Málaga Leads the Construction Sector in Andalucía with an Occupancy Rate of 88%

10 May 2019 – Expansión

Málaga is leading the ranking of house sales in Andalucía with 32,438 transactions and a market share of 32%, almost doubling that of its nearest rival, Sevilla (17.4%).

According to the participants of the round table organised by the Association of Property Developers and Construction Companies in Málaga (pictured above), the province is currently the driving force behind the construction sector and is home to some of the highest employment rates in the country (88.5%). That means that the sector now employs 62,700 people of the 70,200 surveyed in the Active Population Survey (EPA) when just five years ago, that figure amounted to just 57%.

In terms of the challenges facing the sector, the most important ones are rising rental prices and the generation of buildable land. In this context, the General Secretary for Housing at the Junta de Andalucía, Alicia Martínez, took advantage of the round table event to announce a new housing plan called ‘Plan Vive Andalucía’, which includes a greater commitment to affordable housing, the reactivation of obsolete urban areas and the promotion of R&D in the sector, amongst other initiatives.

Original story: Expansión (by Juan A. Gómez)

Translation: Carmel Drake

Sabadell Finalises Sale of €5bn in Real Estate Assets to Cerberus

12 July 2018 – Voz Pópuli

Banco Sabadell is finalising the largest real estate divestment in its history. The entity chaired by Josep Oliu (pictured below) is negotiating with Cerberus to close the sale of Project Challenger, a package of real estate assets worth around €5 billion, according to financial sources consulted by Voz Pópuli. Sources at Sabadell declined to comment.

Cerberus is thought to be negotiating a payment of around €2 billion, according to the same sources. The agreement could be signed within the next few days. The bank has been holding exclusive negotiations for several days with the fund chaired by John Snow and led in Spain by Manuel González Cid, although it has not ruled out the possibility of other candidates also presenting offers, including Lone Star and Bain Capital.

Project Challenger comprises properties – homes, developments and land – that Sabadell foreclosed during the crisis. The assets are not covered by the Deposit Guarantee Fund (FGD), and so their sale is relatively simple, provided the negotiations do not run aground in the coming days.

Goodbye to real estate

In addition to Project Challenger, Sabadell has launched three other operations in the last few months to free up its balance sheet of toxic assets. It has already closed one of those deals: Project Galerna, which the bank sold to Axactor, as revealed by this newspaper.

In addition to Galerna, Sabadell has Project Makalu underway, with €2.4 billion in problem loans; and Project Coliseum, with €2.5 billion in foreclosed assets. These three portfolios are covered by the Asset Protection Scheme (EPA), which the bank received in exchange for taking over CAM. For this reason, their sales depend on the negotiations currently underway with FGD.

Sabadell is expected to make a decision regarding the future of its real estate over the coming weeks to reveal a radically different image of the bank at the presentation of its half-year results, which will take place at the end of this month.

For Cerberus, this agreement would see it consolidate its position as one of the largest funds with real estate assets in Spain, alongside Blackstone – which took over the property of Popular and Catalunya Banc – and Lone Star, which signed a billion euro agreement recently with CaixaBank.

Meanwhile, in Spain, Cerberus controls the platform Haya Real Estate, which it has tried to list on the stock market, albeit unsuccessfully; and it is close to signing the acquisition of Anida and BBVA’s property, pending approval from the FGD.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Spain’s Banks Set to Sell €120bn+ in Problem Assets This Year

4 July 2018 – Cinco Días

Spain’s banks are stepping down on the accelerator to put an end to the property hangover, although it will still take another two or three years for them to get rid of all of the excesses left over from the financial crisis. And that is not so much due to the leftover real estate portfolios but more because of the portfolios of non-performing loans, a caption that is continuing to augment the balance sheets of financial institutions.

In this way, the experts hope that this year will see a new record in terms of the sale of portfolios, for an approximate total of €120 billion, including the macro-operations from Santander and BBVA, announced last year but completed this year. Without them, the figure could amount to more than €51 billion, slightly higher than in 2017, which would increase to €80 billion if Sareb manages to sell a €30 billion portfolio.

Pressure from the European Central Bank (ECB) and the Bank of Spain, as well as that exerted by the market itself, is causing financial institutions to opt to sell their portfolios of problem assets in single operations wherever possible, rather than selling them off in a piecemeal fashion, in light of the prospects of rising prices.

Interest from opportunistic funds to invest in Spain and, also forecasts for even greater price rises for real estate assets in the future, are leading the banks to take advantage of the opportunity to clean-up their balance sheets between this year and next, just 10 years after the start of the crisis, explain several experts.

“The funds have large amounts of liquidity. Moreover, interest rates are still at historical minimums (still negative) and so financing can be obtained at very low prices, hence their interest in buying large portfolios of assets linked to property. They want to take advantage of the current climate”, explains Íñigo Laspiur, Director of Corporate Finance CBRE España.

All of the experts agree that the sale by Santander of Popular’s property to Blackstone, an operation announced last year, but ratified at the beginning of this year, for a gross amount of around €30 billion, was the trigger that caused the banks to decide to divest their portfolios on a mass scale.

Since that operation was ratified at the beginning of this year, to date, the banks have divested more than €62 billion in problem assets. That amount includes BBVA’s operation with Cerberus, the fund to which it sold €13 billion. Nevertheless, that operation is still pending approval from the Deposit Guarantee Fund (FGD) since some of it forms part of the Asset Protection Scheme (EPA), having proceeded from the former savings bank Unnim.

Financial sources maintain that there are currently operations underway amounting to another €21 billion, plus an addition €8 billion that may be closed over the coming months. The largest include the sale of around €11 billion in assets from Sabadell (of which €900 million has already been sold to Axactor), whose sale is scheduled for this month.

To these figures another €30 billion gross may be added from the sale of a Sareb portfolio this year if Pedro Sánchez’s Government approves that potential operation in the end. Santander has also put up for sale another €6 billion.

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

Sabadell Receives 7 Offers to Liquidate its Doubtful Debt

28 June 2018 – Expansión

In the end, seven international funds have presented offers to Banco Sabadell to be awarded one or more of the four portfolios that the entity has put on the market this year to liquidate almost all of its problem asset balance. The funds in question are Cerberus, Lone Star, Blackstone, Oaktree, Deutsche Bank, Bain Capital and CPPIB, although not all of them have bid for all of the assets, given that three of the funds are only interested in the foreclosed properties and the four others only want to purchase the non-performing loans (NPLs).

On the advice of KPMG and Alantra, Sabadell has set itself the objective of divesting toxic assets worth €10.8 billion this month, before the summer. That figure is equivalent to 72% of the bank’s total problem assets, which amounted to €14.9 billion at the end of the first quarter. Of that total figure, €7.5 billion are doubtful balances and €7.4 billion are foreclosed.

This volume of non-performing assets, which is weighing down on the entity’s balance sheet, has been packaged into four portfolios called Challenger (€5 billion), Coliseum (€2.5 billion), Makalu (€2.4 billion) and Galerna (€900 million). Just over half, €5.8 billion, are assets inherited from the purchase of CAM, and, as such, they form part of the Asset Protection Scheme (EPA). As a result, the divestment of three of the portfolios (Coliseum, Galerna and Makalu) must first be approved by the Deposit Guarantee Fund (FGD), which is the entity that will cover 80% of the losses generated by those protected portfolios.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Sabadell Engages Alantra to Sell 2 Portfolios Containing €8bn in Foreclosed Assets

11 April 2018 – El Confidencial

Banco Sabadell is in the running to try to complete its real estate clean-up this year, and to this end, has engaged Alantra to sound out the market to sell two portfolios known as Project Coliseum and Project Challenger, comprising €8 billion in foreclosed assets, which the entity has already started to show to potentially interested parties (…)

This move forms part of the plan designed by the financial institution at the end of last year to remove almost €12 billion in toxic assets from its balance sheet through the sale of a number of portfolios. The first two are already on the market and amount to €3.4 billion, but the main courses are about to be served.

In order to speed up the process, the entity chaired by Josep Oliu has opted to create a portfolio containing mainly Sabadell risk and another, subject to examination by the Deposit Guarantee Fund (FGD), containing properties proceeding from the former CAM, which are protected by the Asset Protection Scheme (EPA).

The first, according to financial sources, is going to comprise a gross volume of more than €5 billion, whilst the second will amount to around half that figure, at just over €2.5 billion, and it will need the approval of the FGD, given that it will have to cover 80% of the losses.

Sabadell closed last year with €8.0 billion in foreclosed assets and €5.7 billion in non-performing loans, according to the real estate exposure data submitted to the CNMV – Spain’s National Securities and Exchange Commission – and its average coverage ratio currently amounts to 55%.

The large buyers that Alantra is currently sounding out include the major funds that typically participate in these types of operations, such as Apollo, Lone Star, Blackstone and Cerberus, according to the same sources.

This potential divestment joins the two portfolios that Sabadell already has on the market: Project Galerna, which comprises €900 million in non-performing loans; and Project Makalu, comprising €2.5 billion in assets from the former CAM, according to Voz Pópuli. In both cases, KPMG is advising the sales process.

Moreover, as El Confidencial revealed, Solvia, the servicer arm of Sabadell, has decided to join the housing boom and create its own property developer, Solvia Desarrollos Inmobilarios, containing €600 million in land and unfinished developments.

The entity wants to grow this new property developer by signing agreements with different companies, funds and family offices interested in delegating the management and development of its land and developments.

If it manages to bring all of these plans to fruition, Sabadell will follow in the footsteps of Santander and BBVA, which last year completed their real estate clean-ups with the sale to Blackstone and Cerberus, respectively, of the bulk of their toxic properties. That would leave CaixaBank as the last major bank that still needs to make a significant move to comply with the guidelines set by Europe: to remove a decade of crisis from its balance sheet.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Project Makalu: Sabadell Puts €2.5bn Portfolio Up For Sale

21 March 2018 – Vozpópuli

Banco Sabadell is stepping on the accelerator to complete its balance sheet clean up as soon as possible. After months of negotiations with the Deposit Guarantee Fund (FGD), the Catalan entity has decided to place on the market its first large portfolio proceeding from CAM’s Asset Protection Scheme (EPA). In this way, it has distributed information to investors about Project Makalu, comprising €2.5 billion in assets from the former Alicante-based savings bank, according to financial sources consulted by Vozpópuli.

This operation comprises foreclosed assets and unpaid loans from companies and individuals covered by the EPA. It follows another portfolio that has been on the market for a few days, Project Galerna, comprising €900 million in non-performing loans.

KPMG is advising Sabadell on both operations, which together comprise assets and loans worth €3.4 billion.

The group chaired by Josep Oliu has been negotiating with the FGD for months to try to kick-start these operations. The aim is that they will be followed by two more portfolios taking the total value of the assets for sale to €12 billion and whereby reset the entity’s real estate calculator. The issue is not simple because the sale of these loans may generate a hole for the Fund that would impact the State deficit.

Strategic plan

The Catalan entity announced at the recent launch of its strategic plan in London that it maintains the objective of reducing its exposure to problem assets at a rate of €2 billion per year. With the sale of Project Makalu alone it would more than exceed that goal.

The bank held €15.2 billion in problem assets at the end of 2017, but the forecasts indicate that that figure will fall below €9 billion by 2020: €4 billion in doubtful loans and €5 billion in foreclosed assets. And that is without taking into account the divestments that are now being worked on with the FGD.

Project Makalu is the fourth largest portfolio of problem assets ever to be put up for sale by a Spanish bank, behind only Popular’s Project Quasar, amounting to €30 billion, purchased by Blackstone; BBVA’s Project Marina, amounting to €13 billion, acquired by Cerberus; and Project Hercules, amounting to €6.4 billion in mortgages from Catalunya Banc, which was bought by Blackstone.

Meanwhile, Project Galerna is similar to Project Gregal, which Sabadell sold less than a year ago to three funds: Grove, D. E. Shaw and Lindorff. That portfolio comprised loans linked to consumers, without real estate guarantees, which had already been fully written off, and so all of the proceeds from the sale were recorded directly as gains.

Precedents

Besides Gregal, Sabadell closed two other major operations last year: Normandy, comprising €950 million in property developer loans, which was acquired by Oaktree, and which also proceeded from CAM’s EPA; and Voyager, comprising €800 million, which was purchased by the largest pension fund in Canada.

The latest operation launched by Sabadell joins others recently placed on the market by Sareb, BBVA, Cajamar and Kutxabank.

Original story: Vozpópuli (by Jorge Zuloaga)

Translation: Carmel Drake

BBVA & Sabadell Hold Delicate Negotiations with the FGD to Sell Their Assets

5 February 2018 – Expansión

BBVA and Sabadell want to remove from their balance sheets the damaged real estate assets that they still own as a result of their acquisitions of Unnim and CAM, respectively. Those assets, which have a book value of around €16 billion in total, are temporarily protected by an Asset Protection Scheme (EPA), which, was granted at the time by the Deposit Guarantee Fund (FGD) so that the two banks would take on the business of the former savings banks, which had filed for bankruptcy. The negotiations that the two banks are now holding with the FGD share significant difficulties that cannot be solved easily, although they also have notable differences.

The European Central Bank has been putting pressure on the supervised entities to remove any damaged assets that they still own from their balance sheets, as soon as possible, because it understands that their maintenance reduces the banks’ ability to make profits and lets the doubts continue to hang over the real health of the entities. Now that the ECB considers that the worst of the crisis is over and that the banks are reasonably capitalised, it wants to clear up all the doubts. He has granted a period of five years for these problems to be resolved, although, in reality, it wants them to be sorted in a shorter timeframe: within three years.

When it acquired Popular, Santander launched a procedure to remove all of the real estate assets of its subsidiary from the balance sheet, by reaching an agreement with Blackstone to create a mixed company, in which the US fund holds the majority stake and where Santander has parked assets with a theoretical value of €30 billion. Liberbank has done the same, for a much small sum, retaining just 10% of the capital in its new company.

Meanwhile, BBVA has reached an agreement with Cerberus to transfer €13 billion to a company in which the bank will hold a 20% stake. Of those assets, a significant part, around €4 billion, correspond to assets proceeding from Unnim, which have a guarantee from the FGD for 80% of the losses that may be incurred at the time of their sale.

Meanwhile, Sabadell wants to divest assets worth €12 billion, which sit in a portfolio that is still subject to an EPA that will end in 2021, with the same guarantees as BBVA’s. The difference in the size of the two portfolios is clear.

That is where the problem arises. To close the operation, the FGD needs to accept that it will assume the losses incurred at the time of the sales. And even though its resources have been contributed exclusively by the financial institutions themselves, the public body does not have sufficient funds to assume those losses and whereby avoid grounds for dissolution.

Differences

In reality, the portfolio proceeding from Unnim does not cause excessive problems for several reasons. Firstly, it is smaller and, therefore, the loss to be assumed is considerably reduced. Moreover, according to sources in the know, the FGD has already recognised a coverage for those assets that is pretty close to the market value at which they could be sold (…).

The case of Sabadell, however, is different because the size of its protected portfolio is much larger. It started off at €22 billion and now amounts to just over half, around €12 billion. Sabadell considers that the real value of its assets is approximately half their theoretical value (…) but the FGD (…) maintains that the provisioning need is much lower, around 35% of the book value of those assets.

The difference in criteria between the two parties is important. In figures, it means that there is almost €1.8 billion that separates them and that, of that amount, if it is confirmed in the end, the FGD would have to assume almost €1.5 billion. That would be impossible in the current conditions, because it would mean that the body that guarantees the deposits of banking clients up to €100,000, would have to declare itself bankrupt or, as it has done on other occasions, impose an extraordinary surcharge on its shareholders, domestic entities, to balance its accounts and cover the hole (…).

A solution

But, on the other hand, the FGD is also interested in closing the chapter on asset protection schemes as soon as possible because, until that happens, it will be very difficult to progress with the construction of a European deposit guarantee fund, which is the third leg of the banking union. Indeed, it is not being built precisely because of reluctance being shown by the countries in the north to assume the problems of the past (…).

For this reason, sources close to the conversations confirm that they are now focusing on a possible solution that goes beyond the current moment. The FGD may be interested in reaching an agreement that would entail the possibility of accounting for the losses not in a single year, but rather over a longer period of time, possibly three years. The next few weeks are important because the authorities want to close the conversations before the end of the month.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

BBVA Prepares Sale of €1.5bn Property Developer Loan Portfolio

30 November 2017 – Expansión

The property sector / The second largest Spanish bank detects a large appetite from opportunistic funds for the real estate risk it has left over: €4.8 billion, after deconsolidating €13 billion of foreclosed assets.

BBVA is making steady progress to clean up its balance sheet. The entity is preparing the sale of a portfolio of property developer loans with a gross value of between €1.5 billion and €1.6 billion (31% of the total) after deconsolidating the risk associated with its foreclosed assets.

The group’s gross real estate exposure has been reduced to €4.8 billion in the form of property developer loans following the agreement with Cerberus to transfer €13 billion in foreclosed assets to a newly created company. BBVA’s plan is to sell one-third of its property developer loan portfolio to an opportunistic fund.

“It is going to be a very competitive portfolio”, said Javier Rodríguez Soler, Head of Strategy and M&A at BBVA, speaking to Expansión. In parallel to the operation with Cerberus, the bank has identified a large appetite from the big funds, such as Lone Star, Blackstone and Apollo, for loans linked to the property sector. The portfolio comprises finishing buildings, properties under construction and land.

Transfers to its subsidiary

The intention of BBVA is to reduce its risk estate risk to almost zero. The Head of Strategy said that the bank is looking to transfer another €1.5 billion of performing property developer loans to its Spanish subsidiary.

Many banks separated out their real estate businesses to curb the impact of the fallout from the burst of the bubble on their annual accounts. BBVA’s property unit lost €281 million during the 9 months to September this year, down by 10.9% compared to a year ago. Sources at the entity expect the real estate business to stop generating losses in 2018.

Yesterday, BBVA took a giant step to clean up its real estate-related risk. The bank has created a company together with Cerberus to transfer 78,000 properties with a gross value of €13 billion. 47% of the foreclosed assets are located in Cataluña, the historical heartland of Catalunya Caixa (CX) and Unnim, which were both absorbed by BBVA during the crisis. Some of those properties are social housing units, whilst some of those proceeding from Unnim are covered by an Asset Protection Scheme (EPA).

The US fund will own 80% of the new vehicle after paying BBVA €4 billion; the banking entity will own the remaining 20%. Haya Real Estate, Cerberus’s platform in Spain, will manage the portfolio of properties that the bank holds onto. The agreement also involves the transfer of 400 employees from Anida, the real estate arm of BBVA, to the joint company with Cerberus.

Original story: Expansión (by R. Sampedro and R. Lander)

Translation: Carmel Drake

Sabadell Engages Alantra, KPMG & PwC To Sell Its Toxic Assets

17 November 2017 – Expansión

Sabadell has decided to go one step further in its strategy to clean up its balance sheet. To this end, the entity has engaged Alantra, KPMG and PwC to sell the real estate assets that it inherited during the crisis, which amount to approximately €12,000 million. The plan involves dividing that volume of doubtful loans into three different portfolios, with the aim of facilitating their digestion in the market. It would be the largest portfolio sale ever carried out by the entity, which has divested €1,750 million in toxic loans and assets so far this year.

Financial sources say that the firms engaged to sell the portfolio have already started to sound out the market in search of potential buyers. If everything follows the agreed timetable, the operation will come onto the market during the first few months of 2018 with the intention of being closed at some point next year. The bank itself declined to comment on the news.

Protection of assets

Most of the toxic property that Sabadell plans to sell was inherited from Caja de Ahorros del Mediterráneo (CAM) and was acquired in the summer of 2012 under an Asset Protection Scheme (EPA) capable of covering losses of up to €16,610 million. The EPA, which is valid for up to 10 years following the purchase, covers Sabadell for 80% of the loses incurred on the savings bank’s asset portfolio, whose value at the time amounted to €24,644 million. The potential cost of those losses is assumed by the Deposit Guarantee Fund (FDG).

Now, five years after the purchase of CAM, Sabadell has managed to divest 51% of the doubtful loans. This means that €11,940 million still remain on the bank’s balance sheet.

Sources in the market indicate that pressure from the Bank of Spain for entities to clean up their balance sheets, especially those linked to EPAs, has been one of the reasons that has led Sabadell to launch this operation. The supervisor wants to liquidate these agreements to free the FGD from further charges and to open the door to a new European fund. This comes in addition to the renewed investor appetite towards these types of assets.

“We have seen that there is significant demand from international funds in relation to the banks’ portfolios of non-performing assets. Nevertheless, the supply is immense and it is important to choose the timing very carefully to avoid having to offer excessive discounts”, explain the financial sources.

General trend

In addition to Sabadell, other Spanish entities have stepped on the accelerator with the sale of toxic assets in 2017. So far this year, 10 entities have managed to divest up to €36,458 million. It should be noted that the aforementioned figure has been significantly impacted by the macro-operation undertaken by Santander, which sold 51% of Popular’s real estate, worth €30,000 million, to Blackstone.

In fact, Sabadell’s effort to reduce its doubtful loans has been one of the arguments most used by analysts to support the significant rise in share prices on the stock market in its reports. Before the crisis in Cataluña started to undermine the confidence in the markets, the entity saw an increase of up to 49% in its share price, to €1.94.

Original story: Expansión (by Andrés Stumpf)

Translation: Carmel Drake

BBVA Awaits FGD’s Approval To Sell €14,000M RE Portfolio To Cerberus

13 November 2017 – Voz Pópuli

The largest operation of the home stretch of 2017 is pushing ahead. BBVA and Cerberus are close to reaching an agreement regarding the sale of a large proportion of the bank’s real estate assets to the US fund. Financial sources consulted by Vozpópuli indicate that a deal may be signed within the next few weeks, between late November and early December.

One of the points still being discussed is the perimeter (of the transaction). The sources consulted indicate that what is on the table is the option of selling a stake in a new company with assets and loans worth €14,000 million.

The same sources add that an agreement could have already been reached if it hadn’t been for the crisis in Cataluña and the need for the Deposit Guarantee Fund (‘Fondo de Garantía de Depósitos’ or FGD) to give its approval. BBVA received an asset protection scheme (‘Esquema de protección de activos’ or EPA) for which the FGD committed to cover “80% of the losses resulting from a portfolio of assets worth €7,359.7 million”.

BBVA has real estate exposure on its balance sheet amounting to €17,774 million in total, according to the most recent figures. Of that figure, foreclosed assets (€11,937 million) and doubtful loans (€3,357 million) account for €15,300 million. Those loans and properties have a coverage ratio of more than 61%. For this reason, BBVA could sell them for 39% of their appraisal value without having to recognise any losses. Even so, the FGD would still need to approve any deal.

The need for consent from the FGD could delay any asset sale for several months. That is what has happened, on more than one occasion, to Banco Sabadell, such as with Project Normandy. It is worth remembering that the FGD’s Management Committee comprises not only regulators and Government members but also bankers, who do not want to spend even one more euro of their resources (…).

Although BBVA’s sale (known as Project Marina and Sena) is on track, the sources consulted indicate that it could all be thrown up in the air at any moment. “It would not be the first time that an operation that has almost been finalised dies off because of one of BBVA’s management committees or Board of Director meetings”, they say. The same thing is happening with Cerberus, one of the most inflexible funds when it comes to price: “Once the price has been fixed, it is very difficult to move it or play with counter-offers”, they add.

This operation has generated a lot of commotion amongst other opportunistic funds, many of whom were not invited to participate, and who have even indicated their displeasure to BBVA’s leaders. The negotiations between Cerberus and the bank arose after the fund’s President, John W. Snow (former US Treasury Secretary) cracked the whip over his own management team in Spain. He did so after Cerberus missed out on the sale of Popular’s real estate, which was awarded to Blackstone.

Snow himself decided to come to Madrid in person to meet with the President of BBVA, Francisco González (pictured above) and propose an operation similar in size to Project Quasar (Popular). Indeed, Cerberus purchased a €600 million portfolio from the bank in June, Project Jaipur, which gave rise to the current negotiations.

Although the operation still hangs in the balance, BBVA has never been as close to sealing an agreement like this one. There is a lot of optimism amongst the advisors to the operation, PwC and Linklaters. But, for the time being, anything can happen.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake