Knight Frank: Investment in Offices Amounted to €1.3bn in Q1 2019

7 May 2019 – Eje Prime

According to data compiled by Knight Frank, investment in the office sector amounted to €1.3 billion during the first quarter of 2019.

By type of investor, in Madrid, 45% of buyers were funds, 25% were institutions, 18% were real estate companies, 9% were corporates and 3% were Socimis. Meanwhile, in Barcelona, 64% of purchasers were investment funds, 19% were corporates, 13% were private investors and 4% were real estate companies.

Yields in the prime areas remained stable at around 3.75% in Madrid and 4% in Barcelona, which are in line with previous years and similar to those observed in other major European cities.

The average prime rent in Madrid also remained stable at around €30.50/m2/month, with prices rising to €38/m2/month in some of the most sought-after spaces in the CBD. In total, 124,000 m2 of office space was leased in the capital during Q1 2019, up by 4% YoY.

Original story: Eje Prime 

Translation/Summary: Carmel Drake

The Keys To Banco Popular’s Much Needed Recovery

19 January 2017 – Expansión

Analysts at Citi think that Banco Popular’s core business, which focuses on SMEs and corporates, is one of the most profitable in the Spanish banking sector. That is according to a recent report about the entity (still chaired by Ángel Ron), which anticipates a potential increase in the bank’s share price of up to 40%.

But the strength of Popular’s underlying business has been eclipsed for years by the problem assets that it accumulated during the real estate bubble. So much so that the analysts at the US bank consider that the entity’s capacity to drain its toxic real estate is its “greatest challenge” over the next few years.

“On the basis of our analysis, Popular has the largest volume of toxic assets of any of its peers, by far: in fact, it has three times as many if we take into account their relative size to the total volume of assets (18% compared to 6%)”, say sources at Citi. The analysts anticipate a series of difficulties for the bank when it comes to reducing its level of problem assets, which they consider represent a real “pain in the neck” for the entity.

In their report, Citi’s analysts assess the three ways through which Popular is seeking to rechannel its problem assets. In essence, the three pillars on which its recovery will be based are: the capacity to recover toxic credits, the sale of foreclosed assets and the effective management of Aliseda.

Cut its toxic loan balance in half

Regarding the toxic loans (non-performing loans or NPLs), Citi predict that the Directors of Banco Popular will manage to reduce the total volume from 17.1% of the total portfolio to just 8.9%. This reduction will be based on a lower inflow of gross credit, a higher recovery rate of doubtful loans and a more aggressive path of divestment than the one undertaken to date.

In terms of its foreclosed assets, the entity chaired by Ángel Ron (who will soon hand over the leadership role to Emilio Saracho) will have several specialist tools for developing, managing and selling those assets: Aliseda, Aliseda SGI, commercial agreements with third parties and its own network of bank branches. Citi’s forecast estimates that by 2020, Popular will have reduced its volume of foreclosed assets by around €8,000 million, i.e. to almost half of its current balance (which stands at €15,000 million) and excluding the almost €6,000 million that are going to be separated out into a different vehicle.

In terms of Aliseda SGI (in which Kennedy Wilson and Värde Partners own a 51% stake), which manages around €23,000 million in assets, its future is linked to what Popular decides to do in the end with some of the real estate assets that it is planning to segregate out into a specialist vehicle. “We estimate that it will take Popular nine years to free itself from all of its problem assets, including future flows from loans to property developers and mortgages in the non-performing category and relating to foreclosed assets”, they explain. In the opinion of Citi’s analysts, a spin-off operation involving the segregation of the assets managed by Aliseda would have three main benefits:

“It would accelerate the divestment of foreclosed assets…by one or two years; it would allow the underlying profitability of the bank’s business to surface sooner (due to lower financing and management costs) and it would free up around €4,000 million in theoretical provisions (40-50 basis points of regulatory capital)”.

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake