Cerberus Fights Off Blackstone to Acquire €9.1bn in Toxic Assets from Sabadell

19 July 2018 – El Confidencial

Banco Sabadell has chosen who is going to take over its toxic assets. In the end, after an express process that has seen the bank receive several binding offers, Cerberus has fought off competition from the other interested parties, including Blackstone, Lone Star and Oaktree. According to a relevant fact filed by the entity with Spain’s National Securities and Market Commission (CNMV), “the real estate assets involved in the operation have a combined gross book value of approximately €9.1 billion and a net book value of approximately €3.9 billion”.

They correspond to two of the four foreclosed property portfolios that Sabadell had put up for sale, “Challenger” and “Coliseum”, which will be transferred to one or more newly constituted companies in which Cerberus will own a direct or indirect stake with 80% of the capital and Banco Sabadell will retain the remaining 20% share.

As for Solvia Servicios Inmobiliarios, it will continue to be wholly owned by the Catalan entity and will also continue to provide integral management services for the real estate assets of both portfolios included in the operation “on an exclusive basis”, according to the statement.

Once the operation, which is subject to the corresponding authorisations, has been closed, control over the real estate assets will be transferred and, therefore, those assets will be deconsolidated from the bank’s balance sheet. In this way, according to explanations from Sabadell, the sale “contributes positively to improving the group’s profitability, although it will require the recognition of additional provisions with a net impact of approximately €92 million”, which will improve the Catalan entity’s Tier 1 capital ratio by around 13 basis points.

The operation forms part of a restructuring plan designed by the entity at the end of 2017, through which it is seeking to remove €12 billion in toxic assets from its balance sheet. Sabadell closed last year with gross foreclosed assets amounting to €8.023 billion and non-performing loans amounting to €5.695 billion, according to real estate exposure data filed with the CNMV.

The other two portfolios that the entity wanted to divest are known as Project Galerna, containing €900 million in non-performing loans, which was acquired by the Norwegian firm Axactor, and Project Makalu, with €2.5 billion from the former CAM. With their sale, the entity will complete its real estate clean-up, just like Santander and BBVA have already done.

Original story: El Confidencial (by María Igartua)

Translation: Carmel Drake

Sabadell Engages Alantra to Sell 2 Portfolios Containing €8bn in Foreclosed Assets

11 April 2018 – El Confidencial

Banco Sabadell is in the running to try to complete its real estate clean-up this year, and to this end, has engaged Alantra to sound out the market to sell two portfolios known as Project Coliseum and Project Challenger, comprising €8 billion in foreclosed assets, which the entity has already started to show to potentially interested parties (…)

This move forms part of the plan designed by the financial institution at the end of last year to remove almost €12 billion in toxic assets from its balance sheet through the sale of a number of portfolios. The first two are already on the market and amount to €3.4 billion, but the main courses are about to be served.

In order to speed up the process, the entity chaired by Josep Oliu has opted to create a portfolio containing mainly Sabadell risk and another, subject to examination by the Deposit Guarantee Fund (FGD), containing properties proceeding from the former CAM, which are protected by the Asset Protection Scheme (EPA).

The first, according to financial sources, is going to comprise a gross volume of more than €5 billion, whilst the second will amount to around half that figure, at just over €2.5 billion, and it will need the approval of the FGD, given that it will have to cover 80% of the losses.

Sabadell closed last year with €8.0 billion in foreclosed assets and €5.7 billion in non-performing loans, according to the real estate exposure data submitted to the CNMV – Spain’s National Securities and Exchange Commission – and its average coverage ratio currently amounts to 55%.

The large buyers that Alantra is currently sounding out include the major funds that typically participate in these types of operations, such as Apollo, Lone Star, Blackstone and Cerberus, according to the same sources.

This potential divestment joins the two portfolios that Sabadell already has on the market: Project Galerna, which comprises €900 million in non-performing loans; and Project Makalu, comprising €2.5 billion in assets from the former CAM, according to Voz Pópuli. In both cases, KPMG is advising the sales process.

Moreover, as El Confidencial revealed, Solvia, the servicer arm of Sabadell, has decided to join the housing boom and create its own property developer, Solvia Desarrollos Inmobilarios, containing €600 million in land and unfinished developments.

The entity wants to grow this new property developer by signing agreements with different companies, funds and family offices interested in delegating the management and development of its land and developments.

If it manages to bring all of these plans to fruition, Sabadell will follow in the footsteps of Santander and BBVA, which last year completed their real estate clean-ups with the sale to Blackstone and Cerberus, respectively, of the bulk of their toxic properties. That would leave CaixaBank as the last major bank that still needs to make a significant move to comply with the guidelines set by Europe: to remove a decade of crisis from its balance sheet.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

The Banks Still Hold €77,250M Of Toxic Assets

13 June 2016 – El Mundo

The banks are still paying for the excessive risks that they assumed when they financed real estate operations virtually indiscriminately. Eight years after the burst of the real estate bubble, the default rate and volume of doubtful loans held by the top 12 banks have decreased, without exception.

Nevertheless, despite the balance sheet clean ups, the entities are still having to take on waves of land, buildings, homes and offices. By the end of 2015, the banks had absorbed €4,562 million more new foreclosed assets, which took the total volume of this toxic caption to €77,250 million. As such, they are having to take preventative measures and the recovery of their ordinary business is being hindered, according to a report prepared by Bankia’s research team.

The rescue of a sector in trouble may be hit by what is one of their major problems today. Since 2015, the recovery in prices and sales of the market that represents the main drag on the banks’ balance sheets is a relief for the sector because it allows the volume of sales of foreclosed assets to increase and at prices that are closer to the net values of the assets (which are discounted by the book value of the provisions recognised). This situation means that the banks will try to place significant portfolios of assets on the market over the next few months. The list of entities that are sounding out the wholesale market in search of buyers for their assets so far this year includes BBVA, Sabadell, Bankia, Popular…even Sareb, the so-called bad bank. (…).

Of the major Spanish entities to have survived the wave of mergers since 2010, BBVA is the one that held the highest volume of foreclosed assets at the end of 2015, with €16,138 million. Like in the case of Santander, that figure relates to property that the bank has had to take on in Spain and in the case of the group chaired by Francisco González, it is explained by the absorption of Catalunya Banc at the end of last year.

The entity created from the merger of the savings banks Catalunya, Tarragon and Manresa had already sold its portfolio of most problem mortgages to the investment fund Blackstone in April for €4,123 million (the portfolio had a nominal value of €6,000 million). Even so, BBVA is still, by far, the group that had to take on the highest volume of foreclosed assets in 2015: €2,385 million primarily land, which was 45% more than the second entity in the list, CaixaBank, which absorbed €1,634 million.

However, taking into account the recovery of the real estate market and the interest from investors, BBVA thinks that its exposure to toxic assets could be eliminated within a period of three years, as the group’s CEO, Carlos Torres, said in February. In this way, the asset digestion process could be entering its final phase, after a 2015 during which the entity sold around 21,080 foreclosed assets, 9% fewer than the year before, but with a significant increase in returns, which translated into capital gains of almost €120 million, compared with €17 million a year earlier.

At the other end of the spectrum are the entities that completed sales of assets to investment funds in 2015, which bought them at significant discounts. In this way, Kutxabank is the entity that liquidated its assets the quickest. Last year, it took a giant leap by reducing its volume of foreclosed assets by €1,503 million. In one of its major milestones, the bank created from the former Basque savings banks reached an agreement with Lone Star to transfer half of its real estate portfolio, held in the subsidiary Neinor, for €930 million and to grant a management contract for the other half.

Bankia, meanwhile, was the next entity that most reduced its foreclosed assets by the most, although its figures were much smaller than Kutxabanks, with sales of €352 million. (…).

Original story: El Mundo (by César Urrutia)

Translation: Carmel Drake

Banks Delay Property Sales & Await Higher Returns

11 August 2015 – Cinco Días

Spain’s banks are delaying their property sales and are instead waiting for conditions in the market to improve significantly before they increase their rate of sales. That was the conclusion of a report published by the ratings agency Moody’s in May about the management of the property glut still sitting on entities’ balance sheets, which now amounts to €83,000 million. And the trend has been confirmed by the (most of the) banks themselves in their recent half-year results presentations. (…).

In particular, Santander, BBVA, CaixaBank, Sabadell, Popular and Bankia sold 32,397 properties in total during the first six months of 2015, which represents a decrease of 18% with respect to the 39,241 transactions recorded during H1 2014.

However, the transactions this year have been closed with average discounts of around 35% – a significant improvement on the  60% discounts that the entities were forced to accept just a few years ago, as they desperately tried to get rid of the assets they had accumulated on their balance sheets following the burst of the real estate bubble. Some entities are now even generating profits from the sale of properties.

That is the case of BBVA, which recorded profits of €36 million from the sale of real estate assets worth €456 million during the last quarter. This turnaround enabled the entity to reduce the losses from its real estate arm to €300 million during H1 2015, which represents a decrease of 35% on the negative figures it recorded a year earlier. And it achieved this result selling half as many properties, with 5,190 transactions closed in the 6 months to June 2015, compared with 11,402 in H1 2014.

Banco Santander also reported similar success…the entity sold 5,200 properties during H1 2015, compared with 6,000 during H1 2014…it closed Q2 2015 with the “smallest quarterly loss” ever since the creation of the bank’s RE arm.

Meanwhile, Banco Sabadell reduced its sales volume by a third from 7,541 during H1 2014 to 5,190 in H1 2015, and with lower discounts – specifically, with an average reduction to gross value of 46.4%, versus 52.4% last year and 60% in 2013.

CaixaBank sold 5,907 properties in H1 2015 compared with 7,392 in H1 2014…and has also offered lower discounts this year.

However, two banks stand out as the exceptions to the rule – Bankia and Popular – which actually both increased their sales volumes during H1 2015. The former sold 3,345 properties in H1 2014 and 4,135 in H1 2015, with discounts this year of 35%…(…). Meanwhile, the latter really bucked the trend, with the sale of 1,172 properties in H1 2014, increasing to 4,135 in H1 2015, whereby doubling its revenues from asset sales…(…).

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

Sacyr Sells Its Subsidiary Testa To Merlin For €1,793M

9 June 2015 – Expansión

Strategy / The construction company cleans up its balance sheet with this transaction and improves its financial position, with a view to growing its international construction and concessions businesses.

Yesterday, Sacyr agreed the sale of its property subsidiary, Testa, to the Socimi Merlin Properties for €1,793 million. The group chaired by Manuel Manrique (pictured above right), which has been advised by the bank Lazard, has opted for Merlin’s proposal after rejecting the bids made by other investors such as the US fund Blackstone and the real estate company Colonial.

The agreement forms part of an “accordion operation”, in which Testa will simultaneously make a contribution to its shareholders of €1,196 million, through an ordinary dividend of €527 million and a reduction in share capital of €669 million. Through this transaction, Sacyr and Testa will normalise their balance sheets.

The sale comes just two days before Sacyr’s AGM, to be held on Thursday, where the Chairman of the group, Manuel Manrique, will reveal the foundations of the new industrial plan based on international construction and the development of concessions.

The largest Socimi

Merlin is the largest Socimi (listed real estate asset investment company) on the Spanish stock exchange, with a market capitalisation of €2,208 million and a portfolio of assets worth €2,594 million. The company debuted on the stock exchange on 30 June last year with €1,250 million of share capital from investors such as UBS, Marketfield and Gruss Capital.

Merlin, the real estate company controlled and chaired by Ismael Clemente (pictured above left), wanted to expand its assets with the purchase of a significant stake in a company in the RE sector and set its sights on Testa a while ago. Sacyr’s subsidiary closed yesterday with a market capitalisation of €2,906 million.

Sacyr holds a 99.93% stake in Testa; the remaining shares are listed on the stock exchange. The company has been looking for a partner for several months, to inject capital into its subsidiary. The search for an ally led Sacyr to consider an IPO of Testa’s shares aimed at institutional investors in order to strengthen its subsidiary’s balance sheet. The initial objective was to place 30% of the shares, but the construction company increased the option to 100%, once it had assessed the appetite of investors.

Merlin has more than enough financial muscle to handle this operation. In April, the company announced a capital increase amounting to €613.7 million. The real estate company, which earned €19.2 million during the first three months of 2015, has already invested the €1,250 million it secured from its debut on the stock exchange.

Testa owns real estate assets valued at €3,180 million, according to the most recent appraisal completed on 31 December 2014. Its properties include the Torre Sacyr, in the Cuatro Torres Business Area in Madrid, and Diagonal, 605 in Barcelona. It also owns two office buildings on Paseo de la Castellana, at numbers 193 and 83, where the construction group has its headquarters. Furthermore, it is the owner of several shopping centres in Malaga and on the Balearic Islands, and also owns residential blocks for rent. In 2014, Testa recorded turnover of €187.9 million.

(…)

Original story: Expansión (by R. Ruiz and C. Morán)

Translation: Carmel Drake

Colonial Repays €1,040M Loan Early & In Full

8 June 2015 – Expansión

Colonial, the real estate company in which Villar Mir owns a stake, has repaid the syndicated loan that it held amounting to €1,040 million, ahead of time and in full. It used the funds raised from its €1,250 million bond issue, closed at the end of May, to finance the repayment.

Original story: Expansión

Translation: Carmel Drake

BofA In Final Talks To Buy Hotel Loans From Bankia

27 May 2015 – Bloomberg

Bank of America Corp. is in final talks to buy loans with a nominal value of c. €400 million ($436 million) from Bankia SA, backed by hotels in Spain, said two sources close to the transaction.The loan package, called Castle, will likely be sold for less than the nominal value of the borrowings, said the sources, who asked not to be identified because the information is not public. They declined to elaborate on the size of the discount.

A spokesman for Bankia, Spain’s fourth-largest bank, declined to comment. An external spokeswoman for Bank of America in Madrid was not immediately able to comment.

Investors are targeting hotels in Spain as the economy recovers and the euro’s slide against a basket of currencies that include the pound encourages more foreigners to visit the country. A record 65 million tourists came to Spain last year, with the largest share, 15 million, coming from the U.K. In the first two months of 2015, spending by visitors rose an annual 8 percent to €6.6 billion.

European banks and asset managers plan to sell or restructure €70 billion of riskier real estate as they try to clean up their balance sheets, Cushman & Wakefield Inc. said in an April report. The region’s lenders, asset managers and bad banks such as Spain’s Sareb sold €12 billion of loans tied to property during the first three months of the year, Cushman & Wakefield estimates.

Original story: Bloomberg (by Sharon R Smyth)

Edited by: Carmel Drake

Bankia Will Earn Rental Income Of €324M From Torre Foster

6 April 2015 – Expansión

Bankia will earn €324 million from the rental of Torre Foster, the building that the bank owns in the Cuatro Torres complex on the Paseo de la Castellana in Madrid. In October 2013, Bankia signed an agreement to lease the property to Cepsa, a company owned by Abu Dabi. BFA-Bankia inherited the building from Caja Madrid, which purchased it from Repsol for €815 million in 2007. The lease contract was established for a period of eight years and may be renewed for another seven years. According to the annual accounts of Torre Norte Castellana, a fully owned subsidiary of Bankia, whose sole activity is the lease of the building, the annual rental cost is €21.63 million.

The entity must dispose of this asset as part of its restructuring plan. The rental contract, which was signed as part of the bank’s strategic plan for the period 2012-2015, included a purchase option, which is exercisable in 2016. It will be organised through the acquisition of shares in Torre Norte, at a price that will be determined on the basis of objective criteria that have already been agreed.

At the time, Bankia thought that the best way of generating value from Torre Foster was to rent it out; the building’s value was updated following the balance sheet clean up that the BFA-Bankia group performed in 2012, after its nationalisation. Torre Foster contains office space measuring more than 109,000 square metres, including a gross leasable area of 56,250 square metres, as well as 37,500 square metres in its five-storey garage, reports Europa Press.

Original story: Expansión

Translation: Carmel Drake