’s asset portfolio; another 45% relate to offices and the remaining 24% relates to homes. Hispania’s hotel activity generated revenues of €3.25 million during the first half of this year. In total, the Socimi has 1,439 rooms, plus more than 300 rooms in the Holiday Inn Bernabéu and 6,097 rooms in the Bay portfolio.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake

Bankia Considers Cerberus’ Offer For 75% Of ‘Big Bang’

13 October 2015 -Expansión

Bankia’s Project Big Bang is moving towards the finishing line and a clear frontrunner has emerged: Cerberus. In recent weeks, the US fund has submitted a bid for 75% of the assets forming part of the macro-project through which the nationalised entity wants to get rid of all of its foreclosed assets. Cerberus must have put around €2,100 million on the table, according to financial sources.

The same sources say that only one counter-offer has been submitted, by the fund Oaktree, one of the most active players in Spain in recent months. However, its offer must have been lower and for a smaller package of assets.

Other large funds such as TPG, Apollo, Lone Star and Blackstone all exited the process before the binding offer phase, due to the complexity and costs associated with the transaction. They were also deterred by the fact that Cerberus has first-hand knowledge of the assets, since it manages them through its real estate platform Haya Real Estate, formerly Bankia Habitat, which it acquired in 2013. For this reason, Cerberus has been able to offer a price that is closest to the reality of the assets, without having to incur significant expenses in terms of appraisal and consultancy fees.

Bankia’s department for Corporate Investments has been analysing the offers since they were submitted two weeks ago. This stage of the process is very complex, since each one of the proposals is limited to different groupings of the 46,000 assets up for sale, which include homes, commercial premises and plots of land. Moreover, the offers have been received just as Manuel Lagares, the Head of the Corporate Investment team, is leaving the firm, to move to Credit Suisse.

The key behind the success of this operation will  be whether the prices are more or less aligned with those of the provisions. The portfolio, initially valued at €4,800 million has provisions amounting to €1,900 million, and therefore Bankia is not going to be willing to sell for less than €2,900 million.

The complexity of the process forced Bankia to announce over the summer that it would consider dividing up the portfolio. As such, it is possible that the entity led by José Ignacio Goirigolzarri will award the portfolio to both Cerberus and Oaktree. It may also opt to open a new round of offers with a more segmented portfolio, as a means of maximising its value.

Negotiations

In fact, according to sources close to the operation, the key obstacle is that the funds are leaving the lowest quality assets outside of their offers, and Bankia is not willing to be left with only the least attractive homes, commercial premises and land in the real estate market.

The investment bank Credit Suisse and the consultancy firm KPMG are advising the nationalised entity on this transaction.

The Big Bang portfolio comprises 38,500 homes, with a nominal value of €3,300 million; almost 5,000 commercial premises, worth €1,100 million; and 2,600 plots of land, with a gross price of €400 million.

For Cerberus, winning Project Big Bang would enable it to obtain economies of scale in its commitment to the recovery of the Spanish real estate sector. The US fund has acquired the real estate managers of Bankia and Cajamar – Cimenta2 – in recent years, as well as AyT, the securitisation fund manager, previously owned by Ahorro Corporación and Cecabank. But it still has not bought any large asset portfolios like its competitors Lone Star and Blackstone.

Meanwhile, Oaktree has revealed itself to be one of the most active funds in Spain in recent months, due to its purchase of a portfolio of mortgages from Bankia.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Eugenio Hinojosa Resumes Empark Negotiations

13 October 2015 – Expansión

The Spanish businessman Eugenio Hinojosa has resumed his plans to purchase Empark, the leading car park company in Spain and Portugal. The operation could amount to around €900 million, including debt. Hinojosa, one of the largest operators of parking spaces in Madrid, has resumed talks to purchase Empark after exclusive negotiations broke down between the shareholders of the parking company and the funds that control Vinci Park (Ardian and Crédit Agricole), the car park giant in France.

Last week, sources close the operation said that the negotiations are progressing and only a few minor details now need to be resolved relating to avals, guarantees and creditor approvals (mainly bondholders) due to the change in control of the company. “Financing is not a problem”, assured the sources consulted.

Hinojosa plans to join forces with other partners, including the company Andersen Partners, to buy Empark. Empark declined to comment on the matter. Empark’s controlling partner with a 50.3% stake, is Assip, a vehicle named after the Portuguese company A. Silva & Silva, which is in turn controlled by the founding families of the company who participate in the management of the group. The main executives of Empark, which manages 500,000 parking spaces in Spain, Portugal, UK and Turkey, are José Augusto Tavares (Chairman), Pedro Mendes (CEO) and Antonio Moura.

The remaining capital is divided amongst several investment funds, managed by BES (22%) and Ahorro Corporación (8.2%). The Mello family holds a 2.6% stake. In theory, these partners are also selling their respective stakes in the company. Ahorro Corporación’s stake is now being managed by the fund GED Capital.

Political risk

In July, Vinci Park reported that the negotiations to purchase Empark had broken down after the due diligence (audit of the assets) was completed with findings that were not satisfactory. Sources close to the company say that behind the decision was the high exposure that Empark has to town halls governed by parties linked to Podemos following the municipal elections in May.

Eugenio Hinojosa, who is a related by marriage to the founding family of Cortefiel, has been building up a sizeable portfolio of car park assets in Madrid, and now owns more than 12,000 parking spaces. He was one of the main competitors in the tender for the Aena car parks in 2013, but was his offer was outbid by Empark and Saba. He managed to suspend the award after filing a special appeal with the Central Administrative Court of Contractual Appeals against the airport operator’s decision, but then lost the ruling.

In 2014, the controlling shareholders of Empark engaged JPMorgan and Caixa Banco de Investimento (CBI) to find a buyer. One of the reasons for their exit from the company (they purchased it from Ferrovial in 2009) has been the financial problems of its Portuguese partners, which have undergone a complicated bankruptcy process and have had to make loan repayments in recent months.

Empark closed 2014 with sales of €180 million and an EBITDA of €66 million. As well as managing some of the busiest car parks in Madrid, Aena awarded the group the operation of its car parks in the Western region (including Barajas) in 2013, requiring the management of 40,600 parking spaces. Two years ago, the company also won the tender to manage 82,000 ground-level parking spaces in Madrid.

Original story: Expansión (by C. Morán)

Translation: Carmel Drake

GreenOak Recruits Zarrabeitia From CBRE

16 July 2015 – Expansión

International funds still regard Spain as one of their favourite destinations for investment. As such, one of the most active firms, the US fund GreenOak, has just strengthened its team in Spain to boost its commitment to the market.

The fund, which specialises in the real estate sector, has recruited Javier Zarrabeitia, former director of CBRE España. Zarrabeitia, the son of the CEO of Testa Inmuebles, is a specialist in capital markets. Before joining CBRE, he advised large real estate transactions, such as the sale of BBVA’s building on Castellana, 77 to GMP for €90 million. In fact, GreenOak was one of the finalists in that auction.

In addition to Zarrabeitia, GreenOak is planning to hire three or four other people over the coming months at its offices in Madrid. The firm currently has a team of ten professionals dedicated to the Spanish market, although most of them are based in London.

Francesco Ostuni leads the Spanish team – he is the European Director of Acquisitions at GreenOak, and was formerly a director at Morgan Stanley and before that at the Qatar sovereign fund. In turn, Ostuni reports into the founding director of the fund, John Carrafiell, who led Morgan Stanley’s real estate strategy for several years, and closed operations such as the purchase of Canary Wharf. (…)

GreenOak, which has assets under management amounting to $5,000 million (€4,533 million) around the world, has already made several real estate investments in Spain during the last year.

Background

The US fund took its first big step in Spain last year, when it purchased seven shopping centres from the Dutch group Vastned Retail for €160 million. Subsequently, it tried to enter the office market – it participated in the process to purchase not only Castellana 77, but also Castellana, 89 – Ahorro Corporación’s headquarters – which was ultimately purchased by Corporación Financiera Alba, owned by the March family.

In recent months, GreenOak has been adding to its portfolio of Spanish investments, with the purchase of five logistics assets in the Community of Madrid, encompassing 200,000 m2. The US fund paid between €60 million and €75 million to close that acquisition.

The firm plans to close new operations in the short term, mainly in the logistics segment – where it has agreed to buy three more assets – , as well as the market for shopping centres and offices, after its two previous failed attempts.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

March Family Buys Ahorro Corporación’s HQ

11 May 2015 – Cinco Días

Corporación Financiera Alba, owned by the March family, announced on Friday that it had acquired the headquarters of Ahorro Corporación in Madrid for €147 million.

The property is located at number 89 on Madrid’s Paseo de la Castellana, just 50m away from the Picasso building. The property measures 20,000 square metres, spread across 12 floors of rented offices, another floor containing retail premises and 530 parking spaces. The building’s current tenants include Sareb, Deloitte and Alain Affelou in the offices and Lateral, Maki and New York Burger in the retail area.

Original story: Cinco Días

Translation: Carmel Drake