Tag: banking sector

BCA: How one Architecture Studio Became a Leading Player in Barcelona’s 22@ District

7 May 2018 – Eje Prime

Albert Blanch and Merche Conca founded BCA in 1994 without a portfolio of clients and working from the living room at home. 25 years later, the architecture studio is a leading player in Barcelona, where it has carried out projects with Socimis and funds such as Colonial, Lar and Blackstone, and has generated an assembly line in which thirty of its own professionals work on 45 projects each year. That number is the average that Blanch likes working with – “fifteen projects coming in, fifteen underway and fifteen being completed”, says the architect – who, from his office in the Sant Gervasi-Galvany neighbourhood, confirms to Eje Prime that, “when projects don’t come to your door, you have to go and look for them”. It was this approach that enabled BCA to overcome the crisis without leaving Barcelona and to grow its turnover by 200% over the last few years.

Proof of this is its presence in the 22@ district, the new fashionable neighbourhood for the tertiary sector in Barcelona. In the so-called technological hub of the Catalan capital, a melting pot for large office projects being developed in the city, BCA has worked on fifteen jobs, including the Cornerstone building, the UA1 property and Torre Pujades (…).

But in order to handle this volume of buildings in the most rapidly growing prime area of Barcelona, BCA has had to win the trust of various real estate players over the last two decades. Once again, Blanch refers to his motto of not waiting for the opportunities to come to you. In this way, he and Conca launched their studio with clients that were “very important but with very small projects, including several in the banking sector”, says the architect. Leading entities in Cataluña such as La Caixa and Banco Sabadell backed their firm, which started out designing bank branches, “a product that its very limited from an architectural point of view but for which there was a lot of demand at that time and that guaranteed us income to allow us to survive”, adds Blanch.

That specialisation carried out by BCA also boosted the growth of the studio. Heads of the banks that they worked with recommended Blanch and Conca to their superiors for most high-profile projects such as entire buildings and regional offices, but “combining these larger jobs with the bank branches, that was our formula for success”, says the architect.

The remodelling of Vía Augusta, 21 for Colonial launched them into the office sector 

The next success story came with the complete remodelling of a building owned by Colonial on the corner of Vía Augusta and Diagonal, in the heart of Barcelona. That project, which was completed in 2000, “really put us on the map in the office sector”, says Blanch. More than one property developer and fund called at BCA’s door after that and allowed the firm to participate in larger projects (…).

Following the building on Vía Augusta 21, many more projects emerged, mainly in Cataluña but also in Madrid, the Community of Valencia, Navarra, Murcia, the Canary Islands and Aragón. And BCA does not only survive on offices. The studio also carries out projects in the residential, hotel, facilities and urban planning sectors (…).

Like many other large architecture studios, BCA has also undertaken work at airports. The firm won a public tender to expand Terminal C at El Prat (…).

Original story: Eje Prime (by J. Izquierdo)

Translation: Carmel Drake

Moody’s: House Prices Will Rise By 8.6% Over Next 3 Years

3 November 2017 – El Economista

An increase in the proportion of the active young population and the greater affordability of housing will boost house prices in Spain by 8.6% over the next three years, according to forecasts from the ratings agency Moody’s, which has analysed the impact of demographic trends on prices in the residential real estate sectors of seven large European markets.

In the case of Spain, the risk rating agency forecasts a rise in house prices of around 5.6% in 2018, but then limits that increase to 1.4% per annum in each of the following years, until 2020.

“Low interest rates, an improvement in economic conditions and the higher proportion of the active young population will serve to boost the housing market”, says Greg Davies, analyst at Moody’s, adding that in the last decade, the proportion of young workers has increased by 8%.

The agency indicates that the current environment of low interest rates and the economic recovery, which is reducing the still high level of youth unemployment, are contributing to the affordability of housing in Spain, although it says that salary growth is still low, which is preventing some young professionals from buying a home, something that Moody’s expects to improve over the next few years.

In this sense, the agency points out that in 2014, around 14% of full-time workers in Spain earned less than 2/3 of the median income, compared with just 7% in Italy and 9% in France.

On the other hand, Moody’s underlined that Spain has experienced a decline in the demand for new build homes, whereas there has been a lot of activity in the second-hand market. Construction activity in the country currently represents just 40% of the volume recorded in 2007, reflecting, amongst other factors, the sovereign deleveraging, including the banking sector, which has led to a substantial reduction in residential investment.

Original story: El Economista

Translation: Carmel Drake

Fitch Warns Of RE Bubble In The Centres Of Spain’s Large Cities

25 October 2017 – El Mundo

The ratings agency Fitch is warning that a real estate bubble is now visible in the centre of Spain’s large cities, although it does not anticipate a widespread bubble in house prices across the country as a whole in the short term, due to the high volume of stock that still needs to be absorbed and the restrictions facing people wanting to access a home.

Those were the findings of analysis performed for the Housing Sector in Spain report published by the entity, which explains that bubbles involving these types of localised assets are now very evident: the strong demand and limited supply of housing in the country’s main cities are leading to extreme price increases that are becoming increasingly “unsustainable”.

According to the agency, in the central neighbourhoods of Madrid and Barcelona alone, prices have recorded an annual increase of between 15% and 35%.

For Fitch, this demand is being influenced by quantitative easing, purchases by foreigners and investment decisions, given that investors are looking to benefit from the appreciation in asset prices and rental yields. Nevertheless, the agency forecasts that these “ingredients” will not influence the overall real estate market in the short term.

Similarly, the ratings agency asserts that it is “highly unlikely” that the problems in the real estate market are correlated with the economic recovery in general and it forecasts that the average discounts being applied to sell foreclosed homes are going to continue to be very high and stable over the next few years.

This situation will continue for as long as the banking sector continues to have an excess stock of housing and for as long as buyers insist on significant discounts to acquire foreclosed homes, said the ratings agency.

According to data from the company, the discount on the sale of foreclosed homes is still “high”, up to 60% on average, compared to the initial valuation, whilst discounts can range from between 50% to 75%.

In this sense, the dispersion of the discounts on the sale of foreclosed properties is decreasing. In fact, the gap between the range of discounts decreased to 25 percentage points at the end of 2016 from 35 percentage points during the period comprising 2010 and 2011. Nevertheless, it says that this reduction is not widespread.

Problems accessing housing

On the other hand, Fitch explains that access to housing will continue to be complicated because the velocity of the house price index is exceeding wage variations.

In this way, the families’ capacity to save is increasingly reduced, also due to the labour market that favours temporary contracts over permanent ones, which makes it hard for would-be buyers to save enough to make the initial down payment of 20% necessary to buy a home.

The report also underlines that access to housing over the long-term may be limited by the gradual elimination of monetary stimuli in the market and the likely scenario of higher interest rates.

Original story: El Mundo

Translation: Carmel Drake

Apollo Warns Of Slowdown In Investment Activity In Cataluña

19 October 2017 – Expansión

Andrés Rubio, Head of Europe for Apollo Global Management, one of the largest funds in the world and one of the most active in Spain, has said in London that the Catalan crisis “is not good” for Spain or for Cataluña and that investors are already taking into account the risk caused by the political instability.

At a conference organised by EY and the Spanish Association of Capital, Growth and Investment (Ascri) in the British capital, Rubio explained that “Spain is a model country in Europe for how it has dealt with the (financial) crisis and for the reforms that it has undertaken, above all in the employment, taxation and banking fields”. Nevertheless, “what we are seeing now is not good at all, either for Spain or for Cataluña”, he said. “Any investor looking at Cataluña now is analysing the risk”, explained Rubio, who acknowledges that he has seen a sharp slowdown in the market. “There is less activity in Cataluña now than there was a month ago, that’s for sure”.

Apollo Global Management has been one of the funds that has invested the most in Spain in recent years. Since it decided to back the Spanish market at the height of the (financial) crisis, it has invested around €1,000 million. Its main assets include an 85% stake in Altamira Real Estate, a real estate manager purchased from Banco Santander in November 2013 for €664 million, and Evo Banc, which it acquired from Nova Caixa Galicia for €60 million. It also owns a portfolio of hotels purchased from La Caixa and it wants to grow further in that segment.

Funds

Rubio’s comments echo the opinion of the other major funds meeting in London to analyse investment opportunities in Spain. Many expressed their concern for the situation in Cataluña and said that it may affect their investment decisions over the medium term. “Uncertainty is never good”, said Fernando Chueca, Director at Carlyle. “Nobody likes instability”, explained Nader Sabaqqian, from 360 Capital Partners, a technological fund that currently holds investments in two companies headquartered in Barcelona – Xceed and 21 Buttons – and which wants to make more purchases in Spain.

Above all, investors fear the political instability that may be created within the central Government, as well as the social discontent that is growing in Cataluña as the political tension rises. The heads of most of the large funds with interests in Spain say that, for the time being, they are not going to take any drastic decisions, but if the uncertainty continues, they will have to start to take action. “International investments have been suspended in Cataluña for a year now”, said another director.

Rubio, who is a Spanish citizen, but who was raised in New York, praised the clean up of the Spanish banking system during his speech at the conference. He explained that the sector has seen a reduction in the number of banks from 49 to 12 since the start of the crisis. He added that “Spain has a tailwind” and that Apollo is satisfied with the investments it has made. “We believe in Spain and we will continue investing”, he said.

Original story: Expansión (by Amparo Polo)

Translation: Carmel Drake

Interview With Arcano Bosses: Álvaro De Remedios & Jaime Carvajal

19 September 2017 – Expansión

Interview with Álvaro de Remedios (pictured above, left) and Jaime Carvajal (pictured above, right), President and CEO of Arcano / The executives are committed to backing the Spanish economy and do not believe that Cataluña will break the rule of law.

In 2003, after a lifetime as an investment banker, Álvaro de Remedios (Madrid, 1968) decided to found Arcano and he was soon joined by Jaime Carvajal (Madrid, 1964). Both shared the vision of accompanying their clients throughout the transaction process and of placing the knowledge of senior executives at their disposal. Fourteen years later, Arcano has 15 partners, a workforce of more than 140 people, offices in Madrid, Barcelona and New York, and it has added the management of alternative assets and real estate advice to its core investment banking business.

Q: The boutique advisors have completed quite a few high-profile operations in recent months.

Jaime Carvajal: It is a world that is growing. The bankers at boutique firms have a lot of experience and the teams are more senior than in the large investment banks, in general. But sometimes, it is good to have both profiles involved in an operation. For this reason, Jefferies makes so much sense for us.

– What fruits are being born from the alliance with Jefferies?

Álvaro de Remedios: We are Jefferies’ partners in Spain. We benefit from its status as a global bank with an international presence and a great sectoral specialisation, and they benefit from our local presence and closeness to the market. Apart from the fact that we have business cards with different logos on them, we act as a single firm. We signed the alliance more than two years ago. The first year was spent understanding each other’s businesses, and during this second year, we have participated in several operations together (…).

Q: Do you expect to see an upturn in corporate operations?

Á.R: Yes, we think so, although that could just be our perception and not the view shared by the sector. We have closed around 30 advisory operations in the last 18 months. We are all very busy.

Q: Are the prices of operations rising due to the high degree of liquidity?

Á.R: There is a lot of liquidity and prices are clearly rising, but there is one key element that is different to before the crisis and that is the fact that financings are much more prudent than before. Prices are higher, but they are not off the scale, and financing is more conservative because investors are being cautious. The scars from the crisis are still there and that is a lesson.

Q: Are investors willing to earn less in this environment?

J.C: The very low interest rates have forced a change in expectations and has resulted in the arrival of new investors, such as infrastructure and pension funds, which are willing to forgo profitability in exchange for assuming lower risk. That is what is driving up prices.

Q: Is the real estate market at its peak in Spain?

Á.R: We are not betting on a rise in interest rates or an increase in prices; we bet on our own added value: we buy a building, we do it up and that is how we generate returns. Our expectation is that prices are not going to grow by much more in the real estate market, but, with our strategy, we are still generating returns (…).

Q: Is the economic outlook bright?

J.C: At Arcano, we started to back the Spanish economy in 2012 and we continue to do so. There are no significant risks threatening the economy: the banking system is robust and the problem of Popular has been resolved. The only clear problem is the inevitable increase in interest rates, but that is not going to happen in the short term, at least in Europe (…).

Original story: Expansión (by S. Arancibia, I. Abril and A. Stumpf.)

Translation: Carmel Drake

D.E.Shaw Purchases €103m Of Property Developer Debt From Bankia

3 April 2017 – Idealista

Bankia has managed to sell Project Gold, a portfolio of property developer loans amounting to €102.97 million. According to market sources, the buyer is the investment fund D.E. Shaw Group. As a result of this operation, the bank chaired by José Ignacio Goirigolzarri (pictured above) has managed to decrease its doubtful debt balance by €77.24 million and sign its first portfolio sale of the year.

Project Gold comprises a portfolio of doubtful and non-performing loans amounting to €102.97 million, from a variety of industrial sectors, although the property developer segment accounts for the lion’s share.

According to a statement from Bankia, this operation allows the entity to fulfil a dual objective: to reduce delinquency, by selling off doubtful and non-performing loans, and to increase liquidity and free up resources for the granting of new loans. The sale of this package has reduced the entity’s doubtful debt balance by €77.24 million.

The bank has another batch up for sale: Project Tour is a package worth €166 million, containing 1,800 properties, including finished homes, land, commercial premises, industrial assets and hotels. These assets are located primarily in the Community of Valencia, led by Valencia; Cataluña, led by Barcelona; the Canary Islands, led by Las Palmas; Madrid and Castilla y León (where Segovia is home to the most assets).

The entity chaired by José Ignacio Goirigolzarri is known in the market as one of the most dynamic entities: in 2016, it had several portfolios up for sale in the market, including Project Ocean, a real estate loan portfolio worth almost €400 million, which was sold to Deutsche Bank; Project Tizona, containing mortgage loans worth €1,000 million; and Project Lane, with properties worth €288 million.

More than €2,000 million in homes and debt up for sale

According to data compiled by Idealista, the banking and extra-banking sectors currently have more than €2,000 million up for sale in the form of non-performing loans secured by properties and real estate assets (homes, premises, offices, industrial warehouses and land).

Some portfolios are well-known, such as BBVA’s Project Vermont, a batch of property developer loans secured primarily by newly-constructed homes, worth almost €100 million. Several funds were interested in acquiring that lot, specifically, Oak Hill, Fortress and AnaCap.

The same entity has several more packages on the market: Project Buffalo, which comprises homes worth €400 million in total. Another project from the entity chaired by Francisco González is known as Boston, which comprises 16 office buildings located in Madrid, Barcelona and Valencia, worth €200 million. Finally, Project Rentabiliza is a portfolio containing debt to property developers.

In addition, Liberbank has Project Fox on the market, a portfolio of real estate debt worth around €200 million. It is the entity’s first (but not its last) portfolio of unpaid mortgages.

Original story: Idealista (by P. Martínez-Almeida)

Translation: Carmel Drake

The Keys To Banco Popular’s Much Needed Recovery

19 January 2017 – Expansión

Analysts at Citi think that Banco Popular’s core business, which focuses on SMEs and corporates, is one of the most profitable in the Spanish banking sector. That is according to a recent report about the entity (still chaired by Ángel Ron), which anticipates a potential increase in the bank’s share price of up to 40%.

But the strength of Popular’s underlying business has been eclipsed for years by the problem assets that it accumulated during the real estate bubble. So much so that the analysts at the US bank consider that the entity’s capacity to drain its toxic real estate is its “greatest challenge” over the next few years.

“On the basis of our analysis, Popular has the largest volume of toxic assets of any of its peers, by far: in fact, it has three times as many if we take into account their relative size to the total volume of assets (18% compared to 6%)”, say sources at Citi. The analysts anticipate a series of difficulties for the bank when it comes to reducing its level of problem assets, which they consider represent a real “pain in the neck” for the entity.

In their report, Citi’s analysts assess the three ways through which Popular is seeking to rechannel its problem assets. In essence, the three pillars on which its recovery will be based are: the capacity to recover toxic credits, the sale of foreclosed assets and the effective management of Aliseda.

Cut its toxic loan balance in half

Regarding the toxic loans (non-performing loans or NPLs), Citi predict that the Directors of Banco Popular will manage to reduce the total volume from 17.1% of the total portfolio to just 8.9%. This reduction will be based on a lower inflow of gross credit, a higher recovery rate of doubtful loans and a more aggressive path of divestment than the one undertaken to date.

In terms of its foreclosed assets, the entity chaired by Ángel Ron (who will soon hand over the leadership role to Emilio Saracho) will have several specialist tools for developing, managing and selling those assets: Aliseda, Aliseda SGI, commercial agreements with third parties and its own network of bank branches. Citi’s forecast estimates that by 2020, Popular will have reduced its volume of foreclosed assets by around €8,000 million, i.e. to almost half of its current balance (which stands at €15,000 million) and excluding the almost €6,000 million that are going to be separated out into a different vehicle.

In terms of Aliseda SGI (in which Kennedy Wilson and Värde Partners own a 51% stake), which manages around €23,000 million in assets, its future is linked to what Popular decides to do in the end with some of the real estate assets that it is planning to segregate out into a specialist vehicle. “We estimate that it will take Popular nine years to free itself from all of its problem assets, including future flows from loans to property developers and mortgages in the non-performing category and relating to foreclosed assets”, they explain. In the opinion of Citi’s analysts, a spin-off operation involving the segregation of the assets managed by Aliseda would have three main benefits:

“It would accelerate the divestment of foreclosed assets…by one or two years; it would allow the underlying profitability of the bank’s business to surface sooner (due to lower financing and management costs) and it would free up around €4,000 million in theoretical provisions (40-50 basis points of regulatory capital)”.

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake

Spain’s Banks Recover But Its Toxic Assets Remain

9 January 2017 – Tribune

Hit by a severe crisis several years ago, Spain’s banking sector has recovered but at a cost as thousands are laid off and it struggles to get rid of toxic assets.

“The system is closer to putting most of the crisis legacies behind it,” said analysts at the International Monetary Fund in charge of Spain in a recent report. Still, the ghosts of a crisis that saw the European Union bail out the sector have recently been revived as Italy suffers a similar predicament, with the State having to rescue Monte dei Paschi di Siena, the world’s oldest bank.

The EU lent €41 billion ($43 billion) to rescue the Spanish banking sector in the spring of 2012, compared to some €50 billion in Greece, as an example.

At the time, Spain was waist-deep in a financial crisis caused when a property bubble burst in 2008, after years of euphoria that saw loans granted almost blindly to households incapable of reimbursing them.

Since then, though, the share of problem loans on the balance sheets of Spain’s banks has dropped considerably.

In the second quarter of 2016, it stood at an average of 6%, according to the European Banking Authority (EBA) regulatory agency. This is slightly above the European median of 5.4%, but well below that of Italy, Portugal or Greece, which stand at 16.4%, 20% and 47% respectively.

Spain’s central bank, which is even stricter in its calculations of the share of bad loans, said in November that it stood at an average of 9.2%, against a high of 13.6% at the end of 2013. The Moody’s ratings agency predicts this should continue to drop thanks to “favourable macroeconomic conditions” such as expected growth of 3.2% in 2016, double the eurozone average.

Banks are also much stricter in granting loans now.

But on a darker note, they are struggling to sell the huge amount of property seized during the crisis from households that could not pay, as buyers remain scarce.

“Despite the mild recovery in the housing market observed in 2015, banks’ real estate repossessions continue to exceed the volume of properties that banks are managing to sell,” said Moody’s in a note.

Original story: Tribune

Edited by: Carmel Drake

Bank Revenues From Asset Sales Exceeded €10,000M In 2015

29 February 2016 – Expansión

Last year, Spain’s listed banks recorded revenues of €10,118 million from the sale of assets from their property portfolios. Popular recognised the highest volume of sales with €2,109 million, followed by Santander (€2,070 million) and BBVA (€2,000 million). These three banks accounted for 61% of such revenues. The remaining 39% was spread between Sabadell with €1,902 million, CaixaBank with €1,312 million, Bankia with €465 million and Bankinter with €260 million.

And these entities expect to increase their sales in 2016. (…).

House sales in Spain increased by 11.1% in 2015, thanks to the growth spurt in the second hand market, to reach 354,132 operations, the highest figure since 2011, according to data from the National Institute of Statistics (INE).

Popular stepped on the accelerator during the year, with a 40.3% increase in these revenues, which meant that it exceeded its forecast sales for the year of €2,000 million, by €109 million. If all goes according to plan, then the bank will close this year with sales of €2,800 million, whereby increasing its volume of these operations by another 33%.

Subsidiaries

Popular groups these types of assets into its real estate arm Aliseda, which it controls 100%. Aliseda Servicios de Gestión Inmobiliaria, in which Popular holds a 49% stake and Värde Partners and Kennedy Wilson control the remaining 51% stake, is responsible for marketing these assets, which current amount to 31,000 units.

Last year, Santander sold 11,423 properties in total, for €2,070 million, according to the entity. The sale of foreclosed assets amounted to €898 million, with a corresponding gross value of €1,375 million. The bank led by Ana Botín controls 100% of Altamira Santander Real Estate, which holds all of its real estate assets. Apollo is responsible for marketing the assets through Altamira Asset Management after Santander sold that entity to the US fund.

By contrast, BBVA retains control over 100% of its distribution process through its subsidiary Anida. The bank recorded revenues of €2,000 million last year from the sale of 21,082 real estate assets. The entity says that these operations were particularly important during the final quarter of 2015, as their returns improved.

CaixaBank recognised €1,312 million from the sale of some of its properties (€1,380 million in 2014) and €765 million from rental income (€1,132 million in 2014). The improvement in the real estate market meant that these transactions mainly took place during the final quarter of the year, with a gain of 2%, although the final balance for the year generated a loss of almost 6%. (…).

Sabadell sold 10,949 properties for €1,902 million, representing an increase of 16% during the year, thanks to the increased interest from investors in the Spanish real estate market, which allowed the entity to reduce its exposure to problem assets more quickly than forecast in its Triple plan.

In this context, the discounts on the gross value of foreclosed assets have been lower, down from 51% in 2014 to 44% last year, said the entity. Sabadell has started 2016 with a boost in this segment, thanks to the sale of 4,500 homes to the fund Blackstone. (…).

Bankia generated revenues of €465 million from these sales, up by 56% compared with 2014. (…). The entity…channels its sales through Haya Real, a wholly owned subsidiary of Cerberus.

Finally, Bankinter sold 2,496 properties, up by 61% compared with 2014, but turnover from those sales fell by 5.3% to €260 million.

Original story: Expansión (by Elisa del Pozo)

Translation: Carmel Drake

INE: Mortgage Signings Gained Momentum In 2015

26 February 2016 – Cinco Días

The bank’s commitment to the recovery of the mortgage market, following the period of crisis during which time financial entities almost hermetically sealed the credit tap, is reaping its rewards. The signing of new mortgages increased in 2015, for the second year in a row and the rise was significant. In 2014, the downward trend that had lasted for seven years was broken and the number of home loans signed increased by 2.3%; in 2015, that recovery gained momentum, with the growth in new mortgages amounting to 19.8%.

The mortgage war unleashed by the banks undoubtedly contributed to that recovery. The banks have been making their loans increasingly cheaper and the spreads above Euribor now amount to around 1%, when three years ago they rarely fell below 3%.

Fernando Encinar, Head of Research at Idealista, says that we have now seen the second consecutive year of recovery in the mortgage market, “where we have witnessed four main trends: an increase in the number of operations signed, an increase in the average amount granted, a decrease in interest rates – partly due to the decline in Euribor, but also due to pressure on the spreads, thanks to greater competition between banks – and an increase in the number of fixed rate mortgages being signed, although variable rate products still account for the majority of new mortgages. We expect these four trends to continue in the market in 2016, and whereby contribute to the normalisation of the real estate sector. “

According to the provisional data published today by the National Institute of Statistics (INE), the value of these mortgages amounted to €25,934.7 million, up by 24.1% compared with a year earlier. The average value of mortgages granted for homes rose by 3.6% in 2015, to €105,931.

In December 2015 alone, 19,362 new mortgage contracts were granted for the acquisition of homes, up by 21.1% compared with the same month in 2014, for an average amount of €107,880, up by 2.5% compared with December 2014.

By autonomous region, Andalucía (45,971), Madrid (42,382) and Cataluña (38,583) accounted for the highest volume of mortgages granted for homes.

The number of mortgages signed increased in every autonomous region last year. The greatest increases were observed in the Balearic Islands (+41.4%), Cataluña (+25.9%) and Cantabria (+24.9%).

Original story: Cinco Días

Translation: Carmel Drake