Santander & Blackstone Sign €7.3bn Loan for their Joint Venture

19 March 2018 – Expansión

Santander and Blackstone are moving forward with the creation of the joint venture that is going to hold the former real estate portfolio of Popular. The US firm controls 51% of the company’s share capital and also manages the assets, for which it has paid around €5 billion. Meanwhile, Santander retains 49% of the shares.

The joint venture is going to group together assets with a gross value of €30 billion. Within the framework of the agreement, the assets were appraised at €10 billion, the book value at which they are recorded on Popular’s balance sheet following the clean up applied by Santander.

The balance sheet of the joint venture, known as Project Quasar, is going to be backed by around €3 billion in capital to be contributed by the two partners and debt. In this sense, the company owned by Santander and Blackstone has just closed a syndicated loan agreement led by Morgan Stanley and Deutsche Bank amounting to €7.3 billion. Blackstone is also participating in the syndicate, through one of its companies, and will contribute €1 billion, equivalent to 14% of the total financing.

Conditions

The loan has been signed for a five-year term and is due to mature on 15 May 2023. The interest rate has been fixed at 1-month Euribor, with a floor of 0% and a spread of 3.15% for the first three years. From the fourth year onwards, the differential will increase to 3.25%. 1-month Euribor currently stands at -0.371%.

The loan has an initial commission of 0.8%. In turn, Santander and Blackstone must allocate 70% of their joint company’s net income to repaying the debt. According to financial sources, the price of the loan is in line with the conditions of the assets owned by Blackstone and Santander’s company. Although the joint venture’s portfolio comprises foreclosed assets and non-performing loans, the transfer of those assets to the new firm has been performed at around one-third of their nominal value; moreover, the assets have mortgage guarantees, which has allowed Santander and Blackstone to reduce the cost of its financing.

It is also worth noting the ranking that the loan has in the debt structure of the company. It is a senior liability, which means that it has collection preference over other claims. Ultimately, add the sources, it is the owners and not the banks who are going to be left with the asset risk (…).

Popular’s package of assets, included in the agreement with Blackstone is broken down as follows: €1.9 billion in properties; almost €3.2 billion in loans proceeding from real estate activity; and €4.3 billion in other types of assets linked to the property development sector, including deferred tax assets (…).

If the operation is not completely finalised by 31 March, the agreement for the joint venture may be terminated at the behest of either partner.

Original story: Expansión (by M. Martínez & I. Abril)

Translation: Carmel Drake

Sabadell Offers €33M for Duro Felguera’s HQ in Madrid

20 November 2017 – Eje Prime

Sabadell may complete the purchase of a new asset very soon. The financial institution is close to signing the acquisition of the headquarters of the company Duro Felguera for €33 million. The Asturian company, which is fighting hard to avoid having to file for creditor bankruptcy, would raise liquidity for its internal battle as a result of the agreement.

Interestingly, Duro Felguera must have rejected an offer amounting to €38 million from Sandra Ortega, the daughter of the founder and President of Inditex, Amancio Ortega. According to Voz Populi, although she was offering a higher financial proposal, she was also imposing the condition that the company remain as the tenant of the property for ten years, in return for a price of €2 million per year and a seven-year deposit.

By contrast, Sabadell is offering €33 million without any requirement for the company to remain in the building or to pay any deposits, which means that Duro Felguera would see a cash inflow of between €10 million and €15 million after paying off its loan.

Original story: Eje Prime

Translation: Carmel Drake

Is Murcia’s ‘Ghost Airport’ Finally Set For Take-off?

24 April 2017 – El País

The government of Murcia has made definitive steps toward reviving the region’s international airport in Corvera and is once again putting the management contract for this ‘ghost’ travel hub out to tender, despite the failure of other similar ventures in Spain to pay off and in spite of the fact that it is still embroiled in a long-running legal battle with the first company to win the concession back in 2007.

The new phase of this cripplingly expensive aviation saga began on March 25 with the bidders’ conditions released in the Official Journal of the European Union. Interested companies have until May 2 to register. After that date, those who can provide proof of financial buoyancy and experience will have two months to provide detailed technical and economic plans.

Corvera airport received an initial investment of €270 million and building work on it is all but finished. But the facility was never opened to the public and, in December 2015, the regional government was forced to cancel the contract with Madrid-based Sacyr on the grounds that the company granted the concession had exceeded its allotted time period.

The subsequent legal battle between Sacyr and Murcia’s authorities has become increasingly complex and is now headed for the High Court.

Corvera is the first regional airport to be put out to tender since the frenzy to open small airports across Spain began sapping resources and leading – in the case of Castellón and Ciudad Real, to years of disuse – or, in the case in Huesca, Lérida, Salamanca, León, La Rioja, Burgos and Albacete, to crippling losses absorbed by the airport networks. When it opens, it will replace the region’s San Javier airport.

According to estimates from Murcia’s Department of Development and Infrastructure, Corvera will be able to welcome 800,000 foreign tourists in the first four years, pushing total passenger traffic up to 3.5 million a year, a figure which could, in time, rise to 5 million. It will also create 20,000 jobs and raise regional GDP by 3.5 percentage points.

These passenger figures would mean revenue of €495.8 million (€600 million including sales tax) in the first 25 years. A complementary activities zone totalling 600,000 square meters is also on the cards, with profits from it remaining in private hands.

The successful bidder will be able to establish fees and negotiate with airline operators – a freedom which should improve competitiveness in the Alicante, Murcia and Almería regions and allow for more efficient management, according to the authorities.

Meanwhile, the regional government has introduced two conditions to recoup some of the taxpayer money that has been sunk into the project: the successful bidder will pump €0.73 per passenger into state coffers for the first 10 years, €2.09 per passenger in the five years following that, €2.27 in the subsequent five years and €2.56 for the last five years. A total of 10% of income earned by cargo airline companies on cargo weighing more than 50,000 tonnes will also be paid to the region.

There will also be incentives to increase passenger traffic; if there are more than 2.5 million passengers a year, the successful bidder will get a discount of 5%; another 5% discount will be applied if numbers exceed 400,000 in the winter months, or from November to February.

Original story: El País (by Ramón Muñoz)

Edited by: Carmel Drake

Sareb Unlikely To Distribute Any Profits To Its Shareholders

30 December 2016 – Expansión

Accounting circular / The Ministry of Finance has softened its demands on Sareb. In exchange, the bad bank’s owners, namely, the State and Spain’s largest banks, will not receive anything for their investments in the bad bank, for at least the next few years.

The Ministry of Finance has softened the situation facing the shareholders of Sareb (the most important of which is the State, through the Frob), by not forcing it to recognise latent losses in its income statement, like it has been obliged to do until now. In exchange, the Ministry has shut down the possibility that these shareholders will receive any results from their investment, even if the company does manage to generate profits at some point.

The harsh situation created by the accounting circular that the Bank of Spain designed for Sareb has barely lasted a year. According to that legislation, Sareb was obliged, within a period of two years, to reappraise all of the assets on its balance sheet (which proceeded from the real estate portfolios of the former savings banks that received public aid) and recognise the latent losses in the income statement each year, given that the price at which it bought those assets was significantly higher than their market prices.

The reality of all of this was seen last year when, in order to avoid near bankruptcy, the bad bank reduced its capital to zero and converted a substantial part of its subordinated debt (€2,171 million) into capital, to offset some of the losses for the year and restore the equity balance. Sareb recognised provisions amounting to €3,900 million in 2015 and recorded capital of €953 million (2% of the balance sheet) and subordinated debt of €1,429 million.

It was expected that something similar would happen this year, although with a less intense effect, given that most of the assets were reappraised in 2015, and that the capital balance would again be reduced and more subordinated debt would be converted into capital.

But to avoid this, the Ministry of Finance has made two significant changes. The first is that Sareb must continue valuing its assets at market prices, but if those values result in the creation of latent losses, then rather than recognise them in the income statement, they should be recorded in the equity statement, whereby reducing the company’s share capital. In parallel, and to avoid the company having to file for insolvency due to an excessive reduction of its capital, Sareb may also benefit from the exception afforded to real estate companies at the height of the crisis, which exempted them from having to comply with a certain relationship between the value of their assets and their own funds. (…).

Two conditions

In exchange for these concessions, which will undoubtedly give Sareb some much needed breathing room, the new legislation from the Ministry of Finance establishes two conditions. The first is that when an asset is sold for below its acquisition price, the real loss must be recognised in the income statement; and the second is that if Sareb generates profits in the future, then whilst the equity account exists in which the latent losses are being reflected, then all of the profits earned must be applied to that account. That means that, in all likelihood, Sareb’s shareholders (…) will not receive anything for their investments in the company over the next few years. And it is reasonable to think that they will never receive anything, given Sareb’s asset composition.

This is the first time that this fact has ever been acknowledged, more or less explicitly. (…).

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Acciona Postpones Sale Of RE Subsidiary

14 April 2016 – El Economista

The delay in forming a Government in Spain, along with the uncertainty surrounding the United Kingdom’s departure from the European Union and the instability in world markets, are delaying the possible IPO or sale to a private investor of a stake in Acciona’s real estate subsidiary.

In an interview with EFE-Dow Jones, the Corporate Development Director of Acciona, Juan Muro-Lara, said that the political gridlock “is part of a cocktail of uncertainty in Europe, driven by volatility in the markets and possible discounts on prices”, which means that now “is a difficult time to close operations at a good price”.

For this reason, he said that it is better to wait “for all those uncertainties to be resolved” in order to have the right market conditions for the sale of Acciona Real Estate and he added that “seeing as we do not need to complete the sale at any price, we would rather wait for the conditions to be right”.

Original story: El Economista

Translation: Carmel Drake

La Generalitat Legalises Room Rentals For Tourists

16 July 2015 – El País

The Catalan government has decided to legalise the supply of tourist accommodation that individuals offer in their homes through technology platforms such as Airbnb and Homeaway. Citizens will be able to rent out rooms in their places of residence, if they pay the tax that other establishments are subject to. Homes may accommodate tourists for stays lasting no longer than 31 days and they may only rent out rooms for four months in total, although not necessarily consecutively. The local councils will decide in which areas the activity will be authorised.

Cataluña will become the first autonomous community to legislate on the rental of rooms in private homes to tourists. The activity has been happening for some time now, but it was in a legal limbo, and so was under the hotel sector’s spotlight. Last year, hundreds of citizens who carried out the activity in Barcelona, held demonstrations on numerous occasions after La Generalitat levied a fine of €30,000 against eight platforms offering such rooms, including Airbnb. As such, the Catalan Government became the first Administration in the EU to penalise that kind of business.

Nevertheless, the Department for Work and Employment presented a draft bill yesterday aimed at regulating the supply, in the same way as cities such as Amsterdam (Holland) and San Francisco (USA) have done. In these cities, individuals may offer private rooms to tourists for a maximum number of days and in return the tourists are subject to a tourist tax. (…)

In Cataluña, citizens will be able to rent out a maximum of two rooms in their “usual and permanent place of residence” – in return, they must declare it as an economic activity and pay a tourist tax of €0.65 per night in Barcelona and €0.45 per night in the rest of Cataluña.

Property owners, who must be officially registered (’empadronados’) in their properties, will be subject to certain conditions: they may not accommodate more people than permitted by the residency certificate; they may only provide breakfast, no other services; and the owner must continue to live in the property for the duration of his/her client’s stay. (…)

A spokesman for the Government explained that the bill is currently in the planning stage and that a decree will materialise in between five and eight months. The platform Airbnb welcomes La Generalitat’s announcement and said: “We hope to work with La Generalitat over the next few days to understand more about the proposals that have been announced and to find out how residents can participate in the upcoming discussions”.

Original story: El País (by Lluís Pellicer)

Translation: Carmel Drake