Tag: capital ratio

Solvia: Sabadell Puts its Real Estate Subsidiary Up For Sale

17 October 2018 – El País

Sabadell is going to listen to offers from several real estate vulture funds that are interested in acquiring its subsidiary Solvia, the manager of its properties. The entity, which declined to comment, has now entrusted the sales process to an investment bank. In the summer, Jaime Guardiola, CEO of Sabadell, justified holding onto Solvia due to “the great contribution it makes to the bank”, but now he is taking a step towards selling it. Sources in the sector indicate that Sabadell wants to strengthen itself and take advantage of the good climate still being enjoyed in the real estate market.

The banks are getting rid of properties before the booming market deflates. They are selling not only portfolios, but also the companies that specialise in the management of those real estate assets, known in the sector as servicers. Until now, it was typical for the banks to include their servicers in the package of asset sales: that is what CaixaBank did with Servihabitat and BBVA with Anida.

But, Sabadell wanted to get more mileage out of its subsidiary and so decided not to sell Solvia when it divested around €12.2 billion of its properties to Axactor, Cerberus, Deutsche Bank and Carval. Nevertheless, Sabadell has now taken the definitive step and is open to offers from the interested vulture funds. According to sources in the market, the interested parties include Cerberus and Oaktree.

148,000 assets under management

Based on data as at May 2018, Solvia is one of the leaders in the real estate services market in Spain, with a portfolio of 148,000 units in assets under management, whose value exceeds €31 billion, according to the entity. In a report from Goldman Sachs, Sabadell indicates that Solvia’s annual profit amounts to €40 million.

The company has extensive experience in the marketing of new build developments, given that it has placed more than 10,000 homes in new developments on the market since 2015. At the moment, Solvia has 55 developments up for sale. In terms of rental, as of October, the firm was managing 32,000 assets, of which 74% belong to Sabadell. Solvia also works with other clients, including Sareb.

The report from Goldman Sachs noted that Sabadell could sell Solvia as a way of raising its capital ratios, with little detriment to its income statement.

Market sources agree with these arguments to explain the step taken by Sabadell. On the one hand, as the European Central Bank has indicated, entities must accelerate the sale of all businesses relating to the real estate sector. The banks are aware that times of lower economic growth will come and understand the importance of taking advantage of the appetite that the large international funds still have for Spanish property.

On the other hand, the sale of Solvia will also result in cost savings, a reduction in the workforce and, above all, lower capital consumption. In the last quarter, between March and June, Sabadell’s capital ratio decreased by one point, from 12% to 11% for its CET 1 fully loaded capital ratio (the highest quality indicator). The limit on the basis of which the ECB applies severe measures is 10.5%.

This decrease was due to the problems that Sabadell has been facing with its British subsidiary TSB, which was left without a service for weeks. Between March and June, the bank lost €138 million in provisions against real estate portfolios and the problems at TSB.

Original story: El País (by Íñigo de Barrón)

Translation: Carmel Drake

Axis: Spain’s Banks Will Divest At Least €40bn of Their Problem RE Assets This Year

30 March 2018 – El Mundo

Spain’s banks are still trying to lighten their balance sheets of the huge load left on them by the real estate crisis. Forecasts for this year indicate that they will manage to divest assets worth at least €40 billion including properties, foreclosed land and defaulted and non-performing loans.

Those are the estimates made by the consultancy firm Axis Corporate on the basis of operations that are currently being sounded out in the Spanish real estate sector. The figure includes transactions worth at least €9 billion by Sareb, sales of around €6 billion by Bankia and operations by CaixaBank and Banco Sabadell with a volume of close to €12 billion each. “To all of these operations, we have to add the retail operations that the servicers are currently undertaking”, explains José Masip, Real Estate Partner at Axis Corporate and coordinator of the Assets Under Management Observatory Report published recently by the company.

In 2017, sales of toxic assets linked to real estate exceeded €50 billion, “almost twice the €27.4 billion sold between 2012 and 2016”, says the report. Spanish entities are accelerating the clean up of this type of asset from their balance sheets to reduce their default rates and fulfil the European regulations that force entities to reduce the weight of non-performing assets to pre-crisis levels. Despite that and according to data from the consultancy firm JLL, the volume of non-performing assets with real estate collateral in the hands of the banks and Sareb amounts to around €200 billion: €80 billion in REOs (foreclosed assets) and €120 billion in NPLs (Non Performing Loans or doubtful credits).

Greater weight of funds

Both firms predict that the rate of sales seen last year will continue in 2018, above all due to the growing interest from international investment funds (…).

The main investment funds focused on the purchase of real estate assets in Spain are Bain Capital, Oaktree, EOS Spain, Apollo and Axactor, who are following in the footsteps of others such as Blackstone and Cerberus.

The latter two entities starred in the two most important operations of last year. In July, Santander sold a portfolio comprising 51% of the toxic property it had inherited following the purchase of Banco Popular to Blackstone in an operation worth €5.1 billion; meanwhile, in November, BBVA sold 80% of its real estate portfolio to Cerberus for around €4 billion. In a similar operation, also in 2017, Liberbank sold part of its toxic portfolio to the funds Bain and Oceanwood for €602 million.

The transactions were structured through the creation of joint ventures in all cases, in which the bank held a minority percentage of the company or servicer and the acquiring fund took over the bulk of the management. According to Emilio Portes, Director of the Portfolio Business at JLL for Southern Europe, “the structure offers entities a stake in the profits of the assets with upside potential at the same time as cleaning up their balance sheets and slightly improving their capital ratios. Similarly, it offers buyers more advantageous prices without limiting their strategy and management capacity”.

Indeed, in Axis’s opinion, those servicers are expected to be some of the main players in the market over the short and medium term. According to data from the consultancy firm, more than 80% of the assets under management are in the hands of five of them: Altamira (linked to Santander), Servihabitat (CaixaBank), Haya/Anida (controlled by Cerberus after the operation with BBVA), Aliseda/Anticipa (Blackstone) and Solvia (Sabadell). The outlook for this year points to greater concentration in the sector, “with the possible sale of some of the existing servicers”, in such a way that their specialisation and differentiation will be definitive.

Original story: El Mundo (by María Hernández)

Translation: Carmel Drake

Sabadell Considers Selling €1.8 bn Portfolio Whilst it Negotiates with FGD

1 February 2018 – Voz Pópuli

Banco Sabadell is preparing an artillery of divestments over the coming months. The entity chaired by Josep Oliu (pictured above) has been sounding out the market for several weeks now regarding the launch of what would be its largest sale of problem assets to date, worth €1.8 billion, according to financial sources consulted by Vozpópuli.

This operation, which still needs to be approved by the bank’s Board of Directors, would be the precursor to a mega-operation amounting to €12 billion that the entity is considering launching over the next few months, according to Expansión. Sabadell has three mandates granted to launch these divestments in 2018 with Deloitte, KPMG and Alantra.

Nevertheless, these sales have been held up by the Management Committee of the Deposit Guarantee Fund (FGD). The €12 billion that Sabadell wants to sell are precisely those covered by the Asset Protection Scheme (EPA) granted by the semi-public fund during the sale of CAM.

The Management Committee, whose members include bankers from some of Sabadell’s competitor firms, is questioning the sale of the €12 billion because of the hole it would cause in its own accounts. The FGD held equity funds of €1.6 billion at the end of 2016. The same thing is happening with BBVA. In that case, the FGD is considering whether to approve the accelerated sale of assets proceeding from Unnim’s EPA.

Two positions

This story is about two very different positions. On the one hand, Sabadell and BBVA want to bulk sell all of the problem assets that they inherited from the purchases of CAM and Unnim, respectively, in one go. In terms of the danger posed by the end of the EPA, they know that, like happened to Liberbank, when the guarantees end, the unsold assets will affect their capital ratios, by raising the denominator (APRs).

Meanwhile, the FGD is studying the impact that these operations may have and whether the contracts signed at the time allow such accelerated divestments.

Sabadell was one of the most active entities in the sale of problem portfolios last year, with the sale of Project Normandy to Oaktree and Project Voyager to the largest pension fund in Canada.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

CNMC Approves Sabadell’s Sale of Hotel Socimi to Blackstone

4 December 2017 – Eje Prime

The sale of Sabadell’s hotel Socimi has been given the go-ahead. Spain’s National Markets and Competition Commission (the CNMC) has given the green light to the first phase of the sale of Banco Sabadell’s hotel subsidiary, HI Partners, to the US fund Blackstone for €630.7 million.

The operation was agreed in October through the company Halley Hodco, which is controlled by the US investment fund. The sale of the Socimi will generate a net profit of €55 million for Sabadell and will improve its capital ratio by 22 basis points this year.

A few months ago, the Catalan bank engaged Credit Suisse, Citi and JP Morgan to work on the possible IPO of the hotel chain, but in the end, the financial institution decided to completely divest the company.

In addition to Blackstone, the fund Brookfield also bid for the purchase of the company, which was created only two years ago. HI Partners has a portfolio of 29 assets and is worth €1 billion. Its hotels include the Abora Catarina in Maspalomas (Gran Canaria); the Ritz-Carlton Abama and the Jardín Tropical, both in the province of Tenerife.

Original story: Eje Prime

Translation: Carmel Drake

Popular Puts €500M Distressed Asset Portfolio Up For Sale

21 April 2017 – El Mundo

Banco Popular, the Spanish entity that is under the most pressure from the ECB to accelerate the cleanup of its balance sheet, is starting to debut on the wholesale market, in search of investors interested in its portfolios of distressed assets. The entity has committed to eliminating €15,000 million from its balance sheet by 2018, which represents almost half of its total risk.

The latest move has been to put a portfolio of distressed assets up for sale, amounting to €500 million. The portfolio is sparking potential interest amongst funds that specialise in buying portfolios at low prices to generate returns from them later through the recovery of their value or their resale. Banco Popular told this newspaper that it does not have any portfolios of that kind up for sale and that it only publicises such operations once they have been completed, however, two financial sources consulted separately, confirmed otherwise.

The portfolio up for sale is the largest, by volume, that the entity has marketed since it began its timid cleanup process at the end of 2016. In January, whilst the entity’s former Chairman was in the middle of being replaced, Popular sold a portfolio of debt, amounting to €200 million and secured by hotel assets. It also placed a €400 million portfolio, secured by homes, parking spaces and storerooms. The purchasers in those cases were the investment funds Apollo and Blackstone, respectively.

The sense in the financial markets is that this move by Banco Popular will be the first of many whereby the entity will try to offload new portfolios of assets in order to fulfil the “ambitious and realistic” strategies that the regulators have been requiring of it since 20 March to clean up its balance sheet and achieve the established capital and risk coverage ratios.

Changes in the sector

In fact, Popular is far from the only entity to be placing portfolios of this kind on the market. So far this year, entities such as Bankia, Sabadell, Deutsche Bank and BBVA have placed €1,600 million with specialist funds such as Blackstone, Grove and Oaktree. (…).

Original story: El Mundo (by César Urrutia)

Translation: Carmel Drake