Santander To List 2% Of Its Socimi And Whereby Avoid CIT

6 February 2015 – El Confidencial

Desperate times call for desperate measures. That is the proverb that Banco Santander is going to apply to a problem that has arisen after it sold a network of 1,152 bank branches bearing the red flame to a group of investment funds in 2007. The entity, which had to take the branches back when the investment company that had taken ownership of them filed for bankruptcy, is going to float that company on the stock exchange as a Socimi, and whereby avoid paying Corporation Tax. Oleguer Pujol, amongst others, was involved with the original investment company.

The main objective of the transaction that Santander and the other creditors that seized control of Samos Servicios for the non-payment of a €2,000 million loan is to float the newly named Uro Properties on the Alternative Investment Market (Mercado Alternativo Bursátil or MAB). In fact, none of the current shareholders, which includes Santander itself – the largest, with a stake of almost 25% – as well as Caixabank, which entered through the back door and BNP Paribas, all primary lenders, are planning to sell or reduce their stakes in the Socimi.

The transaction will involve listing the company with the placement of a maximum of 2% of its capital, the minimum requirement. With such a small amount of floating capital or free floating capital, Uro Properties is only allowed to list on the MAB, even though its total assets are worth €1,600 million. As such, it will become the largest real estate company on the Spanish stock market. None of the other Socimis that followed the same path in 2013, such as Hispania, Lar, Axia or Merlin Properties, are equal in size.

Since the shareholders are not going to sell their old shares or proceed to offer new ones, like the other Socimis mentioned above have done, the only apparent purpose for listing Uro Properties is to benefit from the tax regimes offered to these kinds of companies. According to Law 11/2009, dated 29 October 2009, these real estate companies pay Corporation Tax at a rate of 0%.

To maximise the tax savings even further, the shareholders of Uro Properties Holding SA have created a parent company in Luxembourg, under the name Ziloti Holding SARL. The shareholders have already asked the MAB for permission to list their shares, as soon as possible, specifically, before the end of February.

From success to failure

The background to Uro Properties dates back to 2007, when Emilio Botín invented a transaction, which other large multinationals later went onto to make fashionable in Spain: the sale of properties to investment funds to obtain sizeable gains in exchange for staying as tenants and paying rent. It is what is called sale and leaseback. The purchasers of Santander’s 1,152 branches were Pearl Insurance, Sun Capital and Drago Real Estate, which were advised by Oleguer Pujol, now accused of crimes against the Treasury, and Luis Iglesias, who was arrested after his home was search, but not charged, according to an official spokesman.

The three funds paid €2,040 million and Santander generated profits of €850 million. But the collapse in the valuation of the real estate assets themselves and the loss of the bank’s credit rating led to an adjustment in the appraisal value of the branches – which were guaranteeing the loan – of more than €400 million. This meant that the purchasers were no longer able to service the loans they had taken out to finance the purchase.

Following the bankruptcy of Samos Servicers, Santander, which had borne most of the financing risk by granting mezzanine debt, had to convert that loan into capital. This meant that it went from being a creditor of the company to a shareholder in the renamed Uro Properties. BNP Paribas, Caixabank, Société General, Royal Bank of Scotland, Barclays and a group of German and Austrian banks, including Bayerische and Raiffessen, did the same thing.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

Talus To be Ortega’s Neighbour On Gran Vía

29 January 2015 – Cinco Días

Two buildings on the same street in Madrid have changed hands within just over a week of each other. The fund Talus Real Estate has agreed the acquisition of the building on Gran Vía 30 (on the corner of Calle Valverde) for €42 million. On Monday, the company Drago Real Estate announced the sale of its building on Gran Vía 32 to Pontegadea, the company that owns Inditex’s real estate assets and receives its dividends on behalf of Amancio Ortega, the founder and primary shareholder of the fashion group.

According to sources close to the negotiations, JLL and Aguirre Newman have participated in the sale of the property on Gran Vía 30, as advisory consultants. However, the companies involved did not want to confirm this information yesterday.

The same sources said that the buyer plans to refurbish the property. The fashion chain Sfera, owned by El Corte Inglés, has a store that occupies two floors of the building.

Talus Real Estate’s main executives are David Finkel and Jordi Moix and its headquarters are located in Madrid. According to the company’s website, before joining Talus, Finkel worked for Westbrook Parners, where he co-directed their business in London. Westbrook Partners is a real estate investment group that was founded in 1994, has offices in the US, London, Munich, Paris and Tokyo and has invested USD 10,000 million to date. Prior to that, he worked for the Japanese entity, Nomura and for iStar Financial, another international real estate investment group.

Moix has held senior positions in the Spanish real estate companies Reyal Urbis, Metrovacesa, Layetana and Habitat; he has also worked for IAG and Citibank. Currently, he is vice-president of FC Barcelona’s real estate business.

Gran Vía is trading up

The sale of the property on Gran Vía 30 is the latest in a series of transactions undertaken on the Madrid street that will change its appearance as it approaches its 105th birthday.

The fashion group Primark will occupy several floors of Gran Vía 32, when it opens its largest store in Spain there. Talus Real Estate will also refurbish the Gran Vía 30 building. In Plaza de España, the Chinese group Wanda will convert the Edificio España into a luxury hotel and shopping centre. Next to the building sold by Santander, the hotel chain Barceló will take over some of Torre Madrid to open another hotel.

Late last year, Axa Real Estate, a subsidiary of the insurance company Axa, acquired Gran Vía 37, where the fashion retailer H&M has its largest store in Spain and which used to house the Avenida cinema, for €80 million. Also last year, the Community of Madrid sold Gran Vía 20 for €20 million to Caja Rural de Almendralejo Sociedad Cooperativa de Crédito.

2015, another big year for real estate investment

With the sale of Gran Vía 32 and the upcoming sale of the Plenilunio shopping centre, the amount of investment in Madrid will amount to €800 million. According to sources familiar with the transaction, the sale of the shopping centre will reach a figure close to €400 million.

In 2014, investment in real estate in Spain amounted to between €6,000-€9,000 million, almost twice the figures recorded in the previous three years.

During the year ahead, Socimis, which revolutionised the sector in 2014, will continue to invest, as will investment banks, whereby replacing opportunistic funds. The liquidity injection announced by the ECB will boost the sector. The expected sale of Realia will be another major transaction. Industry experts are also drawing attention to investment in logistics platforms.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake