ECI & Matutes Negotiate the Sale of Ayre Hotels for €200M

12 January 2018 – Expansión

Advanced conversations / The retail giant and hotel chain want to cash in on the sale of a hotel portfolio comprising five establishments and more than 800 rooms.

El Corte Inglés and Grupo Matutes want to take advantage of the good times that the tourist sector is enjoying and the investor appetite for the real estate market to sell some of the assets in the Ayre chain – a brand of urban hotels, which they jointly control (50:50) – and make some money.

Specifically, the groups are finalising the sale of a portfolio comprising five hotels, with more than 800 rooms, located in Madrid, Barcelona, Oviedo and Córdoba, worth around €200 million, according to sources in the sector. Those sources indicate that the two companies have already received several offers and that the operation could be closed during the first quarter of the year.

Ayre was created in 2006 as the urban brand of the Palladium Hotel Group – then known as Fiesta and belonging to the Grupo Empresas Matutes (GEM) –. At the end of that year, El Corte Inglés purchased a 50% stake in the chain, through Parinver, its holding company. The retail group classified that acquisition as an operation of a financial nature at the time.

Currently, the urban chain Ayre owns 10 hotels in Madrid, Barcelona, Sevilla, Valencia, Córdoba and Oviedo. Last summer, the companies decided to put half of the assets up for sale and reposition at least two of the other establishments – the hotels in Valencia and Sevilla – under the Only You brand, the premium sub-brand of Ayre.

The company that owns Ayre is FST Hotels, controlled equally by Fiesta Hotels & Resorts (Grupo Matutes) and Parinver (El Corte Inglés). FST Hotels, which is headquartered in Palma de Mallorca, closed 2016 with turnover of €49.4 million, up by 14% and a net profit of €4.2 million, up by 100% compared to 2015, according to the most recent accounts filed with the Commercial Registry.

The President of the Company is Abel Matutes Juan, whilst Florencio Lasaga, the director of El Corte Inglés and President of the Ramón Areces Foundation (its largest shareholder) serves as the Vice-President. FST Hotels also has Jesús Nuño de la Rosa, the CEO of El Corte Inglés, on its Board, as well as Carlos Martínez Echevarría and Cristina Álvarez Guil, both directors of the retail group; and Abel Matutes Prats, Director General of Palladium, amongst others.

The operation forms part of the strategy of Grupo Palladium, whose objective is to grow through hotel management, and move from being an owner to a manager, in line with other Spanish chains. Palladium, which is headquartered in Ibiza and is more than 40 years old, has 50 hotels in six countries – Spain, Mexico, Dominican Republic, Jamaica, Italy and Brazil – and operates three other brands besides Ayre: Palladium Hotels & Resorts, Fiesta Hotels & Resorts and Ushuaïa.

Meanwhile, El Corte Inglés would add the sale of this hotel portfolio to the list of non-strategic divestments that the group has undertaken in recent months: in November, it reached an agreement with the fund GPF to sell it the management of its Motortown workshops, located in 55 of its shopping centres; in October, the company chaired by Dimas Gimeno sold 40% of Torre Serrano to Infinorsa for €50 million; and in September, it sold off a logistics warehouse in La Bisbal del Penedès (Tarragona). The group has also sold buildings in Madrid, Barcelona and Sevilla, amongst other cities, in recent months.

Original story: Expansión (by R. Arroyo and V. M. Osorio)

Translation: Carmel Drake

Aedas Completes €2.3M Capital Increase

17 July 2017 – Eje Prime

Aedas Homes is continuing to raise funds to finance its growth. The company, the heir of Vallehermoso, has carried out a €2.3 million capital increase, which it plans to use to continue to boost its growth and strengthen its position as a key player in the real estate development business in Spain.

According to the Commercial Registry, the company Aedas Homes has carried out a capital increase amounting to €2.3 million. This is the second injection that the company has received in recent months after it increased its capital by €31.5 million in April. In this way, the company’s subscribed capital now amounts to €33.7 million.

Aedas Homes, created by the fund Castlelake and advised by Merlin Properties, was created with the objective of constructing 12,000 homes on land that it has been acquiring since 2013, spanning around 1.35 million m2. In March, Aedas Homes, which competes directly with Neinor Homes, Aelca and Vía Célere, began marketing its first fourteen developments and the group plans to add another fifteen developments to its portfolio in the near future.

The company began life in 2013, where the country’s housing market bottomed out and almost all of its activity was suspended. The fund Castlelake is one of the players who decided to back this business in Spain and in order to carry out its plans, it started to create a portfolio of land in locations that, according to its criteria, would be the first to recover.

At the end of 2015, when the real estate recovery started to become a reality and after investing more than €1,000 million in Spain, the fund had accumulated a portfolio of land covering more than 1.3 million m2, equivalent to 12,000 homes, of which 75% corresponded to primary residences.

It was at this point that the leaders of the project started to think about the possible evolution of all of their assets. To figure it out, they invited the Socimi Merlin Properties to enter the fold, to advise the group on the best formula for operating its land portfolio.

At the company’s helm is David Martínez (pictured above), who has vast experience in the real estate sector. After holding positions of responsibility at groups such as Ferrovial and Bovis Lend Lease in the 1990s, Martínez led projects such as Valdebebas and served as a senior manager at Distrito Castellana Norte.

New hires

In parallel to its growth, Aedas Homes is continuing to beef up its management team. The company recently hired Enrique Gracia, former director of Merlin, as the new Head of Finance. Gracia joined Aedas Homes in May; he has more than fifteen years of experience in the real estate sector (…).

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Marina d’Or Launches Aggressive Marketing Campaign

4 October 2016 – Cinco Días

The former hotel and real estate empire Marina d’Or has launched an aggressive marketing campaign to raise revenues. It has put apartments up for sale from as little as €130,000 and retail premises from €200,000, with a “guaranteed” return of 7%.

The empire created by Jesús Ger began to crumble at the same time as the real estate bubble burst in Spain. The Holiday City, which was advertised in the City of London as the best place to spend the summer and as a golden retirement destination for British pensioners, is resorting to aggressive marketing techniques once again to increase its sales in the short term.

The key to the campaign, which is featuring in most national newspapers, is the slogan… “Guaranteed returns of 7%”. The small print explains that these investment opportunities relate to fully operational retail premises, with an established client base, as well as beach-front apartments. It specifies that the return of 7% with guaranteed rent will be over “1, 2 3 or more years, depending on the agreement”.

The reality is that the entity selling these assets is the hotel subsidiary of the group, which has not filed for bankruptcy, unlike its property developer associate.

Hoteles Marina d’Or has been selling homes and retail premises from €130,000 and €200,000, respectively, since the summer. In theory, the guaranteed return used to be 4%, but in September, that figure was increased to 7%.

How does it work?

The mechanism is simple. The company undertakes to pay that percentage over the purchase price on the basis of a signed contract, if the owner grants it the right to rent out its property in return. “In reality, they are apartments that the hotels already manage and given their locations, it is almost certain that they will be occupied; and as such, we are able to promise such returns”, said a sales agent from Marina d’Or. A spokesperson for the firm added that the sale of these apartments represents a direct cash injection and allows them to consider using this formula with more homes in the future. (…).

The hotel and real estate complex, which has half a dozen hotels, ranging from three- to five-star categories, is also home to several leisure facilities and a large spa. (…) The company, which guarantees annual interest of more than €9,000 per year for a flat costing €130,000, held own funds amounting to €86.2 million at the end of 2014, the last period for which accounts have been deposited in the commercial registry.

The company generated revenues of €38.6 million in 2014, in line with the preceding year. Its profit amounted to €627,000, compared with a loss of more than €1 million in 2013. The debt repayment calendar of Hoteles Marina d’Or, a limited company that is fully owned by Jesús Ger, was clear at the end of 2014. Last year, it had to repay €1.2 million; this year €1.4 million; and in 2017, €2.8 million. In 2018, the amount will increase to €4.6 million and from 2019, to €87.5 million. In total, the company’s debt amounts to almost €100 million. (…)

The return means multiplying the average interest rate on one- and two-year deposits by 30, given that on average such deposits paid out 0.23% in July. Nevertheless, the return is not quite so far-fetched in the real estate world. Sources in the sector acknowledge that it is high, given that holiday apartments offer around 4% in their contracts, and that it depends on the tourist occupancy rates in the area. In any case, there is a risk, given that the hotel company is responsible for paying that interest rate.

Original story: Cinco Días (by Pablo M. Simón y Laura Salces)

Translation: Carmel Drake

Allianz Real Estate Opens Branch In Spain

22 September 2016 – El Economista

The real estate arm of Allianz has arrived in Spain, attracted by the investment opportunities on offer here. Allianz Real Estate has just opened a branch in Madrid to track its operations in the Iberian Peninsula and take responsibility for the management of the properties owned by the group.

To lead the project, the firm has hired Miguel Torres, ex-Arthur Andersen, who has been linked with GE Capital Real Estate since 1995, according to the Commercial Registry. “After the recovery of the real estate markets, Spain and Portgual are once again in the focus of international real estate investors”, explained the CEO of Allianz Real Estate, François Traush, who highlighted that the incorporation of Torres into the team aimed “to identify attractive investment opportunities to allow us to continue constructing a diversified portfolio”, for our shareholders.

With more than 20 years of experience in the real estate and structured financing sectors, Torres joins the company from GE Capital in Mexico, where he served as Director General, leading a team of 50 specialists and an unit with almost €3,500 million in real estate financing. Prior to that, he held various management positions at GE entities in Madrid, New York and Stamford.

Allianz Real Estate’s portfolio contains €41,700 million in assets under management: €29,300 million in direct and indirect investments, plus loans amounting to €12,400 million, based on figures at 2015 year end, when it closed operations amounting to €7,400 million. Its goal is to reach the €60,000 million threshold “within the next few years”.

The company, which has subsidiaries in Germany, France, Italy – into which the operations in Spain will report -, Switzerland and the USA, includes the office in Madrid as part of its regional expansion.

Its investment aspirations cover almost the entire sector: from taking stakes in debt, to investing in listed companies, direct and indirect positions in financing and building a significant property portfolio.

It debuted as a lender in Spain a year and a half ago, with a loan for €133 million that allowed the Socimi Merlin to acquire the Marineda Shopping Centre, which, at the time, was the largest investment in this type of complex since 2008.

The strategic logic is two-fold. The low interest rate environment is causing insurance companies to dust off old commitments to property in light of the meagre returns being offered by public debt and the high capital consumption involved with other investments. Companies such as Mapfre, Mutua Madrileña, Santalucía, Reale and Línea Directa have acquired properties recently and are looking for opportunities, although their involvement as financiers is residual or non-existent, unlike the role performed by multi-national firms such as Axa and Allianz.

The sector hopes that Brussels will smooth the path, easing the burden of callable capital, given that the Juncker Plan itself wants to involve infrastructure projects that Europe needs.

In addition, the real estate sector is presenting itself as an alternative that offers higher returns, especially given the security of their operations. The high expectations of growth in terms of office rents and a notable increase in the number of small operations, is converting this segment of the market into one of the most attractive options. In the case of the most cutting-edge buildings and those located in prime areas, rents may increase by up to 22% over the next three years. For the other more modest assets, the annual yield amounts to around 7%. Similarly, yields of commercial premises amount to around 7.5%,and rents are expected to increase by an average of 2.4% p.a. in Madrid over the next two years.

Original story: El Economista (by Eva Contrerar and Alba Brualla)

Translation: Carmel Drake

La Finca Goes On Market For €700M: A Chinese Fund Is Interested

22 September 2016 – Ok Diario

Procisa, the property developer behind the business and residential complex La Finca, located in the northwest of Madrid, has put the “For Sale” sign up. Its Board of Directors is now listening to offers for the purchase of 100% of the company’s share capital, which is currently controlled by the heirs of Luis García Cereceda, founder of the family empire who died in 2010. There are already several investors interested in negotiating the purchase of the group.

According to sources close to the company’s Board of Directors, the objective right now is to continue depreciating the assets and to close the sale before the crisis that the company is undergoing hinders the operation.

According to data from the Commercial Registry, the value of Procisa’s assets decreased to €890 million at the end of 2014 (the last year for which accounts are available), an figure that falls well below the more than €1,000 million recorded in 2010. In fact, according to the sources consulted, the firm is currently reported to be worth around €700 million, a figure that concerns the company’s directors.

The key behind the success of this operation is for the majority shareholder, Susana García Cereceda, to give her approval for the sale of 100% of Procisa, something which has been denied until now. In fact, in June, the General Shareholders’ Meeting approved the carve out of the company into several companies, to allow the US fund Värde, which is investing in the Spanish real estate market, to enter the business. The majority shareholder wanted Värde to acquire 40% of the office business and for the entirety of the residential business to remain in the hands of the García Cereceda family.

According to the plans designed by the main shareholder, Procisa’s assets were going to be distributed between the new company La Finca Global Assets (which was going to manage the rental of offices and retail premises), the company Finca Somosaguas Golf (which was going to focus on building a luxury residential area under the Casablanca brand) and La Finca Promociones y Conciertos Inmobiliarios (into which the other assets and debts from the current Procisa company were going to be integrated).

Nevertheless, that operation was blocked by the Commercial Court number 11 of Madrid, in light of the opposition filed by Yolanda García, the sister of Susana and owner of 49% of Procisa. It was in this context that the company’s change of strategy arose, which is now “to listen to offers” in order to complete the sale of all of the company’s share capital. (…).

According to sources, a Chinese investment fund is already willing to make an offer for Procisa, although the sources consulted preferred not to give any more clues about the deal so as not to jeopardise the potential sale. The trump card that the company’s Board of Director have to close the operation is the recovery of the Spanish real estate sector, and the fact that a number of major companies are located in La Finca, both Spanish and multinationals. In addition, the company owns a luxury residential area, which has great potential to appreciate over the medium term.

Original story: Ok Diario (by L. Ramírez and Jaime Acero)

Translation: Carmel Drake

Tauro Buys Building In Madrid For €9.2M

21 July 2016 – Expansión

The real estate investment fund Tauro Real Estate, managed by Josep Maria Xercavins, has purchased a building in Madrid for €9.2 million. The property is located on Calle Ciudad de Barcelona, 89 and was built recently.

The building comprises 31 homes and 50 parking spaces, which will be put up for rent. Tauro Real Estate already owns eleven buildings in Barcelona and three in Madrid, according to data from the Commercial Registry. Its portfolio currently contains 300 homes and the fund is expected to close once it has 500 homes. Tauro’s aim is to acquire properties that generate good returns (from rental income) and capital gains upon sale.

Original story: Expansión

Translation: Carmel Drake

Hispania Completes Its Socimi-Conversion Process

21 June 2016 – El Mundo

Hispania, in which George Soros holds a stake, has completed its conversion into a Socimi by merging with one of its subsidiaries, which was already operating under that company structure.

The firm has concluded this internal reorganisation just days after it completed a €230 million capital increase, which it undertook to raise funds to finance new investments.

Hispania has completed its conversion into a Socimi, a decision approved at its last General Shareholders’ Meeting, by signing a public deed that officially merges the two companies in the Commercial Registry, according to a statement to Spain’s National Securities and Exchange Commission (CNMV).

Until now, the company was a listed real estate company; and one of its subsidiaries operated under the Socimi structure and carried out the majority of its operations. Thus, with this operation, Hispania has reorganised its company structure by integrating several subsidiary companies and converting its parent company into a Socimi. The merger will take effect from 2017 for accounting purposes.

Investments

After completing these two operations, the Socimi plans to invest around €400 million over the next “nine or ten months” in new assets to grow its real estate portfolio. It acquired several hotel assets a few days ago.

Nevertheless, Hispania is ruling out buying any new homes for rent, given the narrow profit margin that it considers those assets offer in comparison with others. As such, the company will place its focus on the office and hotel markets.

Residential properties already account for around 12% of Hispania’s existing real estate portfolio, which was valued at €1,463 million at the end of last year.

Original story: El Mundo

Translation: Carmel Drake

Martinsa’s Board Approves The Liquidation Of The RE Company

3 March 2015 – Cinco Días

The largest ever property and land sale in Spain’s history begins

Yesterday (Monday), Martinsa Fadesa held what will possibly be its last ever Board meeting. During the meeting, it was agreed that the company would begin liquidation proceedings and that today (Tuesday), it would file a petition to the Commercial Court in La Coruña, for the liquidation of the group, after its main creditors failed last week to approve the proposed agreement presented by the company.

Last week the deadline ended for Martinsa Fadesa’s creditors to sign up to (or reject) the proposed agreement presented by the company on 30 December 2014. According to financial sources, the main creditors, including Sareb, CaixaBank and Popular (which held €1,457.8 million, €907.9 million and €574.2 million of the company’s debt as at 30 June 2014, according to those sources) all opposed the agreement.

“Martinsa’s proposed agreement is not feasible, the business plan that has been presented is not credible”, said the financial sources. “As a result of the liquidation, the creditors will have access to €980 million in terms of asset value”, they maintain, “and the creditors will have access to more transparent information during the liquidation process”.

Martinsa Fadesa recorded a net negative equity position of €4,603.4 million at the end of 2014 (€4,288.6 million in 2011), according to the annual results presented by the real estate company to the CNMV. The company closed last year with assets worth €2,392 million and liabilities amounting to €6,995 million; it recorded losses of €313.6 million in 2014 (51.9% lower than in 2013) and increased its turnover by 18.3% to €130 million.

Between 2006 and 2007, Fernando Martín, the Chairman of Martinsa Fadesa, agreed to purchase Fadesa from Manuel Jove, in a transaction worth €4,045 million. In 2008, Martinsa Fadesa filed for bankruptcy and in 2011, it agreed a payment schedule to allow it to emerge from the bankruptcy situation. That same year, the company decided, in a shareholders’ meeting, to file a social responsibility claim against Jove and Fadesa’s former CEO, Antonio De la Morena for €1,576 million. Commercial Court number 1 in La Coruña and the Provincial Court of La Coruña both rejected the claim filed by Martinsa Fadesa and so the company appealed to the Supreme Court. Last month, the Supreme Court also rejected Fernando Martín’s claim.

For the last two years, Martinsa has failed to meet the payment commitments established in the agreement that allowed the company to emerge from its bankruptcy proceedings (these amounted to €451 million in 2014). The Supreme Court’s rejection of the company’s claim was the last straw for the real estate company. The group had assured its creditors that it would use the money to pay them if it won its appeal at the Supreme Court; however, having now lost its claim, the company will have to also pay the legal costs associated with the process, which legal sources estimate could amount to €60 million.

Experts in bankruptcy matters consider that Martinsa Fadesa’s liquidation process will be the largest to ever to take place in Spain.

The same experts explained that the bankruptcy judge may reinstate one, two or three members of the previous bankruptcy administration team, however given the size of the liquidation process that is now beginning, it would be usual for Ángel Martín Torres (KPMG), Antonio Moreno Rodríguez (Bankinter) and the lawyer Antonia Magdaleno to jointly take charge of the liquidation.

Claims of €34 million for construction defects

Martinsa Fadesa is facing 32 civil lawsuits of more than €50,000 (each) brought by groups of owners and individual owners for construction defects. At the presentation of its latest results, the company explained that the total amount claimed in these cases amounts to €34 million. In addition, the group is also facing other kinds of legal processes. One item that stands out is the €19.4 million provision that Martinsa has made in relation to the group’s development in Miño, La Coruña. “Claims have been filed with both the Commercial Registry and the Civil Registry by house buyers in this area, with the result that some of these cases have been declared resolved in the contracts, which means that the company will have to return the amounts received on account from these clients”, explained Martinsa Fadesa.

In its 2014 accounts, the company states that it has a deferred payment agreement with the Tax Authorities for the amount of its privileged bankruptcy debt, i.e. €47.68 million. That debt fell/falls due on 20 December 2014 (€9.6 million) and 20 December 2015 (€38 million), respectively. Martinsa requested and obtained “reconsideration of the due date of the instalment relating to 2014” from the Tax Authorities. The new payment date has been set for 20 May.

In 2014, Martinsa Fadesa employed 150 people (161 people in 2013). Last year, the group incurred staff costs amounting to €14.3 million (€12.9 million in 2013).

Original story: Cinco Días (by Alberto Ortín)

Translation: Carmel Drake