Moody’s: The Average LTV on Residential Mortgages Amounted to 64.6% in Q1 2019

30 May 2019 – El Diario

According to the latest data from INE, more and more people are taking out a mortgage to buy a home in Spain. 30,716 mortgage contracts were signed in March, up by 15.8% YoY.

Many buyers are attracted by rising house prices (investment growth), which the ratings agency Moody’s considers is something “positive”. However, with personal savings rates in freefall, banks are having to lend more than ever to enable families to afford their homes.

Specifically, the percentage that the loan granted represents over the appraisal value of the property (LTV) amounted to 66.5% in Q4 2018, its highest figure ever. That figure moderated slightly to 64.6% in Q1 2019 but many families are now asking to borrow 65%-70% of the value of their homes, which means a greater risk for banks and a higher probability of defaulted payments.

According to Moody’s, whilst a portfolio with an average LTV of more than 80% has a default rate of more than 6%, a portfolio with an average LTV of less than 60% has a default rate of 1%.

Nevertheless, although some banks are now lending mortgages with LTVs of 100% in certain cases, the percentage of loans with LTVs of more than 80% is lower than it was before the crisis. Such mortgages currently account for 13.1% of the total compared with 17% in 2006.

Moreover, according to Moody’s, mortgage borrowers are better off today than they were at the outbreak of the crisis as they are in a better position to afford interest rate rises and other changes in the market thanks to the strict criteria that the financial entities have applied when granting loans in recent years.

Original story: El Diario (by Marina Estévez Torreblanca)

Translation/Summary: Carmel Drake

Témpore Cut its Losses by 46% in 2018

27 February 2019 – Europa Press

Témpore, the rental home Socimi constituted by Sareb to provide an outlet for its residential portfolio, closed 2018 with a net loss of -€384,394. That figure represents a 46% reduction in the losses recorded a year earlier, according to reports from the firm, which is listed on the MAB.

The result also improves on the forecasts set out by the company in its listing prospectus by 13%.

Témpore’s portfolio of 2,249 homes and parking spaces generated revenues from rental income of €7.3 million last year, up by 1.3%, thanks to the renewal of contracts and the consequent increase in rents.

The increase in the firm’s housing stock, through a contribution from Sareb by a non-monetary capital increase, did not have any impact on last year’s accounts because it was not closed until the end of the period.

Nevertheless, it allowed Témpore to close the year with assets worth €339 million, a figure that almost doubles (+93%) the volume in the year of its constitution and, which, according to its data, consolidates the firm’s position as the third largest rental home company in the country.

Higher rents, lower defaults

In operational terms, the Socimi managed to reduce the default rate of its tenants to 4%, compared with 5.5% at the end of 2017.

Moreover, it achieved an average increase in rental prices of 12% for the new contracts it signed and its contract renewals (…).

Original story: Europa Press 

Translation: Carmel Drake

Unicaja Considers the Sale of a Large RE Portfolio in 2019

12 February 2019 – Expansión

Unicaja accelerated the clean up of its balance sheet during the course of 2018. The Málaga-based entity decreased its volume of non-performing assets by 22%, in such a way that it is now close to the reduction objective it established in its latest strategic plan for 2020. That is according to the figures provided by the bank itself during the presentation of its results for last year.

The entity chaired by Manuel Azuaga (pictured above) ended 2018 with a volume of non-performing assets (NPAs) amounting to €3.6 billion, of which €1.7 billion were foreclosed assets and €1.9 billion were non-performing loans.

In five years, the bank has reduced its toxic legacy by 51% or more than €3.8 billion. Unicaja’s commitment to investors was to bring its exposure to problem assets down below the €3.5 billion mark before the end of 2020. The rate of sales of small NPA portfolios has allowed it to get ahead in the calendar that it established in its strategic plan. But the entity will continue its clean up.

The heads of Unicaja have reported their intention to continue with small portfolio sales during 2019. Moreover, they do not rule out carrying out the sale of a large portfolio in order to segregate a majority of the non-performing exposure, in a similar way to what most of the Spanish banks have been doing over the last two years.

Unicaja’s decision to carry out a massive property sale will depend, like in other cases, on the discounts that the entity will have to apply to its portfolio. The NPAs of the Malagan bank have an average coverage level of 57%, which means that a discount of a similar percentage could be applied to the book value without resulting in accounting losses for the entity this year.

High asset quality

Unicaja is, together with Abanca, the only Spanish bank entity that still retains ownership of its servicer, the real estate subsidiary through which it sells its homes and commercial premises.

The recent decision by Sabadell to sell 80% of Solvia to Intrum followed other previous operations that have seen the Spanish banks undoing their positions in the property segment, including the sale of Servihabitat to Lone Star by CaixaBank, and of Aliseda to Blackstone by Santander.

Beyond Unicaja’s plans for its property, the entity has been recording a positive trend in terms of the quality of its assets for several years now. The net inflows of problem loans have registered eight consecutive quarters of decreases, and between September and December, they recorded the largest decrease in the bank’s historical series.

Since 2014, Unicaja’s default ratio has also decreased by almost half: from 12.6% recorded in December 2014, the Málaga-based entity has managed to clean up its balance sheet to bring the rate of toxic loans down to just 6.7%.

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake

Santander Awards the Management of Popular’s €5bn Portfolio to Blackstone

12 November 2018 – Expansión

Santander and Blackstone have reached an agreement whereby the US fund, through the real estate servicer Aliseda, has taken on the management of a portfolio of assets from Popular amounting to €5 billion, which Santander is retaining on its balance sheet. The portfolio includes real estate assets and loans linked to the retail segment and Santander is retaining ownership of 100% of the assets. They were left out of the transfer of Popular’s assets to Quasar, the joint venture that the bank and Blackstone launched last year.

Santander transferred the bulk of Popular’s damaged portfolio to Quasar (€30 billion gross, linked primarily to property developers), along with 100% of the share capital of Aliseda. Blackstone controls the management of Quasar and 51% of the shares and Santander the remaining 49%. The bank has this stake valued at €1.7 billion on its balance sheet.

“The assets under management have been classified into two different groups, to reflect their owner: the Santander Group portfolio, owned by Popular (and now absorbed by Santander) and the Popular portfolio, owned by Project Quasar 2017”, according to the annual accounts of Aliseda. Specific teams have been configured within the servicer to manage Santander’s assets.

As at June, the latest available disaggregated figures, the entity chaired by Ana Botín still had a portfolio of foreclosed assets amounting to €10.5 billion gross. They have been cleaned with €5.2 billion in provisions (48.9%), which brings their net value to €5.4 billion. Nevertheless, in September, it sold a portfolio of properties worth €1.5 billion to Cerberus. In addition, Santander has loans to property developers amounting to €5.7 billion. Of the total, €1.8 billion are doubtful balances, with a default rate of 32%.

Santander currently has agreements with three servicers (Altamira, Aliseda and Casaktua). It paid those three companies almost €460 million in management commissions last year.

Meanwhile, Aliseda, which is now controlled by Blackstone and Santander, has rescinded the syndicated loan that it signed in 2015. At the time, the funds Värde Partners and Kennedy Wilson owned 51% of the real estate manager’s share capital and Popular owned the remaining 49%.

Following the acquisition of Popular by Santander, the entity chaired by Ana Botón repurchased the 51% stake held by Värde Partners and Kennedy Wilson, as a step prior to the transfer of 100% of Aliseda to Quasar.

“According to the syndicated financing contract subscribed on 27 November 2015, the cancellation of the loan has been formalised, following the repayment of the principal and outstanding interest, and of the cancellation penalty for the overall amount of €266.03 million”, said Aliseda’s report.

The bank with the greatest share of the loan was Popular itself (33.33%), with an outstanding balance of €87.86 million at the end of 2017. Bankia, Santander, Sabadell and Bankinter, with shares of 10%, had outstanding balances of around €25 million each. ING (€24.3 million), Crédit Agricole (€23.3 million) and BBVA (€17.5 million) completed the group of banks in the syndicate.

The interest rate on the loan, conditioned on the debt ratio and the gross result of the company, was six-month Euribor plus a spread of between 2.75% and 3.50%.

Following the change of ownership of Aliseda and its senior management team, the servicer paid compensation for redundancies of €1.4 million last year. It also paid €5.64 million for a remuneration plan that granted certain executives the right to receive remuneration in the event of a change of control of the company.

Original story: Expansión (by M. Martínez)

Translation: Carmel Drake

Témpore Debuts on the MAB with a 7.7% Share Price Increase

4 April 2018 – Expansión

The shares of Témpore Properties made their stock market debut yesterday and enjoyed a notable rise despite the wider context of share price decreases. Sareb’s Socimi joined the Alternative Investment Market (MAB) and will list through the fixing system, whereby its share price will be adjusted twice a day, following two auctions. In the first of them yesterday, after the bell was rung, Témpore’s share price had risen by 4.8% to €10.90 with respect to its reference rate of €10.40 at which it had started trading. The company incorporated 14.68 million shares for trading in total, and so, after its first day of trading, the company had a market capitalisation of €164.4 million. Yesterday, 18,952 shares were traded, worth €197,700.

Juan Ramón Dios and Nicolás Díaz Saldaña, the Chairman and CEO of the company, respectively, were responsible for ringing the bell yesterday, together with Jaime Echegoyen, Chairman of Sareb. Saldaña highlighted the specialist nature of the company, which is going to allow it “to optimise its income statement”, as well as the absence of debt, which is why “we have scope to look for resources to undertake our expansion”.

Témpore has begun its life on the stock market with 1,383 homes in Madrid and Barcelona and a housing stock worth around €152 million. Its growth strategy for the next three years includes the purchase of batches of homes from the bad bank to reach 4,200 properties. The purchases will be financed through capital increases in which it expects to open itself up to institutional investors.

The first operation is planned for the end of the year. Saldaña expects to have assets under management worth between €350 million and €400 million. Within three years, he plans to have net assets worth between €500 and €600 million; make the leap onto the main stock market; reduce Sareb’s participation to a minimum; and “make way for strategic investors who will provide stability over the medium and long-term”, said Saldaña.

The CEO has set the following objectives for the company, to begin with: improve the occupancy rate, reduce the default rate and increase rental income, in such a way that the yield exceeds 5%, from the current level of less than 4%.

Similarly, he wants the firm to have a leading role in the consolidation of the sector, given that “in two years, there is going to be a concentration process due to the growth challenges resulting from the scarce supply”.

Original story: Expansión (by R. Martínez)

Translation: Carmel Drake

Sareb’s Socimi Makes it MAB Debut with 1,383 Homes on the Outskirts of Spain’s Large Cities

3 April 2018 – Expansión

Sareb’s Socimi is making its debut today on the Alternative Investment Market (MAB) with a total valuation of €152.7 million. The company owns 1,383 homes, inherited from the rescued savings banks, located close to Spain’s large and medium-sized cities. Most can be found in very dynamic metropolitan areas such as Vallecas, with annual price rises of 10%-12%, and Hospitalet de Llobregat, as well as in places further afield, such as Manresa (Barcelona).

Témpore Properties, which has just two employees on its payroll, has delegated all of its management work to Azora, which will charge €1.5 million for its services in 2018 and €1.7 million in 2019, provided it fulfils all of the objectives set out in the business plan in terms of profitability and occupancy rates.

Azora, which is also the management firm for Hispania and Goldman Sachs, employs 140 people, half of whom work for Sareb directly or indirectly.

“Our greatest challenge is to increase the profitability of the rental portfolio from 3.7% to 5.5%”, explains Nicolás Díaz Saldaña, CEO of Témpore Properties and former Head of Rentals at Sareb.

As a first measure, the company is going to increase its rents, taking advantage of the renewal of its rental contracts. 33% of them expire in 2018, another 36% in 2019 and the remainder in 2020. “The prices that were applied by the savings banks are very out of date”, explains Díaz Saldaña. The average increase will amount to 15% and will rise to 20% in the outskirts of Madrid and Barcelona. The company assures that, despite those increases, 80% of its tenants are renewing their contracts.

Témpore is tightening up the requirements to access its homes in an effort to reduce its default rate, which currently stands at 4.8%. It demands the payment of a rental insurance from future tenants, which has a cost of €10 per month, as well as the one-month mandatory deposit. Moreover, the monthly rental cost may not account for more than 40% of the total income of the family unit.

In total, 24% of Témpore’s homes are located in Barcelona. “The Catalan political risk is not holding back rental prices. The rise in the metropolitan area of Barcelona stands at around 6%-10%”, says the CEO. 36% of the new package of homes that Sareb is going to transfer to the Socimi this year are located in Cataluña.

Témpore does not have any bank debt and has a credit line open with Sareb amounting to €2 billion, which it has not made use of yet.

The bad bank owns 98.5% of the Socimi and the intention is to allow investors (primarily institutional) to acquire shares, in such a way that will end up with a minority stake within three years. Témpore assures that there are many real estate funds, insurance companies and pension funds with liquidity willing to invest.

“Our business is one of scale. Témpore has to aspire to being as large as Testa Residencial, our best comparable”, says Díaz Saldaña.

Testa, in which Santander, BBVA, Acciona and Merlin all hold stakes, is planning to make its stock market debut at the end of May or beginning of June this year.

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

Axis: Spain’s Banks Will Divest At Least €40bn of Their Problem RE Assets This Year

30 March 2018 – El Mundo

Spain’s banks are still trying to lighten their balance sheets of the huge load left on them by the real estate crisis. Forecasts for this year indicate that they will manage to divest assets worth at least €40 billion including properties, foreclosed land and defaulted and non-performing loans.

Those are the estimates made by the consultancy firm Axis Corporate on the basis of operations that are currently being sounded out in the Spanish real estate sector. The figure includes transactions worth at least €9 billion by Sareb, sales of around €6 billion by Bankia and operations by CaixaBank and Banco Sabadell with a volume of close to €12 billion each. “To all of these operations, we have to add the retail operations that the servicers are currently undertaking”, explains José Masip, Real Estate Partner at Axis Corporate and coordinator of the Assets Under Management Observatory Report published recently by the company.

In 2017, sales of toxic assets linked to real estate exceeded €50 billion, “almost twice the €27.4 billion sold between 2012 and 2016”, says the report. Spanish entities are accelerating the clean up of this type of asset from their balance sheets to reduce their default rates and fulfil the European regulations that force entities to reduce the weight of non-performing assets to pre-crisis levels. Despite that and according to data from the consultancy firm JLL, the volume of non-performing assets with real estate collateral in the hands of the banks and Sareb amounts to around €200 billion: €80 billion in REOs (foreclosed assets) and €120 billion in NPLs (Non Performing Loans or doubtful credits).

Greater weight of funds

Both firms predict that the rate of sales seen last year will continue in 2018, above all due to the growing interest from international investment funds (…).

The main investment funds focused on the purchase of real estate assets in Spain are Bain Capital, Oaktree, EOS Spain, Apollo and Axactor, who are following in the footsteps of others such as Blackstone and Cerberus.

The latter two entities starred in the two most important operations of last year. In July, Santander sold a portfolio comprising 51% of the toxic property it had inherited following the purchase of Banco Popular to Blackstone in an operation worth €5.1 billion; meanwhile, in November, BBVA sold 80% of its real estate portfolio to Cerberus for around €4 billion. In a similar operation, also in 2017, Liberbank sold part of its toxic portfolio to the funds Bain and Oceanwood for €602 million.

The transactions were structured through the creation of joint ventures in all cases, in which the bank held a minority percentage of the company or servicer and the acquiring fund took over the bulk of the management. According to Emilio Portes, Director of the Portfolio Business at JLL for Southern Europe, “the structure offers entities a stake in the profits of the assets with upside potential at the same time as cleaning up their balance sheets and slightly improving their capital ratios. Similarly, it offers buyers more advantageous prices without limiting their strategy and management capacity”.

Indeed, in Axis’s opinion, those servicers are expected to be some of the main players in the market over the short and medium term. According to data from the consultancy firm, more than 80% of the assets under management are in the hands of five of them: Altamira (linked to Santander), Servihabitat (CaixaBank), Haya/Anida (controlled by Cerberus after the operation with BBVA), Aliseda/Anticipa (Blackstone) and Solvia (Sabadell). The outlook for this year points to greater concentration in the sector, “with the possible sale of some of the existing servicers”, in such a way that their specialisation and differentiation will be definitive.

Original story: El Mundo (by María Hernández)

Translation: Carmel Drake

Cajamar Puts €200M Debt Portfolio Up For Sale

23 October 2017 – Expansión

Cajamar, the largest credit cooperative in Spain, with €39,943 million in assets, has placed a package of 1,450 delinquent loans on the market worth €200 million. The majority of the loans have been granted to small- and medium-sized companies and are secured by mortgage guarantees.

By autonomous region, 75% of the portfolio is located in the Community of Valencia and Andalucía; and the remaining 25% is situated in Murcia, Cataluña, the Community of Madrid and Castilla y León.

It is the first package of non-performing assets that Cajamar has put up for sale this year. In 2016, the entity completed two divestments of this kind. The first, closed during the second quarter, comprised doubtful and non-performing loans, as well as foreclosed properties, amounting to €524 million in total. The second, sold during the fourth quarter, contained non-performing loans only, amounting to €206 million.

As at 30 June, Cajamar held €3,885 million in doubtful loans and had a default rate of 12.38%. It had €3,776 million in real estate assets on its balance sheet. Of those, 50% are finished homes and 25% correspond to land. The group has prioritised sales through the retail channel, for which it enlists the support of its assets sales platform, Haya Real Estate.

The entity has just launched a commercial campaign that offers more than 4,000 properties with discounts of up to 40%. They include one-bedroom apartments in Alhaurín el Grande (Granada) with prices starting at €46,000.

Operating range

Cajamar has 1,090 branches across Spain, a workforce of 5,743 employees and 3.5 million clients. During the first half of the year, it earned €44.29 million. It holds an agreement in insurance with Generali, another in investment funds with Trea and it sells consumer loans from Cetelem.

Above all, the entity is dedicated to meeting the financing needs of small and medium-sized companies in the agri-food sector.

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

Mortgage Default Rate Drops To 4.73% In June

19 October 2017 – Expansión

The default rate on loans granted to buy homes decreased from 4.79% to 4.73% in June, whilst the default rate in the property developer and real estate sector fell from 24.12% to 21.47%. These figures represent the lowest levels recorded since December 2011.

Original story: Expansión

Translation: Carmel Drake

Liberbank Finalises Property Sale To Ensure Success Of Capital Increase

4 October 2017 – Cinco Días

Liberbank does not want to follow in the footsteps of Popular and is taking firm strides to avoid that fate. Its focus now is on shaking off the property that it still holds following the crisis, in order to project the image in the market that it has cleaned up its books and to ensure the success of its upcoming capital increase. In this way, the entity is finalising the sale of a large part of its portfolio of foreclosed assets this week, in parallel to the capital increase, which its General Shareholders’ Meeting is expected to approve on 9 October.

The entity led by Manuel Menéndez is working against the clock to ensure its independence. The CNMV has given it until 30 November to extend, for the third time, a veto on short positions that it imposed in June, a few days after Popular’s future was resolved. Sources close to the operation expect the first stage (the sale of a portfolio worth €800 million) to be closed this week. Or within 15 days, at the latest, since in that case, it would be performed in parallel to the start of the capital increase.

Liberbank received the first binding offers at the beginning of last week. And from those, it has selected three funds: KKR, Bain and Cerberus. The latter is the firm that acquired the bank’s real estate subsidiary, Mihabitans, in the summer, through Haya Real Estate. It spent €85 million on that purchase. The market described the operation as a “success” and uses it as an example for the upcoming sale of the toxic property.

Haya is exclusively managing the current foreclosed real estate assets on Liberbank’s balance sheet, as well as any future foreclosed real estate assets that end up being incorporated onto the bank’s overall balance sheet or onto those of any of its real estate subsidiaries. According to the accounts for the first half of the year, Liberbank held €3,115 million in foreclosed assets on its balance sheet, with a provision coverage ratio of 40%. Of those, €1,741 million are finished homes, €1,162 million are plots of land, €480 million are homes under construction and €402 million are offices and warehouses.

This new sale of foreclosed assets, dubbed ‘Operación Invictus’, will be closed for a price of around €400 million. Although the book value of the real estate assets in the portfolio is €800 million, the sale will be closed at a discount of at least 50%. Santander closed the sale of 51% of Popular’s property to Blackstone at a discount of 66%.

With the aim of wiping out the losses that this sale will generate and of getting rid of a large part of its real estate portfolio, once and for all, the Board of Directors of Liberbank proposed a capital increase on 6 September, which they are now trying to safeguard. The bank hopes to raise €500 million through the operation. The objective is for the bank’s default ratio to amount to 3.5% by 2019 and for the coverage ratio on its non-performing assets (doubtful loans and foreclosed assets) to rise to around 50%. At the end of June, Liberbank recorded figures of 11.3% and 40% for these ratios, respectively.

With a balance sheet of €40,000 million, Liberbank is the smallest entity of those supervised by the ECB, together with Banco Crédito Social Cooperativo, the parent company of Cajamar. One of Liberbank’s other missions is to increase its return on equity (ROE) to 8% by 2020, compared with the figure of 2.7% recorded during the first half of this year. It is the second time that the bank has increased its share capital since it started trading on the stock market in 2013. The previous capital increase, in May 2014, saw it raise almost €500 million.

Then, the bank responsible for coordinating the operation was Deutsche Bank; now it is being managed by Citi. Last time, the injection of fresh funds allowed the entity to early repay €124 million that the FROB (Fund for Orderly Bank Restructuring or ‘Fondo de Reestructuración Ordenada Bancaria’) had injected it with; to strength its top-tier capital ratio to more than 10%, as if the Basel III requirements were completely applicable; and to bring forward the payment of dividends to its shareholders.

Original story: Cinco Días (by Álvaro Bayón and Pablo M. Simón)

Translation: Carmel Drake