Banks Still Own Problem Assets Amounting To €213,000M

5 May 2016 – Cinco Días

Spain’s banks still have a heavy burden weighing down on them following the burst of the real estate bubble: they now own foreclosed assets worth €84,000 million, taken on since the start of the crisis.

According to the Bank of Spain in its financial stability report, published on Wednesday, that figure “has remained stable since December 2012, always ranging between €75,000 million and €84,000 million”.

Of that amount, 37.6% relates to land, 25% to finished buildings, 22.3% are foreclosed assets resulting from the acquisition of homes, and 5% are buildings under construction.

In the last year, land has decreased by 0.5 points, finished buildings have dropped by 0.43 points, homes have increased by 1.8 points and buildings under construction have remained stable.

But beyond these properties, the banks’ exposure to non-performing assets and problem loans amount to almost €213,000 million in Spain’s financial sector as a holw.

The banks have lots of “non-performing assets on their balance sheets, which do not generate any revenues for the income statement, but which do require financing”, said the financial supervisor, which has published data relating to 2015 year-end.

“A hindrance to solvency”

The Bank of Spain also warns that “although these two indicators have decreased, by 14.5% as a whole, over the last year, they still represent a significant percentage of the total assets of the banks in their business in Spain and they place negative pressure on the income statements of the entities, reducing their profit generation capability and therefore, representing a hindrance to increasing the solvency of the institutions”.

In terms of total loans that have been refinanced or restructured, that balance amounted to €205,000 million at the end of last year, which represents a YoY decrease of 6.4% compared with the end of 2014.

Of the total amount of loans whose initial terms have been adjusted, “51.5% relate to non-financial companies and 46.2% to households”, said the Bank of Spain.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

Popular Instructs Aliseda To Sell €4,000M Property Portfolio

21 January 2016 – Expansión

(…) Following on from Banco Popular’s announcement yesterday that it plans to divest assets worth €8,000 million…. Aliseda, the company ultimately responsible for handling the sale of the real estate assets sitting on Popular’s balance sheet…has been given a mandate to find a buyer for a portfolio of properties with a book value of €4,000 million. The market price of the portfolio has not been revealed.

Aliseda is owned jointly by Banco Popular (which holds 49% of its share capital) and the investment fund Värde, which controls the remaining 51%. During its first round of contacts to identify parties potentially interested in purchasing the property portfolio, the heads of Aliseda have identified half a dozen investment funds that may put forward bids.

In addition to this block sale of properties, Popular’s plans for the divestment of its non-productive assets this year include the sale of another €4,000 million of properties and loans.

The aim is to significantly reduce the non-productive part of its balance sheet. If the forecasts that the entity plans to announce next week at its 2015 results presentation are fulfilled, then Popular will succeed in reducing its problem portfolio by 25% by the end of this year. Such an acheivement would not only lighten the load on its balance sheet, it would also represent the clear implementation of one of the recommendations that the European supervisory authorities are making, with more emphasis on the European banks. That recommendation urges banks to take advantage of the provisioning efforts made in recent years and to sell non-productive assets that are weighing down on their accounts, particularly those that have associated maintenance and financing costs, as they are also penalising their income statements.

In order to put the objective that Popular is setting itself into context, it should be noted that the bank sold properties worth €1,000 million and non-productive assets amounting to €1,500 million during the first nine months of last year (the most recently available public data). Market sources consider that the combination of sales that Popular wants to carry out will have a neutral effect on the income statement, from the perspective of direct revenues, given that the discounts on the net value of the properties included in the portfolio that it wants to sell over the coming weeks will likely be offset by the net revenues that it will obtain from the sale of the other assets to be sold.

Nevertheless, overall, the operation should result in cost savings for Popular amounting to more than €200 million, according to market sources, given that the associated maintenance and operating costs will disappear and there will be no need to make new provisions for the assets sold. Moreover, and, above all, the bank will make significant savings in terms of the financing costs associated with its assets. (…).

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Sareb Unlikely to Acheive Any Of Its Goals For First 5 Years

29 December 2015 – Economía Digital

Sareb, the bank that was formerly chaired by Belén Romana and which, following her resignation, is now led by Jaime Echegoyen (pictured above, centre), is about to close its third year of activity. And it is doing so with a great deal of uncertainty over whether it will be able to fulfil the four main objectives it set itself in 2012.

Those objectives were: to reduce its balance sheet by 44% by December 2017; to repay 49.9% of its €50,781 million ordinary debt by that date; to have sold 45,000 homes, also by that date; and to guarantee shareholder returns of between 13% and 14%.

Unrealistic goals

The majority of its shareholders, even initially, did not expect to receive such high returns. But it seems like the other objectives are not going to be easy to acheive either, above all the main one: to repay €25,000 million of its debt within the next two years, half of which it paid out to acquire its 197,500 assets (more than 107,000 real estate assets and almost 91,000 financial assets).

Despite the work performed over the last three years, and having repaid €8,500 million of the €50,781 million that it must return to the savings banks that transferred those assets, it is a long way from achieving the objective set out for the company’s first five years of operation. To repay half of its ordinary debt between 2016 and 2017, it must fork out around €16,000 million.

Untenable position with increasing interest rates

And all of this is happening in an enviable situation in terms of interest rates, which meant that Sareb was able to reduce its financing costs, by lowering the spread on the renewal of its bonds, at the end of the first half of the year and will do so again at the end of 2015. In the event of an increase in interest rates, which will happen, sooner or later, the situation will automatically worsen.

The first step that Sareb must take to be able to repay half of its debt by the end of 2017 involves reducing its balance sheet by 44%. So far, as at June 2015, it had reduced its assets by just 14%. And then only thanks to the good performance of the financial assets, which decreased by more than €7,000 million, given that, by contrast, the value of its real estate assets has barely changed from the initial balance of €11,357 million.

Minimal reduction in assets

That lack of variation in terms of the value of its real estate assets is due to the fact that the sales that have been made fall well short of the 45,000 house sales forecast between 2013 and 2017, and because the foreclosure of property developer mortgages have ended up increasing the number of properties on the bad bank’s balance sheet.

At the end of 2015, Sareb still owns more than 90,000 of the 107,000 real estate assets that were transferred to it when it was first created, in February 2013, despite numerous campaigns launched in December by both the bad bank and by the servicers entrusted with the sale of these assets.

New accounting circular

And as if that were not enough, the Bank of Spain published a new accounting circular earlier this year. It was both expected and feared by Sareb, and it obliges the bad bank to individually value its assets at market prices, compared with the criteria used when they were transferred, which involved average discounts by asset type.

In theory, the accounting impact of the measure is not expected to alter the revenues streams and, if, as expected, new provisions are required, then they will be drawn from the conversion into capital of the amounts required from the €3,600 million subordinated debt in issue and subscribed to by around thirty investors. Those investors include the State, through the FROB, which is the main shareholder, with €1,652 million, followed by all of the main banks, with the exception of BBVA.

Original story: Economía Digital (by Juan Carlos Martínez)

Translation: Carmel Drake

Sabadell To Invest €450M In Its Hotel Arm

4 December 2015 – Expansión

Hotel Investments Partnership (HI Partners), the hotel management and investment arm of Banco Sabadell, is backing itself forward to become one of the main players in the Spanish hotel sector. The firm wants to become one of the largest hotel owners in Spain, involving itself in the management of hotels and improving their income statements. “There is a significant opportunity in the market for the creation of large portfolios of hotel assets”, says Alejandro Hernández-Puértolas (pictured above, centre), CEO of HI Partners.

The company will invest €450 million over the next three years to refurbish and increase the value of its hotels, an amount that will be completely financed by Sabadell during this first phase.

The bank controls 99% of the company’s capital and Hernández-Puértolas and two other partners, Sergio Carrascosa and Santiago Fisas (pictured above, left and right, respectively), own the remaining 1%. Enric Rovira, Deputy CEO of the Sabadell, is the President of HI Partners, which has a dedicated team comprising 22 professionals and is managed independently of the bank.

Creation of two vehicles

Sabadell transferred 22 hotels with 1,600 rooms to HI Partners, after it had accumulated them on its balance sheet during the crisis as the result of foreclosures due to unpaid debts. Moreover, the entity has entrusted the team with the management of a portfolio of hotel debt amounting to €800 million, which as around one hundred assets associated with it. According to Hernández-Puértolas, around thirty of these hotels may be transferred to HI Partners over the next few years, increasing the number of rooms owned by the investment company from 1,600 to 8,000. Meanwhile, HI Partners is also analysing the purchase of assets in the market that are not linked to the bank.

For the management of this real estate portfolio, HI Partners has just constituted two new companies: HI Partners Holdco Value Added and HI Partners Holdco Gestión Activa. The first vehicle will be the focus of most of the company’s efforts and will receive around 90% of the investment. It will take ownership of the best hotels in the portfolio, notably the largest properties, those situated in premium areas and those capable of generating significant yields once they have been refurbished. This company currently owns three assets: the Hotel Prestige Coral Playa, located on the Costa Brava; the Silken Málaga – which HI has just purchased from Urvasco -; and the new hotel that the company is constructing on Calle Atocha in Madrid, which will be managed by the Axel chain.

The thirty-odd hotels to be transferred to HI Partners from Sabadell’s debt portfolio are also expected to be incorporated into the Value Added company. The challenge is for that vehicle to generate an EBITDA of €35 million in 2018 and of €70 million in 2021.

Meanwhile, HI Partners Holdco Gestión Activa now owns 19 hotels, the majority of which are smaller properties, located in secondary areas. The objective is to divest the majority of these establishments, although the firm wants optimise their management first. As such, it expects to sign agreements with several hotel operators to this end.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Blackstone To Buy €790M Of Property Loans From CaixaBank

22 July 2015 – Bloomberg

Blackstone Group LP is buying a portfolio of bad loans with a nominal value of €790 million ($858 million) from Spanish lender CaixaBank SA, according to two people with knowledge of the matter.

The debt is linked to newly completed residential units as well as land and homes under development, according to the people, who asked not to be identified because the deal is not yet complete. The sale of the portfolio, known as Tourmalet, is expected to close at the end of the week, the people said.

Spanish banks are seeking to sell off bad real estate debt that has weighed on their balance sheets since the financial crisis sparked a property crash. Lenders foreclosed on more than 70,000 homes in 2014 with Andalusia, Cataluña and Valencia hit the hardest, according to data from the National Statistics Institute.

The assets backing the CaixaBank debt comprise 88% residential property, 9% land and 3% commercial property, according to a sales document obtained by Bloomberg News. The assets are mainly based in Andalusia, Madrid, Castilla La Mancha and Cataluña, according to the document.

Blackstone, which is run by billionaire Stephen Schwarzman (pictured above) has become the largest private equity real estate investor.

Spokesmen for Blackstone and CaixaBank declined to comment on the deal.

Original story: Bloomberg (by Sharon R Smyth)

Edited by: Carmel Drake

Bankia Sold 4,135 Properties In H1 2015 For €262M

17 July 2015 – Expansión

Bankia sold 4,135 properties during the first six months of 2015, i.e. more than double the number it sold during the same period in 2014 (1,919). Half of the sales were made directly through branches and the other half were closed through intermediaries. These properties form part of Bankia’s stock and have nothing to do with the assets that the bank transferred to Sareb after receiving public aid.

The sales generated revenues of €262 million, up 82% on the year before. 92% of the sales relate to residential properties. The remaining 8% include the sale of retail premises, whose sales volumes increased 6-fold compared with the previous year.

At the end of the first quarter, Bankia had foreclosed properties on its balance sheet amounting to €4,213 million – this amount had barely changed since the end of 2014.

Original story: Expansión (by M. Romani)

Translation: Carmel Drake

Merlin Makes A Proposal To Buy A 30% Stake In Testa

20 April 2015 – Expansión

Strategic alliance / The listed real estate company, which is increasing its share capital by €614 million, has made a proposal to the construction group Sacyr to acquire 30% of its subsidiary, which will also become a Socimi.

The scarcity of well-located real estate has led many investors to design imaginative solutions in order to invest. That is the case of Merlin Properties. The largest Socimi (listed real estate investment company or ‘sociedad cotizada de inversión en activos inmobiliarios’) on the stock exchange, with a market capitalisation of €1,714.6 million and an asset portfolio worth €2,417 million, wants to increase its assets through the purchase of a significant stake in a company and it has focused its attention on Testa, the equity subsidiary of the Sacyr group.

Testa is almost entirely owned by Sacyr (99.93% stake). The remaining shares are listed on the stock exchange. For the last few months, the company chaired by Manuel Manrique has been looking for a partner to inject capital into the subsidiary. The search by its ally eventually led Sacyr to propose a public offering of shares (OPS or ‘oferta pública de suscripción’) aimed at institutional investors in order to strengthen Testa’s balance sheet. The goal is to place 30%.

Although the stock exchange placement has already been proposed, the possibility that Merlin will acquire that percentage for around €500 million and become the preferred partner in Testa is gaining momentum, according to sources close to the process.

Both companies would lead the real estate company’s new phase, whereby Sacyr intends to convert Testa into a Socimi and so benefit from the tax advantages afforded by that company structure. This option would also allow Merlin to acquire a stake in Testa and comply with the regulations that permit Socimis to own subsidiaries or stakes in other companies of that type.

Merlin’s interest in acquiring a stake in Testa has not put a stop to the OPS for the moment. The amount of the transaction, whereby the construction group would end up controlling a 70% stake, is valued at around €500 million, according to various analysts.

The Socimi chaired by Ismael Clemente, has more than enough financial muscle to handle any transaction. On Wednesday, Merlin announced a capital increase worth €613.7 million. The real estate company will complete this transaction less than a year after it was first listed on the stock exchange, since it has already invested the €1,250 million it secured on its debut in the market. Now, the Socimi, owned by UBS, Marketfield and Gruss Capital, is evaluating new investments amounting to €2,000 million. “The company has a portfolio of projects and potential investments amounting to approximately €1,950 million, of which €170 million correspond to assets and investments being analysed on an exclusive basis or as part of a due diligence process; and another €1,780 million relating to assets and investments in the analysis phase”, says the company in an admission prospectus for the new shares published yesterday in the CNMV. The capital increase will carry preferential subscription rights and will take place between 18 April and 2 May.


Testa owns real estate assets worth €3,180 million, according to the latest appraisal performed as at 31 December 2014. These include the Torre Sacyr, in the Cuatro Torres Business Area complex in Madrid and Diagonal, 605 in Bacelona. The company owns two office buildings on the Paseo de la Castellana (in Madrid), at numbers 193 and 83, where the construction group has its headquarters. Moreover, it owns a number of shopping centres in Malaga and the Balearic Islands, as well as residential housing blocks, which it rents out. In 2014, it recorded a turnover of €187.9 million.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

The Five Largest Banks Sold 19% More Properties In 2014

10 February 2015 – Cinco Días

Banks are stepping on the gas in the race to reduce the weight of properties on their balance sheets. Last year, Santander, BBVA, CaixaBank, Sabadell and Popular sold 86,726 properties in total, an increase of 18.7% on the 73,000 units sold during the previous year. However, this boost in the rate of sales has not been reflected on the revenue side.

In fact, revenue from this activity grew by only 6.4% from €10,699 million in 2013 to €13,619 million last year, due, in large part, to the reductions in the sales prices being applied by these entities. The pressure being placed on real estate assets by the significant provisions imposed by the Government in 2012 has allowed these five large companies to sell off 230,000 properties in just three years.

CaixaBank holds the record for the number of transactions – in 2014, it sold 23,400 of its own properties or 35,870 if we include those owned by developers that it supports. Some of this success was based on its commitment to the rental market, which accounted for €1,132 million of the €2,512 million generated from its foreclosed assets (or €5,432 million if we include sales conducted by third parties), whereas it takes an average of four years to sell foreclosed assets.

Overall, Caixabank generated losses from this activity amounting to €1,148 million, an impact that the bank hopes to mitigate between 2015 and 2016. This drive should be helped by the Texan fund TPG, which now controls the entity’s real estate company Servihabitat.

Another one of the entities that recorded the best results in this field in 2014 was BBVA, which opted to retain control of Anida, its real estate platform, contrary to the general trend towards outsourcing. BBVA sold off 23,069 properties in total, including both its own properties and those owned by the developers it finances and whose homes it sold; in total, it recorded income of €1,932 million.

As a result, BBVA generated 18% more cash in 2014 than in the previous year. The company says that it has noted “more buoyant demand” in “an environment in which prices are slowly stabilising”. The entity, chaired by Francisco González, celebrates the fact that its losses in this area decreased to €876 million in 2014 from €1,252 million in 2013. And explains that this improvement is based on a lower volume of outstanding properties that need to be cleaned up and the “the launch onto the market of foreclosed assets with a smaller adverse effect”.

Banco Sabadell follows next in the ranking; it has also decided to retain control of its real estate company, Solvia, and is considering a potential IPO, as it observes a gradual improvement in the market. The entity sold 16,172 properties in 2014, both owned and third party properties, for which it generated turnvoer of €2,744 million; in both cases these figures represented a decrease of 12% on the significant number of sales it recorded in 2013.

Banco Santander, which recorded strong sales during the early years, reduced its clearance rate to 11,615 properties last year, however the higher value of the remaining assets allowed it to still generate revenues above the €2,000 million it achieved in 2013.

Finally, Banco Popular is one of the entities that seems to have benefitted most from the outsourcing of its real estate platform, Aliseda, which is now controlled by a consortium of funds comprising Kennedy Wilson and Värde Partners. The entity, chaired by Ángel Ron, increased its sales from 3,900 properties in 2013 to 8,600 units last year, and doubled the corresponding turnover, from €732 million in 2013 to €1,503 million in 2014.

“We would not be able to increase sales at this rate if the provisions were not sufficient”, reflected the bank’s CEO, Francisco Gómez at the most recent results presentation, where he stated that these provisions have enabled the entity to account for “the properties at market prices”. As a result, the number two at Popular hopes to “increase the value generated from real estate sales over the next few quarters”.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake