Hotels Suffer from the First Decrease in Overnight Stays since 2012

24 January 2019 – Expansión

The record number of tourists registered in 2018 has not removed the bitter taste from the mouths of Spanish hoteliers, who are starting to suffer from symptoms that the sector is worn out. In 2018, Spanish hotels recorded the first decrease in the number of overnight stays in six years. A moderate decrease, of –0.1%, according to data from INE, but one that has not been seen since 2012, when Spain was in the midst of the financial crisis.

Spain is receiving more tourists than ever, and they are increasing their spending year on year, but they are also gradually reducing their average stay, and some of the demand is opting for alternative destinations, such as Turkey, which are competing on price, which is eroding the margins of many hotels at home (…).

According to data from Exceltur, Spain lost 21 million overnight stays in 2018, due to a decrease in the average stay. The boom in low-cost airlines, amongst other factors in the sector, has favoured the democratisation of tourism. Increasingly more people are travelling, but they are doing so for shorter periods. Whilst in 2008, the average stay was 9.4 days, it is now 7.4 days.

That change can be observed most easily amongst overseas tourists, who account for 65.8% of overnight stays and who decreased the number of nights spent in Spain by -0.4%, whereas domestic tourists increased their overnight stays by +0.4%.

The change in trend is being observed primarily in the traditional beach and sun markets, and in the most important months for the sector, in the height of the summer. In the Canary Islands, the primary destination for international tourists, accounting for almost one third of all overnight stays, visits by foreigners decreased by 3.6%(…).

According to explanations provided recently by the Head of Research at Exceltur, Óscar Perelli, these decreases reflect “the recovery of competitor countries”. Hotels, especially those on the beach, are being affected by competition in terms of prices from countries such as Turkey, Egypt and Tunisia. Those markets have recovered around 12 million tourists in recent years and they are still 20% below the levels they reached before their own crises (…).

Travellers from the United Kingdom and Germany account for 46% of all of the overnight stays made by non-resident visitors, and yet, there was a -0.9% decrease last year in the case of British tourists.

As a result, many hotels are trying to compete through promotional packages and cost reduction policies, and so prices barely increased in 2018. The Index of Hotel Prices from INE reflects a 1.5% increase in hotel tariffs, barely three decimal points above inflation for the year, making it the lowest rise in prices since 2013.

In terms of tourists who increased their hotel stays by the most, those who have to travel long distances, including visitors from the US (6.1%) are also the travellers who spend the most (€113 per tourist per day, compared with €98/tourist/day for those visiting from traditional markets), and so representatives in the sector recommend focusing promotional strategies to attract tourists from those countries.

Original story: Expansión (by Inma Benedito)

Translation: Carmel Drake

Spain’s CNMC Takes Madrid, Bilbao & San Sebastián to Court Over Anti-Airbnb Legislation

7 August 2018 – El País

The competition authorities are cracking down on the attempt by some of Spain’s large Town Halls to regulate the boom in tourist apartments, created by Airbnb and its competitors, which many blame for contributing to an increase in residential rental prices and the expulsion of the most underprivileged from the centre of Spain’s cities. The National Markets and Competition Commission (CNMC) announced on Tuesday that it is going to challenge the urban planning rules approved recently in Madrid, Bilbao and San Sebastián on the basis that they violate “competition” and harm consumers and users. Other rules, not yet in force, in Barcelona and Valencia, could also be targetted by the CNMC, warn sources at the agency.

Imposing a compulsory licence on those who rent their homes to tourists. Limiting the types of properties that may be leased for short periods. They are some of the measures introduced by the Town Halls that the CNMC is now challenging. And the battle doesn’t stop there. New rules that other cities decide to approve may also clash with the opinion of the market regulator, which is now sending the cases of Madrid, Bilbao and San Sebastián to the High Court of their respective autonomous regions. They will have to decide whether to admit the appeals and overturn, in part or in whole, the municipal regulations.

The body chaired by José María Marín Quemada said that it has sent a request to the three municipalities to provide explanations regarding the “need and proportionality” of the restrictions or, failing that, for those restrictions to be annulled. In the absence of a satisfactory response, the CNMC will resort to the courts through a contentious-administrative appeal. The informal talks held so far have made very clear the gulf that separates the independent body from the Town Halls.

In its note, the CNMC details the different regulations that are, in its opinion, deserving of appeal for being measures with “restrictive effects on competition”. Madrid requires a licence for the rental of tourist apartments and homes. The municipality also establishes a period of one year, extendable for one more, before new licences can be granted in areas such as the Centro district. According to the recently approved legislation, the rental of tourist apartments that do not have an independent entrance will be prohibited, which represents 95% of the homes in the city centre.

In both Bilbao and San Sebastián, the regulations limit tourist apartments to ground and first floors only, unless they have independent access from the street. In Bilbao, moreover, tourist apartments need to be authorised and registered; and in San Sebastián new tourist apartments are prohibited in certain parts of the centre.

Higher prices

The Competition authority believes that, with their decisions, the municipal teams in Madrid, Bilbao and San Sebastián “are impeding the entry of new operators and consolidating the position of the existing suppliers of tourist accommodation”. The body has announced that these measures will lead to “higher prices in terms of tourist accommodation” and lower quality, investment and innovation in tourist accommodation in those three cities (…).

The affected municipalities reacted quickly, stating that they will defend their regulations in the courts. The Town Hall of Madrid, governed by Manuela Carmena (Ahora Madrid) said that it wants to combine the defence of tourism with the rights of “citizens in our neighbourhoods”, according to Julio Núñez. “Our objective is introduce regulation that protects the residential use of land and favours competition in a sector where hostels and hotels already operate”, add sources at the Urban Planning Department (…).

Original story: El País (by Luis Doncel)

Translation: Carmel Drake

Sabadell Sells €9.1bn to Cerberus & €2.5bn to Deutsche Bank

19 July 2018 – Voz Pópuli

Banco Sabadell is selling its property to Cerberus and Deutsche Bank. The Catalan entity has agreed with the US fund to transfer 80% of its foreclosed assets, worth €9.1 billion for €3.9 billion. And is finalising the sale of €2.5 billion in real estate loans proceeding from CAM to Deutsche Bank, according to financial sources consulted by Vozpópuli. The entities involved all declined to comment.

The agreement with Cerberus, which this newspaper revealed, includes two of the four large portfolios for sale: “Challenger”, containing assets from the bank – around €5 billion – and “Coliseum”, containing foreclosed assets proceeding from CAM and with public aid from the Deposit Guarantee Fund (FGD).

According to a statement filed with the CNMV, Sabadell values those two portfolios at €9.1 billion and is selling them to a new company for €3.9 billion, equivalent to 42% of the initial appraisal value. Cerberus will own 80% of the new company and Sabadell the remaining 20%, in such a way that the bank will receive around €3.1 billion. The sale requires provisions of €92 million. The Solvia platform was left out of the agreement.

Agreement with Deutsche Bank

Meanwhile, the agreement with Deutsche Bank is for Project Makalu, another of the four portfolios that Sabadell put up for sale. It already sold the first, unsecured, portfolio – Project Galerna – to the fund Axactor.

Of the four portfolios, this is the largest containing loans backed by real estate collateral. And it is protected by the public aid that Sabadell received for the purchase of CAM, at the end of 2011. For that reason, this operation, which may be signed in the next few days, requires the approval of the FGD.

Deutsche Bank has fought off tough competition from Oaktree and Lone Star to acquire this portfolio. The price of the operation could reach between €800 million to €900 million, according to market valuations. The advisor on the sale has been KPMG.

The German bank is one of the typical buyers of these types of portfolio, although until now, it had not purchased anything of this magnitude in Spain. Last year, it closed two operations, one with Sareb amounting to €400 million and the other with CaixaBank amounting to €700 million.

Balance sheet

Following the imminent agreement with Deutsche Bank, the divestment team at Sabadell led by Jaume Oliu and Simon Castellá will have transferred €12.5 billion in problem assets to Cerberus, Deutsche Bank and Axactor.

This latest acquisition by Cerberus is the fourth largest in history in Spain, behind the sale of Popular’s property to Blackstone – €30 billion; the sale of BBVA’s property to Cerberus – €14 billion; and the most recent sale of CaixaBank’s property to Lone Star – €12.8 billion.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Cerberus Fights Off Blackstone to Acquire €9.1bn in Toxic Assets from Sabadell

19 July 2018 – El Confidencial

Banco Sabadell has chosen who is going to take over its toxic assets. In the end, after an express process that has seen the bank receive several binding offers, Cerberus has fought off competition from the other interested parties, including Blackstone, Lone Star and Oaktree. According to a relevant fact filed by the entity with Spain’s National Securities and Market Commission (CNMV), “the real estate assets involved in the operation have a combined gross book value of approximately €9.1 billion and a net book value of approximately €3.9 billion”.

They correspond to two of the four foreclosed property portfolios that Sabadell had put up for sale, “Challenger” and “Coliseum”, which will be transferred to one or more newly constituted companies in which Cerberus will own a direct or indirect stake with 80% of the capital and Banco Sabadell will retain the remaining 20% share.

As for Solvia Servicios Inmobiliarios, it will continue to be wholly owned by the Catalan entity and will also continue to provide integral management services for the real estate assets of both portfolios included in the operation “on an exclusive basis”, according to the statement.

Once the operation, which is subject to the corresponding authorisations, has been closed, control over the real estate assets will be transferred and, therefore, those assets will be deconsolidated from the bank’s balance sheet. In this way, according to explanations from Sabadell, the sale “contributes positively to improving the group’s profitability, although it will require the recognition of additional provisions with a net impact of approximately €92 million”, which will improve the Catalan entity’s Tier 1 capital ratio by around 13 basis points.

The operation forms part of a restructuring plan designed by the entity at the end of 2017, through which it is seeking to remove €12 billion in toxic assets from its balance sheet. Sabadell closed last year with gross foreclosed assets amounting to €8.023 billion and non-performing loans amounting to €5.695 billion, according to real estate exposure data filed with the CNMV.

The other two portfolios that the entity wanted to divest are known as Project Galerna, containing €900 million in non-performing loans, which was acquired by the Norwegian firm Axactor, and Project Makalu, with €2.5 billion from the former CAM. With their sale, the entity will complete its real estate clean-up, just like Santander and BBVA have already done.

Original story: El Confidencial (by María Igartua)

Translation: Carmel Drake

EC Approves Sale of 80% of BBVA’s RE Arm to Cerberus’s Subsidiary

9 April 2018 – El Mundo

On Monday, the European Commission authorised BBVA’s sale of 80% of its real estate business to a subsidiary of Cerberus Capital Management (Cerberus) after concluding that the deal would not represent any problems in terms of competition in the market given the “limited” overlap in terms of the activities of the two entities.

The bank chaired by Francisco González (pictured above) announced an agreement at the end of November by virtue of which it would transfer 80% of its real estate business to the US fund Cerberus for a price of approximately €4 billion.

Specifically, BBVA and Cerberus agreed to create a joint venture for the real estate business in Spain.

The real estate business referred to in this agreement comprises around 78,000 real estate assets with a gross book value of approximately €13 billion, as well as the assets and employees necessary for the management of the business. The whole business has been valued at approximately €5 billion.

The services of the EU’s Competition Authority examined the operation through the simplified procedure, which is reserved for less problematic cases.

In the words of the bank when the operation was announced, the agreement with Cerberus is an “opportunity” to take advantage of the experience of an industrial partner who is an expert in the management and sale of real estate assets and to benefit from the strong outlook of the Spanish economy.

Original story: El Mundo 

Translation: Carmel Drake

The IMF Commends Sareb’s “Effective” Management & Divestment Progress

10 October 2017 – El Diario

On Friday, the International Monetary Fund (IMF) commended the “effective” management of Sareb and its progress in the asset divestment process, which has enabled the real estate company to liquidate 22% of its portfolio and 20% of its debt in its four years of life.

“To date, Sareb has fulfilled its objectives quite well, and the review of its business strategy seems to be well designed”, acknowledged the supervisory body in its latest report evaluating the Spanish financial sector.

Nevertheless, it adds that the company, created in 2012 to help with the clean-up of the banking sector, will face challenges in the future.

In its report published on Friday, the IMF refers to: the highly sensitive nature of Sareb’s activity to the evolution of real estate prices; the financial expenses that the entity must pay to service the debt that it took on to purchase assets back in the day; and the “stiff competition” from the banks, which are also divesting their real estate portfolios.

Even so, the body endorses the progress that Sareb has made to reduce the perimeter of assets received from the financial institutions by so much, as well as to service its commitments to repay its debt, which is guaranteed by the Spanish Treasury.

For the IMF, behind this progress, is the “effective” approach that Sareb applies to managing the portfolio, and which includes strategies for “the transformation of loans into properties, the recovery of loans, the sale of assets and the reactivation and sale of suspended projects”.

In the opinion of the institution, which is headquartered in Washington, Sareb is continuing to play a “critical role in the preservation of financial stability”, and therefore recommends greater involvement of the authorities in the preparation of the entity’s business plan.

The report that the IMF published on Friday focuses on analysing the weight that doubtful loans still play in the Spanish banking sector, which is still high despite the transfers that were made to Sareb when it was created.

In this sense, the international body echoes the initiative that the so-called “bad bank” has launched to give greater dynamism and transparency to the sale of loans, through an online platform, which is now operational, albeit in the pilot phase, on the company’s website.

Original story: El Diario

Translation: Carmel Drake

Mazabi Prepares To Debut Its Socimi On Stock Market In 2018

12 June 2017 – Expansión

The family property management firm Mazabi is preparing to debut its Socimi – Silicius Inmuebles en Rentabilidad – on the stock market. It plans to list it on the stock exchange at some point next year, with a target valuation of €400 million.

The multifamily office, which was created in 2009 and which currently manages assets worth more than €1,000 million in 14 countries, wants its Socimi to be constituted as an ideal investment vehicle for families interested in obtaining returns from their assets and improving liquidity, as well as for institutional investors interested in obtaining a coupon from their investments.

Silicius was incorporated in 2015 and was registered under the Socimi framework last year. The company, promoted by El Arverjal – a family office owned by the Mencos family – and managed by Mazabi, will debut on the stock market before September 2018.

Currently, Silicius owns assets worth €90 million and generates revenues of around €5 million. It is finalising additional financing amounting to between €20 million and €30 million so that it can undertake new investments before the summer. In parallel, the group is negotiating the contribution to its fund of assets from other partners and the incorporation of investors who will contribute capital depending on the opportunities that are generated.

Incorporation

“The objective is to debut on the stock market with a value of between €200 million and €250 million next year and, once listed, incorporate an individual or institutional shareholder with a placement on the stock market to try and reach the target market capitalisation of €400 million”, explained the CEO of Mazabi, Juan Antonio Gutiérrez.

The Director said that the Socimi’s average debt will be in the order of 25%: “The objective is to pay a coupon and, for that, the level of debt has to be low”.

The company focuses its investments on assets worth between €5 million and €30 million and is currently analysing purchase opportunities amounting to €100 million. “We focus on the segment that private investors can’t afford, but which fall below the level of interest of the funds and large Socimis, which is where there are more opportunities and less competition”, explained Juan Díaz de Bustamente, CEO of the Socimi.

Currently, the firm’s portfolio includes a hotel in Conil (Cádiz), two office buildings in Madrid – one on Calle Obenque and another on Calle Virgen de los Peligros – and four retail assets – including a store leased to Cortefiel on Paseo de la Castellana, 18 (pictured above) and another set of premises leased to Vips on Calle Velázquez 136. It also owns a stake in Lazora.

The company is not going to limit its acquisitions to Spain and will analyse opportunities in the main European capitals. “Our investments have to fulfil three principles: diversification, liquidity and coupon”, they state. Specifically, the company is currently evaluating the possibility of completing an acquisition in Portugal.

The Directors explain that it would be reasonable for 20% of its assets to be located outside of Spain. “You lose the tax effect, but it allows you to diversify geographically”, they add.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Charme & Miura Finalise Purchase Of Valtecnic & Ibertasa

25 May 2017 – El Confidencial

A major new operation is brewing in the property appraisal sector in Spain. The private equity firms Charme Capital Partners and Miura Private Equity are about to close the purchase (to acquire a majority stake) of the appraisal companies Valtecnic and Ibertasa, according to sources close to the operation. Some finishing touches still need to be completed, such as obtaining approval from the Bank of Spain.

Charme and Miura are joining forces to acquire these two real estate services firms, which will continue to operate independently in the domestic market. In other words, the investment funds will co-invest in and take control of both companies, but will not merge them. In addition, the management teams of the two appraisal companies will continue at the helm as well as in their roles as minority shareholders.

Last year, Charme came very close to acquiring Tinsa, the largest company in the property appraisal sector in Spain, but that firm ended up being purchased by another private equity firm, Cinven, which paid Advent €300 million. Meanwhile, Miura invested in Group BC through its first fund until the end of 2015 – that company is dedicated to the outsourcing of services from financial institutions (mortgage advisory, recoveries…).

These operations represent the indirect entry of private equity firms into the real estate sector and their clear commitment to an upwards cycle. According to data from the Spanish Association of Value Analysis (AEV), the number of property appraisals grew by 13% during the first quarter of 2017, to 228,879 in total, worth €75,620 million, up by 3.1% with respect to the same period a year earlier. (…).

The number of appraisal companies has been cut in half

The appraisal sector was hit hard by the burst of the real estate bubble although, like in the property development sector, to the extent that the mortgage activity is resuming, so the volume of appraisals is also showing signs of recovery. Nevertheless, the crisis took a serious toll and led to the disappearance of lots of companies. Whilst in 2011, there were 58 appraisal companies, by the end of 2016, that figure had fallen to 37.

Nevertheless, in recent years, several companies, above all in the real estate consultancy sector, have broken into this market with their own appraisal businesses. Such was the case of CBRE Valuation Advisory, Aguirre Newman Valoraciones and UVE Valoraciones in 2011. More recently, another consultancy firm, JLL, obtained approval from the Bank of Spain for its appraisal business, which operates under the JLL brand.

Valuations

On the other hand, like in the property development sector, the activity of the appraisal companies has not been without controversy, especially for the role that they played in the real estate bubble. The appraisal companies have been repeatedly accused of producing inflated appraisal values at the height of the boom and of continuing to do so even in the face of a depressed market.

In addition, concerns regarding the transparency and independence of these entities caused the Bank of Spain to force the banks and savings banks to disassociate themselves from the appraisal companies in terms of ownership. That decision resulted in the disappearance of several players, such as Tabimed (Banco Sabadell) and TVG (Abanca). Others changed activity, such as Sivasa (Banco Santander), whilst others still, such as Tasamadrid (Bankia), were sold.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Neinor Buys 7,000m2 Plot Of Land In Valencia

5 April 2017 – Expansión

Neinor Homes is stepping on the accelerator and strengthening its presence in Spain by entering a new region. The property developer – which debuted on the stock market on Wednesday 29 March –  has completed the purchase of its first plot of land in Valencia, with a buildable surface area of 7,000 m2, where it will construct 54 homes. This acquisition allows the company, which is controlled by the US fund Lone Star, to expand its operations to Valencia, where it is considering opening a local office.

According to the company, the market in Valencia displays the characteristics that it demands for its investments: a shortage of structural supply, a lack of competition, positive population growth and unsatisfied demand. For this reason, it is looking for “new opportunities in the city”.

Since the beginning of January, the company has invested €51.5 million in the purchase of buildable land in Sitges, Gerona, Sabadell, Mairena de Aljarafe (Sevilla), Sazares (Málaga), Madrid and Valencia. These plots will allow the developer to build more than 700 homes on almost 90,000 m2 of land.

The CEO of Neinor, Juan Velayos (pictured above), said that the purchases made during the first quarter place the company on the road to exceed its annual objective in terms of acquisitions, set at €200 million. “It is a confirmation that we are still able to buy carefully selected plots of land from non-natural landowners, such as banks and companies without any development activity”.

In this way, sources at Neinor underlined that each one of these operations exceeds the profitability objectives set by the property developer and that they were closed only after rigorous legal, technical and commercial due diligence had been completed.

The firm has 1 million m2 of land in its portfolio, with a gross value of €1,120 million, on which it plans to construct more than 9,000 homes.

At the end of February, the company had 60 active developments – already started or planned to be launched – in País Vasco, Madrid, Cataluña, Andalucía and the Community of Valencia, on which it plans to construct 4,002 homes.

The property developer plans to reach cruising speed in 2020, with the completion and delivery of between 3,500 and 4,000 homes per year.

The company, which plans to announce its results on 26 April, closed last year with revenues of €228.6 million and a gross operating profit (EBITDA) of €9.6 million.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

INE: Fixed Rate Mortgages Enjoy Unparalleled Popularity

29 July 2016 – Cinco Días

The mortgage market is not only on track to recovery, it is proving unstoppable. The enormous and increasingly attractive mortgages being offered by the banks to secure new clients are encouraging homebuyers. And that is being reflected in the figures. According to the property registers, the signing of new mortgages for the acquisition of a home recorded a significant YoY increase of 34.1% in May, to reach 26,579 contracts, an increase that was ten basis points higher than the rise recorded in April (24.6%) and twenty points higher than the increase in March. With the YoY rise in May, mortgages recorded 24 consecutive months of increases.

And the data reveal another important fact to keep in mind. It seems that the firm commitment of the financial institutions to fixed rate mortgages is working, with increasingly more clients choosing that option. 80.4% of the mortgages constituted in May had variable rates, compared with 19.6% that had fixed rates. Just a month before, in April, variable rate mortgages accounted for 85.2% of the total, whilst fixed rate mortgages represented 14.8%. But the increase in fixed-rate loans is unquestionable if we compare the latest figures with those from just a year ago. In May 2015, when 19,732 new mortgages were constituted, 92.8% of them were variable rate and 7.2% were fixed rate. In other words, the proportion of new fixed rate mortgages has almost tripled in one year.

And, in recent months, the financial institutions have shown a greater predilection for fixed-rate mortgages, given the low interest rate environment in which they are operating. And, what’s more, the battle to win clients is still very much alive and kicking, with some entities now offering interest rates of less than 2%. There are several examples: BBVA is offering 15-year fixed rate mortgages at 1.90%. Bankinter is offering 1.80% on its 15-year mortgages and 1.60% on its 10-year products. Meanwhile, Activobank’s promotional mortgage to celebrate its anniversary establishes a rate of just 1.50% over 10 years. (…).

With just two days left of trading before the end of July, the average Euribor rate currently sits at -0.057%, compared with -0.028% in June. Thus, the decrease in Euribor has doubled in just a month. (…).

According to the provisional data for May, provided by INE yesterday, which comes from public deeds signed in the previous months, the 26,579 mortgages that were constituted during the month represent an increase of 12.6% compared with the 23,607 signed a month earlier.

The value of those mortgages amounted to €2,776.9 million, up by 33.1% compared to a year ago and 8.6% higher than in April. The average mortgage loan amounted to €104,480, which represents a reduction of 0.8% compared to May 2015 and 3.6% compared to a month earlier. (…).

Original story: Cinco Días (by M. Calavia)

Translation: Carmel Drake