14 October 2016 – El Confidencial
Just three years after selling the management of their real estate companies to large international funds, Spain’s large banks are engaged in a widespread movement to try to regain control of those companies once again and as such, achieve absolute freedom to sell their properties by other means.
The reason? There are basically two motives. On the one hand, the banks consider that more profitable options exist to allow them to divest property without penalising their capital; and on the other hand, they want to save the management commissions that they are having to pay the funds for taking over the reins of these real estate companies, known in the jargon of the sector as “servicers”, and whose fees rise in line with the volume of assets managed.
Looking back…in December 2012, Banesto agreed the sale of Aktua to Centerbridge; in September 2013, Caixabank sold 51% of Servihabitat to TPG and Bankia sold 100% of its real estate company to Cerberus; two months later, Santander reached an agreement with Apollo to sell 85% of Altamira and Popular sold Värde and Kennedy Wilson 51% of Aliseda. Sabadell and BBVA, the other two large Spanish banks, chose to continue to manage their assets internally; the first through Solvia and the second through Anida.
Nevertheless, the majority of these marriages of convenience have been suffering from serious tensions for a while now; and these differences of opinion are causing the banks to begin to try to regain control of their real estate companies. According to El Confidencial, Popular is trying to reach an agreement with Värde to repurchase Aliseda and transfer its assets to the so-called “Proyect Sunrise”, a kind of bad bank through which it seeks to divest up to €6,000 million.
Santander has also been engaged in negotiations for severals months with Apollo, from which it already snatched a series of assets from the former real estate fund Banif to transfer them to Metrovacesa, the real estate company that has just finished merging its properties (not its land) with Merlin. In fact, that operation is an example of the type of project that the sector is now committed to, and which has caused all kinds of rumours to circulate about potential alliances.
For example, the entity chaired by Ana Patricia Botín and BBVA have found another way of getting rid of almost 7,000 homes (between the two of them) in the form of Testa, the rental housing subsidiary owned by Merlin. The two banks are deconsolidating all of the real estate assets that they are transferring to both Merlin and Testa, because they hold minority stakes, and this allows them to generate liquidity because the former is a listed company and the latter will be listed on the MAB from next year and on the main stock exchange within five years.
In the case of Servihabitat, Caixabank will be able to start to seriously consider a movement of this kind from next year, given that for the first four years (of the ten-year duration of their alliance), TPG has a special grace period, according to sources familiar with the agreement.
The case of Bankia is special, because the bulk of its assets were transferred to Sareb and it accounts for the real turnover of Haya Real Estate, the “servicer” created by Cerberus, given that the company was created with €12,200 million of the entity’s real estate assets and with €36,000 million from Sareb. Moreover, the fund acquired the companies Reser Subastas and Gesnova from Bankia.
Last year, Gesnova lost the entire portfolio of contracts that it held with the former real estate fund of Bankia, which was sold to Goldman Sachs, a blow that was compounded by Sareb’s decision to award Solvia the management of the portfolio of foreclosed assets that until then had been managed by Gesnova. In total, Haya saw a quarter of its revenues go up in smoke.
“All of the banks are looking at how to regain control of their servicers because they are realising that better alternatives exist, above all following the Metrovacesa operation, and in light of the fact that the real estate market is recovering”, said one source. “Everyone is talking to everyone else, lots of potential alternatives are being presented, which may or may not materialise, but the reality is that there is going to be a lot of movement in the world of the servicers over the next two years” said one executive from the sector.
Meanwhile, the funds are willing to withdraw from their investments provided the entities are willing to stump up the cash. In the case of Apollo, the figure is likely to exceed €1,000 million and in the case of Värde €800 million, according to sources. (…).
Original story: El Confidencial (by R. Ugalde)
Translation: Carmel Drake