Spain’s Developers Increasingly Look for Alternative Financing

6 January 2020 Alternative financing is taking on an ever more visible role in the Spanish real estate market. Several groups beyond the traditional banking institutions are playing an active role. Although alternative financing didn’t even exist just four years ago, now such lending already accounts for 20% of the total loans to developers.

Fund managers such as Colliers International, Ibero Capital and Alantra, among others, are financing an increasing amount of loans, while crowdfunding platforms are increasingly providing yet another alternative.

Developers generally look to raise 65% of the financing from banks, while using equity to pay for the rest. There are currently about 200,000 new homes under construction, and the existing financing arrangements will only pay for a quarter of the total. The rest, which will require approximately €15 billion in financing, will need to come from somewhere else.

La financiación alternativa está asumiendo un papel cada vez más visible en el mercado inmobiliario español. Aunque el financiamiento alternativo ni siquiera existía hace solo cuatro años, ahora esos préstamos ya representan el 20% del total de préstamos a inmobiliarias.

Los administradores de fondos como Colliers International, Ibero Capital y Alantra, entre otros, están financiando una cantidad cada vez mayor de préstamos, mientras que las plataformas de crowdfunding ofrecen cada vez más otra alternativa.

Las inmobiliarias generalmente buscan recaudar el 65% del financiamiento de los bancos, mientras usan el capital para pagar el resto. Actualmente hay alrededor de 200,000 casas nuevas en construcción, y los arreglos de financiamiento existentes solo pagarán una cuarta parte del total. El resto, que requerirá aproximadamente € 15 mil millones en financiamiento, deberá provenir de otro lugar.

Original Story: El Economista – Luzmelia Torres

Translation/Summary: Richard D. Turner

Meridia Takes €83.5-Million Loan to Build Project in Barcelona’s 22@

21 November 2019 – A socimi controlled by Meridia has arranged an up to €83.5-million syndicated loan with CaixaBank and Santander to build the future headquarters of Everis in Barcelona’s 22@ district.

The firm’s real estate vehicle, Meridia III, requested the loan, which will be guaranteed by the plot of land located at Avenida Nova Icària 213, as well any future construction on the site. The loan will last until seven years after the end of construction.

Original Story: Expansión – Marisa Anglés

Adaptation/Translation: Richard D. K. Turner

Tightened Lending Standards Put Drag on New Developments

8 November 2019 – Developers are complaining of a lack of financing in the sector due to tightened lending standards and the high cost of alternative financing. Spain’s banks are looking to reduce their exposure to the real estate market, at a time when many of them still have extensive amounts of NPLs and REO on their balance sheets. At the same time, alternative financing vehicles often have interest rates reaching up to 10%, making many potential developments economically unviable.

A conference on financing and alternative investment in the real estate sector, organised by the IE Real Estate Club and the Urbanitae real estate investment platform, saw market sources discuss the problems facing the sector.

Developers argued that banks should provide more financing to that they can build the 150,000 homes a year the country requires. Currently, sources say that banks will only extend financing to only the largest developers who can 30% to 40% of the financing using equity. Smaller firms with less access to capital are often unable to get 100% for new developments.

Original Story: Expansión – Carlos Lospitao

Adaptation/Translation: Richard D. K. Turner

Bankia’s Return to Financing Developers: €180 Million in First Semester 2018

20 August 2018

In the year to June, the Spanish bank signed ten financing operations, nine lines of guarantees, as well as seven comfort letters, worth fifty million euros, on its return to the development business after the European Commission.

Bankia has returned to the development business in a big way. The Spanish bank financed real estate projects in the amount of 180 million euros in the first half of the year in its return to the sector, after freeing itself of the restrictions imposed by Brussels five years ago as a condition for receiving lines of capital that saved the institution from bankruptcy.

From January to June, the institution signed ten financing operations, nine lines of guarantees, and seven comfort letters worth almost 50 million euros, as reported by the company on Monday.

In its return to the real estate business, Bankia created a development management team at the end of last year, in line with its plan to loan 400 million euros per year to the sector and capture a market share of 8% by 2020.

Bankia’s re-appearance in the area of developer loans began with a loan to the Basque group Amenabar, one of the country’s most promising developers, for the construction of 150 homes in Las Rozas (Madrid).

Alberto Manrique, director of ​​Bankia’s development team, this line of business is “one of the bank’s levers” in a new phase of growth that began this year.

Original Story: EjePrime

Translation: Richard Turner

 

Sareb Requests Permission To Deduct Its Input VAT

11 July 2016 – Expansión

Operations / The company known as the bad bank states that value added tax is designed to be charged to end consumers and asks that it be allowed to deduct it on its incoming assets.

The bad bank was born when it received foreclosed properties and developer loans from the rescued saving banks; and its mission is to gradually divest all of the assets in its possession, before it is wound up in 2027.

The company chaired by Jaime Echegoyen has to pay VAT on the homes that it acquires and for the new properties that enter onto its balance sheet, those that are foreclosed due defaulted developer loans, but it is planning to file a request for permission to deduct this tax in light of the entity’s special nature.

That it what it will ask of the new Government that is created following the next elections, according to official sources. Its objective is that the future Government will refer its request to the European state, where, it seems, it will not face any regulatory problems in terms of its harmonised tax configuration.

The institution argues, firstly, that this tax is designed to be borne by the end consumer, but that the current wording of Law 37/1992 governing VAT, forces it to bear the cost during the exercise of its activity, in operations of a commercial nature.

Secondly, it states that given that it is not able to deduct the VAT, it is forced to pass the charge onto end consumers through its house prices, in such a way that buyers “suffers from an unjustified increase in the tax charge”, since they also have to pay tax on the asset transfer itself. In its opinion, “this bias may be overcome”.

Legal experts at the institution also maintain that allowing the bad bank to deduct VAT from its foreclosed properties, as well as from those received by means of “dación en pago” would not result in a decrease in the funds raised by the autonomous governments. By contrast, they consider that it would boost said amount, given that Sareb would no longer charge VAT that it has been allowed to deduct from the house prices and that decrease would result in an increase in the volume of operations and therefore in the number of properties sold, which means that income from taxes on property transfers would rise.

In terms of the change to regulations in Europe, Sareb argues that Directive 2006/112/CE provides for the possibility of exempting the payment of VAT: In general, it establishes that it is not possible to exempt the sale of properties from VAT before their first occupancy, but that any transfers that are carried out after that first occupancy should be exempt. Sareb hopes that this possible amendment will be accompanied by a transitory regime for second and subsequent sales of unoccupied homes acquired before the change enters into force.

Original story: Expansión (by A. Crespo and S. Arancibia)

Translation: Carmel Drake