Sareb Sells NPL Portfolio To Bank Of America & Hayfin

16 September 2016 – Expansión

Sareb has just sold a portfolio of non-performing loans worth €70 million to Bank of America and Hayfin Capital Management (founded by former directors of Goldman Sachs), which is secured by several residential buildings in Madrid. The agents of the operation have been Haya Real Estate and Solvia, who have declined to comment. Sareb does not have its own sales network, but uses the exclusive services of the two real estate managers, together with those of Servihabitat and Altamira Asset Management.

According to sources close to the operation, the discount obtained in the transaction has been 50%.

As a result of the new accounting legislation, operations are now a lot more segmented and therefore smaller.

Solvia, which belongs to Banco Sabadell, has been collaborating as one of Sareb’s agents for almost two years. It won the management of a portfolio containing 42,900 assets, of which 33,000 were properties originally from Bankia and the others were loans acquired from Banco Gallego and Banco Ceiss with various kinds of real estate guarantee.

In March, Sareb completed the sale of another batch of loans, which were secured by industrial logistics assets, hotels and offices, located in Madrid, Barcelona, Cáceres and Tarragona. The nominal amount of the operation amounted to €73.7 million.

The opportunistic funds, the typical stars of these operations, are starting to withdraw from the Spanish market and funds with more potential are now arriving, including Socimis and family offices. The funds that have sold portfolios in the last four years have managed to obtain IRRs of between 10% and 20%, according to business people in the sector.

Sareb was created in 2012 and is owned by the FROB (45%) and by the main banks (55%), with the exception of BBVA. 80% of its assets are loans to property developers and the remainder are real estate assets. Their total nominal value amounts to €107,000 million. By size, the bad bank exceeds its Irish counterpart Nama. Even so its market share barely reaches 4%, because it is a very fragmented market. The large banks compete directly with Sareb in the sale of properties, but bank bad has the advantage of time on its side. It has 12 years to execute its business plan and is under no pressure to list on the stock market.

According to the latest statements by its Chairman, Jaime Echegoyen, Sareb should stop losing money next year. Recently, it has started to develop plots of land from scratch, which will result in 700 homes and €100 million of investment. 21% of Sareb’s revenues are generated by the sale of real estate assets. It is currently selling an average of 27 units per day.

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

Sareb Has Returned €1,000M Assets To Banks

24 June 2016 – Expansión

In recent years, Sareb has found itself with an unexpected line of business as it works to slim down its balance sheet: it has been returning certain assets to the entities that transferred them to it initally. The company chaired by Jaime Echegoyen (pictured above) has returned more than €1,000 million in real estate assets and loans linked to the property sector to groups that transferred it the assets in the first place.

Those €1,000 million represent 2% of Sareb’s balance sheet upon creation – €50,781 million – and 13.5% of the total reduction in its asset value since 2012.

The assets have been returned due to information or appraisal deficiencies made by the transferring entities, at the time of transfer, between 2012 and 2013. Thus, some assets were transferred to Sareb with values that exceeded their real values and other should not have been transferred to the company at all, as they did not meet the requirements.

Financial sources consulted indicated that some personal loans were transferred to Sareb, which had nothing to do with the purpose of the company.

According to Sareb’s annual reports, corrections are made to asset purchase deeds “for the purposes of identifying the improper categorisation of assets, changes in the perimeter and errors or variations in the estimated valuation on the transfer date”.

Bond returns

With these properties and loans, the entities have returned €1,000 million in bonds that they received in exchange for their assets. (…).

Sareb was created at the end of 2012 from the assets of all of the entities that received public aid during the European bank rescue. Firstly, the banks controlled by the Frob – Bankia, Catalunya Banc, Banco de Valencia, NCG Banco and Banco Gallego – transferred their properties and developer loans, and then those entities that had received aid but not been nationalised –Liberbank, Caja 3 and Banco Ceiss, together with BMN– transferred their assets.

Of all of these entities, Catalunya Banc has received the most assets (in return) from Sareb over the last three and a half years. The entity absorbed by BBVA has now been returned €365 million in total, mainly between 2013 and 2014. CB is followed in the ranking by NCG Banco – now Abanca – with €182 million; Bankia with €168 million; and Banco de Valencia – purchased by CaixaBank – with €161 million.

By year, the most active period in terms of property and loan “adjustments” was 2014, when Sareb returned almost €550 million worth of assets to the entities. But the real estate company is still finding problems with the homes and loans that it was transferred, and this year it has already sent back assets worth almost €60 million to Liberbank, Bankia, Caja 3 and Banco Ceiss. (…).

A new tool

Recently, Sareb launched a new internal tool to help it handle all of the assets that it has on its balance sheet and expedite their transfer. It is called Atlas and it performs more than 300,000 valuations each year, automatically, cross checking market data with socio-economic indicators, such as rental income and population size in each place. (…).

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Sabadell Puts €1,300M NPL Portfolio Up For Sale

20 April 2016 – Expansión

Sabadell has become the most determined Spanish entity when it comes to trying to clean up its balance sheet. The entity chaired by Josep Oliu (pictured above) has two portfolios up for sale through which it hopes to sell off €1,300 million of non-performing assets. Moreover, it may soon add another €1,700 million portfolio, if a large deal that the entity is currently preparing eventually goes up for sale. In total, €3,000 million, of which €2,200 million comprises doubtful loans linked to real estate developments, and which represent around one sixth of its doubtful assets in Spain. The remainder, €800 million, relate to non-performing consumer loans.

The latest divestment to come onto the market is Project Pirene, advised by KPMG, containing €460 million of problem assets linked to property developers, according to sources consulted at international funds. Unlike some of its recent operations, this one originates from Sabadell’s own business, and not from CAM, Caixa Penedès or Banco Gallego.

This operation combines Project Corus, with €800 million non-performing consumer loans; and Project Normandy, under assessment, with €1,700 million non-performing real estate loans, according to El Confidencial.

The Catalan group hopes to close the first two operations within the next two months, so that they may be accounted for in its financial statements for the first half of the year. Meanwhile, Project Normandy may be delayed somewhat due to its large size. In fact, the operation would be one of the largest seen in Spain in recent years. The largest, Project Big Bang, containing €4,800 million in foreclosed assets, was suspended by Bankia due to its complexity and the large discounts being demanded by the funds.

Sabadell was one of the Spanish entities that reduced its default rate by the most during 2015. Following the purchase of the British bank TSB, its default rate fell by almost five percentage points. If we exclude that acquisition, the rate fell by almost three percentage points, from 12.74% to 9.86%. In total, the entity manages €21,500 million of problem assets, with a coverage ratio of 53% for its doubtful debts and of 44% for its real estate assets.

Besides these operations launched by Sabadell, only a handful of other entities have decided to divest their problem assets so far in 2016, namely Cajamar, Bankia and BBVA. Popular announced that it would be very active, but it has not yet put any portfolios on the market.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Solvia Plans To Purchase Other RE Platforms

27 March 2015 – Expansión

The real estate platform expects to hire 200 people this year / Banco Sabadell is giving greater autonomy to its subsidiary, Solvia, which has taken a big step forward after being awarded the management of 42,900 assets by Sareb, worth €11,500 million.

Banco Sabadell wants to covert Solvia into a leading player in the Spanish real estate sector. The entity has proposed that it lead the consolidation process that the servicers in the market are expected to undergo (in the coming months and years). Servicers are the asset management platforms that were created in Spain following the burst of the real estate bubble and the restructuring of the financial sector. These companies were created as “bad banks”, in which entities placed the (distressed) assets that were accumulating on their balances sheets. In recent years, almost all of the financial institutions have opted to sell all or part of their platforms to specialist funds. Nevertheless, Sabadell has chosen to retain full ownership of Solvia and to promote its growth to the maximum.

“Solvia is the only servicer whose capital is held 100% locally; it is supported by a committed shareholder, a strong brand and an excellent system and team of professionals”, says Miguel Montes, CEO of Sabadell and the head of the real estate company.

As one of the winners of the contract to manage some of Sareb’s portfolio, Solvia now manages assets amounting to €34,000 million, with a portfolio of 135,000 units. Of this, €25,000 million relate exclusively to property and the remaining €9,000 million relate to loan portfolios.

Potential IPO

According to Montes, Solvia will grow through the purchase of new product portfolios and the acquisition of other platforms, since some of them have been left with small portfolios. “In Spain, there will be a consolidation (of the number of players) in the servicer market. Solvia will opt to purchase (some of its smaller competitors) to increase its size. We think that this is a business that is worth investing in”, he assures.

According to the director, if it grows in size, Solvia may consider an IPO. “Now is still not the right time to list the company on the stock exchange; before considering that, Solvia must establish itself as an independent multi-client servicer, but the stock exchange is not the only alternative, there are other options”, he says.

To accelerate growth and facilitate its ability to work with all kinds of external clients, Sabadell has decided to grant Solvia maximum independence, by providing the entity with the resources and structure necessary to operate autonomously. Thus, the company will depend increasingly less on the bank’s central services and will have its own management team. As such, it has launched a serious offensive to attract talent and recruit experienced professionals.

Solvia closed 2014 with a workforce of 240 people and this year expects to hire 200 more, to take its total number of employees to 440.

The real estate company recently hired Francisco Pérez – former director of the real estate developer Vertix – as the regional director in Cataluña. To strengthen its office in Madrid, it has hired Javier Román Palero from the fund Apollo.

The majority of the properties that Solvia manages following the award of Sareb’s portfolio, which in turn came from Ceiss, are located in the central region of Spain. Under project Ibero, Solvía also won the management of properties from Sareb that had previously belonged to Banco Gallego and Bankia. In total, 42,900 units with an original value of €11,500 million, although Sareb purchased them for €7,000 million. “We have completed the migration of the portfolio of assets that came from Ceiss and Banco Gallego; the migration of the properties from Bankia will be completed in May”, explains Montes.

To strengthen its autonomy, Solvia is expected to adopt a brand that differentiates it from Sabadell. In fact, at its regional headquarters in Barcelona, it already has a sign that does not include the letters “B” or “S” in the logo, which identify the bank.

Alicante

In parallel, Solvia has relocated some of its team to Alicante, where it has opened the registered headquarters of the property marketing platform. “In 2014, Solvia sold 16,200 units for €2,750 million. None of the banks sold as much as us”, highlights Montes.

In parallel to the sale of properties from the portfolio, Solvia’s other main business line is the direct development of newly built homes on land that it owns. “We have 1,400 homes under construction” – he says – “and we expect an annual production of one thousand newly-built homes”. According to the director, Solvia has already sold several entire developments. “The number of “off-plan” sales that we are recording is spectacular”, he notes.

Montes says that Solvia’s business is “strategic” for Sabadell, since it will allow the entity to harness the potential being offered by the change in the cycle of the Spanish real estate sector. “Instead of leaving it for someone else to do, we are willing to invest and work hard in this business to leverage the potential value of the real estate market”. He argues.

Solvia has also started to sell land, a market that was completely paralysed until now.

Original story: Expansión (by S. Saborit/S. Arancibia)

Translation: Carmel Drake

Sareb Continues To Review Its Asset Transfer Prices

12 March 2015 – Expansión

‘Sareb got married in a rush, without preparing a gift list, and after the ceremony it began to realise what the gift boxes it had come home with actually contained’. Shortly after the creation of the bad bank, one of its senior executives used this metaphor to explain the need to review the assets that the entity had received from the former savings banks.

In order to meet the deadlines set by Brussels for the financial bailout, Bankia, Novagalicia, Catalunya Banc, Banco de Valencia, Banco Gallego, Banco Mare Nostrum, Liberbank, Cajatres and Ceiss transferred a huge volume of properties and developer loans (to Sareb) in a mad rush.

On the basis of valuation reports performed by independent experts, the Bank of Spain set the price that Sareb paid for the assets: €50,781 million in total, in bonds guaranteed by the State. But Sareb reserved the right to review these transfer prices, in an operation known as the “correction of hidden flaws”, to make up for errors in both valuation and scope (perimeter) – assets that did not fall within the perimeter in the end and assets that should not have fallen inside the perimeter – and to make a claim for the difference.

One of the peculiarities of the transfer review mechanism is that the bad bank only allows for corrections in its favour. After reporting the errors detected to the former savings banks and evaluating the claims, Sareb corrects the differences by repaying the bonds it used to pay for them.

To date, the bad bank has already recovered €640 million of the amount it paid to the entities in relation to both valuation and scope (perimeter) errors. The entity most affected to date has been Catalunya Banc, with €318 million (of corrections), followed by Novagalicia (€182 million) and Bankia (€127 million).

But this total amount is expected to rise, because the company chaired by Jaime Echegoyen has reserved its right to review prices for up to 36 months, a period that will expire at the end of 2015 for the entities classified in Group 1 (Bankia, Novagalicia, Catalunya Banc and Banco Valencia) and in February 2016 for the entities in Group 2 (BMN, Liberbank, Ceiss and Cajatres).

Nevertheless, Sareb does not expect to work up until the deadlines in every case. It has already closed an agreement to finalise the review of the price paid for the assets transferred from Novagalicia, Catalunya Banc, Banco de Valencia and Ceiss. Now its investigation will focus on the properties and loans transferred from Bankia, Liberbank, and BMN; it still needs to sign an agreement to finalise the review with Banco Gallego or Cajatres.

Moreover, Sareb reserves the right to review for scope errors until the end of the remaining life of the (corresponding) asset(s), for those assets it paid for but which were never transferred or those that were transferred when they should not have been, such as any consumer loans.

The experts at the asset management company are basing their detailed analysis on the audit that was conducted by a consortium of thirteen companies, coordinated by the law firm Clifford Chance, but they will go into more detail for certain samples.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

Solvia Will Take Over Management Of Ceiss’s Assets From Next Week

26 February 2015 – Expansión

From next week, Solvia, the real estate arm of Banco Sabadell, will gradually incorporate assets from Sareb, the so-called bad bank, into its managament portfolio. Specifically, it will take over the management of assets that were originally held by Banco Ceiss.

In November last year, the Asset Managament Company for Bank Restructurings (Sareb) awarded Solvia, the real estate arm and recovery platform of Banco Sabadell, the management of a portfolio of 42,900 assets that had been originally held by Bankia, Banco Gallego and Banco Ceiss.

In total, 7,000 assets were held by Banco Ceiss; they will be added to those from Banco Gallego that Solvia is already managing. Only the management of the assets originally held by Bankia will remain pending; and that is expected to happen within the next few months”, according to Solvia.

Original story: Expansión

Translation: Carmel Drake