Tag: balance sheet

Bankia Puts €450M Rental Property Portfolio Up For Sale

27 June 2018 – Expansión

Bankia is going to start a sales process for a portfolio of rental properties with a market value of €450 million, reports Reuters, citing two sources familiar with the operation.

The entity chaired by José Ignacio Goirigolzarri expects the interested groups to present their non-binding offers over the summer, so as to finalise the process with definitive offers from September onwards, indicates one of the sources.

This portfolio of rental properties forms part of the €4.9 billion in assets and loans foreclosed during the crisis that Bankia is trying to eliminate from its balance sheet.

At the end of March, Bankia had a gross exposure of around €16.6 billion on its balance sheet comprising non-performing loans and assets. The bank’s objective is to reduce its non-performing assets by around €9 billion.

Original story: Expansión

Translation: Carmel Drake

Project Ágora: CaixaBank Sells €650M NPL Portfolio to Cerberus

21 June 2018 – Voz Pópuli

CaixaBank is getting serious with the digestion of its real estate. The Catalan bank has just closed its first major divestment of 2018 and is analysing another possible large-scale operation to be completed in the second half of the year, according to financial sources consulted by Vozpópuli.

The sale that has just been announced is Project Ágora, a €650 million portfolio whose transfer has been agreed with Cerberus. According to the same sources, the US fund and CaixaBank have already signed a pre-agreement and are now negotiating the small print of the deal. Cerberus could pay around €200 million, according to market estimates.

Project Ágora comprises around 150 unpaid loans from large companies backed by retail premises, offices, industrial land and residential assets.

Strategic revision

Following this sale, the market is expecting CaixaBank to close a macro-operation during the second half of the year. The repurchase of Servihabitat, announced two weeks ago, is seen as a preliminary step, since that is what Santander did with Aliseda before it sold Popular’s real estate to Blackstone.

The sources consulted indicate that no process is underway yet, although the entity is reportedly working on some numbers and doing some preparation work in that regard. The entity led by Gonzalo Gortázar (pictured above) is being advised by consultancy firms, including KPMG. The Madrilenian banker wants to know whether undertaking an operation such as Quasar (Popular-Blackstone) or Marina (BBVA-Cerberus) will require it to recognise any new provisions.

CaixaBank has €14 billion in foreclosed assets on its balance sheet, worth €5.8 billion. That represents a discount of 58%, according to its accounts for the first quarter. Santander sold Popular’s real estate at a discount of 67% and BBVA sold its assets at a discount of 62% (…).

Gortázar’s team wants to avoid the market fixating on CaixaBank following the sales undertaken by Santander and BBVA, and the operations that Sabadell has underway.

The commitment from Cerberus

With Project Ágora, Cerberus is continuing to grow its real estate business in Spain. The fund led in Spain by BBVA’s former Finance Director, Manuel González-Cid, already purchased a portfolio from CaixaBank at the end of last year – Project Egeo – and is completing the purchase of 80% of BBVA’s real estate for €4 billion. For this, the comments to be issued by the Deposit Guarantee Fund (FGD) in the next few weeks will be critical.

In addition to the portfolios that it has been buying, Cerberus has a large part of its Spanish real estate interests in Haya Real Estate. After trying, unsuccessfully, to debut that entity on the stock market before the summer, the fund is negotiating its key contract and/or a possible acquisition of assets with Sareb. The fund certaintly has a great deal at stake with that operation.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Sareb Sold Almost 5,000 Properties During Q1, Up by 12%

14 May 2018 – Eje Prime

Sareb sold almost 5,000 properties during Q1. During the first three months of the year, the bad bank placed 4,782 units, of which 2,358 corresponded to own properties and 2,424 to loan collateral properties that were transferred from the balance sheet of property developers, according to a statement issued by the company. Compared to the first quarter of 2017, that sales figure represented an increase of 12%.

88% of Sareb’s sales between January and March involved homes, whilst 7% corresponded to the sale of plots of land and the remaining 5% to the sale of commercial assets that the bad bank held relating to the tertiary market.

Similarly, the real estate company has announced the proposal to its General Shareholders’ Meeting to appoint Juan Ignacio Ruiz de Alda as a new board member, as a representative of the Restructuring Fund (Frob). The executive, with experience at Metrovacesa and Banco Santander, amongst other companies, would take over from Lucía Calvo, who left the company in January.

In 2017, Sareb ended the year with a real estate portfolio worth €37,179 million and €3,050 million of repaid debt, meaning that the company had managed to reduce its indebtedness by 25% during its first five years of life.

Original story: Eje Prime

Translation: Carmel Drake

Sabadell Cuts its Property-Related Losses by 50% in Q1 2018

3 May 2018 – Eje Prime

Sabadell’s real estate weighs down on its income statement by half as much as it did a year ago. The bank’s losses resulting from the property business decreased from €161.1 million to €84.8 million in just one year, according to figures published by the bank at the end of the first quarter of 2018.

The division of the financial entity that manages its property (the Asset Transformation Unit) recorded a negative result but gave the bank reason to hope. Sabadell justified the improvement to the increase in the gross margin on real estate, which rose by 57%, to €30 million, as well as to the 50% decrease in provisions and the impairment of the portfolios, with respect to the opening quarter of 2017.

Moreover, the bank is continuing to work on cleaning up its balance sheet of toxic assets. Its latest move in this regard involved the launch of a sales process for a real estate portfolio worth €7.5 billion, for which several funds are already bidding. Three of them, Cerberus, Blackstone and Lone Star, have been testing the water with the entity by suggesting that the operation, which is expected to be closed in the summer, should also include its servicer Solvia.

In this sense, during the first quarter, Sabadell increased its coverage ratio over doubtful debt in its real estate business from 56.7% to 62.7%. Thanks to that, the bank is able to apply higher discounts on the sale of its portfolios without having to incur losses that would negatively affect its income statement. Currently, the portfolio of inherited real estate assets that the entity chaired by Josep Oliu still maintains is worth almost €12 billion.

Original story: Eje Prime 

Translation: Carmel Drake

Unicaja Takes In €20 Million Through Sale of Land

26 March 2018

Unicaja, the Malaga-based bank, is accelerating its sale of the real estate assets it was forced to take on during the financial crisis. Last year it sold a portfolio of land, reducing its holdings of foreclosed assets by one hundred million euros, and reported a gross profit, due to the transaction, of 20 million euros, according to a report.

In addition, Unicaja reached an agreement last year with the Norwegian fund Axactor to create two joint ventures and de-consolidate more than 4,000 foreclosed assets (in lieu of debt payments) valued at €252 million. The Nordic fund paid Unicaja between 150 million and 200 million euros in the transaction, according to knowledgeable sources. One of these companies will take control of 3,035 of Unicaja’s foreclosed assets, and the other will take on a further 1,034 foreclosed assets from España Duero. Axactor will control 75% of both, while the remaining 25% remain with the Unicaja group.

Unicaja’s real estate management platform, called GIA, will manage the properties. The majority are located in Andalusia and Castilla y León, where the two institutions are based.

The transaction has not had a significant impact on its financial statements, according to the report.

Property assets

In total, the Unicaja group, including its subsidiary España Duero, reduced its volume of unproductive assets by 21% last year. In absolute terms, €1.201 billion in toxic assets left its balance sheet. Such loans to developers and real estate assets generate many expenses and no income, reducing profitability.

Unicaja earned 138 million euros last year, 2.5% more than in 2016. The level of balance sheet provisions related to real estate stands at 64%, one of the highest in the sector. Its delinquency rate stands at 8.7%.

The bank has a market value of €2.225 billion. Investors who took part in its IPO in June 2017 have seen their initial investment go up by 23% in nine months.

Original Story: ProOrbyt Expansion – R. Lander / R. Sampedro

Translation: Richard Turner

Blackstone & Santander Finalise the Transfer of Popular’s Portfolio

22 March 2018 – Eje Prime

Blackstone and Santander are signing their agreement. Sources close to the operation have explained that the two groups are on the verge of sealing the deal that will see Blackstone take control of 51% of the share capital of the new company that is going to be created with the €30 billion in real estate assets from Popular. The new entity is going to be known as Quasar.

The US fund is also going to be responsible for managing the new company and its CEO is going to be Eduard Mendiluce, who is also the most senior executive at Anticipa, the other large real estate company that the fund owns in Spain, according to Expansión. Santander will own the remaining 49% of the shares in Quasar.

The new Project Quasar Investments has agreed to take out a syndicated loan for €7.3 billion from a group led by Morgan Stanley and Deutsche Bank. Blackstone itself is participating in the loan, through one of its subsidiaries, which will see it contribute €1 billion or 14% of the financing.

In parallel, the fund and Santander are going to contribute €3 billion in share capital to the company, which will amount to more than €10 billion. It is worth remembering that Popular’s non-performing loans were appraised at €10 billion, the book value at which they have been registered on the bank’s balance sheet after the clean-up carried out by Santander.

Original story: Eje Prime

Translation: Carmel Drake

Bankia Plans to Grant €400M Per Year in Property Developer Loans

28 February 2018 – El Confidencial

Talking about property developer loans at Bankia is like mentioning rope in the house of a man who hanged himself. Nevertheless, José Ignacio Goirigolzarri is not only not afraid of the business that took his entity to the brink of bankruptcy, he also wants to become an important player in that segment once again. His aspiration is to reach a market share of between 7% and 8% between now and 2020, which would mean granting more than €400 million per year since then. That is according to the new strategic plan for 2018-2020 presented by the entity on Tuesday. The plan did not excite the market for its forecasts, but rather for the announcement that it is going to return 20% of the bank’s capitalisation to its shareholders.

The President of Bankia estimates that “the real estate development market, in terms of turnover (not balances) is going to amount to between €5 billion and €5.5 billion over the next three years. We aspire to reach a market share in the origination of new loans of between 7% and 8%, from the 0% that we registered at the end of 2017”. The restructuring plan imposed by the European Commission for the entity’s rescue with public money prohibited it from participating in that business until now. “We think that it is reasonable and that we will be able to achieve it”, he added.

This ambition to enter the property developer loan market contrasts with its prudence in terms of retail mortgages, where it expects a decrease of 2.2% during the year. Bankia explains that “mortgages account for a very significant weight, representing around two-thirds of the bank’s total portfolio. It is reasonable for the balance to decrease and for higher quality loans to join the fold”.

These figures are incomparable with those recorded during the real estate bubble that burst in 2008: the entity transferred property developer loans and foreclosed assets to Sareb amounting to €22.3 billion. But the return to this activity by Bankia is nevertheless significant, no matter how much Goirigolzarri assures that “it does not represent a large lever” for future results. Moreover, the President clarified that now the developments are more concentrated both geographically – Madrid, Cataluña, Andalucía and Valencia account for 65% of the total – as well as business-wise – the largest 20% of operators control 25% of the market.

Is it different this time?

(…). According to one source in the sector, “it seems that the banks have emptied their balance sheets of property and are now wanting to fill them up again”. The move is so clear that even the Bank of Spain has issued its first warnings to the sector and has introduced safeguards in the form of the new accounting circular to prevent a repetition of the disaster.

The major argument that the entities are using to justify themselves is one that you always hear before any crisis: “This time it’s different”. “Despite the best moment, the banks are now much more prudent when it comes to granting loans. In the property developer business, for example, we are analysing the feasibility of the project to be financed in great detail, as well as the solvency and professionality of the applicant, who will also have to assume part of the risk associated with the operation”, said one of the big four.

The proposal to return capital attracted more attention than the plan itself

In all other respects, the strategic plan presented on Tuesday did not surprise the market, given that it is less aggressive than those unveiled by the bank’s competitors recently. Basically, Bankia forecasts that its profits will grow to €1.3 billion in 2020 due to: rate hikes (it is the entity that will benefit the most from the forecast increases); even greater synergies with BMN than expected (€190 million vs the €155 million previously announced); and a reduction in toxic assets and in the need to recognise provisions against them. It also expects to increase its market share in all segments, although that will account for less than 20% of its forecast growth.

Original story: El Confidencial (by Eduardo Segovia)

Translation: Carmel Drake

Santander & Blackstone Launch Spain’s Largest Financing Deal Since the Crisis: €7bn

2 January 2018 – El Confidencial

The largest real estate operation in Europe is going to also bring with it the largest financing deal the sector has seen in recent times. The sale of €30 billion in Banco Popular assets that Banco Santander agreed with Blackstone last summer is going to mark another milestone in January when the two partners plan to close a mega-loan amounting to €7 billion.

This debt will be assumed by the joint venture created ad hoc to buy the portfolio of assets. It promises to be backed not only by Spanish entities but also by large international investment banks and funds that invest in debt, some of which may include entities owned by Blackstone. According to sources familiar with the operation, the net value of the assets amounts to around €10 billion.

To finance that property portfolio, the liability structure of the new company (the assets and liabilities of which will be equal by definition) will consist of 30% capital and 70% debt. Given that Blackstone is going to control 51% of the share capital and Santander 49%, each shareholder will have to contribute around €1.5 billion to the vehicle (the former will have to contribute slightly more given its slightly larger stake), whilst the remainder of the joint venture’s balance sheet will comprise the aforementioned €7 billion in debt that is expected to be signed this month.

The fact that the joint venture is going to have such a high percentage of debt allows the return on capital to increase: the lower that is, the greater the return with the same profits. That is what is called leverage and it is normal for it to be even higher in vehicles of this kind. By way of example, Sareb (the semi-public bad bank that absorbed the properties of the rescued savings banks) comprises 90% debt and just 10% capital.

Santander deconsolidates Popular’s real estate

After increasing the provisions against this portfolio to 63% in the case of foreclosed assets and to 75% in the case of the loans, the net valuation of all of the toxic real estate that the new company will own amounts to €9.7 billion. To that figure, we have to add the final valuation of Aliseda, the former real estate manager of Banco Popular, which also formed part of the operation. Almost half of the assets sold are land (€12.6 billion gross), followed by residential (€8 billion), retail (€2.1 billion), industrial warehouses (€1.5 billion) and hotels (€0.8 billion), as well as €4.9 billion split between offices, garages and other types of real estate assets.

This company was created because Santander wanted to remove (deconsolidate) Popular’s real estate from its balance sheet after it purchased the entity in June. It could have sold it in its entirety, but it chose to create a vehicle in which the majority was held by another shareholder – Blackstone, which fought off Lone Star and Apollo to win the auction and pay €5.1 billion – and retain a 49% stake. In this way, it will be able to obtain additional profits if the recovery continues in the real estate market and the company sells the assets for more than their current value. For the time being, it will have to inject the aforementioned share capital, amounting to €1.5 billion.

Although the small print of the conditions associated with this financing still needs to be confirmed, the deal underlines the growing business that is currently being seen in terms of real estate loans and debt funds. In the last month alone, Metrovacesa has closed a loan for €275 million and Testa has raised €800 million with the bonus of not having to mortgage any of its buildings.

Original story: El Confidencial (by E. Segovia & R. Ugalde)

Translation: Carmel Drake

Sareb Sells €150M NPL Portfolio to Oaktree

30 December 2017 – Expansión

The bad bank has closed the sale of several non-performing loan portfolios during the last few days of the year. A week ago, it announced the sale of a package of loans secured by properties to Deutsche Bank, whose nominal value amounted to €375 million. That was its largest sale of the year.

And yesterday, Sareb reported that it has reached an agreement to sell the so-called Project Tambo to the US fund Oaktree for a nominal value of €150 million. The debt is secured by residential assets and land located in the Balearic Islands, the Canary Islands, Cataluña, the Community of Madrid, País Vasco and the Community of Valencia.

Sareb has been advised by CBRE and Ashurst in this process, whilst Oaktree has awarded its mandate to JLL and Herbert Smith Freehills.

The bad bank, where the toxic assets of the rescued savings banks were parked, closed 2017 with a lower volume of transactions of this kind compared to 2016. Nevertheless, it has launched a trial to test an online sales channel, which may allow it to intensify its activity over the next few months.

Having said that, 80% of the revenues that Sareb obtains do not proceed from the institutional market, but rather from the direct sale of properties in the retail market.

In five years, Sareb has divested 27% of the 200,000 assets that it received initially and has repaid debt amounting to almost €13 billion. It has ten years left to liquidate the rest of its balance sheet. The entity’s cumulative losses amount to €781 million.

Original story: Expansión (by R. L.)

Translation: Carmel Drake

CPPIB Buys €800M RE Portfolio from Sabadell

20 December 2017 – Eje Prime

With year-end just around the corner, the major players in the real estate sector in Spain are putting the pressure on to close operations. Such is the case of Sabadell, which has just sold a portfolio of real estate assets worth €0.8 billion to the Canadian fund Canada Pension Investment Board (CPPIB) for approximately €0.2 billion.

This investment giant, which channels investments worth €210 billion, has won the auction for Project Voyager, through which the entity chaired by Josep Oliu is divesting €0.8 billion in problem loans linked to the construction, SME and hotel sectors, according to Voz Pópuli. The other finalists were Deutsche Bank, Bain Capital and Cerberus.

The completion of this agreement will represent CPPIB’s first investment in Spain; the fund is known for its conservative profile. With this sale, Sabadell will comfortably exceed its annual target of reducing its volume of problem assets by more than €2 billion. As at the end of September, it had decreased the balance by €1.764 billion, to just over €15.5 billion.

Original story: Eje Prime

Translation: Carmel Drake