The RE Sector Is On Course For Record-Breaking Year

12 September 2017 – Expansión

The real estate sector is experiencing a whirlwind year. After breaking the investment record in 2016, experts now expect the pace to continue this year and for a new investment record to be registered, excluding corporate operations.

For Adolfo Ramírez-Escudero, President of CBRE, 2017 is going to be an “exceptional” year, once again. “Investment could reach €12,000 million, whereby exceeding the expectations at the beginning of the year, which would make 2017 the best year since records began, if we exclude the corporate transactions carried out by Merlin in 2015 and 2016”, he says.

The CEO of JLL, Enrique Losantos, says that investors are maintaining their interest in the Spanish market “attracted by the strong underlying economics, returns that are still higher than in certain other European markets such as Paris and prices that are much more affordable, comparatively”.

For Oriol Barrachina, the CEO of Cushman & Wakefield, although the ECB is expected to inject less money, the appetite from investors will continue into 2018, given that the growth in wealth and the performance of assets comes from economic activity and not from the issuance of money by the Central Bank”.

Meanwhile, according to Alberto Valls, Partner in Financial Advisory at Deloitte, whilst institutional stability continues and the expectation of growth and the creation of employment in the economy is sustained, Spain will continue to be an attractive country. “We are not ruling out consolidation in the sector towards larger vehicles, involving Socimis and property developers, therefore I forecast a high level of activity in terms of corporate operations in the sector in 2018 due to concentration”.

The star players

In this sense, the Partner responsible for the Real Estate sector at KPMG in Spain, Javier López Torres, says that “the trend of consolidation amongst the new real estate companies, and their debuts on the stock market, is going to continue, and there will also be new inter-relations between new players”.

In terms of the most powerful players, institutional investors with the lowest capital costs will be the stars of operations with less need for management, which are becoming increasingly fewer because most of what could be sold has already changed hands, explains the Partner in Financial Advisory at Deloitte, Javier García-Mateo. “In the face of a pipeline of operations where there is a need for a strong transformation component, the PERES (Private Equity Real Estate) will be the players that will likely lead the sale and purchase of properties”, he adds.

Meanwhile, the Socimis will have more freedom to divest their assets as most have now fulfilled the three year period since their purchase, the fundamental requirement to be able to enjoy the tax benefits afforded to these vehicles, says Alejandro Campoy, Director General of the Investments Divisions at Aguirre Newman.

Increase in rents

In terms of the behaviour of rents in the office segment, Mikel Echevarren, CEO at Irea, says that “the economic recovery and the creation of employment will lead to an increase in occupancy rates and rents in Madrid and Barcelona”.

Sources at CBRE indicate that Barcelona is already ahead of Madrid, due to the even greater scarcity of high-quality office space in the Catalan capital. Moreover, that situation is giving rise to a significant number of pre-rental operations.

“The growth forecast in rental income is clear and very robust. Our data estimates that for the period 2017-2019, office rental prices in Barcelona will grow by around 5.2% p.a. on average, and in Madrid by 4.3% for the same period”, explains Losantos (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Cranes Return To Spain After Almost A Decade Away

19 December 2016 – La Vanguardia

After nine years away, since the financial crisis first started to crush the real estate bubble in 2007, cranes have returned to form part of the Spanish landscape during 2016, They are a visible sign of the recovery that the real estate sector has been enjoying since 2014.

With just a few weeks to go before the end of the year, real estate investment is on track to set a new record in 2016, of almost €14,000 million, thanks to large-scale operations such as the merger of two giants in the sector, Merlin and Metrovacesa, to create the largest real estate company in Spain, with assets worth more than €9,300 million.

This year, the growth of the economy, improvement in employment, low interest rates, return of financing and the continuous inflow of foreign capital have combined to allow the real estate sector to consolidate its recovery despite the political uncertainty that hung over Spain for most of the year.

After almost a decade of paralysis, the property developers that survived the crisis and others created more recently have set cranes up on the streets, especially in cities with the most economic and tourism activity, where the “stock” is now practically non-existent and demand for new homes a reality.

Quabit is planning to invest €470 million between now and 2020 on the purchase of urban land on which it will build more than 3,000 homes; and Neinor Homes has set itself the objective of launching around 40 new developments this year and selling more than 1,500 homes.

The newly formed company Dospuntos, controlled by the US fund Värde Partners, plans to invest €2,000 million over the next six years and complete 2,000 homes per year from 2019 onwards. Vía Célere has just bought the largest available plot of land in the centre of Madrid from Repsol and Adif, which is ready for the construction of homes.

Inveravante, owned by the business man Manuel Jové, and the real estate subsidiary of BBVA, have joined forces to promote 850 homes; the German investment fund Aquila Capital and Ónice will spend €100 million building luxury homes in La Moreleja; whilst Ibosa will invest another €30 million converting the Hotel Foxá M-30 into homes.

The recovery of the sector is undeniable. According to the notaries, house purchases grew by 10.3% in September, a percentage that rises to 13.2% according to INE, after registering eight consecutive months of increases and growth of 10% in terms of the signing of mortgages for house purchases.

The Ministry of Development calculates that prices rose by 1.6% during the third quarter, to complete 6 consecutive quarters of increases, whilst permits for the construction of new homes soared by 32% in September to reach figures not seen since 2011.

Moreover, house purchases by foreigners grew by 19.7% during the first half of the year, with Britons leading the ranking, despite the threat of “Brexit”. (…).

During 2017, the number of transactions is expected to grow by 6.5% and prices are forecast to rise by 3.5% to reach 2004 levels. Meanwhile, Tinsa estimates that prices will remain stable or will increase by between 1% and 2%, at most, during 2017, in line with forecasts for the end of this year. (…).

Original story: La Vanguardia (by Cora Serrano)

Translation: Carmel Drake

Experts Predict Mergers Between RE Servicers

30 March 2016 – El Mundo

The real estate servicers that emerged from the financial institutions are driving housing developments, taking advantage of the recovery in the sector in areas with demand, and also the growth in rents. Experts predict that we will see mergers between these entities over the next few years in order to reduce costs.

Servihabitat, owned 51% by the TPG and 49% by CaixaBank, currently manages €51,000 million of assets for financial institutions, Sareb, investment funds, holding companies and large landowners, and whereby leads the ranking of servicers in the Spanish sector. Of the total, €21,000 million relate to financial assets and €30,000 million relate to real estate assets. The company also has 59 developments under assessment and under construction, containing more than 2,500 homes, as well as 38,000 contracts for rental assets.

The Executive Director of Servihabitat’s real estate business, Juan Carlos Álvarez, has explained that the firm has completed 18 developments containing 707 homes over the last three years. Moreover, it finishes an average of 15,000 homes per year from developers who have left projects unfinished, given that most of the financial assets that it manages relate to developers who have filed for bankruptcy; it deals with just a handful of mortgages to individuals.

Whilst at the beginning of the crisis, it was common practice to pursue court proceedings and “daciones en pago” to manage financial real estate assets, now the strategy involves making the real estate assets supplied as collateral more attractive to sell them at the best price possible, says the Director of Financial Assets, Agustín Melchor.

Solvia, the real estate arm of Banco Sabadell, has also gained a lot of weight in the multi-client servicers field, although its two main clients are the bank led by Josep Oliu and Sareb. It manages more than €28,000 million of assets, of which more than €5,300 million are financial assets, and it also manages land under development worth €4,200 million, and more than 10,000 rental properties (worth more than €2,500 million).

In the development sphere, it has constructed more than 3,400 homes since 2011 and currently has 34,426 properties up for sale, including homes (13,634), parking spaces, storerooms, retail outlets, offices, warehouses, plots of land and others, such as moorings and buildings under construction. It has 23 new property developments underway – 21 that it is constructing on behalf of clients and two that it is marketing itself – which contain more than 1,100 homes, primarily in the areas of Barcelona and Madrid, Levante and Andalucía.

Rental properties as a business

Although Servihabitat and Solvia do not own any assets themselves (they manage them on behalf of their clients), Anticipa Real Estate (owned by the fund Blackstone and created with 40,000 mortgages from CatalunyaCaixa) specialises in buying up mortgages and properties to focus on the business of rental homes. Thus, its strategy involves long-term management, rather than the liquidation of assets, and in 2015, it acquired developer loan portfolios from CaixaBank and Sareb for around €1,000 million and 5,000 homes in total; it also agreed to buy 4,500 homes from Banco Sabadell – 3,000 of which are currently rented out.

Of the portfolio of mortgages under management, 25% pay normally, whilst the remaining 75% pay with varying degrees of default. Anticipa plans to apply “dación en pago” arrangements to the majority of its problem loans. To date, it has signed 3,000 agreements in total. Following the “dación en pago”, most borrowers leave the home, but 5% remain, with a reduced rental price under a three year contract, explained the CEO of Anticipa, Eduard Mendiluce.

The future of the sector

Experts predict that there will be mergers between the servicers over the next few years, as the banks de-couple themselves from these companies and new investors look for economies of scale to reduce their costs, according to the Esade Alumni Real Estate Club. One of the first examples has been the Norwegian company Lindorff, specialist in non-performing loans and recoveries, which has acquired Aktua, the real estate services company of the former Banesto: “We expect to see more operations”, say sources at the Club.

Moreover, the distancing of the banks is going to force these companies to look for new clients and choose between offering end-to-end real estate services to third parties and becoming real estate companies. Sources at the Club expect that the major banks will sell their servicers and that over the long-term, there will end up being four operators in Spain after the concentration process: Servihabitat and Solvia, as integrated service companies and Neinor Homes (the fond owned by Lone Star) and Anticipa as real estate companies, the first focusing on development and the second on rental properties.

Original story: El Mundo

Translation: Carmel Drake

Lindorff Buys Aktua From Centerbridge For c. €300M

21 March 2016 – El Confidencial

Aktua, the real estate services company created by the former Banesto, which was acquired by the opportunistic fund Centerbridge Partners in 2012, is about to change owners once again. The Norwegian company Lindorff has reached an agreement to complete the acquisition for almost €300 million, which will turn it into one of the largest landlords in Spain. The Scandinavian company has fought off competition from Apollo Capital Management, the toxic property management arm of Banco Santander, as well as the German firm Activum SG Capital Management.

According to several sources, Lindorff has won the auction led by Barclays, Bank of America Merrill Lynch and Linklaters against those two opponents, and is now putting the finishing touches to the legal conditions so that it can close the operation. It has not been simple because, whilst Aktua was on the market, its parent company, Centerbridge, acquired the real estate arm of Ibercaja – on 2 February – which meant that it had to recalculate the numbers for the potential buyers.

Aktua manages around 42,000 properties worth almost €7,000 million; those assets will be added to those that Lindorff already manages in Spain. The Scandinavian company was one of the pioneers to invest in the real estate and recovery services sector when the crisis first began. In fact, in 2012, it bought Reintegra for €100 million, the subsidiary of Banco Santander dedicated to the recovery of doubtful debts, and in December 2014, it acquired Sabadell’s recovery arm, for which it paid €160 million. Along the way, it also acquired several non-performing debt portfolios, including several from the bank led by Ana Botín.

Currently, Lindorff España, which last year appointed Alejandro Zurbano as its CEO, employs more than 1,100 professionals and has a presence throughout the country, with offices in Madrid, Valladolid, A Coruña, Alicante, Barcelona, Granada, Jerez de la Frontera, Santa Cruz de Tenerife, San Sebastián and Valencia. The multi-national company from the North of Europe has almost 4,000 employees in total, located in its 11 countries of operation, including Norway, Finland, Sweden, Denmark, Russia and Germany.

Although the amount of some of its operations have not been made public, Lindorff has invested almost €1,000 million to become one of the largest landlords in the country. Its work involves managing homes and retail premises, owned by the various real estate companies that it has acquired, claiming the payment of unpaid loans from their owners and negotiating the debt to obtain a spread. Once the last details of the purchase have been finalised, Linforff will manage non-performing loans, homes, retail spaces and land owned by Banesto, Ibercaja, Banco Mare Nostrum (BMN), Santander and Sabadell.

The sale of Aktua was essential for the main overseas funds that have become the largest landlords in Spain, because it is a volume-based business that is currently still very atomised. Sources in the market expect to see a process of concentration in the sector, in which almost €10,000 million has been invested, mainly on the purchase of non-performing loan portfolios. Some are already leaving, such as Elliott, which recently sold its recovery management platform to Cabot, and Fortress, which has now put its main businesses in Spain up for sale: the financing company Lico Leasing and the loan management platform Paratus.

For Centerbridge, the sale of Aktua is going to generate a sizeable profit, given that it acquired the platform for around €100 million in 2012 and is now selling it for almost €300 million. The real estate platform of the opportunistic fund employs 400 people and generates a gross operating profit or EBITDA of around €50 million.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

Outlook 2016: The Housing Market

11 January 2016 – El Mundo

(….) Gonzalo Bernardos, Economist and Director of the Real Estate Masters at the University of Barcelona; José García Montalvo, Professor of Economics at the Pompeu Fabra University; Julio Gil, President of the Real Estate Research Foundation (FEI); and José Luis Ruiz Bartolomé, partner at Certus Capital; outline their predictions for the residential market in 2016. In general terms, all of them consider that the improvement that began in 2015 will strengthen in 2016… political uncertainty permitting.

Increasing prices

All of the experts agree that house prices will rise this year. But they differ in terms of their view regarding the size of this increase. Bernardos is the most optimistic and talks about a “splendid year” with an average price rise of 12%. (…).

Ruiz Bartolomé is more conservative. He expects the annual increase to amount to around 3%-5% in 2016 – “the year of consolidation” – and warns that there are “regions that will not begin to recover until 2017”. For García Montalvo, “in Madrid, Barcelona, the coast of Málaga and a few other areas, prices may rise by between 5% and 10%, whilst on aggregate they will continue to be stable with small variations”, he says. “Nevertheless”, he warns, “there are significant political risks that could have a substantial impact in the market”.

More accessible credit

Access to mortgages will continue to relax in 2016, according to most of the analysts, but their view vary regarding the intensity. For Ruiz Bartolomé, demand for credit will be prudent, whilst for Bernardos, it will be more decisive. “Banks are going to pursue clients”, says the latter, who calculates that 30% more mortgages will be signed this year. (…).

Bernardos even says that financial institutions will grant almost 100% of the appraisal value of homes to those individuals who earn more than €4,000/month. In terms of the cost of credit, they praise low interest rates – and expect Euribor to enter negative territory within a year. Gil also expects that credit will continue to flow and hopes that it will be limited to solvent demand. At the same time, he highlights that “we are living in the best financial situation in terms of interest rates to buy a home”. He does not expect these circumstances to extend beyond 2016, once rates in the USA begin to rise in earnest.

More younger buyers?

(…) In terms of the profile of buyers, Bernardos is clear: “Almost everyone who has a job will be able to afford to buy a house, provided they have some savings – around €20,000”. The economist refers to those households with monthly incomes of €1,800 (young couples with salaries of €900 each) and points out that he is talking about homes worth between €100,000 and €150,000 – “the best sellers”. He expects house purchases to increase by 20%, to reach 490,000 operations per year.

Despite the aforementioned “relaxation” in terms of credit, García Montalvo does not expect that young people will be able to return to the market, at least in the short term, due to the high rate of youth unemployment, the predominance of precarious (employment) contracts and low salaries. Gil shares this view. (…).

More powerful sellers

After years at the mercy of demand, sellers are going to gain strength once again. “They will regain their bargaining power, primarily, in the cities. If they set reasonable prices, they will not have to offer discounts”, says Bernardos. “As demand increases, so too does the power of sellers. In 2016, the situation of sellers will improve in general”, agrees Ruiz Bartolomé. (…).

According to Bernardos, property developers will increase their prices. “Property developers (with projects) in good areas will increase prices three times between the project launch and project completion”.

New builds will increase

(…) “Whilst in 2015, permits were processed for 65,000 new homes, in 2016, we expect that figure to increase to 100,000 units. The best sign of the recovery is that in 2015, property developers bought a lot of land in the large cities, as well as in the suburbs”, says Bernardos.

Ruiz Bartolomé thinks that residential developments will grow even further because “dozens of investors and property developers are looking for operations”. He also warns about the shortage of good quality land. (…).

Turning point for the rental market

With the tailwind supporting the market to buy, 2016 will represent a turning point for the rental market, according to the experts. Following its meteoric rise in recent times, the rental system will now stabilise. “The proportion of homes being rented will start to stabilise”, says García Montalvo, who is in no doubt that “the rental market will strengthen as the main way towards emancipation, just like in other countries that are developing in a similar way to Spain”.

“In general, Spaniards still prefer to buy rather than rent if they can afford to”, says Ruiz Bartolomé. Having said that, he clarifies that “there is still rental demand from those who cannot afford to buy and also from young people with a new vision of housing as a necessary cost that must be covered rather than as an investment or status symbol. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake

Barceló Buys Spain’s 5th Largest Tour Operator

11 January 2016 – Expansión

The travel division of the Barceló Group has acquired all of the shares in Spain’s fifth largest tour operator, Special Tours, which specialises in tours of Europe, the Middle East, the Far East, Africa and Oceania, as it continues progressing with its plans to internationalise and strengthen its position in Latin America.

The Mallorcan group, which did not disclose any of the financial details of the operation, will incorporate Special Tours’ entire workforce, comprising 300 employees. It will also maintain the company’s current operations, which are headquartered in the Ciudad de la Imagen in Madrid, as well as its management team, led by Carlos Jiménez (pictured above), who will continue to be the CEO of the company after the integration.

The Barceló Group has said that this operation, which is pending approval by the corresponding regulatory bodies, forms part of the company’s commitment to product specialisation and internationalisation and goes some way towards fulfilling its objective of becoming a major player in the Latin market.

In this sense, the Barceló Group said that Special Tours has been operating in every country in the Latin American market, where it plays a very important role, for more than 30 years.

Focus on Latin America

The Corporate Director General of the Barceló Group’s travel division, Alejandro Subías, said that the operation represents a “significant” boost to the firm’s strategic plan and allows it to continue its commitment to consolidating its position in Latin America.

“With the integration of the team led by Carlos Jiménez, we are continuing to grow, complementing and strengthening our current product portfolio, and to offer even more travel options and experiences to our clients, which is the real raison d’être of our group”, added the director.

Original story: Expansión

Translation: Carmel Drake

RE In 2016: The Experts Are Cautiously Optimistic

31 December 2015 – El Economista

Experts in the real estate sector continue to talk about the improvement experienced in the market in 2015 with caution; and they consider that 2016 will be the year of stabilisation following almost a decade of severe crisis. But, above all, the experts believe that we will see new homes being constructed once again next year.

That is according to the statistics published by the Ministry of Development for construction permits (…).

Given that it takes around 18 months for a new development to be constructed, in 2016 we can expect to see the inauguration of properties for which permits were granted at the end of 2014 and during 2015.

In this way, the President of the Spain’s Property Developers’ Association (APCE), Juan Antonio Gómez-Pintado, believes that investment funds and Socimis will both continue to be key players in 2016, although he says that the role of “property developers will become increasingly important and we will probably see (more) joint operations between these players”.

Such operations are already taking place in certain areas where new build properties are scarce, with investors approaching traditional property developers to leverage their experience in the sector in exchange for providing financial muscle. (…).

Other forecasts for next year

With this outlook, Beatriz Toribio, Head of Research at fotocasa.es expects to see a YoY increase in the price of second-hand housing in 2016, for the first time in eight years, as well as a lower rate of growth in terms of sales volumes, not because of a decrease in activity, but because the comparison will be made against figures from 2015, which will not have the same “step effect” that we have seen in 2015, with respect to the 2014 figures. (…).

Stabilisation or recovery

Against this backdrop, the experts have differing opinions when it comes to naming the current situation in the real estate sector. Juan Fernández-Aceytuno, the Director General of Sociedad de Tasación, thinks that 2016 could be the year of “consolidation”, but warns that several uncertainties still exist in the market.

Beatriz Toribio also thinks that it is still too soon to be talking about recovery because at the moment, house sales represent just one third of the volumes recorded ten years ago”, and so she prefers to describe it as the “normalisation” of the sector.

The main challenges facing the sector

In terms of the main challenges facing the real estate sector in 2016, Toribio believes that the main one is having the capacity to construct homes that new buyers actually want to purchase, in terms of quality, design and energy saving features, at prices that they are willing to pay, as well as reducing the housing stock at the same time.

According to Fernández-Aceytuno, the sector needs to open the market up to the demand that has been building up during the crisis to drain the stock of unsold properties. Finally, APCE has said that the sector’s main task for 2016 is to cultivate “more transparency” and to improve its image.

Property developers want a Housing Minister

In any case, given the political uncertainty following the general elections on 20 December, property developers in Spain believe that “having a Secretary of State or Minister for Housing would be more than justified” given the sector’s weight in terms of GDP. (…).

Original story: El Economista

Translation: Carmel Drake

Aliseda’s CEO, Pedro Berlinches, Opines On The RE Sector

24 August 2015 – Expansión

Interview with Pedro Berlinches (pictured above right), CEO at Aliseda. 

The real estate company owned by Banco Popular and the funds Värde Partners and Kennedy Wilson will start to build homes this year.

18 months after Popular outsourced the management of its real estate assets to Aliseda, its CEO, Pedro Berlinches, takes stock and is optimistic about the future. The company – jointly owned by the funds Värde Partners and Kennedy Wilson (51% stake) and Popular (49% stake) – is already paying dividends (the yield for shareholders is 18.2%) and expects to close 2015 with a double digit growth in profits, after it recorded profits of €68.4 million in 2014. As well as managing Popular’s foreclosed assets and loans, Aliseda, which has recently received additional investment of €100 million from Värde, will commence the development of 900 homes this year, for completion in 2018.

How have your first few months been?

The overall picture has been very positive. We exceeded our targets for the sale of real estate assets during 2014 and the first half of 2015. And we are going to slightly outperform the objective we set for property sales (€2,000 million) by the end of the year (i.e. 33% more than in 2014). The sale of land has been boosted and we will end the year with much higher figures than in 2014.

Which new activities will you focus on?

Basicaly, the development of real estate and the management of portfolios for third parties, be they real estate assets or loans. (…).

Aliseda recorded profits of €68.45 million in 2014 (…). What is the profit forecast for 2015?

We expect profits to experience a significant double-digit increase compared with 2014.

Why was the share capital increased by 2014?

The company was created with a capital structure that included loans from shareholders and third parties. The shareholders converted around 50% of their subordinated debt into capital. (…).

What are the plaform’s main sales channels?

Banco Popular’s retail network plays a very important role, as it accounts for 73% of sales. Another 23% of sales are made through direct marketers and 4% of sales are closed online. We launched a new website in April to increase the weight of direct sales made online to 10% by the first quarter of 2016.

Why has the sale of a large batch of assets amounting to €450 million been postponed?

Due to the economic conditions of the offers received, Popular (the owner of the assets) has decided to postpone the transaction. (…).

Have international funds withdrawn from the market due to the political situation in Spain?

No, not for the time being at least. To date, we have not seen any funds withdrawing from the market, quite the opposite. We have seen concern amongst investors. I think they have been nervous about the political situation. But the decision to postpone Popular’s €450 million transaction was taken purely on the basis of price.

How do you think the real estate market and prices will evolve?

There is not a single real estate market in Spain. The evolution by province is going to be uneven. Prices decreased by 0.3% on average during the first quarter (of 2015), nevertheless, they increased in certain areas, such as in Madrid, Barcelona, Valencia, Alicante and Málaga, where there is demand and a shortage of supply. And prices have bottomed out now so that the trend is towards a slight increase. I do not see us having double-digit growth rates again like before the onset of the crisis. We shouldn’t think that the problems are over and everything is positive now, but clearly there has been a change in perception, the macroeconomic indicators are very positive. Local property developers and international investment funds are seeing that clear opportunities are arising.

Is there a danger of over-supply of new housing?

Quite the opposite. Permits for between 35,000 and 38,000 homes are being approved this quarter, whereas during the peaks before the boom, hundreds of thousands of permits were being granted per year. The supply of new homes is limited and yet there is demand. It is good that the number of permits has increased in recent quarters, but we are light years away from (the levels seen in) 2007.

Can we expect to see a wave of consolidation amongst the servicers?

It is too early to anticipate any movements. But experts are certaintly talking about a possible concentration of servicers. Most of them are at least partially owned by investment funds, which will establish their exit strategies at some point and that may lead to movements, but I do not see that happening in the very short term. (…).

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

The Banks Are Setting The Pace For The New Real Estate Era

4 May 2015 – ABC

Financial institutions still have 65,000 homes for sale and are developing land and housing projects.

The banks were the “stars” of the real estate crisis. And although they are now reneging on this business – “it is not our vocation”, say the senior directors in the sector – the same banks are forming the cornerstone of the recovery once more. The financial sector, ranging from banks to investment funds, is playing a leading role in the revival of the sale and purchase of homes. They are the financiers, marketers and even the developers. Currently, and after having recovered from the real estate “hangover”, the main (financial) institutions in our country still have more than 65,000 homes on their balances sheets, as well as other assets such as shops, garages and offices.

The banks are still the primary real estate companies in the country and their behaviour is determining the speed of transactions and, above all, the prices at which transactions are being closed. Sales made by the so-called bad bank, Sareb, have lost steam in 2015, although it continues to be a key player. According to a recent announcement by its Chairman, Jaime Echegoyen, the company that manages assets from the bank restructuring sold 2,800 properties during the first three months of this year, which represents around 26 units per day, versus the 32 properties it sold per day during the same period in 2014. “We are one of the top five players in the market”, said the senior executive.

Bad banks

On the other side of the majority of the sales made by the bad bank are the banks and “vulture” funds that go hand in hand with this business. CaixaBank leads the ranking of the financial entities, through its real estate company Servihabitat, which is controlled by the US fund TPG. The entity manages assets with a value of close to €60,000 million, after it was awarded some of the most substantial portfolios auctioned by Sareb and whereby gained strength. Next in the ranking is Haya Real Estate, the brand that Cerberus gave to Bankia Habitat after its purchase, which manages (assets worth) more than €52,000 million; and then Altamira (owned by the fund Apollo, which was purchased from Santander at the beginning of 2014) with €45,500 million (of AuM).

The real estate arm of Sabadell, Solvia, is also ranked among the top five most active (managers) in the market, despite having followed a different strategy from that of its peers. The bank chaired by José Oliu was the only one that did not sell its real estate arm to investment funds and its decision, to develop and make a profit for itself, has generated good results (so far). After the recent transfer of a portfolio from Sareb for €34,000 million, the managers of the company want Solvia to lead the process of consolidation that is expected to take place in the so-called “servicer” sector in the near future.

The funds seek out the “servicers”

The funds, which are experts in managing these types of assets, have found a stroke of luck in this business. However, to make it more profitable, they are looking for volume, i.e. to add more portfolios and benefit from scale. This explains the interest that many of these funds have shown in the auction processes held in recent months, including in Catalunya Banc’s portfolio of problematic mortgages, which was eventually awarded to Blackstone; (the US fund) also purchased the Catalan bank’s (real estate) platform (in a previous transaction).

Nevertheless, the experts consulted believe that it is still early days for talk of M&A activity and that no deals will take place until 2016, i.e. until the market is more saturated. Regardless, the consolidation of this new sales channel is already a reality. “The wholesale channel has consolidated as a divestment channel”, assured Francisco Gómez, the CEO of Banco Popular, last Friday, when he presented this group’s latest results.

New developers

Another way to “recover from the hangover” is through development. Banco Santander is a clear example of this: the entity chaired by Ana Botín is currently developing around 300 real estate developments across Spain. It is a formula for trying to recover the investments it made in land during the boom years. Santander is constructing on land that ended up on its balance sheet after non-payments by developers and against which the entity has had to make significant provisions. Sareb is also developing land and completing the unfinished developments acquired that it thinks may be profitable.

As the CEO of Santander, José Antonio Álvarez, explained at the presentation of the bank’s results, that to ensure that there is demand for developments, the entity is more selective in terms of the circumstances of a projects (it invests in) and it only begins construction once 30% of the properties have been sold (off-plan). Santander sold 2,500 real estate assets (during the 3 months to) March 2015, a reduction on the volumes recorded during the first quarter last year. Specifically, the entity sold 12,000 properties in 2014.

Other entities, such as BBVA and Popular, are also now selling foreclosed properties at prices that exceed the value at which they are accounted for on their (respective) balance sheets.

Original story: ABC (by María Cuesta and Moncho Veloso)

Translation: Carmel Drake

Santander: The Real Estate Recovery Will Strengthen In 2015

16 March 2015 – Pisos.com

Tomás Riestra, analyst in the Research Department at Banco Santander shares his views about the outlook for 2015 in a short interview.

The recovery in the real estate sector is now well underway after beginning timidly in 2014. So says Tomás Riestra, analyst in the Research Department at Banco Santander, who expects 2015 to be the year of stabilisation. “This improvement is based on the flow of credit and the fact that prices have begun to grow timidly, in an environment of greater economic growth and the generation of higher quality employment”, said the expert.

For Riestra, house prices will not return to pre-crisis levels because obstacles from the crisis still remain, like the stock of homes for sale, and because lessons have been learnt from those years. “The real estate boom resulted in a set of circumstances that is not going to be repeated”, specified Riestra, for example, the (construction) sector is not going to have the same importance in terms of Spanish GDP (going forwards).

Original story: Pisos.com

Translation: Carmel Drake