Árqura Homes: Sareb Launches a Property Developer to Build 17,000 Homes

11 June 2019 – Europa Press

Sareb has constituted its own property developer, Árqura Homes, through which it plans to build and sell 17,000 new homes over the next decade with an investment of €2.2 billion. The new entity looks set to rival the country’s main listed property developers on the basis of its land portfolio and investment plans.

Árqura has been constituted following the transfer of land and developments underway worth €811 million. 56% of its portfolio corresponds to just over 2 million m2 of land, 41% corresponds to developments in progress and the remaining 3% are developments that have been suspended.

The bad bank led by Jaime Echegoyen (pictured above) is going to team up with Värde for this initiative, which will hold 10% of Árqura’s share capital. Moreover, Aelca, a real estate company controlled by the US fund, will be responsible for the management and marketing of the new homes.

This operation represents Sareb’s second foray into the real estate market through the launch of its own firm after it launched the Socimi Témpore at the end of 2017. That firm became the third largest rental home company in the country and is currently on the verge of being sold to the fund TPG.

In the case of Árqura, it hopes to reach its cruising speed in terms of development between 2021 and 2022 and of homes deliveries between 2023 and 2024. Its homes will be distributed across 15 regions, although more than half (58%) will be concentrated in the most sought-after regions of the Community of Madrid, Cataluña and Andalucía.

Original story: Europa Press

Translation/Summary: Carmel Drake

Aelca Locks Horns with its Owner Värde Over Sareb Mega-Contract

12 June 2018 – Voz Pópuli

An underground war in the heart of Aelca, one of the largest property developers in Spain. The real estate firm founded by José Juan Martín and Javier Gómez is immersed in negotiations regarding a possible alliance with Sareb which has generated unease for its main shareholder, Värde Partners, which owns 80% of the share capital.

Sources at the US fund consider that their investee company is negotiating this agreement behind their backs, something that they are opposed to since it could mean that their stake in the property developer decreases to less than 50%, according to financial sources consulted by Voz Pópuli.

Sources at the property developer declined to comment: “Aelca is continuing to work on the project with Sareb. In this sense, we decline to make any comment”.

Meanwhile, Värde Partners has been assessing a possible merger between Aelca and Vía Célere, the fund’s other property developer in Spain, for some time. They see it as the best way to generate value from their investments in Spain ahead of a possible IPO when the market improves. But neither of the US fund’s partners like the merger option, they would both prefer to continue on their own.

Sareb’s process

The property development alliance with Sareb is making progress, with the recent selection of just two finalists: Aelca and Aedas. The President of the bad bank, Jaime Echegoyen, said yesterday that his entity is in no hurry to close an agreement and nor does it have any obligation to close a deal if the numbers do not work out in the end.

Sareb’s idea is to include land worth €800 million in the agreement. According to financial sources consulted, developments in progress worth another €500 million may also be included. And of all of that, Aelca would want to hold onto around €900 million, or 70% of the total.

One of the options being negotiated is that Aelca and/or Aedas acquire the plots in exchange for allowing Sareb into their share capital. The valuation of the property developer is around €1 billion, and so such an agreement would reduce Värde’s stake to below 50%. Even so, according to the same sources, Aelca would have to obtain approval for the operation at the General Shareholders’ Meeting, which would be tricky if the fund is not in agreement.

Moreover, sources at Värde do not think that the valuations that they are seeing for the possible agreement with Sareb are justified, and they fear that the negotiations will dilute their stake (…).

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

80% Of Popular’s Bad Bank Will Comprise Finished Homes

24 October 2016 – El Confidencial

The first details are emerging about Project Sunrise, the bad bank in which Banco Popular is planning to segregate properties amounting to €5,800 million (gross) (€4,000 million net). Approximately 80% of its assets will be finished homes, which the entity hopes will reduce the risk associated with the project and facilitate sales of the vehicle, according to financial sources close to the project. As a result, the entity chaired by Ángel Ron hopes to reach “break even” in its third year of life, in other words, in 2019, and to generate profits thereafter.

According to the plans for the aforementioned bad bank, more than €3,000 million of Sunrise’s balance sheet will correspond to finished homes, whereas only around €400 million will relate to land – the second most important asset. In third place, the bad bank will hold developments in progress with a gross value of €300 million and finally, Popular will transfer homes for rent amounting to another €200 million. It total, more than 40,000 individual assets will be transferred to the new entity.

The bank is looking to increase the quality of the assets that it transfers to this vehicle and whereby achieve a dual objective: on the one hand, improve its prospects for sales and revenues, given that finished homes have more appeal in the market (when compared to land or developments in progress, which require additional investment to be completed); on the other hand, allow lower provisions to be recognised upon transfer, given that the prices at which the assets were awarded to the bank do not need to be reduced by as much in these cases. The average provisioning level of Sunrise’s assets will amount to 31%.

Profits from year 3 onwards

And it is precisely thanks to this greater ease to sell the bad bank’s assets that Popular expects that the new vehicle will emerge from losses during its third year of operation, in other words, in 2019 (it plans to list on the stock market in 2017). Sunrise’s business plan forecasts profits of around €50 million per year for the next two years, according to sources consulted.

To this end, the bank chaired by Ron is relying on a strong performance in the Spanish real estate market, based on good economic forecasts, low interest rates and improvements in other indicators, which are already being seen in some cases, such as the number of mortgages, the volume of house transactions and the prices of operations. According to their calculations, house prices are still undervalued and as a result, will continue to rise over the next few years.

The bad bank, vital for achieving its objectives

The segregation of the bad bank is one of the fundamental milestones in the restructuring plan that Popular presented to justify its €2,500 million capital increase in June, given that, by removing almost €6,000 million (gross) in real estate assets from Popular’s balance sheet, the entity will free up capital and strengthen its solvency levels. Nevertheless, it has faced difficulties due to the lack of buyers interested in the vehicle, and so it has decided to list the vehicle on the stock market by gifting its share capital to the banks current shareholders in the form of a dividend. (…).

Original story: El Confidencial (by E. Segovia and J. A. Navas)

Translation: Carmel Drake