AEV: Spain’s Appraisal Companies Invoiced €283.8M in 2017, Up By 17% YoY

18 April 2018 – Eje Prime

Appraisal companies are thriving in Spain. According to the latest data from the Spanish Association of Value Analysis (AEV), the turnover of the 23 associated appraisal companies during 2017 amounted to €283.8 million,  up by 17.1% compared to the previous year. This upward trend is experiencing an acceleration that almost doubles the turnover growth rate recorded between 2015 and 2016 (9.2%).

Moreover, this ascending inertia is observed in the great majority of the data analysed. The number of real estate appraisals performed increased by 18% to reach 1.25 million appraisals, corresponding to a total appraised value of €389.5 billion. The 650,000 appraisals that were issued for the purpose of mortgage guarantees stand out, in particular, since they represent 24% more than the number carried out during the previous year, according to data from the association.

The number of appraisals conducted without visiting the interior of the property grew substantially, by 67% to be precise, as did the number of appraisals performed online, although at a more moderate rate (by 15%).

In terms of the regional distribution of house appraisals by autonomous community, Murcia recorded the highest growth with respect to 2016, up by 38%. It was followed by Valencia (36%), Cantabria (31%), the Balearic Islands (25%) and Cataluña (25%).

Original story: Eje Prime

Translation: Carmel Drake

Blackstone & Santander Will Transfer 21,000 Of Popular’s Homes To Various Socimis

30 October 2017 – Cinco Días

The sale of the real estate assets proceeding from Popular to Blackstone is not over yet, but the strategy behind the operation is already very clear and will reinforce the US fund’s position as the largest homeowner in Spain. The American firm’s plan involves replicating its previous purchase of banking portfolios linked to real estate on a grand scale. Specifically, the fund will transfer a large part of these homes to several Socimis with the aim of renting them out. A small proportion, the lowest quality properties, will be put up for sale.

In August, Santander sold 51% of Popular’s real estate to Blackstone, together with the real estate management platform Aliseda, which it had previously repurchased from Värde and Kennedy Wilson. These assets (comprising homes, land, office and doubtful debt) were worth around €10,000 million, and so Blackstone will pay almost €5,100 million when the operation is finally closed at the beginning of 2018.

Of that transaction, Blackstone and Santander will manage around 80,000 assets through Aliseda. Of those, 30,000 correspond to homes from property developer loans, according to market sources. Now, it has been revealed that the strategy of the two partners involves transferring approximately 70%, in other words, almost 21,000 homes, to several of the US fund’s Socimis with the aim of putting them up for rent, explain sources in the sector (…).

Blackstone has already followed this strategy in the past. Its first major operation in Spain was the purchase of 40,000 mortgages from the now extinct Catalunya Caixa for €4,123 million in 2015. Next, it created the platform Anticipa Real Estate to manage those assets. Prior to the purchase of Popular’s real estate, it had already acquired around €7,000 million in these types of assets, of which 12,000 were homes.

To create the residential giant, the US firm began to create Socimis to which to transfer its properties for rent. The first of these companies was Albirana Properties, which made its debut on the Alternative Investment Market in March, with a market capitalisation of €170 million and 5,000 rental homes under management.

But that was just the beginning. Since then, Blackstone has created several more Socimis, such as Tourmalet, Torbel, Albirana II and Pegarena, according to the tool Insight View from Iberinform. Now, Blackstone will identify the best homes, put them up for rent and package them into several different Socimis.

Currently, Blackstone is involved in a detailed assessment process of the properties in order to proceed with their appraisal, according to sources in the sector, which will conclude with the completion of the operation during the first quarter next year. The other homes, those that will not be transferred to the Socimis, comprise around 9,000 units. They are the worst quality properties and will likely be put up for sale on the retail market.

Blackstone first entered the rental market with the purchase of homes from Madrid’s Municipal Housing Company in 2013, which it subsequently grouped into the Socimi Fidere, whose shares are also traded on the MAB and which has a market capitalisation of €268 million.

Blackstone, which is led by Claudio Boada as the CEO in Spain, is particularly active in the real estate sector in the country. Last week, it purchased the company HI Partners, the owner of 14 holiday hotels, from Sabadell for €630 million.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

# Of Estate Agents Grow With A Vengeance In The Community Of Madrid

19 September 2017 – Real Estate Press

The resurgence of real estate activity in Spain, and in particular, in the Community of Madrid, has given rise to a significant increase in the number of companies in the sector, which have grown by 18.5% since 2014. Currently, the Community of Madrid has 31,384 real estate companies and 33,616 real estate related premises. In other words, one for every 192 inhabitants.

So far this year, 41,641 homes have been sold in Madrid, up by 17% compared to a year ago, and up by 30% compared to two years ago. Moreover, prices rose by 10.9% in the second quarter of 2017 with respect to the previous year. In addition, rental prices have risen by 11% over the last year.

Jaime Cabrero, President of the Official College of Real Estate Agents in Madrid, says that “Normally, when the sales market is strong, the rental market is weaker, and vice versa, but now both sectors are booming”. He added that “Naturally, we are seeing an increase in (the number of) real estate companies (…); there are 33,616 estate agent premises”, which is a high number of establishments dedicated to real estate activity.

According to figures from the Central Directory of Companies, compiled by Spain’s National Institute of Statistics (INE), over the last three years, the number of estate agent premises has risen by 5,377. The increase in the number of companies, many of which have more than one branch, amounts to 4,912. Logically, this activity has an impact on employment. During the second half of 2017, the sector provided work to 29,300 people, according to the INE’s Active Population Survey, 8,800 more than in 2014 and the highest figure for the last decade.

In fact, the real estate activity category includes all companies dedicated to the sale, purchase or rental of all kinds of properties, including “lessors, agents and brokers”, as well as other key services, such as appraisal. The category also includes companies dedicated to construction, which then carry out the maintenance and rental of buildings, as well as managers of real estate properties. The sub-category containing the latter – “real estate activities on behalf of third parties” – grew by 1,773 companies between 2014 and 2017, to exceed 10,000 in total.

Original story: Real Estate Press

Translation: Carmel Drake

Bank Of Spain Puts Pressure On Banks To Accelerate Property Sales

7 September 2016 – Cinco Días

The Bank of Spain wants Spain’s financial institutions to speed up the sale of their foreclosed assets and get rid of their toxic assets as soon as possible. The supervisor has been unmoved by the banks’ requests to relax some of the interpretations of the accounting circular 4/2016, which comes into force in October, governing their provisions against properties. The banks still hold more than €84,000 million of foreclosed assets.

Spain’s banks are finalising the figures for the new provisions that they will have to make following the entry into force of accounting circular 4/2016 and in particular, its Annex IX, on 1 October, which modifies circular 4/2004 for credit institutions. Initially, the Bank of Spain said that this new standard would hardly affect the final calculation of the sector’s provisions this year, but the reality is somewhat different, at least for several institutions, according to financial sources.

The body led by Luis María Linde has tightened the provisions for foreclosed assets. This twist has forced several entities to make fresh efforts in terms of their provisions, which will be deducted from their income statements. In response, some of the financial institutions had asked the Bank of Spain, during meetings that they are holding regarding the application of this circular, to relax certain concepts and interpretations of the standard. But it seems that the national supervisor has been indifferent to these requests, according to sources in the sector.

Ultimately, the Bank of Spain wants to force the banks to accelerate their property sales and get rid of their real estate assets as quickly as possible. Sources in the sector say that this is the message that the supervisor has been communicating in its meetings with the banks.

Linde wants the sector to significantly reduce their assets, which amounted to more than €84,000 million at the end of 2015. Sources indicate that the Bank of Spain has not set a date for this reduction, but it seems to be clear from both the conversations and the regulations that it seeks to considerably reduce the figure over the next three years. The problem is that the foreclosed asset balance has increased quarter after quarter since the outbreak of the financial crisis in 2008, despite attempts by the sector to sell off properties at significant discounts.

In fact, the heavy weight that these foreclosed assets continue to represent on the balance sheets of Spain’s banks is one of the main criticisms levied by the European Central Bank and other international supervisors.

Over the last three years, the banks have accelerated the sale of these assets, but the incoming volumes still exceed those sales. In addition, the large speculative investment funds, which were previously committed to purchasing large packages of properties, have now reduced their operations, and some are even exiting from certain property purchase operations ahead of time as they are obtaining lower returns than expected, indicate sources at one major bank.

The new accounting circular not only affects the financial institutions, but also the partners that manage those properties, such as Altamira, Aliseda, etc. In the case of La Caixa, it affects its holding company, Criteria, which owns €2,600 million of foreclosed assets and CaixaBank, which holds another €7,122 million. The same thing has happened in the case of Bankia, with the circular affecting both the bank and its parent company BFA, even though that group transferred most of its foreclosed assets to Sareb.

The main domestic banks are racing against the clock to ensure that the Bank of Spain approves their internal risk coverage models, including foreclosed assets, before the end of December, which, according to several sources, would bring some relief in terms of their new provisions. The circular also requires the banks to perform annual appraisals of their foreclosed real estate assets (…).

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

Office Buildings Will Have A Rating On Their Quality

2 February 2016 – Cinco Días

The real estate sector gets ready for a big novelty. Similarly to the debt rating of companies and countries, the office buildings will have a rating to ensure constructive and technical quality to potential investors.

The seal is called Office buildings technical rating. It is driven by the Spanish Association Offices (AEO, in its Spanish acronym), where large landowners, intermediaries and investors are integrated, and it will be voluntary. Although in this entity they believe it will be imposed thanks to the driving companies and because it will become the only guarantee of reference for the real estate market.

The aim of the AEO is to provide all stakeholders an objective and only measure of the quality of buildings. This optional rating system will be approved in two months, as final details are currently being closed. “We are finishing a standard for the technical rating of office buildings, which will be voluntary and will serve to increase confidence and transparency in the Spanish market from the perspective of investment, rental or portfolio analysis” José María Álvarez, AEO Chairman explains.

The first consequence will be knowing the condition of the buildings. Given it is a voluntary act, it is likely that the newest and highest quality buildings will promptly submit to be eligible for this qualification. This organization states that there are 30 million square meters of office space in Spain, with a value of EUR 65,000 million in assets, which generate about 4,300 million in income from leases.

AEO partners

The AEO is composed of more than 60 companies. Among them, large listed companies as BBVA, Iberdrola, Indra, Repsol and Telefonica, which in turn are usually owners of major buildings where their headquarters are installed. Property management companies as Torre Rioja (Angel Soria), Colonial and Pontegadea – family office of Inditex founder Amancio Ortega, also participate.

Listed real estate investment companies as Merlin Properties (of Ibex 35) and Lar España are also partners, as well as intermediaries including JLL, Knight Frank, Savills, CBRE, Cushman & Wakefield or BNP Paribas Real Estate. Mutua Madrileña and Mapfre insurance companies are also members.

The objective of this real estate agents group is to give transparency to the sector. Thanks to this seal, an international fund or a company will know what they face when acquiring a property. There will even be investors that will be suspicious of the buildings which do not have the rating. “It will contribute to transparency in the decision-making process,” says Alvarez on how companies will welcome this rating system.

“It will contribute to transparency in decision making,” the AEO states.

With some final details to be confirmed, the rating will have five sections. Outstanding, for those excellent, will be A+ rating. From there, going down, ratings will be A, B+, B y C.

Appraisal criteria

This certificate will be awarded by AEO in order to have a character of neutrality, but different companies and engineering companies will be responsible for the technical work, opening a new market of professional services for rating companies. Once these consultants rate the offices, the association will review the report and confirm the rating. “The AEO will review and audit all assessments by carried out by external companies,” Alvarez confirms. In addition, the certification will be renewed after a given period to assess for deterioration. This revalidation will take place every three or four years, a term not defined yet.

The concepts considered for the report focus on the architecture and facilities of the buildings Evaluators will consider distribution plants and clearances, common areas, exterior envelope and energy facilities, climate system or control. The unique provisions, seniority and energy and sustainability certifications will also be taken into account. Neither location nor aesthetics will be considered.

This association is of the opinion that this audit will also be useful for an owner to know what works and measures they must take, in addition to how much it can cost in order to improve the rating of their property.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Aura Ree

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

Sareb Modifies Its Loan Portfolio Sales Policy

4 January 2016 – Expansión

The accounting circular prepared by the Bank of Spain has modified the provisioning criteria that Sareb has tried to follow until now and will also force it to modify its business practices in a segment that has been generating significant income for the entity, namely, the sale of large-loan portfolios, which it used to perform at year end and which is now being replaced by individual auctions.

Sareb used to close its year ends with a volume of activity that allowed it to fulfil the objectives established in the budget each year, by completing the sale of various asset portfolios, in particular loan portfolios, during the fourth quarter of the year. This option has been radically altered following the publication and entry into force of the accounting circular that governs the bad bank.

In the circular, the supervisor established the obligation to appraise all of Sareb’s assets (at market value) within two years (i.e. by the end of 2016), to enable the new asset values to be recorded on the balance sheet. This means leaving behind the global valuation approach and moving towards knowing the individual values of each one of the assets. Sareb ended last year (2015) having appraised 60% of its assets.

Under the previous method, Sareb was able to create asset portfolios and determine their initial asking prices by approximating their values based on the amounts initially paid to acquire them. That meant that some of the values were lower than market price and others were higher, but that Sareb’s managers were able to establish overall asking prices for their portfolios that allowed them to generate margins to cover the company’s general costs.

But by appraising the assets one by one, this compensation (margin) is no longer possible and now Sareb has to try to beat the market in each one of its transactions, which is difficult and even more so in the current climate, in which operations are happening again but no significant price increases have been registered yet.

Clean up

For this reason, even though, at the beginning of the autumn, the company led by Jaime Echegoyen (pictured above) said that several loan portfolios had been created, for sale before the end of the year, those sales have not actually gone ahead, because, on the one hand, certain elements are still being removed from these portfolios so that they do not distort any possible sale, and on the other hand, individual loan auctions are being planned, which will make any sales much more difficult because the auction process takes so much longer. (…).

These new asset valuations are going to force Sareb to make sizeable provisions for the negative difference compared with the loan purchase prices, which means that the bad bank is going to record significant losses once again, which means that it will have to convert some of the convertible debt that its shareholders subscribed to in order to restore the company’s equity situation. The final amount of the debt to capital transformation will not be confirmed until the re-appraisal process has been completed.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

AEV: Activity Is Returning To The Home Appraisal Sector

17 March 2015 – El Economista

Activity is returning in the home appraisal sector, with increasingly higher growth each quarter; meanwhile the real estate market is stabilising, according to data from the Spanish Association of Value Analysis (AEV).

Thus, the number of building projects valued, which amounted to 179 in the first quarter of 2014, increased to 224 in the second quarter and to 367 in the third quarter.

Similarly, new appraisals of individual homes, which experienced year-on-year growth of 7% during the first half of the year, accelerated to 10% in the third quarter.

Prices are not rising in the same way

However, the recovery in the sector is not being accompanied by an increase in prices, according to the AEV. The average appraisal values for housing blocks continued to decrease to September 2014, from an average value of €1,342/m2 in the first quarter down to €1,262/m2 in the third quarter, i.e. a decrease of 5.9%.

Meanwhile, data regarding detached homes (viviendas unifamiliar) showed stability during the course of the first nine months (of 2014).

For the secretary of AEV, José Manuel Gómez de Miguel, this data “provides statistical confirmation of the recovery in the residential sector and of the solvent demand for credit that had already begun to be felt in 2014”.

Original story: El Economista

Translation: Carmel Drake

Banks Reduce Number of Appraisers From 12 to 3

24/09/2014 – Cinco Dias

Strong ties between financial entities and appraisal firms, many owned by banks anyway, made Spain’s Central Bank take an action few years ago. The fact, that an arm of a bank was responsible for valuation of a property for which the bank granted a loan – widely practised during the real estate boom – or that they could dictate the discount applied on a delinquent mortgage after the bubble burst has been a clear conflict of interest for years.

However, the pressure from the side of the central authority led to reduction in the banks’ appraisers number from twelve (controlling 46.8% of the market) to a shy 4.9% share.

This is how the latest Economic Bulletin by the Bank of Spain puts the matter, basing on data gathered at the end of 2013. According to them, presently, there are three appraisal companies in the hands of banks: Sociedad Integral de Valoraciones Automatizadas (Sivasa) belonging to Banco Santander, Tasaciones Andaluzas of Unicaja and LKS Tasaciones (tasación = appraisal, translator’s note), owned by Caja Laboral.

Last year, also Global Gestión de Tasaciones (Ibercaja), Compañía de Medios y Servicios de Tasación (Cajasol later absorbed by CaixaBank) were operating on the market and closed their activity at the end of 2013.

A year earlier, Bankia had sold Tasamadrid to private equity fund Advent, since 2010 the owner of Tinsa, a huge appraisal firm held by 35 savings banks. Then, CaixaBank transferred Valoraciones y Tasaciones Hipotecarias (VTH) to Gecopinsa Tasaciones, while Banco Sabadell (that had inherited CAM Tasaciones from Bienes Mediterraneo) and Novagalicia (owning Tasaciones y Valoraciones e Galicia) decided to close their appraisal affiliates.

The objective of the Bank of Spain is to ensure maximum independence to the country’s appraising firms. Minister Luis Maria Linde forbids the directors of the firms to maintain direct contact with salesmen of the banks which hold a share in their capital.

In 2013, financial entites accounted for 71% of clients of the companies. Thus, practically one third of the total gains of 42 appraisers not held by banks proceeded from their ‘significant clients’.

Speaking of conglomeration in the sector, the Bank of Spain reports that ‘37% of all appraisals and the earnings corresponded to two major firms’ and the top five controlled 57% of the total.

 

Original article: Cinco Días (by Juande Portillo)

Translation: AURA REE