INE: Land Sales Increase By 10.5% In 8m To Aug

27 October 2015 – Cinco Días

This week has seen the conclusion of the two major annual events in Spain’s real estate calendar: the Real Estate Trade Fair in Madrid (SIMA) and Barcelona Meeting Point. In addition to a sharp increase in the number of private visitors, this year more companies have wanted to be present at both events, because the figures clearly show that more houses are being sold, at higher prices (the price decreases have now come to an end across most of the country) and most importantly, new properties are being constructed once again.

Given that land is the raw material required to launch new developments, it was crucial for funding to return to this segment of the market as well, and the statistics show that the trend there is now reversing. Not only are more mortgages being granted to acquire homes and complete developments abandoned due to the crisis, loans are also being granted once more to buy land. (…)

According to the latest available statistics, compiled by INE, for the period from January to August 2015, 48,905 plots of land were sold in Spain during the first 8 months of the year, an increase of 10.5% compared with the same period in 2014 (when 44,237 plots were sold). If this trend continues, 2015 will close with a significant increase on the number of plots of land sold last year (65,821), breaking the downward trend that began in 2007 (the first year this data was collected) when 195,269 plots of land changed hands.

What are investors looking for?

In terms of whether more or fewer mortgages are being granted on the plots of land being sold, the figures do not yet reflect an overwhelming improvement (…).

Again, according to INE, between January and July (the data for August is published today), 4,897 mortgages were granted for plots of land, a decrease of just 1.6% compared with the same period last year, when the number amounted to 4,979. Like in the case of land sales, if the trend in mortgages granted for land is maintained between now and the end of the year, then 2015 will close with an increase in the number granted for the first time since 2009.

For the experts and everyone now working in the real estate sector (including the banks, the Socimis and the new servicers), the fact that financing has returned to the land segment is very good news, since this will revive the construction of new builds. Above all, we are now starting to see studies that show that one of the imbalances on the horizon in the market is the lack of offices, developable land and industrial warehouses in prime and other good locations in cities, which is what exactly national and international investors are looking for.

Finally, if this trend continues and improves, it will be a great relief for the banks, since 37.8% of the almost €80,000 million in foreclosed real estate assets that last year weighed down on the balance sheets of the main Spanish financial entities (Santander, BBVA, CaixaBank, Sabadell, Popular, Bankia, Bankinter, Kutxabank, Unicaja, Ceiss, BMN, Liberbank, Ibercaja-Caja3, Novagalicia and Catalunya Banc) related to land, the same percentage as for finished homes, which accounted for 37.1% of the total, according to a study by the Department for Research and Economic Analysis at La Caixa.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Sareb Owns One Third Of Spain’s Problem Banking Assets

17 September 2015 – Expansión

Sareb is playing a key role in the clean up of Spain’s financial sector. According to a study conducted by the consultancy RR de Acuña y Asociados, proof of that is the fact that it now owns one third of the sector’s problem assets.

The firm calculates that the Spanish banking system’s exposure to problem real estate assets amounts to €259,049 million in gross terms, plus a further €32,337 million in doubtful mortgage debt.

According to the study, which is based on the latest available figures, Sareb has loans and real estate assets worth €44,263 million, which in gross terms – before they were transferred – would have been worth €94,750 million.

RR de Acuña y Asociados also highlights that the transfer of assets from entities with public aid to Sareb meant that the first (entities) recorded extraordinary valuation adjustments of €12,700 million. The assets transferred by Bankia, Catalunya Banc, NCG Banco – now Abanca -, Banco de Valencia, BMN, Ceiss, Liberbank and Caja 3 had an initial appraisal value of €106,970 million. Excluding provisions, RR de Acuña y Asociados has identified a mismatch of €12,694 million between the transfer value to Sareb, which the entities must have borne themselves.

Forecast

Although the volume of problematic banking assets has stopped increasing over the last few years, the consultancy warns that it will take time for the entities to digest the leftover real estate assets: “Although the trend in the volume of doubtful assets is stable and is even recording some small downward variations, if we take into consideration the precarious financial situation of the property development and real estate construction companies, all indicators show that the level of exposed assets will continue to behave in the same way, for the next two years at least”, says the report. This means “a decrease in the volume of loans and an increase in the volume of real estate assets”.

As such, the real estate firm observes “an over-supply”, which means that it is “unlikely that house prices will begin to increase in the coming years”.

Meanwhile, yesterday, Sareb announced the repayment of a senior debt tranche amounting to €47.3 million after amending the asset transfer contract it holds with Catalunya Banc.

The asset transfer agreement between the two entities established that either of the parties could make adjustments to regulate the transfer completed in 2012, for a period of 36 months following its signing.

Original story: Expansión (by J.Z. and J.M.L.)

Translation: Carmel Drake

Solvia Plans To Purchase Other RE Platforms

27 March 2015 – Expansión

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

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

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

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

Potential IPO

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

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

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

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

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

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

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

Alicante

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

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

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

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

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

Translation: Carmel Drake

Sareb Continues To Review Its Asset Transfer Prices

12 March 2015 – Expansión

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

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

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

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

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

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

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

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

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

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

Sareb’s Financing Costs Will Be €400m Lower In 2015

19 February 2015 – Expansión

Good news for Sareb. The company has not yet published its accounts for 2014, since it is still waiting for the Bank of Spain to define its accounting framework and whereby determine its final results. But the company, chaired by Jaime Echegoyen (pictured), has taken an important step that will help to improve its results in 2015, its third year of operation.

The bad bank has just renewed the debt that it raised to pay the rescued savings banks for the properties and developer loans that they transferred. Instead of cash, Bankia, Novagalicia (now Abanca), Catalunya Banc, Banco de Valencia, BMN, Liberbank, Banco Caja Tres and Ceiss received senior bonds backed by the State.

The bonds, whose interest rate is linked to 3-month Euribor and the spread on Spanish debt, had maturity dates of one, two and three years and are renewed automatically. The debt relating to the entities classified in the so-called Group 1 (the larger ones) was renewed in December and now (in February) it has been the turn of the Group 2 entities.

Thanks to improved market conditions, in particular, the decrease in the risk premium on Spanish treasury bonds, Sareb has significantly reduced the yield on these senior bonds to the extent that the average spread on its debt portfolio has fallen from 1.954% to 0.832%.

In this way, Sareb will reduce its financing costs by €400 million in 2015, according to the institution’s official calculations. In other words, with the renewal of this debt, the former savings banks will no longer receive this amount for the real estate assets they transferred to the bad bank, which will have a negative impact on their net interest income this year.

The decrease in the interest payments on this debt would have been even greater without the coverage that Sareb contracted over 85% of the portfolio through a swap, which establishes a fixed interest rate regardless of the evolution of Euribor. In this way, it protects its results from upwards movements in the base rate, but it also mitigates the positive effects of any downwards movements.

Repayment of €5,416 million

Sareb’s financing costs have also been reduced by the repayment of debt. The bad bank issued €50,781 million in bonds when it was created to pay the savings banks for their assets. Since then, thanks to the income generated from the sale of properties and loans, it has repaid €5,416 million of that balance.

The amount of debt repaid in 2014 exceeded the initial expectations of €3,000 million by more than €400 million. And Sareb expects that it will exceed its bond repayment forecasts this year as well, although it has not yet shared these forecasts with the market.

“Sareb is fulfilling its main objective, which is to manage and sell its portfolio of assets without generating higher costs for the taxpayer”, said the Chairman of the bad bank in the first ordinary meeting held by the Board of Directors in 2015.

His predecessor in the role, Belén Romana, used to repeat the mantra that reducing its own financing costs was one of Sareb’s priorities to pave the way towards sustainable profitability. Its financing costs amounted to €1,272 million in 2013 and decreased to €1,135 million in 2014. In all likelihood, this downwards trend will only accelerate from here on in.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

CEISS Sells a €485 Mn NPL Portfolio

19/09/2014 – Expansion

Banco de Caja España de Inversiones, Salamanca y Soria (one of Spains savings banks abbreviated to CEISS) has marketed a 100%-provisioned, non-performing loan portfolio for €485 million.

The transaction has been advised by KPMG Corporate Finance and KPMG Abogados (Lawyers – translators note). It allows CEISS to cut in default rate by the aforementioned amount. Still, its REO portfolio contains 36.500 loans to individuals and small/medium-size companies.

With the sale, Banco CEISS takes the next step in its Strategic Plan assuming divestment in all non-core assets.

 

Original article: Expansión (after E. P.)

Translation: AURA REE

Abanca, Ceiss & Blackstone Left Out of Sareb’s Asset Management Tender

9/09/2014 – Cinco Dias

Sareb has announced which of the companies aspiring to managing its portfolio including assets worth €50 billion (€11 billion in real estate and €39 million in developer loans) had been accepted and which rejected.

Both national and international managers eagerly attended the auction as Spains bad bank is the top developer in the country. Moreover, according to a statement by its CEO, Jaime Echegoyen, the operation named Ibero could turn the market around.

Initially, there have been eight non-binding bids, submitted by Aktua, Altamira, Anticipa (servicing platform of Blackstone), Servihabitat, Ceiss, Haya, Solvia and Abanca (former Novagalicia).

After a thorough sift-out, Sareb eliminated Abanca, Ceiss and Blackstone and its Anticipa, former servicer of Catalunya Banc purchased recently by BBVA.

Once the selection pool narrowed, further process seems to become much stricter. Logically, the bad bank will try to play the asset management award out to the end.

Sareb aims at designating the final management team by the end of September when the binding offers are due to arrive. We are going to pick three or four servicers, proven to be professional and efficient in the repossessed asset administration. The choice is large as in the past two years many experts in this field arrived at Spain, Echegoyen said.

Several sources from the market suggest that the negotiations to take place in the upcoming days will be key for the tender. The remaining bidders will have to specify their price, terms and conditions (comissions, discounts, etc.), as well as technical aspects such as a possessed platform, operating process, call center, etc.

Experts from the market venture to state that the auction will lay foundations for the end of the protracted financial crisis in the country.

While Sareb selects its future asset managers, Spanish banks struggle to cleanse their balance sheets before the stress test by the European Central Bank (ECB). Santander, BBVA, Bankia and CaixaBank have already been inspected.

 

Original article: Cinco Días (by Angeles Gonzalo Alconada)

Translation: AURA REE

Ceiss Applies Two Million Euro Discount on Asset Volume Transferred to Sareb

Ceiss Bank has reduced the price of the assets transferred to the bad bank by 1.95 million Euros.

The deed of the asset transfer was corrected on December 26th, in order to adapt the perimeter initially estimated by the entity and precisely configurate it to the date of transfer, according to CNMV (the National Stock Exchange Commission).

As a result, the asset volume transferred by Ceiss to Sareb has been established at 3.135,4 million Euros. At the beginning it was valued at 3.137 million Euros. The correction was conducted through partially anticipated redeem, on the Sareb´s part, of the senior notes.

The bank returned to Sareb the difference between the two amounts equal to 1.95 million Euros.

 

Source: El Economista