FCC is negotiating the sale of 420 subsidized homes in Madrid to Blackstone.

These homes are rented and are located in Tres Cantos (Madrid).

Recently, the main shareholders of Realia – FCC and Bankia – selected Goldman Sachs International for the process of searching for offers that allow their exit from the real estate company. They have a joint share of 57,6%, valued in nearly 144 million Euros.

Operations such as the one carried out by the technology tycoon Bill Gates in FCC, where he has disembarked as the second most important shareholder, or the acquisition of the Spanish tin manufacturer Mivisa by the U.S. industrial group Crown Holdings for 1200 million Euros are seen as a sign of change in the Spanish economy.

In fact, international funds would be ready to invest up to 14.000 million Euros in the Spanish real estate sector next year, according to a study carried out by the firm Knight Frank, which places Spain as one of the main objectives of the great investors within the European Union.

The arrival of foreign capital can also be seen in the Spanish real estate sector. The purchase of homes by foreigners increased 13,6% until June. (…)

Source: Expansión

Blackstone and Goldman compete for the 1500 subsidized properties in Madrid.

In this case, the US venture capital firm Blackstone and the US bank Goldman Sachs have been selected to compete in the final stage for a lot of 1458 subsidized homes of the Region of Madrid, managed by the Housing Institute of Madrid.

The properties are rented and are scattered throughout the whole region, as informed by Bloomberg.

The starting price of the lot being auctioned is of 67,2 million Euros. The properties, which are occupied in 94% present, however, a default rate of 21%. The operation is planned to be closed in November.

As announced by the Regional Government a few months ago, the operation will not affect the tenants of the properties, which will continue in the same conditions and an average rent of 200 Euros. 70% of the 1500 homes protected by the Housing Institute are rented and 30% are rented but with a purchase option and in both cases, the right of the tenant to buy the property at the agreed price will be respected.

The regional Government will also transfer 1588 garage spaces, 443 storage rooms and 45 trade premises in 12 municipalities in the region. (…)

The earnings of these operations will be destined to social policies, the Government announced. (…)

Blackstone acquires Multi Corporation, managing company of 56 malls.

The property fund Blackstone has acquired the Dutch company Multi Corporation, who owns or manages 56 malls, seven of them located in Spain. The purchase affects Espacio Coruña, Modoo (Oviedo), Espacio Cañaveral and Torrelodones in Madrid, Espacio Mediterráneo in Cartagena, Espacio Leon and the one in Girona. The other malls managed by Multi are located in twelve European countries, including Turkey. Their total staff exceeds 500 people.

Spain: for sale.

Spain is for sale. And finally, it seems there are buyers. Dozens of investment funds from all over the world, but mostly from the United States, are buying apartment blocks, real estate firms, and even company debt. There are some vulture funds out for a quick buck, but most are looking for medium-term returns. “Two years ago, Spain was radioactive, and the property sector toxic. Suddenly it’s become our savior; it’s that stupid,” says one veteran real estate developer on condition of anonymity.

On February 7, 2012, when the future of the euro was still in the balance, Jaime Bergel, a former board member of energy giant Endesa, opened an office for 13-billion-dollar US investment fund HIG Capital in Madrid. “We had a feeling that people would come here looking for opportunities,” he says. In fact Merrill Lynch and Goldman Sachs were already here.

On August 6 of this year, HIG carried out its so-called Operation Toro, the first major sell-off of property accumulated by Sareb, the bank set up by the government to hoard unsold property and debt belonging to the country’s failed savings banks. HIG bought around 500 properties for a total of 50 million euros. Most of the properties are low-cost apartments in the outskirts of Madrid, Valencia, Seville, Málaga, Murcia and in the Canary Islands that so far nobody wants.

Investment funds have spent around two billion euros buying up property in Spain since April. Some experts are interpreting the great sell-off as good news, flushing the financial system with new money; others say that it is a de facto takeover of a significant chunk of the economy by foreign capital.

“We are looking for businesses with good assets and that are well managed but that can’t get their hands on the capital they need. We lend them the money and let them get on with running the business,” says Jesús Olmos, KKR’s representative in Madrid. In April, KKR lent 320 million euros to construction materials manufacturer Uralita over a seven-year period, and it has also taken positions in parking lot firm Saba and helicopter maker Inaer.

In 2008 Juan Vizcaíno, once of Lehman Brothers, set up Hipoges, which specializes in managing distressed assets. He now employs around 80 people in Madrid, and already manages assets valued at 2.3 billion euros, most of them in the form of property and bought at knock-down prices from the banks. “Most of the property we buy is new and hasn’t even been lived in. It was bought as an investment by people who have now gone abroad,” he says.

Vizcaíno says the toxic assets business has grown so fast that he has had to move office twice as he takes on new staff to keep up with demand. His current offices occupy more than 1,000 square meters in downtown Madrid: “We are spectacularly busy. Interest in Spain has multiplied tenfold,” he says.

In August, the owners of Mexican fund Fibra Uno bought more than 900 offices that had originally belonged to Banco Sabadell, which the bank had sold to a US fund for 300 million euros. The Catalan regional government sold 13 buildings to French company AXA for 172 million euros in a deal that sees the government pay rent on them. With a profit rate of 9.45 percent, in just under a decade AXA will have recouped its investment in rent alone.

Meanwhile, the Popular Party-controlled regional government of Madrid is busy selling off chunks of housing stock built for low-income families. On June 24, Madrid’s Municipal Housing and Property Company (EMVS) said that it had sold 1,860 low-rent apartments to Blackstone, an associate of Spanish property developer Magic Real Estate, for 128.5 million euros. Blackstone is one of the world’s largest investment funds, with assets of 60 billion dollars.

The purchase looks like a classic vulture fund move: buying where nobody else dared to strip the assets and sell as soon as possible. “Blackstone knows that 85 percent of property in Spain is privately owned, with just 15 percent rented out. The average in Europe is 70/30. Eventually Spain will get to that point. If the figure shifts from 15 percent to 25 percent, that is 2.7 million properties that will enter the rental market. In Germany, Blackstone has 50,000 properties for rent, but until now, there weren’t enough properties available for it to be worth buying in Spain,” says a source close to the operation.

Blackstone is obliged to continue the low-rental policy for a decade, during which time it will operate a zero-tolerance policy toward tenants who fall behind with payments, and after which it can rent them out at higher prices. Most of the properties are in the working-class district of Carabanchel, in the southwest of the city. Speaking to tenants in one block that has been sold off, it is clear most have no idea who the new owners of their homes are. One man says he has stopped paying his rent because he no longer knows who to make the transfer to. Average rents here are around 200 euros a month for a three-bedroom apartment. Many homes have never been occupied.

In August, the Madrid Housing Institute (Ivima), also set up to provide low-cost housing, sold 2,935 low-rent apartments in the working-class dormitory town of Parla to Goldman Sachs and Azora for 201.2 million euros. Azora already manages some 7,000 of these properties slated for social housing, along with student residences and hotels, all valued at 1.3 billion. Fernando Gumuzio, the company’s founder, says the firm charges rents of between 250 and 600 euros.

Gumuzio rejects the idea that companies like his are vultures circling the moribund carcass of the Spanish economy: “I prefer to call them opportunists. They are investing in problem companies, and helping to clean up their debts. This is the first step toward recovery. Later on, the institutional funds will move in.”

Rafael Powley of US consultancy Jones Lang LaSalle explains that investment funds are awash with cash after taking advantage of the collapse of the US property market and its subsequent recovery. “There are a lot of people who made a lot of money buying cheap, and want to repeat their success here.”

The figures suggest that property prices in Spain may well be bottoming out. The price per square meter for office space on the Paseo de la Castellana, Madrid’s upscale central thoroughfare, has been stable for a year now. At the height of the property boom, prices were 13,000 euros per square meter; the rate is around 6,500 euros. “The speculative market is always ahead of the real economy: that’s how you make money,” says Juan Manuel Ortega, who heads Jones Lang LaSalle’s operations in Spain. He says that three years ago, most of the firm’s clients were looking for advice on how to get out of Spain; “now they want us to tell them what to buy.”

Powley explains that most of those rushing to buy now are the same companies that inflated the property bubble of the late 1990s and early 2000s: “In those days, a developer would call you to say that he had sacked his sales team because they had sold his property so quickly that he hadn’t been able to put the prices up.”

Ismael Clemente hails from a tiny community in the western province of Badajoz and has many years of experience in the property business. Before setting up Magic Real Estate, he headed the property division of Deutsche Bank in Spain. In November 2005, seeing which way the wind was blowing, he advised his bosses to get out of the Spanish property market before selling the Hotel Arts in Barcelona in early 2006. The bank made 170 million euros on the deal, selling the hotel to a Dutch group and Singapore’s sovereign wealth fund. “We lost 18 months, but we made up for it with that sale,” he says. Magic is now a partner with Blackstone.

Clemente explains some of the key points of Spain’s emerging property market: “Buying a shopping center in Leipzig is barely profitable, and one setback and you are down on the deal. So the idea is to get into other markets. Prices are back up in Dublin, London is enjoying its own particular boom, while France is beginning to look weak. A shopping center in Valladolid is more risky, but twice as profitable if you handle the purchase properly. That’s why the investors are here. People see these funds as pirate ships, but they are playing with other people’s money. Vultures serve a function: they clean up corpses. It’s the same here: they pump money into a market starved of funds.”

He says that Blackstone’s entry into the Spanish market has sent out a message of confidence: “Investors are like sheep. If things go badly here, these funds can always tell their investors that everybody else was here, and nobody could see what was going to happen.”

Some funds have already set aside fixed amounts to invest in Spain. “A client called me a couple of days ago saying he had 500 million euros to spend in Spain,” says Iñigo de Luisa, a partner at law firm Cuatrecasas. “This summer we have seen a lot of activity: I haven’t seen anything like it since the boom.” De Luisa specializes in buying debt, and advised the Bermudas project that saw Sareb sell 245 million euros in loans owed by Grupo Colonial to Burlington Loan Management. The mechanics of these operations is not rocket science: if a company owes 100, the funds buy the loan for 70, or much less, dependent on the risk. If they get the money back they have won; if not, they keep the property portfolio, which is worth more than the 70 they put up.

The party has barely started. Spain’s banks have huge numbers of apartments that sooner or later they must sell. The vulture funds have taken the first step by taking over the property divisions of Bankia (bought by Catalana Bank and Cerberus, a company partly owned by the son of former Prime Minister José María Aznar, whose government in the late 1990s oversaw the property boom). Meanwhile, La Caixa is negotiating the sale of 51 percent of Servihabitat to the Texas Pacific Group.

The country’s regional administrations are also keen to sell off their property assets, often at fire-sale prices, in a bid to generate desperately needed cash. Andalusia, Catalonia, and Valencia were the first to begin offloading publicly owned property: in total some 144 buildings that they hope will raise around 2.2 billion euros.

British investment company Moor Park, which is tied to risk fund Och Ziff, offered the Catalan regional government 450 million euros for 26 buildings it would then rent out to it. The offer was tempting, but the regional government eventually decided that the conditions were not up to scratch. The buyers wanted to be paid in dollars or Swiss francs. “At the height of the euro crisis, what sort of message would that have sent out?” say sources close to the Catalan government.

Murcia has put the seat of the regional government up for sale; Extremadura is also keen to reduce the size of its property portfolio; Asturias is looking for a buyer for its offices in Madrid and Brussels; the Canary Islands has palaces for sale; and Castilla-La Mancha has so far not found a buyer for 16 government buildings. But a consultant who has acted as an intermediary in the sale of government buildings to foreign investment groups says that only Madrid and Barcelona have any appeal. The regional government of Madrid has already put 11 buildings up for auction this year with a starting price of 32 million euros. But for Madrid City Hall, it was only after dropping the price by 40 percent that it managed to sell its environment department’s offices for 21.8 million euros to the Bank of China. The Valencian regional government says that it is in advanced talks to sell three buildings.

More and more properties owned by regional and municipal governments are expected to come onto the market in the coming months. The central government has so far only raised 90 million euros since 2012 from selling off its property portfolio, but now says that it is to put more than 15,000 properties on the market, among them 61 apartment blocks, almost 7,000 houses, and 800 stores. No price has been agreed, say sources at the Economy Ministry.

This macro-sale includes some attractive assets, as well as many that will prove tricky to dispose of. For example, the former headquarters of the National Stock Exchange Commission on the Castellana, valued at 30 million euros; the building formerly occupied by the RTVE state-owned radio and television company, just round the corner, along with properties in other upscale areas of the capital. The government even wants to sell 14,000 hectares of the Alcornocales natural park in Cádiz, offering permission to the buyer to build an aerodrome, two golf courses and a luxury hotel. As Spain goes on sale, nothing is beyond the bounds of possibility.

Blackstone, the greatest fund in the world, rubs its hands: “Spain is interesting”

“Buy it, fix it and sell it”. This is how the opportunistic of the global capitalism work, who have found in Spain a place to expand at ease, as shown by the last operations of the bad bank, the Forb and the Town Council of Madrid. “The awarded properties at the side of the ocean are promising”, Joan Solotar, managing director at Blackstone, declared in an interview to the television channel CNBC.

Blackstone is the biggest investment fund in the world, and only in the real estate market it manages 64.000 million dollars in assets. As stressed by one of its executives, “the real estate sector in Spain is, absolutely, one of the areas we are focusing on. You only need to see “which banks have the assets and what they need to sell” and that the market is “on a downward path”.

The fund has landed in Europe to buy all kind of assets: hotels, offices, portfolios of homes, blocks of apartments… “The prices are far lower and if we look at a scenario in four or five years and these assets can be improved – with the model buy, fix and sell – Spain is interesting, this executive in Manhattan points out, as “everything is based on the offer and the demand and the real estate assets “can be maintained” while the latter recovers.

Two months ago, Blackstone paid 128,5 million Euros to the Municipal Company of Housing and Land in Madrid  for 1860 apartments built with public funds and on a rental basis. An average 69.000 Euros per home. “Look at the prices of the assets – she adds- the great discounts and the price of building a similar property right now”.

In Spain there is the need to sell cheap what was built at very high prices and the vulture funds are ready to buy. Two days ago, CatalunyaCaixa sold its real estate company to a Swedish and a US investment fund. Twenty candidates had attended the auction.

But not only banks need to sell. The State and other public institutions are speeding up sale processes of public patrimony. This would be the case of the Postal Service (Correos), the train network (Renfe), the National Heritage, the regional governments – such as Madrid – and the town halls, which will lose weight in the next few months at very low prices.

Slowly, the foreign capital is taking hold of the presumed real estate bargains. These are presumed, because no one apart from its managers knows what is being sold, at what price and with what margin. The opacity is complete, in spite of the sellers being institutions such as Frob or the bad bank, owned by the State of with a high public participation, a formula which prevents any regular citizen from having access to them.

And a margin that depends on when the valuations were made, many of them already obsolete. The interesting point right now is to see that the investment funds are rubbing their hands with the Spanish market. “Banks are starting to sell and while the merger and acquisition markets are very slow, the real estate market is behaving differently”, Solotar declares.

The dates chosen to close these deals, the last weeks of July and the first ones in August, are also a proof of the semi-darkness they are moving in.

Blackstone is the biggest of all venture capital funds in the world and this year it has just reinforced its position in Spain. Iñaki Echave joined the firm in February as managing director with responsibilities over Spain and Portugal.

The executive joins a team presided over by the investment banker Claudio Boada, president of the Group of Businessmen between 2004 and 2012 and consultant of the bank HSBC. Previously, he had been president of Lehman Brothers in Spain, where he worked for 16 years,.

Blackstone has a strong real estate division in the States, a market where prices have awoken again.

Blackstone pays 128 million Euros for the properties in Madrid.

The sale is a consequence of the process of reduction of the debt of the Council of the capital, as explained by sources of the Town Hall in Madrid last Tuesday. Through a public bidding, the Council of Madrid started the sale process on the 6th May. Since then, it has received offers from different funds for this lot of properties classified as subsidized homes and with rental agreements. Among those interested there were important firms such as Cerberus, Morgan Stanley and LoneStar.

Finally, Blackstone has acquired this lot of 18 developments located in Carabanchel, Centro, Vallecas and Villaverde for 125,5 million Euros. 1208 properties included in 12 developments are properties on rental agreements and the rest, located in six buildings, are for rental with a purchase option.

Blackstone has taken part in the bidding along with Magic Real Estate, a firm with experience in the management of properties in Spain and in areas of Northern Africa. The fund will not manage the lot of properties as Blackstone, but through a subsidiary called Fidere.

The awardees have paid three million Euros more to acquire 51 parking spaces, 25 trade premises and 2 storage rooms. The new owners have assured that they will maintain the conditions of the agreements with the current tenants, as the purchase agreement included the substitution in the current rental agreements.

Blackstone is present in the sector since 1991. It is currently the world leader in real estate investment of venture capital, with an invested capital of 60.000 million Dollars. The portfolio of Blackstone includes hotels, offices, shopping malls, industrial units and homes in the United States, Europe and Asia. Among its most important assets there are the Worldwide Hilton hotel chain, the Brixmor shopping malls, and the office complex Broadgate, in London. In Spain, they are the owners of the packaging manufacturer Mivisa.

Source: Expansión

Investors in search of bargains.

KKR, Centerbridge, Cerberus, Lone Star, Apollo, Blackstone, Colony Capital or Green Oak. Their names sound more and more often in Spain, as the list of international funds interested in finding a real estate bargain continues growing. The traditional Spanish venture capital is out of the equation, not only due to lack of cash, but also because of the legal limitations to invest in this kind of assets. Only certain firms, such as Atitlan, from the Roig family, or Altamar have the possibilities of participating in the real estate sector.

These great funds have nearly 13.000 million Euros to invest in Spain and a great part of this capital is for the real estate sector that is now considered a priority. Nevertheless, the search for assets is very specific.”The foreign investors focus on a liquid and good quality product, preferably in rent; the search for high profits implies important discounts, which reduces the volume of operations”, Jesús Conde, partner in the real estate department at Baker & McKenzie.

The operations in the sector depend on the market of each asset. In the residential one, “the foreign funds are waiting for Sareb to organize and package the portfolio of the nationalized banks, so as to offer then a very reduced price for a set of assets with a similar level of liquidity and risk, with discounts of up to 90% of the original valuation”, Eduard Saura, managing partner of the financial assessment company Accuracy, explains.  In his opinion, the Anglo Saxon opportunistic funds are the ones keeping an eye on these assets.

This expert considers there is less interest on the segment of shopping malls. However there are still operations. For example, the bid organized by Morgan Stanley for the three malls that its fund Msref has in Spain was attended by many funds that are not present in the country. Only foreign funds have reached the final stage: Bau Post, Drago Capital and the one that is best positioned, Incus Capital.

At the end of the year, another foreign investor made its debut in Spain: the North American Autonomy, which acquired two buildings in the business park Omega, in Alcobendas (Madrid). In Barcelona, other funds, this time European ones, Värde and Anchorage, took part in the Operation Copernico, with the acquisition of five buildings in the centre of the Catalan capital and in Madrid for around 100 million Euros.

If the first ones to arrive to Spain were the Anglo Saxon funds, in the last few months other funds with a Latin American origin, have arrived to the market with a lot of liquidity. “Up to now, the Latin American capital fled the volatility of its countries and bet on the United States to invest. Now they are searching in Spain”, Francisco Machón, in charge of Investments of BNP Paribas Real Estate, assures. One example is the tycoon Carlos Slim, who acquired six months ago properties from CaixaBank for more than 400 million Euros, or the acquisition of a building in Recoletos street, closed last week, by a Latin American family.

“The investors are much more active, although they search for an adjustment in prices in view of the uncertainty of the awaited flow of cash for the next three years”, Javier García-Mateo, in charge of Real Estate at Deloitte, declares.

Source: Expansión

Madrid dinamites the real estate market: it sells 1800 public homes to an investment fund.

The town hall of Madrid has just opened the real estate market that the international investors desire. Last week, the managing board of the Municipal Company for Housing and Land (MCHL) awarded a lot of 1800 homes to the investment fund Blackstone, which paid nearly 120 million Euros in order to get the subsidized homes managed by the municipal organism, according to sources within the sector.

Although it is still not official, the sale has been finalized. Nearly nine months after the beginning of the process, the mayor Ana Botella has finished the sale of a lot of real estate assets in the hands of the MCHL, in need of cash in order to be able to guarantee its viability, as a recent audit carried out by PWC stressed that the municipal company was unable to honor its payments and that suffered an unsustainable level of debt.

After a first try that failed, at the end of February the town hall presided over by Ana Botella received the first signs of interest to buy the 1800 homes. The process has been carried out without a public tender as these were not patrimonial assets and although the operation is over 100 million Euros, the funds will only pay between 30-40 million Euros, as the rest of the amount belongs to the replacement of the financial burden on the homes.

In the beginning, the MCHL negotiated individually with the fund Lone Star, which carried out a process of due diligence and valuation of the assets in order to present an offer. With this price reference, the Town Hall of Madrid started a process of competitive sale, hoping to obtain a higher amount, which is when the real estate funds managed by Morgan Stanley or Blackstone made their binding offers.

However those interested in acquiring the lot of 1800 subsidized homes had a second chance last Friday the 14th June, after the tender was modified and an extension was awarded. The reason for this extraordinary measure was the suspicion of possible irregularities.

The revision of the tender took place even after Cerberus, one of the interested investors, backed off the process. (…)

The MCHL is the organism that has been in charge of developing the access to subsidized housing for more than 30 years, as well as for granting aids for the refurbishment and favoring rehousing. At the end of 2012, the town hall had managed 17000 rental homes with an average price of 685 Euros. According to the conditions of the agreement, before formalizing the transaction, the tenants could exercise a preferential right to buy the home.(…)

 

Source: El Confidencial

Cerberus, associated with Aznar Jr., refuses to acquire the subsidized properties in Madrid.

In 24 hours, those interested in acquiring the subsidized housing business of the City Council of Madrid will have to present their binding offers. One of the investors which will finally not be there will be Cerberus Capital, the U.S. investment fund who has a strategic partner and potential coinvestor in the local firm Poniente Capital for its investments in Spain, that is, the financial boutique presided over by José María Aznar Botella, the eldest son of the former president José María Aznar and the current mayor, Ana Botella, as advanced by this publication in 2012.

According to several sources within the real estate sector, the potential conflict of interest between Cerberus and the City Council of Madrid has forced the company to retire from the process at the last minute, avoiding any compliance matter which could affect the operation and its continuity as investor in Spain, where up to now it has only participated in a small operation of acquisition of branches. As it was a known relationship, there was a possibility of someone starting legal procedures should they have won.

Without the participation of Cerberus, the rest of interested candidates are the usual ones in this type of operations, such as the funds Lone Star, CarVal or Goldman Sachs, although in this case the two most interested funds are Blackstone and the special situations vehicle of Morgan Stanley. During the last few months, all of them have visited all subsidized homes and the public plots on sale that are now managed by the Municipal company for Housing and Land and the Institute of Housing in Madrid.

In this case, acquires hope to obtain assets sponsored by the Local Administration that are now deep in debt and with oversized structures, as happens with other public properties (airports, highways, harbors…) The Municipal Company for Housing and Land only owes more than 630 million Euros, has upcoming maturities of 368 million Euros and has no cash o financing in order to continue its current real estate projects. Also, it is carrying out a drastic labor adjustment so as to end up with 38 employees instead of 342.

As well as the financial institutions with their portfolios of mortgages and default credits to developers, the public companies devoted to the real estate development, generally for subsidized housing, are also in the center of the interest of foreign investors. As explained by Cerberus in a report, Spain, Germany, the United Kingdom, Italy and Ireland are markets with outstanding levels of distressed mortgages. In reference to our country, they assure that, in the second half of 2013, “it will be very interesting for opportunistic investors with real estate experience”.

After several months of process, the City Council is decided to consummate its plans for the Municipal Company for Housing and Land, while the Government of the Community of Madrid waits for its turn to do something similar with the Institute of Housing. As for the municipal company, the urgencies of the mayor have taken shape after PriceWaterhouseCoopers, in a recent audit, declared that “the business is loss-making, with a significant amount of outstanding payments which cannot be assumed. The banking debt is not sustainable and the company, which is solvent, has severe problems of immediate liquidity”.

The questioned major Botella prefers to avoid the political cost of future evictions, one of the more worn fronts for the public opinion. According to the Platform for those affected by mortgages, both public companies caused nearly 40 daily evictions during the last months of 2012. “There are cases with debts of around 4000 or 8000 Euros. These are small debts that are leaving people on the street”, as explained last February by the spokesperson Feli Velázquez, who admitted that “the negotiation in order to avoid evictions is much harder with these two companies than with banks”.

Source: El Confidencial