Quabit Acquires Land from Sankar in Exchange for 4.55% of its Own Shares

3 August 2018 – El Español

Félix Abánades, President and largest shareholder of the listed real estate company Quabit, is continuing to immerse himself in a quagmire of capital increases that he has been promoting in order to raise funds to use to purchase land, on which to build almost 8,000 homes between now and 2022. His ambitious objective is to invoice almost €2 billion, generate a cash flow of almost €500 million and distribute €90 million in dividends.

Land in exchange for shares

Basically, these increases have been of a non-monetary nature, with the purchase of land in exchange for shares in Quabit. A much cheaper route than the two lines of credit amounting to €100 million that the firm signed with the fund Avenue between December 2016 and December 2017.

Those loans carry a clear risk, given that the principal, on which interest of between 12% and 16% is charged, must be repaid within a maximum term of 4 years following the drawdown date.

Repayment commitment

In light of the probability that the principal will not be returned on time, Avenue forced Quabit to issue warrants, an abusive right over the shares in favour of the fund that, in the worst case, would see it take ownership of 8.56% of the property developer.

For the time being, with Quabit trading at €1.77, at the close of business on Thursday, that option would be ruled out, given that the subscription prices agreed with Avenue for the execution of those rights over the shares range between €3.07 and €3.75.

Six capital increases in one fell swoop

It is for that reason that, in light of this negative outlook, Abánades carried out six capital increases in one fell swoop last November, for a combined total of €41.8 million, with the issue of shares at a price of €2, with a nominal value of €0.50 and a premium of €1.50.

All of those increases were of a non-monetary nature, in which Abánades captured estates from the Basque property developer Ondabide in Mijas (Málaga) and plots in Guadalajara contributed by Rayet, Abánades’s own company. The other four capital increases were placed by the President of Quabit with the Malaga-based property developer, Sankar Real Estate.

Agreement with Sankar

Quabit’s agreement with Sankar, for the subscription of those four increases, was aimed at obtaining plots in the Malagan municipalities of Mijas, Marbella and Estepona and in the Menorcan town of Mercadal, some in the form of proindivisos for 30% of the surface area.

The total operation will allow Sankar to acquire 4.55% of Quabit’s share capital, once the four increases have been fully subscribed. A package of 6.78 million shares, valued initially at an issue price of €13.56 million.

For the time being, Sankar has subscribed to two of these increases. With the public deed of the capital increase of the latter, relating to estates on the island of Menorca, the Malaga-based property developer has been obliged to report to Spain’s National Securities and Exchange Commission (CNMV) its stake as a reference shareholder of Quabit, given that it now owns 3% of the shares. Specifically, its stake amounts to 3.31%.

Losses of 12%

A package of 4.93 million shares that have accumulated losses of 12% compared with the €2 price for which they were issued, taking as a reference Quabit’s COB trading price on Thursday, €1.77.

The consequence of these non-monetary increases is affecting the personal stake of Félix Abánades, the President of Quabit, who has seen his position in the company decrease from 24% just a few months ago to the current level of 21.4%. He is trying to maintain the rate with the acquisition of financial instruments that, in the future, may yield another 1% of share capital.

Original story: El Español (by Juan Carlos Martínez)

Translation: Carmel Drake

Overseas Funds Compete to Finance & Buy Land in Spain

15 April 2018 – Voz Pópuli

At the beginning of 2012, at the height of the economic crisis, one of the directors of the Bank of Spain – José María Roldán, now the President of the AEB – faced a tough meeting with investors. One of them told him that land in Spain was worth nothing. “If that’s the case, then I’ll take it all”, replied Roldán.

And if he had done so, today, the executive would be a millionaire and the same funds that raised doubts over the banks’ balance sheets would today be knocking at his door to buy that land and finance developments on it.

The good times in the Spanish economy and the real estate recovery are causing the opportunistic funds to look for ways to take advantage of the situation. They are buying assets, real estate companies – Habitat and Inmoglacier are the most recent examples – and trying to fill the gap left by the banks in the financing arena. That is where they have set their sights on land, the last bastion, where traditional entities are still wary of lending.

“Bank financing is available for projects and occasionally for parts of plots, but it is inflexible and restricted to certain locations and pre-sales levels. Ours (financing) is flexible in terms of volume, periods and conditions”, says Luis Moreno, Senior Partner at Ibero Capital Management, a firm that has just teamed up with Oak Hill Advisors to lend the property developer at least €400 million. In just a few weeks, they already have projects on the table exceeding that amount.

Types of investors

“Bank financing is still almost non-existent and is only granted in very low percentages in situations of high pre-sales”, says Pablo Méndez, National Director of Capital Markets at Savills Aguirre Newman.

The example of Oak Hill is just one of many. Julian Labarra, National Director of Corporate Finance at CBRE, explains the different types of investors that are interested in land. A first group comprises funds that provide bridge loans. Whilst the banks require “that a development already has the necessary permits and a certain level of pre-sales”, some of the funds financing certain projects with “yields of 14-15%”. And they exit after 18-24 month, by which point the development meets the requirements of the traditional banks (…). Active funds in this segment include Incus, Oquendo and Avenue.

Other funds have chosen to team up directly with Spanish property developers: they put up the capital to buy and develop land and the managers contribute their knowledge. There are several examples: Lone Star with Neinor, Castlelake with Aedas, Cerberus with Inmoglacier; Bain Capital with Habitat; and Morgan Stanley with Gestilar.

Another similar, more recent, example is the association between FS Capital – from Finsolutia – and Inmobiliaria Espacio, a company owned by the Villar Mir group, to relaunch the construction business and sell homes by investing €400 million on land purchases (…).

Other funds also interested in land are those committed to financing the whole process, such as Oak Hill, and those that are buying portfolios of land from the banks and from Sareb, but not to resell them, such as Deutsche Bank and Blackstone.

By location, the experts agree that financing has gone from being limited to the large capitals to appearing in increasingly more cities. “(…). Until two years ago, interest was limited to Madrid, Barcelona, Málaga and the Balearic Islands. Now we are seeing operations along the whole coast, as well as in Sevilla, Zaragoza and Pamplona, amongst others (…)”, says Labarra, of CBRE. “This year we will see operations in cities such as Bilbao, Vigo, Salamanca, Zaragoza and Murcia, which have recently come onto the radar of the large investment groups”, adds Méndez, of Savills (…).

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Quabit Will Build 1,700 Homes With Funding From Avenue

30 December 2016 – Expansión

Yesterday, the listed real estate company Quabit signed an agreement with Avenue Europe International Management, whereby the fund will provide a line of credit amounting to €60 million, which Quabit will use to increase its portfolio of residential projects.

Specifically, the funds obtained through this line of credit will be used to acquire buildable urban land for the development of 1,700 homes next year, in Madrid and surrounding areas.

The funds from Avenue will finance 70% of the land acquisitions, whilst the remaining 30% will be financed by own funds from Quabit. Moreover, the real estate company may increase the amount of the credit line to €85 million.

Business plan

This agreement forms part of the business plan that the real estate company chaired by Félix Abánades set for the period 2015 to 2020, which includes returning to residential development, after years focusing on the sale of finished stock and on its financial restructuring.

To this end, during the first nine months of 2016, the listed real estate company has acquired plots of land in Boadilla del Monte (Madrid) and Guadalajara, and has launched five new developments, containing 304 homes in total. Under this plan, Quabit expects to hand over more than 3,000 homes, including assets from its own portfolio as well as those coming from new investments, with a forecast turnover of more than €950 million.

During the first nine months of 2016, Quabit recorded sales of €25.7 million and losses of €10 million, down by 23% compared to the same period a year earlier. Its EBITDA was negative (-€6.9 million), although it improved by 9.1% compared to the third quarter of 2015.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake