CaixaBank Will Save €550M Over the Next 3 Years from the Sale of its Real Estate

27 July 2018 – La Vanguardia

CaixaBank estimates that the sale of 80% of its real estate business to the US fund Lone Star will result in a cost saving worth €550 million over the next three years, from 2019 to 2021.

On 28 June 2018, CaixaBank announced that it had reached an agreement with Lone Star to sell it a portfolio of foreclosed assets comprising real estate assets available for sale as at 31 October 2017 and the real estate company Servihabitat, worth around €7 billion in total.

The CEO of CaixaBank, Gonzalo Gortázar (pictured above), highlighted today that the operation, which is expected to be closed at the end of this year or the beginning of next year, will allow the entity to clean up its balance sheet of the foreclosed assets accumulated during the years of the crisis and to improve profitability.

“We have managed to reduce the volume of harmful assets sooner than we had expected, before the new strategic plan comes into effect” for the period 2019-2021 that CaixaBank plans to present in November, according to Gortázar.

The director added that the operation with Lone Star will not generate “a significant result” for CaixaBank, although it will allow it to increase its future profitability, thanks to cost savings of around €550 million over the next three years, given that having real estate assets on its balance sheet has an associated operating cost.

The completion of this sale will result in the deconsolidation of CaixaBank’s real estate business, which will make it “the bank with one of the most healthy balance sheets in the Spanish market”, he said.

Original story: La Vanguardia

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

Santander & Blackstone Launch Spain’s Largest Financing Deal Since the Crisis: €7bn

2 January 2018 – El Confidencial

The largest real estate operation in Europe is going to also bring with it the largest financing deal the sector has seen in recent times. The sale of €30 billion in Banco Popular assets that Banco Santander agreed with Blackstone last summer is going to mark another milestone in January when the two partners plan to close a mega-loan amounting to €7 billion.

This debt will be assumed by the joint venture created ad hoc to buy the portfolio of assets. It promises to be backed not only by Spanish entities but also by large international investment banks and funds that invest in debt, some of which may include entities owned by Blackstone. According to sources familiar with the operation, the net value of the assets amounts to around €10 billion.

To finance that property portfolio, the liability structure of the new company (the assets and liabilities of which will be equal by definition) will consist of 30% capital and 70% debt. Given that Blackstone is going to control 51% of the share capital and Santander 49%, each shareholder will have to contribute around €1.5 billion to the vehicle (the former will have to contribute slightly more given its slightly larger stake), whilst the remainder of the joint venture’s balance sheet will comprise the aforementioned €7 billion in debt that is expected to be signed this month.

The fact that the joint venture is going to have such a high percentage of debt allows the return on capital to increase: the lower that is, the greater the return with the same profits. That is what is called leverage and it is normal for it to be even higher in vehicles of this kind. By way of example, Sareb (the semi-public bad bank that absorbed the properties of the rescued savings banks) comprises 90% debt and just 10% capital.

Santander deconsolidates Popular’s real estate

After increasing the provisions against this portfolio to 63% in the case of foreclosed assets and to 75% in the case of the loans, the net valuation of all of the toxic real estate that the new company will own amounts to €9.7 billion. To that figure, we have to add the final valuation of Aliseda, the former real estate manager of Banco Popular, which also formed part of the operation. Almost half of the assets sold are land (€12.6 billion gross), followed by residential (€8 billion), retail (€2.1 billion), industrial warehouses (€1.5 billion) and hotels (€0.8 billion), as well as €4.9 billion split between offices, garages and other types of real estate assets.

This company was created because Santander wanted to remove (deconsolidate) Popular’s real estate from its balance sheet after it purchased the entity in June. It could have sold it in its entirety, but it chose to create a vehicle in which the majority was held by another shareholder – Blackstone, which fought off Lone Star and Apollo to win the auction and pay €5.1 billion – and retain a 49% stake. In this way, it will be able to obtain additional profits if the recovery continues in the real estate market and the company sells the assets for more than their current value. For the time being, it will have to inject the aforementioned share capital, amounting to €1.5 billion.

Although the small print of the conditions associated with this financing still needs to be confirmed, the deal underlines the growing business that is currently being seen in terms of real estate loans and debt funds. In the last month alone, Metrovacesa has closed a loan for €275 million and Testa has raised €800 million with the bonus of not having to mortgage any of its buildings.

Original story: El Confidencial (by E. Segovia & R. Ugalde)

Translation: Carmel Drake

Popular Abandons Sunrise To Pursue Other RE Solutions

29 March 2017 – Cinco Días

Speculation about the future of Banco Popular has not dissipated following Emilio Saracho’s arrival as the entity’s new President on 20 February, although it is true that it has tempered slightly. The bank’s low solvency ratios, after it completed a major cleanup effort in 2016, are fueling those rumours and it seems that until the entity shows the market that it is capable of resurrecting itself like Ave Fénix, through some kind of major sales operation, then the market will not stop seeing it as an easy target.

Popular’s level of regulatory capital stood at 8.17% in December, below the 10.5% required by the ECB in January 2019 and also below the average for the sector. Most of its capital consumption is due to its high-risk level, itself a consequence of its large property portfolio, the main problem in all of this. However, a substantial number of the solutions designed by the former President, Ángel Ron, have now disappeared or have been modified. (…)

One project that has been buried almost completely, although it has barely been acknowledged that it is not going to be carried out, is Sunrise. That was Ron’s star project, to eliminate a large part of the entity’s real estate portfolio.

The idea was to transfer around €6,000 million in real estate assets to this vehicle, which was going to be deconsolidated from Banco Popular’s balance sheet, after securing a complex financing structure, and its subsequent debut on the stock market.

It seems that Saracho has not approved of that project since he arrived at the bank and has decided to shut it away in a drawer, never opened. Now questions are being asked about what will happen to Remigio Iglesias and Roberto Rey, two executives hired by Popular last year to serve as the President and CEO of Sunrise, respectively.

Another option still open to Popular is to turn to the European bad bank, which the ECB is expected to create, according to market sources. In fact, Popular’s share price was the most bullish on Tuesday, with an increase of 3.24%, after the European Banking Authority said that it was in favour of creating a European bad bank to solve the problematic loan phenomenon, a project that is also supported by the ECB.

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

Colonial Records Profit Of €5.8M In Q1 2015, Up 132%

8 May 2015 – Expansión

The real estate company Colonial increased its rental income by 3.77% during the first quarter (of 2015) to reach €55 million and its net profit rose by 132%, to €5.8 million. These results do not take into account the €674 million profit recorded last year, due to an accounting entry that resulted form the deconsolidation of Asentia.

Colonial attributed its improved result to the recovery in the real estate market in Paris, Madrid and Barcelona, where it owns (most of its) property. The group has improved the occupancy rate of its buildings as well as the rental income it charges.

Original story: Expansión (by M.A.)

Translation: Carmel Drake