Metrovacesa to Invest €400M in a 2,870-Home Residential Project in Sevilla

7 June 2018 – Eje Prime

Metrovacesa is looking south in its growth plan for the next few years. The listed property developer has unblocked, together with the Town Hall of Sevilla, what is going be its largest project outside of Madrid and Barcelona and what constitutes the largest development currently being planned in the Andalucían capital.

The project is going to bear the name of the Sevillan neighbourhood in which it is located, Palmas Altas Sur, and will consist of a 2,870-home development, of which 2,000 units will be built by Metrovacesa. The remainder will be social housing properties and their construction will be entrusted to the Town Hall, according to El Confidencial.

For the property developer, this land is the most significant plot that it has undeveloped at the moment in its Andalucían portfolio – that region accounts for 25% of the company’s total land bank. The first 600 homes in Palmas Altas Sur will start to be handed over from 2021. Moreover, Metrovacesa will also build 400 VPO homes as part of its construction plan for the area, which will last for five years.

In terms of investment, in the access routes and urbanisation of the land, Metrovacesa is going to invest €60 million, which will come from the corporate loan the firm signed with seven financial institutions at the end of 2017. For the construction of the residential buildings, Pérez de Leza has announced that they will be financed through property developer loans for each phase.

Original story: Eje Prime

Translation: Carmel Drake

BBVA Reduces the Property Portfolio that it will Transfer to Cerberus by 12%

17 May 2018 – Expansión

BBVA is not holding back in its strategy to reduce its exposure to the real estate sector ahead of putting the finishing touches to its agreement with Cerberus. The entity has already cleaned up some of the portfolio that it will transfer to the US fund in September.

Between the reference date for the operation – the end of June 2017, and March this year, the date of the most recent audited accounts -, the bank has decreased its foreclosed assets by 12% – those assets proceed from unpaid residential and property developer mortgages.

The bank is going to create a joint venture with the US fund to reduce its real estate exposure in Spain to almost zero. BBVA will sell 80% of that joint venture to Cerberus for an estimated price of €4 billion. But that amount may vary, depending on the volume of foreclosed assets that end up being transferred.

Initially, a portfolio with a gross asset value of around €13 billion was defined. By March, the entity’s foreclosed assets balance had decreased to a gross value of €11.541 billion. Most of the portfolio comprises finished buildings and land, which are easier to sell now thanks to the recovery of the real estate sector.

To cover its gross risk, BBVA has recognised provisions amounting to €7.073 billion, which reduces its net exposure to €4.468 billion. The coverage ratio of the foreclosed assets amounts to 61%.

Sources at BBVA explain that the portfolio that is going to be transferred to Cerberus also includes the ‘other real estate assets’ caption. The bank’s gross real estate exposure, including both concepts, amounted to €12.472 billion in March compared with €14.318 billion in June 2017.

Until the close of the operation, which is scheduled for September, the assets to be transferred to the joint venture will not be finalised. “Under no circumstances will transferring fewer assets result in a loss to the income statement. In fact, this operation is not expected to have a significant impact on the income statement”, explain official sources at the entity.

Solvency

The agreement with Cerberus will improve BBVA’s solvency. In March, the bank saw its core capital fully loaded ratio worsen to 10.9%. But the transfer of the real estate portfolio to the fund and the sale of its business in Chile will improve that metric to 11.5%.

BBVA has loaned Cerberus €800 million to finance part of its purchase of the real estate portfolio from the bank. The loan has a term of two years and will not accrue any interest. The fund will repay the debt in a single payment on the maturity date.

Spain’s financial institutions have stepped on the accelerator to clean up property from their balance sheets following Santander’s macro-operation to deconsolidate real estate risk amounting to around €30 billion proceeding from Popular (…).

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake

Juan Velayos: Spain’s New Property Developers Will Regulate Land Prices

10 April 2017 – El Economista

Neinor Homes is advancing with the purchase of land to fulfil its plans, which include reaching a cruising speed of completing the construction of between 3,500 and 4,000 homes per year.

In the first quarter alone, the firm, which just a week ago was the first property developer to debut on the stock market in Spain since the crisis, spent €51.5 million buying up buildable land, amounting to almost 90,000 m2 and with capacity for the construction of 700 homes.

“We are continuing to see that now is a good time in the market to buy land”, said Juan Velayos, CEO at Neinor. In this sense, the director stated that the company that he manages is going to continue being very rigorous in these operations to achieve the property developer margin of 18% that it has set itself.

With respect to the rises in market prices that are being seen in some areas, Velayos considers that the new players in the property development market “will act as a natural regulator of the market”.

“I do not think that land prices are going to continue to rise by as much, provided buyers are disciplined. This is a business that is now working with its own funds and buyers with this profile are much stricter with their purchases”. “Unlike what I hear on the grapevine, I do not think that we are going to see a repeat of what has happened in previous periods and that we will only see price rises that make sense”.

The director said that the difference is marked by equity. “When the banks were putting up the cash, they (property developers) were more aggressive. Nevertheless, when you are spending money from your own pocket, you are more inclined to be disciplined. That phenomenon is going to regulate the market”.

On the other hand, Velayos considers that the availability of land is very important. “I think that Spain is going to have a lot of land for several years”. “It is true that there is a problem with buildable land, which we are all aware of. It is also true that the time needed to make land “buildable” is eternal, but there is no shortage of land”.

The director considers that “the solution is none other than to try to ensure that those time frames don’t last forever like they currently do, but there is no problem in Spain in terms of land classified as residential. Simply, the urban planning procedures need to adopt coherent deadlines, and that will gradually happen”.

“I believe that Spain is entering a new phase in which the sector is basically being institutionalised. I am sure that this cannot only remain in the private part of the value chain”. In this way, he is optimistic and hopes that the public sector will start to understand that “the property development market generates a lot of employment, wealth and contributes to GDP”, and that in the end “those harmed by the lack of land are none other than property buyers”.

The property developer will complete and hand over 300 homes this year, however, it will not be until 2018 when the homes of the new stage will start to be completed. Currently, Neinor Homes has more than 4,000 homes in progress and more than 2,000 homes in an advanced phase.

Original story: El Economista

Translation: Carmel Drake

Europe’s Finance Ministers Consider Creating An EU Bad Bank

4 April 2017 – Expansión

According to working documents to which Efe has had access, the European Union’s (EU) Economic and Finance Ministers will meet on Friday to discuss the possibility of creating a bad bank in order to offload the non-performing loans accumulated by European banks in the market.

The text, drawn up by Malta in its role as the current Presidency of the EU, will serve as a basis for reflecting on the actions that may be adopted at the EU level, to reduce the burden of non-performing loans on European entities, during an informal meeting of the ministers in Malta.

These non-recoverable loans account for 5.4% of the total loan portfolio and are worth more than €1 billion (equivalent to more than 7% of the EU’s GDP).

In addition to the creation of an asset management company, widely known as a bad bank, consideration will also be given to the option of creating a secondary market in the EU for these types of loans, to improve supervision, strengthen insolvency regimes and tackle the accumulation of pending court cases.

“Experience suggests that the creation of asset management companies can help to tackle the accumulation of non-performing loans (NPL) regardless of their capital structure (public, private or mixed)”, said the document.

The Maltese Presidency highlighted that the establishment of this company “would very likely” represent a boost to the secondary market for these assets, by creating a transaction history, and at the same time, grouping together these loans would reduce the information gap between buyers and sellers and would facilitate access to the market for smaller banks.

Nevertheless, the Presidency explained that in the past, there have been cases in which these bad banks have served only as a “cushion for removing NPLs from the banks’ balance sheets” and that there have only been “limited sales” in the market.

As a result, it advocates a hypothetical bad bank that fulfils certain “success factors”, such as suitable governance agreements and proactive strategies to maximise the value of its portfolio.

The current EU Presidency considers that this measure should be accompanied by a “substantial boost” in investment in impaired assets in the EU, by private and public investors alike.

In this sense, it underlines that the creation of this company should be executed “in line” with EU rules regarding bank resolution and State aid.

Meanwhile, the Economic and Finance Ministers will analyse the options for boosting a secondary market in which these loans could be offloaded, which is currently being hampered by a lack of reliable information about the quality of the assets and differences in information between sellers and buyers.

In this sense, it opens the door to the creation of “state-sponsored” platforms for transactions involving non-performing loans.

Original story: Expansión

Translation: Carmel Drake

INE: Fixed Rate Mortgages Enjoy Unparalleled Popularity

29 July 2016 – Cinco Días

The mortgage market is not only on track to recovery, it is proving unstoppable. The enormous and increasingly attractive mortgages being offered by the banks to secure new clients are encouraging homebuyers. And that is being reflected in the figures. According to the property registers, the signing of new mortgages for the acquisition of a home recorded a significant YoY increase of 34.1% in May, to reach 26,579 contracts, an increase that was ten basis points higher than the rise recorded in April (24.6%) and twenty points higher than the increase in March. With the YoY rise in May, mortgages recorded 24 consecutive months of increases.

And the data reveal another important fact to keep in mind. It seems that the firm commitment of the financial institutions to fixed rate mortgages is working, with increasingly more clients choosing that option. 80.4% of the mortgages constituted in May had variable rates, compared with 19.6% that had fixed rates. Just a month before, in April, variable rate mortgages accounted for 85.2% of the total, whilst fixed rate mortgages represented 14.8%. But the increase in fixed-rate loans is unquestionable if we compare the latest figures with those from just a year ago. In May 2015, when 19,732 new mortgages were constituted, 92.8% of them were variable rate and 7.2% were fixed rate. In other words, the proportion of new fixed rate mortgages has almost tripled in one year.

And, in recent months, the financial institutions have shown a greater predilection for fixed-rate mortgages, given the low interest rate environment in which they are operating. And, what’s more, the battle to win clients is still very much alive and kicking, with some entities now offering interest rates of less than 2%. There are several examples: BBVA is offering 15-year fixed rate mortgages at 1.90%. Bankinter is offering 1.80% on its 15-year mortgages and 1.60% on its 10-year products. Meanwhile, Activobank’s promotional mortgage to celebrate its anniversary establishes a rate of just 1.50% over 10 years. (…).

With just two days left of trading before the end of July, the average Euribor rate currently sits at -0.057%, compared with -0.028% in June. Thus, the decrease in Euribor has doubled in just a month. (…).

According to the provisional data for May, provided by INE yesterday, which comes from public deeds signed in the previous months, the 26,579 mortgages that were constituted during the month represent an increase of 12.6% compared with the 23,607 signed a month earlier.

The value of those mortgages amounted to €2,776.9 million, up by 33.1% compared to a year ago and 8.6% higher than in April. The average mortgage loan amounted to €104,480, which represents a reduction of 0.8% compared to May 2015 and 3.6% compared to a month earlier. (…).

Original story: Cinco Días (by M. Calavia)

Translation: Carmel Drake

Popular Engages Deutsche To Sell RE Assets Worth €4,000M

13 July 2016 – Expansión

Banco Popular has almost oiled the machinery that it will use to remove between €3,500 million and €4,000 million in property from its balance sheet. The entity chaired by Ángel Ron (pictured above) has engaged Deutsche Bank and EY to create a real estate company, which will be opened up to investors, in order to deconsolidate its assets, according to financial sources.

The plans are already well underway, although the complexity involved means that they will probably be delayed until the end of the year.

For the time being, Popular and its two advisors will focus on defining the perimeter of the assets to be transferred to the company and in creating the ideal structure. To this end, the bank will write to Spain’s National Securities Market Commission (CNMV) to obtain the necessary authorisations.

The plan being carried out by the entity is very similar to the one conducted by Santander, and to a lesser extent by BBVA, with Metrovacesa, when it reduced its stake and transferred its assets in order to deconsolidate them from their balance sheets. That forms part of the merger plan with Merlin Properties. Popular also owns a stake in Metrovacesa, and so has followed the process closely.

In theory, all of the assets to be transferred to the new company will be foreclosed: land, homes and work in progress properties. The new company will have its own management team, which will operate independently of the bank chaired by Ron.

Popular owned €16,132 million in foreclosed assets at the end of 2015. Of those, €4,352 million related to finished buildings; €6,685 million was land; €1,436 million comprised homes proceeding from (unpaid) mortgages; €398 million related to buildings under construction; and €3,255 million corresponded to other assets.

Problematic assets

In addition to these foreclosed assets, Popular held doubtful loans to property developers, which took its total exposure to problem assets to €34,000 million, making it the financial group with the largest real estate inheritance in the financial sector at the end of 2015.

That situation movitvated the €2,500 million macro capital increase that the entity completed last month. One of the main objectives was to increase the coverage of the problem assets from its current level of 38% to 50%, in line with the rest of the sector. The low coverage ratio was one of the impediments facing the entity in its efforts to undertake large sales of real estate assets.

The bank’s strategic plan involves reducing the volume of problem assets by €15,000 million between now and 2018, to €19,000 million.

In addition to its large operations, such as the one it is working on with Deutsche Bank and EY, Popular is also promoting the sale of properties through its commercial network and its real estate manager, Aliseda. That company is controlled by Värde Partners and Kennedy Wilson, which together own a 51% stake in the share capital, and Popular, which holds the remaining 49% stake.

Investors

Värde Partners is one of the major investors who will be invited to participate in the company. In addition to Aliseda, the US fund has joined forces with the bank in its credit card business, WiZink, in which it acquired a 51% stake. Värde also recently launched its own property developer, Dospuntos, which has an ambitious investment plan amounting to €2,000 million. Even so, the project will also be opened up to other international and domestic investors.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Abanca Sells €1,400M NPL Portfolio To EOS Spain

14 June 2016 – Expansión

Two years after taking ownership of Abanca, the Venezuelan company Banesco has started to sell off the bank’s toxic assets. Yesterday, the financial entity headquartered in Galicia reported its first sale of non-performing loans, amounting to €1,385 million, which represents approximately 20% of its total NPL portfolio.

All of the loans were overdue and unsecured, which makes it one of the largest operations of its kind in recent years and also, concentrated in a single buyer.

EOS Spain, a company that specialises in collections management was the winner of the competitive process. It is headquartered in A Coruña and is a subsidiary of the international group EOS. The transaction generated profits of €57.4 million for the bank, according to a statement filed with the CNMV.

The auction generated significant interest, with participation from around twenty investment funds and entities specialising in the recovery of overdue debt. For this competitive process, Abanca was advised by KPMG, the same firm that audits its accounts.

The operation (…) will open a series of future transactions as part of Abanca’s strategy to divest of its non-performing assets. In fact, it says that it is already evaluating similar operations for its non-strategic assets, with the aim of focusing the business on providing credit to families and companies and to boosting the economy.

One of the upcoming operations will involve a portfolio of non-performing loans, secured by mortgaged assets, although that will be smaller than the portfolio just sold. By contrast, the bank will hold onto the other overdue unsecured loans so that they can be managed by Abanca itself.

For EOS, the purchase “represents the strengthening of its relationship with Abanca”, according to a statement from the bank, as well as an intensification of competition and an improvement in its position in the domestic market.

Improved capitalisation

The main effect of the sale has been on the solvency of the entity, given that it had fully provisioned all of the non-performing loans that it has now sold. Abanca calculates that with this transaction, it has improved its capital coefficient by five basis points since the first quarter of the year, when it stood at 14.8%, one of the highest in the sector. Meanwhile, the doubtful asset coverage ratio amounted to 60.8% during that same period. According to the annual accounts, Abanca had decreased its doubtful debt balances by 30% last year to €2,695 million as at December 2015; furthermore, it reduced the weight of foreclosed assets on its balance sheet to just 1%.

Of the total impaired asset balance, more than half (€1,900 million) are secured and only €114 million were overdue by three months or less (as at December 2015), according to details disclosed in the consolidated annual accounts for 2015.

Beyond its consolidated balance sheet, the entity accounted for €5,376 million of financial assets that it had written off. The bank explained that it was not including them on its balance sheet because it regarded (the likelihood of) “their recovery to be remote”, although it clarified that it has not stopped trying to collect the amounts due.

Original story: Expansión (by A. Chas and J. Zuloaga)

Translation: Carmel Drake

Santander & Costain End Their RE Partnership In Sotogrande

2 July 2015 – Expansión

The Spanish bank and the British company are sharing out Alcaidesa’s assets – the development is worth around €90 million.

According to the agreement reached between the two partners, Santander will retain the majority of the land owned by Alcaidesa Holding for residential development, whilst Costain will keep two small plots of land and the operational management of golf courses and the marina, which are already in operation.

To complete the transaction, Costain will pay Santander €37.3 million for its 50% stake in Alcaidesa and will take on €8.5 million of the debt that the property developer owes to the bank. The bank, through its subsidiary Altamira, will hold onto the majority of the property developer’s land, worth €45.8 million.

Santander inherited its stake in Alcaidesa from Banesto, which in turn formed an alliance with Costain in the 1990s, to undertake this residential and leisure project in the Cadiz town of La Línea, near Sotogrande. The crisis that began in 2008 caused a slow down in the construction of more homes in Alcaidesa, which left several unbuilt plots of land that will now pass into Santander’s hands.

The parties expect to complete the transaction in September, once all of the administrative and tax formalities have been completed.

At the end of 2014, the funds Cerberus and Orion Capital paid NH Hotels Group €225 million for the assets (for development), golf course and hotels in Sotogrande.

Original story: Expansión (by Roberto Casado)

Translation: Carmel Drake

Supreme Court: Gains May Be Unfair If Banks Make Profits On Sale Of Foreclosed Properties

23 February 2015 – Expansión

The Supreme Court has established a doctrine and clarified the jurisprudence on the understanding that a bank may be unfairly rewarded in the event that it obtains a significant profit on the sale of a foreclosed home.

The High Court reached this conclusion after studying the case of a bank that launched foreclosure proceedings after the borrowers failed to meet their repayment obligations. The entity foreclosed the home for half of the value specified in the deed (escritura).

In this case, given that not all of the loan was paid off (following the foreclosure of the property), the bank filed a lawsuit against the borrowers and their two guarantors, for the difference between the debt and the value of the foreclosed property, plus interest and execution costs.

However, the borrowers had understood that, as a result of the action (the foreclosure), the debt would be considered to have been repaid, since the value of the property had been set by the bank itself on the basis that it would cover all of the debt relating to the mortgage. They argued, therefore, that the entity had obtained unfair gains.

Establishing doctrine

Although the (local) court rejected the claim and denied the existence of unfair gains, the Provincial Court of Córdoba upheld the appeal of the defendants and concluded that the foreclosure of the property at auction for a 50% discount was equivalent to a deed in lieu. Nevertheless, the Supreme Court did not share that ruling.

According to established case law, the Supreme Court Chamber, which has studied this case, stresses that “in principle, the exercise of the legal right to demand the unpaid part of the loan from the borrowers (following the foreclosure of the mortgaged property for 50% of its appraisal value) could not be regarded as a case of unfair gain”.

Nevertheless, the Supreme Court qualified its statement and noted that in the cases in which the foreclosure (of the property by the bank) is followed by a subsequent disposal (of the property) at a much higher price that the foreclosure price and for a very significant gain, then “it should match it with any outstanding loan and any claim made by the creditor to (share in) the profit”.

The Supreme Court Chamber insists that this clarification is supported by recent legislation introduced to strengthen the (legal) protection for mortgage borrowers.

Original story: Expansión

Translation: Carmel Drake