Companies are Invited to Buy Industrial Land in Galicia with Discounts of up to 50%

23 February 2019 – La Voz de Galicia 

Galician companies, as well as those from outside the region interested in moving into Galicia, will have a batch of 1.25 million m2 of subsidised business land available to them. The discounts will range between 30% and 50%, depending on the area. With this plan, the autonomous administration is providing continuity to the strategy it has outlined in recent years, which allowed it to award almost 1.5 million m2 of land across Galicia between 2015 and 2018, mostly under a sale-purchase regime.

The public company Xestur, which is in the hands of the Xunta, has called a new tender this year through which it is making available 929,422 m2 of land: interested companies have until the middle of March to process their applications with the aim of acquiring 281 plots located in 17 business parks across the region.

Specifically, the plots being offered by Xestur are located on six industrial estates in the province of A Coruña (…); four in the province of Pontevedra (…); another four in the province of Lugo (…) and finally three in the province of Ourense (…).

Besides the almost 930,000 m2 being offered by Xestur, the Xunta is going to add another 322,258 m2 of industrial plots, also for a subsidised price, owned by the Galician Institute of Housing and Land (Instituto Galego da Vivenda e Solo (IGVS)), which are available to be awarded at any time (…).

Specifically, the offer from IGVS comprises 153 plots in total, located in 15 business parks across Galicia, including: three in the province of A Coruña (…), five in Lugo (…); six in Ourense (…) and finally one in Pontevedra (…).

The mobilisation of industrial land is one of the objectives outlined by the Xunta to attract companies to the region and avoid them abandoning the area (…).

Original story: La Voz de Galicia

Translation: Carmel Drake

Lone Star & Cerberus Increase their Commitment to Spanish Property

21 February 2019 – Expansión

The need for the banks to reduce their exposure to property and the funds’ appetite for the Spanish real estate sector have converged in recent years leading to the transfer of portfolios of debt and foreclosed assets worth millions of euros. Blackstone, Cerberus, Lone Star, the Canadian pension fund (CPPIB), Bain, Axactor and Lindorff are the funds that have been behind most of the major transactions involving portfolios of bank debt secured by real estate collateral during that period.

Emilio Portes, Director of Quantitative & Risk Management at JLL for Southern Europe, said that, following a frantic 2017 when more than €55 billion was transacted, last year saw portfolios sold with a gross value of more than €45 billion (…).

In 2018, the indisputable star was Lone Star, which took control of a portfolio worth around €12.8 billion from CaixaBank. Specifically, CaixaBank sold that portfolio along with Servihabitat to a company called Coral Homes in which Lone Star owns an 80% stake. Cerberus was also active last year with the purchase of several portfolios from Sabadell, Santander and CaixaBank with a total gross value of €12.5 billion. Behind it, came CPPIB, Axactor, D.E. Shaw and Lindorff, according to data provided by JLL.

“The sum of the transactions recorded over the last two years exceeds €100 billion, which places Spain as one of the countries with the largest transaction volume in Europe and the most liquid in terms of real transactions”, says Portes. In those portfolios, there are various types of assets, mainly residential, but also land, offices, premises and hotels.

The year ahead

During 2019, the banks will continue to divest assets, although with smaller portfolio sales. “In 2019, we expect a transaction volume of €20 billion, in addition to whatever Sareb ends up doing”, revealed Portes. He explains that most of the large Spanish banks have now reduced their NPA (non-performing asset) ratios to below 5%.

Following the activity undertaken by the large banks, all eyes are now focused on the medium and small-sized entities, particularly those with the greatest property exposure and therefore most pressure, as well as on Sareb, which has assets worth more than €35 billion still left to sell (…).

The heirs of the banks’ property, having purchased at significant discounts, have an average investment horizon of five years before they undo their positions (…)

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Blackstone Publicly Criticises the Government’s Rental Housing Plan

13 November 2018 – Voz Pópuli

The company that has invested the most money in the Spanish real estate sector over the last five years, Blackstone, has publicly criticised the Government regarding its rental housing plan, which includes several measures that will directly impact the US company’s business in Spain.

Blackstone’s most senior representative in Spain, Claudio Boada, has warned that he views with “concern” the plans unveiled by Pedro Sánchez’s Government in this regard. Boada was speaking at a breakfast meeting this morning organised by the United States Chamber of Commerce in Spain (Amcham Spain) with the Minister for the Economy, Nadia Calviño, in attendance, at the Villa Magna Hotel in Madrid.

Claudio Boada, Senior Adviser at Blackstone for Spain and Portugal, was speaking after Calviño’s presentation, at a symposium led by Jaime Malet, President of Amcham Spain, and attended by more than fifty representatives of US companies in Spain. He warned that the US group regards with “concern” the plans unveiled by the Government for rental housing, and he pointed out that his company has invested €25 billion in the country in recent years “backing Spain during the worst years of the crisis”.

In particular, Boada referred to the project to return the duration of rental contracts to five years, versus their current duration of three years (as a result of the Urban Rental Law, dated June 2013), which will be applicable for physical persons. In those cases where the lessor is a legal entity, the minimum duration will be seven years.

The most senior representative of Blackstone in Spain, who attended the meeting together with Eduard Mendiluce, who leads the investment firm’s real estate business, requested channels of dialogue with the Minister for the Economy to address the matters.

The plan from the Government regarding rental homes affects the buoyancy of Blackstone’s core business in Spain. The company chaired by Stephen Schwarzman has been purchasing large packages of mortgages corresponding to more than 100,000 rental homes from Spanish banks over the last five years (…).

The group has taken advantage of the financial and real estate crisis to acquire those homes and mortgages at significant discounts, but it has taken the risk of making the operations profitable by trying to improve the management of those properties.

For Blackstone, whose motto is “buy, fix and sell”, its business involves renting out homes purchased at the most profitable prices possible taking into account the large discounts that it typically obtains upon acquisition. It also gets rid of tenants who do not pay their rent.

For this reason, the plans announced by the Government regarding rental homes affect the US group so much, given that far from making the rental sector more flexible, they would actually slow it down. Problem tenants, those who refuse to pay or leave a rental home, will presumably be given more time to dig their heels in (…).

Royal Decree on the horizon

“Blackstone has not threatened to stop investing in Spain”, said sources close to the investment company consulted by this newspaper at the end of the symposium organised by Amcham Spain. They added that the firm’s intention is very much to continue investing.

Nevertheless, the same sources indicated that Blackstone does require the possibility of entering into talks with the Administration to express its view regarding the rental policy, and that they believe that the Government will approve the new measures in this regard by Royal Decree this month. The company considers that there could be several alternatives reflected in the parliamentary procedure for the new regulation.

Original story: Voz Pópuli (by Alberto Ortín)

Translation: Carmel Drake

Axactor & Grove Compete to Acquire Sareb’s Largest NPL Portfolio

23 July 2018 – Voz Pópuli

The Norwegian investment fund Axactor and the US fund Grove, which is in the process of merging with the British firm Cabot, are competing to be awarded a non-performing loan portfolio with a nominal value of €2.335 billion by Sareb. The portfolio is the largest of its kind to be sold by the company chaired by Jaime Echegoyen (pictured below), according to financial sources consulted by Vozpópuli.

Sareb has recently received binding offers from the two aforementioned funds, as well as from Kruk, a Polish company specialising in debt recovery. Nevertheless, the proposal made by the latter was well below those submitted by the other two. According to the sources consulted, the Norwegian fund, which recently acquired a €900 million portfolio from Sabadell, as this newspaper revealed, looks to be the favourite to win the auction this time around.

The portfolio in question, which forms part of Project Dune, regarding which Sareb is being advised by KPMG, comprises unsecured non-performing loans. In fact, the assets are mortgage tails – loans that have not been repaid following the execution of their corresponding mortgage contracts – from small- and medium-sized property developers.

In this specific operation, the offers that the interested parties have presented reflect significant discounts, which may even amount to 99% of the nominal value of the portfolio, with the aim of trying to recover the maximum possible amount of the debt, which is no longer secured by any collateral.

Gains

In any case, whatever Sareb obtains for this portfolio will represent a gain for the entity, given that all of the loans, which are considered almost irrecoverable, have already been fully provisioned. The completion of the operation will happen in the month of September, at the earliest, according to the sources consulted.

Last week, Sareb shelved the block sale of between €20 billion and €30 billion in real estate assets due to the high cost of the operation. In fact, the Board of Directors of the entity known as the bad bank decided not to undertake that operation for the time being, due to the capital hole that the sale of those assets would have generated for the acquiring fund, which require higher discounts than individual investors.

That deal was called Project Alpha and Goldman Sachs had been working on it for months, to determine how, when and to whom the portfolio could be sold. Sareb was also supported in that deal by the consultancy firm CBRE and the audit firm EY (…).

Original story: Voz Pópuli (by Pepe Bravo)

Translation: Carmel Drake

Galicia Awards 1.1 million m2 of Industrial Land Supported by Aid from La Xunta

6 June 2018 – Eje Prime

La Xunta is promoting the sale of industrial land and Galicia is whereby reaching pre-crisis occupancy levels in the logistics sector. In total, 1.1 million m2 of logistics land has been awarded in the autonomous region, which represents almost 40% of the total available land for sale in 2015.

Amongst the measures adopted by La Xunta in 2018 include the elimination of regional taxes for the purchase of industrial land from the administration, with a 100% deduction of the Property Transfer Tax and Documented Legal Act Tax, according to Inmodiario.

The intention of the territorial government is, in addition to promoting the entry of new players into Galicia, facilitate the reactivation of disused industrial plots. In those cases, La Xunta adds discounts to the land prices of between 30% and 50%.

The Councillor for Infrastructure and Housing at La Xunta, Ethel Vázquez, anticipates that 2018 “will continue along the same path”. Not in vain, her portfolio has received a significant increase in budgeted aid, of 16.5%, achieving an additional €60 million taking the total fund to €424 million.

Original story: Eje Prime

Translation: Carmel Drake

Fitch Warns Of RE Bubble In The Centres Of Spain’s Large Cities

25 October 2017 – El Mundo

The ratings agency Fitch is warning that a real estate bubble is now visible in the centre of Spain’s large cities, although it does not anticipate a widespread bubble in house prices across the country as a whole in the short term, due to the high volume of stock that still needs to be absorbed and the restrictions facing people wanting to access a home.

Those were the findings of analysis performed for the Housing Sector in Spain report published by the entity, which explains that bubbles involving these types of localised assets are now very evident: the strong demand and limited supply of housing in the country’s main cities are leading to extreme price increases that are becoming increasingly “unsustainable”.

According to the agency, in the central neighbourhoods of Madrid and Barcelona alone, prices have recorded an annual increase of between 15% and 35%.

For Fitch, this demand is being influenced by quantitative easing, purchases by foreigners and investment decisions, given that investors are looking to benefit from the appreciation in asset prices and rental yields. Nevertheless, the agency forecasts that these “ingredients” will not influence the overall real estate market in the short term.

Similarly, the ratings agency asserts that it is “highly unlikely” that the problems in the real estate market are correlated with the economic recovery in general and it forecasts that the average discounts being applied to sell foreclosed homes are going to continue to be very high and stable over the next few years.

This situation will continue for as long as the banking sector continues to have an excess stock of housing and for as long as buyers insist on significant discounts to acquire foreclosed homes, said the ratings agency.

According to data from the company, the discount on the sale of foreclosed homes is still “high”, up to 60% on average, compared to the initial valuation, whilst discounts can range from between 50% to 75%.

In this sense, the dispersion of the discounts on the sale of foreclosed properties is decreasing. In fact, the gap between the range of discounts decreased to 25 percentage points at the end of 2016 from 35 percentage points during the period comprising 2010 and 2011. Nevertheless, it says that this reduction is not widespread.

Problems accessing housing

On the other hand, Fitch explains that access to housing will continue to be complicated because the velocity of the house price index is exceeding wage variations.

In this way, the families’ capacity to save is increasingly reduced, also due to the labour market that favours temporary contracts over permanent ones, which makes it hard for would-be buyers to save enough to make the initial down payment of 20% necessary to buy a home.

The report also underlines that access to housing over the long-term may be limited by the gradual elimination of monetary stimuli in the market and the likely scenario of higher interest rates.

Original story: El Mundo

Translation: Carmel Drake

Fitch: Banks Will Continue To Discount Their Foreclosed Assets For 2+ Years

24 October 2017 – Expansión

Fitch report / Financial institutions are selling their real estate portfolios at discounts of between 50% and 70%; those levels are expected to be maintained for at least the next two years.

“We do not expect to see a close correlation between the improvement in the macroeconomic situation and lower discounts on the sale of portfolios of foreclosed real estate assets by the banks. In fact, we expect those discounts to remain at their current levels for at least the next two years”, said Alberto Faraco and Juan David García, analysts at the ratings agency Fitch.

Spain’s banks still hold significant volumes of real estate, inherited from the crisis, which they must get rid of by order of the supervisor. To accelerate the process, entities are selling portfolios of foreclosed real estate assets to international funds and, in exchange, they are demanding significant discounts with respect to the initial value of the properties.

According to Fitch, these discounts amount to between 50% and 70% of their value and the probability that they will continue for a while yet is high. “It is likely that not even the better tone of the Spanish real estate sector will lead to an increase in the prices at which the banks are selling their portfolios of foreclosed assets, given that there is a significant over-supply, which is exercising considerable pressure”, said Faraco and García, authors of the most recent report published by Fitch.

“The foreclosed properties are competing against a stock of around 500,000 recently built homes, which are ready for sale. Moreover, they are suffering from downwards pressure in terms of prices due to the profitability premiums that buyers require of the banks to cover uncertainties in the process”, said the analysts. The entities’ real estate portfolios carry a series of risks that can detract from the profitability obtained by a potential buyer, such as the fact that the dwelling cannot be accessed until the inhabitant is evicted.

Homes that the banks are responsible for placing directly with end buyers are treated differently. Such properties are sold with lower discounts but require much more time and resources go shift, something that the entities, under pressure from the supervisor to decrease their share of non-performing assets, cannot afford.

What Fitch does expect is a reduction in the number of new assets being foreclosed by the banks, in line with the improvement in the macroeconomic situation in Spain. “In this environment, it is also fundamental that the banks adopt a new strategy that favours handling doubtful loans through debt restructurings rather than as foreclosures”, said the experts.

Localised bubbles

Besides the banks’ assets, Fitch is observing an overall improvement in the fundamentals of the Spanish real estate market, with prices on the rise. “Despite the recovery, we do not see the risk of a new real estate bubble in Spain arising anytime soon. There is a large supply of homes that still needs to be absorbed. Nevertheless, we are seeing very localised bubbles in premium areas of certain neighbourhoods of Madrid, Barcelona and the Balearic Islands”, they explained.

Original story: Expansión (by Andrés Stumpf)

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

Liberbank & Bain Negotiate Finishing Touches To Portfolio Sale

19 October 2017 – Expansión

Liberbank is hoping to complete the sale of its portfolio of foreclosed assets to the fund Bain Capital within the next few days. The two entities are continuing their exclusive negotiations to put the finishing touches to the operation, which is due to be signed before the bank begins its €500 million capital increase.

Financial sources explain that the parties are finalising the terms relating to the perimeter of the portfolio. The CEO of Liberbank, Manuel Menéndez, speaking a few days ago, said that the entity will sell a maximum of €600 million in foreclosed assets to the fund.

These operations with funds tend to require significant discounts. The same sources indicate that the entity will have to recognise losses amounting to more than €100 million as a result of the sale of this portfolio, which means that the discount will exceed 55% if the perimeter is not expanded above €600 million.

Other sources familiar with the deal are not ruling out the possibility that Liberbank will start negotiating with other funds again if the conversations with Bain do not end up proving fruitful.

Original story: Expansión

Translation: Carmel Drake

Sacyr Wants To Clean Up Vallehermoso And Sell It Off Within 1 Year

11 September 2017 – El Confidencial

The appetite that international funds have unleashed for the Spanish real estate market has led Sacyr to redouble its negotiations with the creditor entities of its property developer subsidiary, Vallehermoso. The aim is to accelerate the settlement of that firm’s liabilities in order to sell off the last remains of the company, which is now just a shadow of what it used to be, but which is still a recognised brand in the market.

That is precisely the card that Sacyr wants to play: to take advantage of the appetite from the large overseas investors, to offer them a platform with extensive experience in the domestic property development market and which represents a household name for buyers. But, before reaching that point, it needs to complete the group’s financial clean-up.

The company chaired by Manuel Manrique acknowledges in its accounts for the first half of this year that “the negotiations with the creditor financial institutions progressed to decrease the debt significantly during the year”. Vallehermoso closed 2016 with financial commitments of €30 million, a similar figure to the previous year, but it managed to reduce its losses from €32.5 million to €7 million.

Sacyr is confident about its ability to pay off the liabilities of its subsidiary within one year and therefore be in a position to sell the company within the same time frame. Nevertheless, no formal sales mandate currently exists or is being organised, since all efforts are being focused on first achieving an agreement with the banks.

Vallehermoso’s current assets are worth €135 million, according to the latest appraisal performed by Gesvalt at the end of 2016. Of that amount, €129.9 million corresponds to land and €5.1 million to finished products and real estate investments. These figures are a far cry from the assets worth €7,000 million that the company held under its umbrella before the crisis, a giant that is already a distant memory and of which barely nothing remains after seven consecutive years of losses.

In fact, in February 2015, Sacyr was forced to come to the rescue of its subsidiary and inject €248.4 million to re-establish its equity balance, given that the property developer had closed the previous year on the verge of bankruptcy, with net assets amounting to less than half its share capital.

Nevertheless, since then, Vallehermoso has succeeded in convincing its creditor banks to accept discounts on the sales they are undertaking in order to accelerate the unblocking of finished assets, at the same time as sealing “daciones en pago” to also offload land, a strategy that Sacyr is confident of being able to redouble this year to finish cleaning up the company and getting it ready to sell (…).

A step-by-step liquidation 

In 2013 (…), the infrastructure group decided to deconsolidate its property developer subsidiary and account for it as an available-for-sale asset (…).

A year later, at the end of 2014, Sacyr transferred assets worth €1,000 million from Vallehermoso to Sareb in two consecutive operations, which meant the practical liquidation of the group (…).

Since then, Sacyr has held onto Vallehermoso as an available-for-sale asset. So far it has not managed to close the sale, but it is confident that it will be able to within the next few months, if the new round of conversations with its financial institutions yield the expected results.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake