Tinsa & Sociedad de Tasación are the Banks’ Preferred Appraisal Companies

17 May 2018 – Expansión

Last year, the banks commissioned appraisals for properties worth €200 billion. The valuation of these assets was performed by a well-nourished group of entities that have been authorised by the Bank of Spain to undertake these types of operations.

Tinsa and Sociedad de Tasación swept the board in this sector, with market shares of 28.7% and 13.9%, respectively, according to the total revenues for the sector for 2017, which amounted to €284 million, according to data from AEV, the main trade association.

The appraisal sector was particularly badly hit by the consequences of the real estate crisis, given that their valuations, which in some cases did not reflect the reality, contributed to the inflation of the real estate bubble which then burst.

The appraisals performed last year represent one third of those recorded in 2007 when the figure reached €600 billion according to data from the Bank of Spain.

There was also a lack of professionalism in this sector, on which the Bank of Spain has imposed several sanctions in recent years, in some cases on firms that have now disappeared.

More control

Following the crisis, the banks also liquidated their own appraisal companies and, since then, independence and professionalism have reigned.

“The Bank of Spain has increased its control over the sector in the last three years, something that is good news and that works in our favour”, says Juan Fernández-Aceytuno, CEO at Sociedad de Tasación. By way of example, he comments that the supervisor now “requires us to provide 350 information fields for every appraisal”. (…).

In another change, Santander commissioned its appraisals from half a dozen different companies last year, namely: Tinsa, Eurovaloraciones, Ibertasa, Tasaciones Hipotecarias, Krata and Hispania de Tasaciones.

The group explains in its accounts for last year that its strategy, when it comes to choosing these entities, is governed by “the requirements of independence, neutrality and credibility to not undermine the reliability of their valuations” (…).

BBVA works with fifteen appraisal companies including Tinsa and Sociedad de Tasación. The bank confirms that it engages these entities due to “their reputation, independence and recognition in the market, given that they are capable of providing valuations that most appropriately reflect the reality of the market in each region” (…).

Bankia is the entity that engaged the fewest appraisal companies in 2017. It hired Tinsa, Gesvalt, Tecnitasa, UVE and Arco Valoraciones. Sabadell, by contrast, reports in its accounts for last year that it worked with around 30 firms.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

Euroval: RE Activity Is Still “A Long Way” Below The Boom Levels

7 June 2017 – Expansión

The real estate appraisal company Euroval has said that real estate activity in Spain is still “a long way” below the levels reached a decade ago.

Specifically, based on data from a simulation that it has performed, Euroval highlights that real estate activity in Spain currently represents a quarter of the level achieved during the real estate boom.

According to the appraisal company, the recent economic crisis “is still taking its toll” on activity in the Spanish real estate sector. In fact, it has highlighted that the number of mortgages granted, the volume of construction revenues and expenses and the number of transactions carried out are still way behind the figures recorded 10 years ago.

By region, whilst in Andalucía, Murcia, the Community of Valencia and Cantabria, for example, real estate activity was operating at 100% in 2004, it is now performing at 13%. Moreover, the autonomous regions that are improving their activity in this sector compared to 2004 are the Balearic Islands (45%), País Vasco (28%) and Navarra and Extremadura (22% in both).

According to Euroval, “there are no known cases of economic sectors in any country representing a similar percentage of GDP as the real estate sector did in Spain at the time of its greatest rise, after which it suffered losses of more than 80% in less than a decade.

The appraisal company considers that the volume of residential appraisals and the supply of housing are the “key” indicators that reflect this decrease. Specifically, in 2006, around 1.3 million appraisals were performed, compared with 625,000 last year.

In 2016, the autonomous region with the highest volume of appraisals was Andalucía, with 129,200. It was followed by Cataluña, with 120,400; Madrid, with 85,300; and the Community of Valencia, with 76,700.

In terms of the housing supply, Euroval’s conclusions highlight the “anomalous behaviour” in terms of housing demand in Spain, given that “despite the significant decrease in prices”, there is still “weak demand in light of the uncertainty surrounding the economy and employment”.

The data from the appraisal company also indicates that this “weak” growth has been concentrated in primary homes above all, which have increased from 15 million units in 2004 to 18 million last year.

The evolution of finished homes used to amount to around 536,600 properties, almost double the number started that year, whilst in 2016, the figures were 50,351 and 34,351 units, respectively. Euroval predicts that the market will tend towards growth over the next two years.

Original story: Expansión 

Translation: Carmel Drake

RE Broker Aguirre Newman Goes Up For Sale

20 February 2017 – El Confidencial

Spain is experiencing a real estate boom once again and brokers want to take advantage of the situation to make money.

Whilst last year, the private equity fund Cinven acquired Tinsa, the largest appraisal company in the country, and in 2015, Apax Partners took control of Idealista, this year, Santiago Aguirre Gil de Biedma, the brother of Esperanza Aguirre, has decided to put Aguirre Newman, the largest real estate broker in the sector, up for sale.

According to financial sources, Santiago Aguirre has engaged Atlas Capital to sell his majority stake in the consultancy firm. The firm will target both individual and institutional investors, as well as public and private corporations. Aguirre Newman caters for all real estate investment-related matters and offers a complete set of services including valuations, feasibility studies, appraisals, attending compensation boards, leases, property management and technical architectural services.

The company generates annual revenue of around €80 million, with an operating profit of EBITDA of almost €12 million. As such, the financial sources consulted consider that Aguirre Newman could be sold for between €80 million and €100 million. Other sources consider that some of the parties that may be interested in purchasing this real estate broker include the private equity funds Cinven and Apax Partners, which could enlarge the businesses of Tinsa and Idealista, respectively, with this acquisition.

However, the same sources also consider that this could be a good opportunity for some of the main domestic competitors, which would result in a certain degree of concentration in what is a very fragmented sector. In addition to Aguirre Newman, the other large consultancy firms include CBRE, Knight Frank, JLL, BNP Paribas Real Estate, Cushman & Wakefield and Savills. These seven firms account for 90% of the sector’s revenues in Spain and employ 2,200 professionals in total. Almost 400 people work for Santiago Aguirre and his minority shareholder partners.

Low interest rates, the collapse in prices following the crash, the enormous volume of liquidity and the recovery of the Gross Domestic Product (GDP) in Spain have created a cocktail that has led to investment figures not seen since the era of the bubble. According to a report from JLL, non-residential real estate investment (offices, retail, logistics and hotels) amounted to €8,707 million in 2016. That figure represents a decrease of 8% compared to 2015, when operations worth €9,407 million were closed. Nevertheless, the figure recorded in 2016 was still higher than the maximum recorded in 2006 (€7,800 million).

Golden years

Last year, the most active market in terms of investment volume was the retail premises and shopping centre segment (retail), with €2,977 million, down by 3% compared to 2015. (…). Moreover, Aguirre Newman highlights that this figure exceeded the €2,000 million threshold for the third year in a row, which is clear proof of the boom in the real estate sector, especially in retail, which accounts for 35% of all tertiary investment.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

Sareb & The Banks’ RE Arms Commission 3x More Appraisals

2 November 2016 – Cinco Días

During the first half of this year, Sareb and the real estate subsidiaries controlled by the banks commissioned appraisals for 845 properties per day. That figure represents a threefold increase compared to the same period last year. In other words, a real boom in the number of appraisals being performed for real estate portfolios in the sector. This sharp increase has been driven by the Bank of Spain, in its quest to ensure that asset prices reflect the reality of the market, with the dual aim of facilitating their sale and preventing deceptive quantifications in the value of assets on the balance sheets of entities in the industry.

Two specific pieces of regulation have been developed to acheive these aims. Firstly, new accounting regulations for Sareb, which was notified last October that it must reappraise its entire portfolio at market prices in just a few months: at least 50% of its properties had to be reappraised in 2015 and the remainder this year.

Secondly, the Circular 4/2016, whereby the institution governed by Luis María Linde strengthened the coverage and provisions that the financial institutions have to make and which requires them to perform an updated valuation of the real estate collateral securing their loans.

Although the financial institutions have already started to review the value of their balance sheets, for the time being, the regulations have had more impact on the field of appraisals involving Sareb. That is according to the Spanish Association of Value Analysis (AEV), which groups together the main appraisal companies in Spain, which are responsible for performing 90% of the appraisals conducted in the country. According to the association, during the first half of the year, Sareb and the asset management subsidiaries of the major Spanish banks commissioned 152,166 appraisals in total.

That figure far exceeds the 47,256 appraisals that the same group of companies requested during the first half of 2015. The rate has tripled in just one year, with the intermediate step taken during the second half of last year, when 119,942 appraisals were requested, after the so called bad bank was notified about the contents of the Bank of Spain’s new accounting legislation and the short calendar for its implementation.

From the appraisals carried out for Sareb and the banks’ real estate companies during the first half of this year, 46,895 correspond to full appraisals, which are those that include a visual inspection of the property (even if internal access is not possible) as well as the performance of the typical checks for mortgage valuation purposes (such as checking that the property exists, ensuring that the urban planning situation is up to date, etc.), say sources at AEV.

Another 16,676 valuations were performed using automatic templates. Sources at the AEV explain that this type of appraisal tends to be used to carry out valuation updates for large groups of properties using statistical methods.

Finally, another 88,525 appraisals were performed using other, automated, mass-valuation methods, including mathematical models, online valuations and the so-called desktop valuations, which are performed remotely using photographs and street views such as those supplied by Google Street, for example. (…).

The figures published by AEV show that the analysis of these portfolios has resulted in low valuations this year: the 47,000 properties valued during the first half of 2015 had a combined appraisal value of €11,380 million, whereas the 150,000 properties valued during the same period in 2016 have a combined appraisal value of €21,654 million. In other words, triple the number of assets correspond to just twice the appraisal value.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

Sareb Has Returned €1,000M Assets To Banks

24 June 2016 – Expansión

In recent years, Sareb has found itself with an unexpected line of business as it works to slim down its balance sheet: it has been returning certain assets to the entities that transferred them to it initally. The company chaired by Jaime Echegoyen (pictured above) has returned more than €1,000 million in real estate assets and loans linked to the property sector to groups that transferred it the assets in the first place.

Those €1,000 million represent 2% of Sareb’s balance sheet upon creation – €50,781 million – and 13.5% of the total reduction in its asset value since 2012.

The assets have been returned due to information or appraisal deficiencies made by the transferring entities, at the time of transfer, between 2012 and 2013. Thus, some assets were transferred to Sareb with values that exceeded their real values and other should not have been transferred to the company at all, as they did not meet the requirements.

Financial sources consulted indicated that some personal loans were transferred to Sareb, which had nothing to do with the purpose of the company.

According to Sareb’s annual reports, corrections are made to asset purchase deeds “for the purposes of identifying the improper categorisation of assets, changes in the perimeter and errors or variations in the estimated valuation on the transfer date”.

Bond returns

With these properties and loans, the entities have returned €1,000 million in bonds that they received in exchange for their assets. (…).

Sareb was created at the end of 2012 from the assets of all of the entities that received public aid during the European bank rescue. Firstly, the banks controlled by the Frob – Bankia, Catalunya Banc, Banco de Valencia, NCG Banco and Banco Gallego – transferred their properties and developer loans, and then those entities that had received aid but not been nationalised –Liberbank, Caja 3 and Banco Ceiss, together with BMN– transferred their assets.

Of all of these entities, Catalunya Banc has received the most assets (in return) from Sareb over the last three and a half years. The entity absorbed by BBVA has now been returned €365 million in total, mainly between 2013 and 2014. CB is followed in the ranking by NCG Banco – now Abanca – with €182 million; Bankia with €168 million; and Banco de Valencia – purchased by CaixaBank – with €161 million.

By year, the most active period in terms of property and loan “adjustments” was 2014, when Sareb returned almost €550 million worth of assets to the entities. But the real estate company is still finding problems with the homes and loans that it was transferred, and this year it has already sent back assets worth almost €60 million to Liberbank, Bankia, Caja 3 and Banco Ceiss. (…).

A new tool

Recently, Sareb launched a new internal tool to help it handle all of the assets that it has on its balance sheet and expedite their transfer. It is called Atlas and it performs more than 300,000 valuations each year, automatically, cross checking market data with socio-economic indicators, such as rental income and population size in each place. (…).

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

ST: Its Still Too “Early” To Talk About A “Complete Recovery”

21 April 2016 – El Economista

The CEO of ST Sociedad de Tasación, Juan Fernández-Aceytuno (pictured above), said on Tuesday that, despite the clear stability that we are seeing in terms of house prices, it is still “early” to talk about the “complete recovery and normalisation” of the market, and he warned that the recovery will only be an “objective” for as long as the net mortgage volume balance continues to decrease.

Those were the words of Fernández-Aceytuno during the opening session of the XXIII Meeting of the Finance Sector, an event organised by Deloitte, ABC and ST Sociedad de Tasación, at which he presented the five key indicators of the real estate sector.

Fernández-Aceytuno indicated that although there has been a double-digit increase in the number of appraisals commissioned by financial entities to support mortgage requests, the volume of mortgages granted in 2015 was “similar to the volume granted in 1998”, i.e. the lowest level in the series detailing mortgage activity prepared by the Spanish Mortgage Association.

Moreover, he said that in 2015, cement consumption amounted to 11.5 million tons, “similar to the levels seen in the 1930s and almost six times lower than the historical peak”.

“It would be interesting to validate and understand that real estate cycles in Spain are 16 years long, eight years of price and activity decreases, followed by eight years of rises”, said Fernández-Aceytuno, before going on to list the five key indicators for determining at which point we are in the cycle.

The five key indicators of the real estate sector

The first is the relationship between mortgages and transactions, regarding which he noted that during times of growth and recovery, the number of mortgages exceeds the number of transactions. “In Spain, that relationship was reversed in 2011; the good news is that since 2015, the number of mortgages granted has grown more quickly than the volume of house purchases”, he said.

Similarly, he indicated that the relationship between the percentage of appraisals commissioned by financial institutions for own assets and loan collateral has varied “significantly” from those commissioned by end clients to support new mortgage applications.

In terms of the creation of new households, Fernández-Aceytuno highlighted that, according to sources at La Caixa, almost 75,000 new households were created in Spain last year, which represents just 20% of the historical maximum. According to the Bank of Spain, the reference figure should amount to around 250,000 new households per year.

Similarly, he said that the New Home Census for 2016 compiled by ST-Sociedad de Tasación reported around 5,400 new homes for sale, compared with the 45,000 resulting from the calculations published by the Ministry of Development.

The variables that determine this difference are: the age of the home, its rental yield and the preference of property developers and banks to sell their homes in more favourable economic environments.

Finally, in terms of the evolution of outstanding mortgage balance, he said that currently the figure for the volume of loans being repaid exceeds the figure for the granting of new mortgages. “Although the latter increased at a higher rate in 2015, for as long as the net mortgage volume continues to decline, the recovery will just be a goal”.

Original story: El Economista

Translation: Carmel Drake

How Will Sareb Value 250,000 Homes In 3 Months?

2 December 2015 – Cinco Días

Value around 2,778 properties per day. Broadly speaking, that was the contemporary Herculean task that the Bank of Spain entrusted to Sareb when, after more than a year and a half of deliberations, it published legislation on 2 October to govern the accounts of the bad bank.

The new regulations gave the firm until the end of the year to re-appraise at least half of its portfolio – it must complete 100% of its re-appraisals by the end of next year – to value its assets at market prices.

The exercise involves the valuation of 250,000 properties, some of which are physically owned by Sareb and others, which serve as collateral for the problem loans that the bank inherited, in just three months. The company expects to complete this milestone by block booking the sector’s largest appraisal companies and taking advantage of a couple of valuable concessions to the rules.

The first, and perhaps most important, is that not all of the appraisals require an expert to actually visit the properties to perform the valuations in situ. These, known as ECO appraisals, are typically used when granting mortgages, and in this case are only compulsory for the valuation of Sareb’s assets worth more than €1 million.

Next, for completed residential properties, the bad bank may rely on statistical valuation models. The company is hoping to use this option whenever possible, according to sources close to the process, which will allow it to quickly re-appraise 43% of the value of its foreclosed real estate assets and 36% of its loans. In total, around 40% of the total value of the €45,000 million assets that it holds.

Finally, the regulations allow Sareb to develop its own methodological models to establish the price of very specific non-residential assets worth less than €1 million.

The option of avoiding thousands of visits and appraiser measurements in the field will allow Sareb, which finds itself in a race against the clock, to save precious time.

Extra time

Nevertheless, the race is a bit more relaxed than it might seem a priori. Although in theory, Sareb must comply with the obligation to re-appraise half of its portfolio before the end of 2015, in reality, it will be sufficient for the bad bank to request that the appraisals be completed before 31 December, even if some of them are not actually completed until January 2016.

In any case, the task must be completed before the company presents its results for the current year, given that it must recognise provisions in its income statement for the losses that it detects.

As a result, Sareb has commissioned almost all of the appraisal companies approved by the Bank of Spain that have coverage across the country and that invoice more than €1 million per year, in response to the mandate issued by the financial supervisor.

Beyond the small concessions described above, Sareb expects to achieve its objective thanks to the fact that it has already completed some of the work. On the one hand because its everyday commercial activity requires it to value all of the assets it puts up for sale, which has enabled it to accumulate a significant number of updated appraisals during the year.

On the other hand, given that the first draft of the accounting legislation was published a year and a half ago, Sareb’s team has been preparing itself for the consequences that it knew would arise when it was finally approved. In this way, the firm led by Jaime Echegoyen has created a cross-company working group to boost the rate of appraisals being performed and to make use of them to speed up its sales at the same time.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake