Tag: Citi

Sabadell Engages Lazard To Evaluate Future Of HI Partners

29 August 2017 – Expansión

Banco Sabadell is studying the best solution for its hotel manager HI Partners. To this end, the financial entity has engaged the investment bank Lazard to analyse the private sale of its subsidiary or to search for a shareholder to acquire a majority stake in the company, according to market sources.

In this way, Sabadell is opening a window of opportunity to those who may be interested in taking full or majority control of its hotel management company, whilst it continues, in parallel with the IPO of the same entity.

These two options will allow Sabadell to make cash on the one hand and undo its positions, taking advantage of the current investor appetite in the real estate sector and, specifically, the interest in hotel assets, and secondly, to find a partner to take a majority stake and whereby deconsolidate the business from its balance sheet.

The operation, known in the market as a dual-track deal, allows the company to launch a sale and the search for interested parties in parallel to and at the same time as it undertakes the stock market debut process.

In this way, Lazard’s commission is independent of the contract that HI Partners signed to evaluate the feasibility of listing the company on the stock market.

Opportunities

Sources at the bank consulted by Expansión have indicated that this represents a “very preliminary sounding out” of the various deconsolidation and value-generating options. (…).

In this sense, the CEO of Sabadell, Jaime Guardiola, said during the presentation of the bank’s most recent results that the vocation of the financial entity is not to remain as managers over the long term: “we want to exit and we have a very good opportunity ahead of us”, he explained.

HI Partners is led by Alejandro Hernández-Puértolas (pictured above centre), CEO of the company, who, together with Sergio Carrascosa (pictured above left) and Santiago Fisas (pictured above right), two other former executives of Reig Capital, comprise the management team.

The group was created in 2015 following the transfer of around twenty hotels by Banco Sabadell. The financial entity had foreclosed those assets during the crisis following the non-payment of debts. Moreover, HI Partners is responsible for managing the bank’s hotel debt.

IPO

To control these assets, the hotel investment and management arm of Banco Sabadell created two companies: one to hold the best hotels in the chain, HI Partners Holdco Value, and another containing smaller hotels in secondary locations, HI Partners Holdco Gestión Activa, with the intention of improving their management to then sell them on.

For the time being, Sabadell is not ruling out any of the options and is continuing to analyse the debut of its hotel management and investment subsidiary on the stock market.

Before the summer, the bank engaged the investment banks Citi, JPMorgan and Credit Suisse to sound out the market and analyse the feasibility of listing its hotel management subsidiary on the stock market (…).

In the event that the bank decides to debut the company on the stock market, the operation will focus on the company that controls the most strategic assets: 14 high-end hotels located in the main tourist areas and which, as at 30 June, had a combined appraisal value of €689 million, with more than 3,700 rooms in the portfolio.

Original story: Expansión (by R. Arroyo and J. Orihuel)

Translation: Carmel Drake

Santander To Receive Non-Binding Offers For Popular Portfolio This Week

24 July 2017 – Expansión

Santander is heading into the home stretch of its initiative to get rid of Popular’s toxic real estate assets. The process will be accelerated next week when the entity closes the first phase. According to financial sources, Santander is open to receiving non-binding offers until the end of July.

The bank wants to sell a portfolio of foreclosed assets and doubtful real estate loans from Popular for a gross amount of €30,000 million. Santander is planning to sell 51% of this portfolio to a single buyer. The real estate risk of the bank that was resolved by the European authorities amounts to almost €37,000 million, including the stakes in real estate companies, which amount to around €7,000 million.

On 7 June, on the same day that she announced the purchase, Ana Botín revealed a plan to cut Popular’s non-performing assets in half within 18 months. But the segregation of the portfolios of property into a single vehicle could shorten that period. The agency Reuters said on Friday that the bank expects to receive its first non-binding offers by today, Monday 24 July.

Sources in the market take it for granted that the interested parties bidding for Popular’s toxic real estate will include Apollo, Lone Star and Blackstone. Other sources say that one of those funds has already decided to withdraw and they do not rule out others joining, such as Cerberus. In the pools, Apollo and Lone Star are starting off as favourites.

Santander’s plan also involves selling the majority of the servicer Aliseda to the winner of the bid. That company is responsible for managing Popular’s real estate assets and is fully controlled by Santander, after the entity repurchased the 51% stake controlled by Kennedy Wilson and Värde Partners on 30 June 2017.

Aliseda

By also purchasing the servicer Aliseda, Apollo, for example, would achieve important synergies, say sources in the sector, given that the fund already controls 85% of Altamira, which manages Santander’s real estate assets. Meanwhile, Lone Star has strong a strong interest in Popular’s portfolio, which was put up for sale at the end of June, and has an aggressive plan for absorbing real estate assets in Spain. However, the fund controls 39.6% of the real estate company Neinor, a competitor of Metrovacesa, in which Santander and Popular together hold a 70% stake; which may go against it in the bidding.

The rapid sale of 51% of the portfolio of Popular’s toxic assets would allow Santander to deconsolidate the real estate weight from its balance sheet, one of the main factors that triggered the resolution of the until now sixth largest bank by asset volume. Popular’s real estate portfolio contains €10,500 million in land and hotels, plus more than 25,000 homes, according to the latest available data. Half of the properties are located in Andalucía and Valencia.

Santander has recognised provisions amounting to €7,900 million to increase the coverage ratio of Popular’s real estate to 69%. The average in the sector is 52%, which will allow it to offer significant discounts.

Market sources estimate that Santander may record revenues of almost €5,000 million from the sale of 51% of Popular’s real estate portfolio. The bank could also earn up to €630 million from selling some of Popular’s property, according to a recent report from Citi.

Original story: Expansión (by R. Sampedro and N. Sarriés)

Translation: Carmel Drake

Santander Could Earn Up To €630M From The Sale Of Popular’s RE

14 July 2017 – Expansión

Santander will make a profit from the clean-up of Popular’s balance sheet. The bank may earn up to €630 million from the sale of its foreclosed assets and doubtful real estate loans, which have a gross value of €30,000 million. The bank’s real estate risk, according to the European authorities, amounts to almost €37,000 million, including the stakes in real estate companies, which amount to around €7,000 million.

These profits will be obtained in the best of the possible scenarios considered by Citi in a report published this week. The North American investment bank was responsible for advising Santander during its purchase of Popular, which ended up being closed for the symbolic price of one euro.

Santander plans to divest all of Popular’s non-performing assets within three years. But Citi thinks that it will have to offer discounts of between 15% and 20% on the net value of the assets to incentivise bids from investment funds and private equity firm, amongst others. The net value of the assets amounts to around €9,300 million with a provisioning level of 69%.

Financial sources believe that Santander will accelerate the sale of Popular’s more impaired properties to clean up that part of the balance sheet before the end of this year. In this way, it may recognise juicy accounting profits, according to the sources. Popular’s real estate portfolio contains €10,500 million in land, hotels and more than 25,000 homes, according to the latest available figures. Half of the properties are located in Andalucía and Valencia.

Ana Botín has set the goal of getting rid of half of Popular’s non-performing assets within a year and a half.

Clean up

To clean up Popular’s toxic assets, Santander is undertaking a capital increase amounting to €7,072 million. The bank will recognise a provision against €7,900 million of Popular’s non-performing assets to increase the coverage level of the real estate risk from 45% to 69%. The average coverage level in the sector is 52%, which is why financial sources say that Santander is likely to mark a milestone that has not been seen in the Spanish banking sector for years: it looks set to sell property at a profit.

Santander is negotiating with the funds to divest Popular’s non-performing assets. It is studying the possibility of creating one or more vehicles to separate the risk linked to property from the acquired entity. Morgan Stanley is advising the bank on the clean-up plan. Some funds, such as Blackstone, Apollo, Bain Capital and Lone Star have approached the bank to understand its strategy.

Santander forecasts that its purchase of Popular will generate cost synergies of around €500 million from 2020 onwards, although Citi elevates that figure to €606 million. The investment bank considers that Santander is being too conservative in its calculations of the return on investment and its impact on earnings per share.

According to Citi, the purchase of Popular will generate a return of 24% for Santander in 2020 in the best-case scenario, above the 13-14% forecast by the entity. And it estimates that the operation will allow Santander to increase earnings per share by 6% in three years, compared to the forecast of 3%.

Leader in Spain

The resultant entity will rise to the top of the market in terms of assets (almost €470,000 million), deposits (€255,000 million) and loans (€249,000 million). (…).

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake

Sabadell Considers Listing HI Partners As A Socimi

29 May 2017 – Eje Prime

A new IPO may be on the horizon for the real estate arm of one of the large Spanish banks. Banco Sabadell is analysing the option of debuting its subsidiary HI Partners, through which it owns a portfolio of 31 hotels across Spain, on the stock market as a Socimi.

According to Expansión, the bank has engaged the investment banks Citi, JP Morgan and Credit Suisse to study the feasibility of the placement, whose final green light will depend on the entity’s President, Josep Oliu. The eventual debut on the stock market could take place after the summer.

Led by Alejandro Hernández-Puértolas and chaired by Enric Rovira, HI Partners was founded in 2015 by Sabadell to enable the Catalan entity to concentrate the ownership of the real estate assets linked to the tourist sector that it obtained as a result of foreclosures, into a single company. Through two companies, HI Partners Value Added and HI Partners Gestión Activa, the firm now owns 31 hotels with more than 3,500 rooms, which are managed by various hotel operators.

The group’s assets include establishments in Tenerife (the Hotel Jardín Tropical), Marbella (Incosol), Sitges (Terramar), Valencia (Acteon), Málaga (an establishment run by the hotel chain Silken) and Mallorca (the Hilton Sa Torre). In addition, HI Partners manages €800 million of the bank’s hotel debt.

Original story: Eje Prime

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

Santander & Apollo Call Off Altamira Negotiations

30 December 2016 – Vozpópuli

Santander’s repurchase of Altamira has run into trouble.

After months of to-ing and fro-ing, Banco Santander and Apollo have decided to call off their negotiations regarding the possible sale of the 85% stake that the US fund owns in the real estate company. And the reason is price, given that Ana Botín is not willing to meet the expectations of the asset manager chaired by Leon Black. Apollo will not drop its asking price below €1,000 million, whilst Santander’s informal offer amounts to around €800 million, according to several financial sources.

Unless there is a last minute change of heart, all indications are that Altamira’s share capital structure will continue as it is now: with 85% in the hands of Apollo and 15% controlled by Santander. The Spanish bank sold the controlling stake in the real estate company in 2013 for €664 million.

Santander’s intention was to repurchase its stake to create a world-leading property management firm, to administrate its assets in other countries where the default rate is rising, such as in Brazil. Santander engaged Citi to complete this operation. The possible repurchase has been on the table since Ana Botín (pictured above) took over as President of the bank, given that this sale was one of the things that she liked the least from her father’s inheritance.

Botín sees it as a much more expensive way of raising capital than would have been possible to obtain by other means. But unless she can afford a price that will allow Apollo to close this deal at a profit, it is unlikely to go ahead. This change in strategy comes at a time when Apollo is raising a new fund, amounting to more than €4,000 million, to invest in the south of Europe. Given that it has new ammunition to spend from now on, it will value a platform such as Altamira very highly

New strategy

Following this turnaround in negotiations, Apollo has decided to strengthen the future of Altamira be making acquisitions. Santander’s property management firm is well placed in two current acquisition processes: firstly for Unicaja’s real estate arm, GIA, where it is competing with Haya Real Estate; and secondly, for the first bad bank created by the Portuguese State, Oitante, which manages Banif’s problem assets – other players such as Servihabitat (owned by TPG and CaixaBank), Hipoges and Värde Partners (Banco Popular’s real estate shareholder) are also bidding in that tender.

If the latter operation bears fruit, it would be Altamira’s first international venture, and the ideal way for Apollo to generate value from this investment, and obtain more from its sale when it eventually decides to exit.

The fund chaired by Black (one of the 150 wealthiest people in the USA and owner of the painting The Scream) is putting all of its meat back on the grill in Spain after a couple of less active years. In 2013, it closed its largest two acquisitions in the country: Altamira and Evo Banco. Since then, its activity has been limited to the purchase of a small portfolio of homes from BMN and GE Capital’s mortgage portfolio in Spain. Moreover, Altamira was awarded one of the four management contracts by Sareb.

In recent months, Apollo has purchased one of the largest banking portfolios on the market, Project Sun from CaixaBank, containing hotel debt, and it is expected to soon close the acquisition of one of the aforementioned real estate platforms (Oitante or Unicaja).

Original story: Vozpópuli (by Jorge Zuloaga)

Translation: Carmel Drake

PortAventura’s Owner May Buy TPG’s Stake In Servihabitat

30 November 2016 – Voz Populi

The real estate arm of CaixaBank, Servihabitat, is preparing for a possible change in its shareholders. The Italian private equity group Investindustrial (which is headquartered in Barcelona) is holding conversations with TPG regarding the possible acquisition of the 51% stake that the Texan fund owns in Servihabitat. For the time being, no offer has been put on the table, but several financial sources consulted are convinced that a deal will be reached soon and that the group, owned by the Bonomi family, is well positioned to take over the reins of the real estate company.

Investindustrial already has a lot of roots in Spain and above all in Cataluña. The same sources add that Carlo Bonomi, the CEO of the firm, has a good relationship with Isidro Fainé. Both groups completed one of the largest private equity operations between 2009 and 2012, with the purchase of the PortAventura park from Criteria for almost €200 million.

The fund created by the Bonomi family also controls the rental car company Goldcar in Spain and the ambulance firm Emeru. In recent years, it has held stakes in Applus, Euskatel and Recoletos, amongst others. In fact, Investindustrial was one of the groups that submitted a bid for the takeover of RCS (owner of Unidad Editorial), but it was pipped at the post by Cairo Communication.

The possible acquisition of a stake in Servihabitat comes at a time when the financial sector is rethinking its real estate partnerships: Santander has engaged Citi to handle its purchase of Altamira; Popular is negotiating with Värde Partners and Kennedy Wilson to regain control over Aliseda; and Servihabitat has also been the target of rumours in the market. Nevertheless, the sources consulted explain that the Catalan group does not want to regain ownership of 100% of its real estate company, but rather is looking for a new partner whose plans for Servihabitat fit better with its own vision than that of TPG.

This change in strategy has not arisen due to personal differences, but rather due to the new circumstances in the financial sector. When the banks sold their stakes in their real estate companies in 2013, they did so because they needed capital; and they were very successful in this regard. In the case of Servihabitat, TPG paid €310 million for its 51% stake.

Change in strategy

Nevertheless, with the passage of time, the banks are seeing a slowdown in the rate of property sales and are incurring expenses on their income statements as a result of all of the commissions that they are having to pay their property managers.

A priori, the investment in Servihabitat does not fit with the type of investments that Investindustrial usually undertakes. It traditionally backs sectors such as services, consumer and industrial. But, sources in the sector regard Servihabitat as a classic private equity investment, since it is a cash generating machine with potential to grow through corporate operations. In fact, Servihabitat is one of the candidates in the running to buy Portugal’s largest bad bank.

The company generated EBITDA of €111 million last year. Its consolidated profit amounted to almost €44 million.

Original story: Voz Populi (by Jorge Zuloaga)

Translation: Carmel Drake

Santander Launches The Sale Of Its Landlord URO Property

11 November 2016 – El Confidencial

Banco Santander and the other shareholders of URO Property, the Socimi that owns 755 of the Cantabrian-based entity’s branches, have formally launched the sale of the company, with a view to finding a white knight to acquire most of the Socimi’s shares.

According to three sources close to the operation, Citi was given the mandate to open an organised process on 19 September, with a view to closing the operation before the end of the first half of 2017.

The US entity had already been engaged in May to analyse the possible alternatives for a change in the shareholder structure and now that interest from sovereign and pension funds, insurance companies, fixed income investors and several real estate companies, has been confirmed, the formal process has been launched.

Citi, Santander and URO all declined to comment on the announcement.

The Socimi is attractive because it represents a low risk investment, with guaranteed returns and the certainty of dividend distributions. Those characteristics make it an object of desire for large sovereign funds and very conservative vehicles, the main candidates that Santander and its partner shareholders are targetting for this divestment process.

In addition, URO’s shareholders are open to exploring formulas such as the one that Santander has just successfully carried out with Metrovacesa, including merging the Socimi with another large landlord of commercial premises, according to the sources.

In addition to the activity undertaken by the bank chaired by Ana Botín, several other entities have also sold off large batches of branches in recent years, including BBVA, which sold 800 branches to Tree Inversiones Inmobiliarios, now part of Merlin, and Sabadell, which sold a portfolio of 228 branches and 133 parking spaces to Moor Park, which, in turn, subsequently sold the portfolio to the Mexican businessman Moisés El-Mann.

URO is currently very limited in terms of its business operations, due to the clauses included in the bond issue, amounting to €1,300 million, which it undertook in the spring of 2015, a month after it sold 381 of Santander’s branches to Axa.

Those two operations were a complete success from a financial point of view because they granted the Socimi the stability that it had been seeking for so long, but they also reduced its room for maneouvre, as the entity was forced to use the rental income from 666 of Santander’s branches to guarantee the issue, and also pledge another 80 branches (…).

Santander and CaixaBank will continue to hold stakes in URO

According to URO, the net book value of its current portfolio of branches amounts to €1,585 million, based on its most recent official accounts corresponding to the month of June, whilst its market capitalisation on the Alternative Investment Market (MAB) amounts to €197.5 million.

The decision to activate a formal sales process represents the company’s response to the desire expressed by several of its shareholders to exit from its share capital, now that the “lock-up period” has come to an end.

URO’s creditor entities, led by Santander and CaixaBank (which hold stakes of 22.78% and 14.5%, respectively), decided to execute their debts and take over control of the company in 2014. Both plan to continue as shareholders in the Socimi following the sale, although they are hoping to take advantage of this move to adopt smaller positions.

Other shareholders include BNP Paribas, one of the entities that wants to sell, which controls 9.18%; whilst the former shareholders of URO, Sun Capital (renamed Atisha Holding) and Pearl Group (now Phoenix Life) hold 18.92% and 14.90%, respectively. Other entities, such as Barclays and several hedge funds, which hold stakes of less than 5%, also want to exit. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Banks & Funds Bid For Citi’s Real Estate Legacy

31 May 2016 – Expansión

Citi’s real estate legacy in Spain is up for auction. Two US funds, Ares Management and York Capital, have put real estate loans and foreclosed assets amounting to €180 million up for sale, and banks and opportunistic investors are bidding to acquire the portfolio.

Around half of the portfolio comprises mortgages, of which the majority are up to date (in terms of their repayments), whilst the rest are homes and other assets that the funds have acquired as a result of non-payment (by borrowers).

Ares Management and York Capital purchased these assets from Citi in Spain at the beginning of the crisis, as they took advantage of the fact that the US entity was withdrawing from certain activities. That was further reflected last year with the sale of its credit card and retail banking business to Banco Popular.

Resale of assets

The strategy to resell assets is common amongst the opportunistic funds, either because they have already obtained the expected returns or because they believe that they can obtain a higher price by selling the portfolio at a particular time.

For example, that is exactly what Fortress did recently, with the sale of Geslico, the former recoveries platform of the savings banks, to the Norwegian group Axactor. The same fund has been selling off other assets in Spain, just like other funds that arrived in Spain and purchased assets between 2011 and 2012.

The operation is being advised by N+1, under the name Project Firefox, and the first offers are expected to be received within the next few days, according to sources at the funds.

In addition to this portfolio, last year, Citi sold another portfolio to Evo Banco from the fund Apollo, containing €370 million of mortgages and 200 properties.

In parallel, the US bank sold its retail banking and credit card business to Popular for €240 million. The Spanish entity acquired a portfolio of 1.2 million clients, around €2,300 million assets under management, €2,000 million in deposits, a network of 45 bank branches and a workforce comprising 950 employees. Moreover, it acquired 1.1 million credit cards, which have a total outstanding loan balance of €1,400 million.

Project Firefox will have to compete with the avalanche of real estate asset portfolios that the Spanish banks have put on the market in the last month, with Bankia, CaixaBank, Sabadell, BBVA, Santander, Cajamar and Abanca, amongst others, all offering up assets for sale.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Citi Seeks New Shareholders For Uro Property

20 May 2016 – Expansión

Uro Property, the Socimi that owns a quarter of Santander’s branch network in Spain, may see a change in its shareholders in the coming months. The company that holds 84% of its share capital, Ziloti Holdings, has given Citi a mandate to study possible shareholder changes.

This mandate comes in the face of interest from some of the current shareholders to exit the company, given that they were forced to acquire shares in the first place when their debt was converted into capital in 2014.

The main shareholders of Uro Property – both through Ziloti and otherwise – are Santander, with 22.7%; Atisha Holding, the former Sun Group, with 18.9%; Phoenix Life Assurance, with 14.6%; CaixaBank, with 14.5%; BNP Paribas, with 9.2%; and other private investors and international entities.

Citi will mainly look for investors amongst the large pension funds, insurance companies and investment funds.

The departure of the shareholders was vetoed until March under an institutional agreement reached following the recapitalisation of Uro.

The renewal of the shareholder base is one of the outstanding milestones for the company, which owns 755 Santander branches in Spain. It refinanced its debt last year and cancelled a swap, whereby reducing the financing costs of its €1,300 million debt from 6% to 3.35%. Last year, the Socimi sold 381 branches to Axa for €308 million, recording a capital gain of €27 million.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake