Tag: exposure

Santander Transfers Land Worth €4bn to a Newly Created Land Manager

18 March 2019 – Cinco Días

Santander is making history once again. The entity has created a company to which it is going to transfer all of the land proceeding from its exposure to property, which has a gross book value of around €4 billion (and a net value of around €2 billion).

The purpose of this new vehicle, known as Landmark Iberia, will be to advance with the urban planning procedures required to generate value from these plots and to continue selling the land, with the ultimate goal of selling the whole company if an attractive offer is received.

Landmark is not like any of the bank’s previous projects given that it is not a servicer. Its job is to generate value from the plots that it receives from Santander – it is the first entity of its kind in Spain.

The operation forms part of the group’s overall strategy to reduce its exposure to real estate, in accordance with the instructions of the Bank of Spain. Last year, Santander decreased the value of its exposure by 55.9% in gross terms to €15.1 billion, according to the entity’s annual accounts, thanks to its operations with Blackstone (project Quasar) and Cerberus.

Landmark will likely become the largest landowner in the country, alongside other major companies in the sector such as the property developer Metrovacesa and the fund Cerberus.

Original story: Cinco Días 

Translation/Summary: Carmel Drake

Unicaja Considers the Sale of a Large RE Portfolio in 2019

12 February 2019 – Expansión

Unicaja accelerated the clean up of its balance sheet during the course of 2018. The Málaga-based entity decreased its volume of non-performing assets by 22%, in such a way that it is now close to the reduction objective it established in its latest strategic plan for 2020. That is according to the figures provided by the bank itself during the presentation of its results for last year.

The entity chaired by Manuel Azuaga (pictured above) ended 2018 with a volume of non-performing assets (NPAs) amounting to €3.6 billion, of which €1.7 billion were foreclosed assets and €1.9 billion were non-performing loans.

In five years, the bank has reduced its toxic legacy by 51% or more than €3.8 billion. Unicaja’s commitment to investors was to bring its exposure to problem assets down below the €3.5 billion mark before the end of 2020. The rate of sales of small NPA portfolios has allowed it to get ahead in the calendar that it established in its strategic plan. But the entity will continue its clean up.

The heads of Unicaja have reported their intention to continue with small portfolio sales during 2019. Moreover, they do not rule out carrying out the sale of a large portfolio in order to segregate a majority of the non-performing exposure, in a similar way to what most of the Spanish banks have been doing over the last two years.

Unicaja’s decision to carry out a massive property sale will depend, like in other cases, on the discounts that the entity will have to apply to its portfolio. The NPAs of the Malagan bank have an average coverage level of 57%, which means that a discount of a similar percentage could be applied to the book value without resulting in accounting losses for the entity this year.

High asset quality

Unicaja is, together with Abanca, the only Spanish bank entity that still retains ownership of its servicer, the real estate subsidiary through which it sells its homes and commercial premises.

The recent decision by Sabadell to sell 80% of Solvia to Intrum followed other previous operations that have seen the Spanish banks undoing their positions in the property segment, including the sale of Servihabitat to Lone Star by CaixaBank, and of Aliseda to Blackstone by Santander.

Beyond Unicaja’s plans for its property, the entity has been recording a positive trend in terms of the quality of its assets for several years now. The net inflows of problem loans have registered eight consecutive quarters of decreases, and between September and December, they recorded the largest decrease in the bank’s historical series.

Since 2014, Unicaja’s default ratio has also decreased by almost half: from 12.6% recorded in December 2014, the Málaga-based entity has managed to clean up its balance sheet to bring the rate of toxic loans down to just 6.7%.

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake

Project Newton: Bankia Puts €450M Toxic Asset Portfolio Up for Sale

21 September 2018 – Voz Pópuli

The insatiable appetite of the opportunistic funds for Spanish property is never ending and the banks are taking advantage to reduce their exposure to real estate assets and whereby clean up their balance sheets. The latest to come to the market is Bankia, which has put a €450 million portfolio up for sale comprising primarily property developer loans, although Project Newton, as the operation has been baptised, also includes a small proportion of foreclosed assets, according to financial sources consulted by Vozpópuli.

Newton’s sale is expected to be completed this year and will be followed by two other asset portfolios that the bank plans to sell soon, according to reports from Bloomberg. The operations disclosed by the US agency include a €1,500M portfolio comprising unpaid mortgages and a €2,000M portfolio comprising foreclosed assets.

At the end of the first half of the year, the entity chaired by José Ignacio Goirigolzarri held €15.2 billion in toxic assets, after reducing its balance by €1.7 billion between the months of January and June.

Strategic plan

With the sale of the three aforementioned portfolios before the end of the year, the bank would more than exceed its annual objective in terms of asset sales, which amounts to €2.9 billion per year for the next three years. In fact, if Bankia divests all three portfolios, its real estate exposure would decrease to €11.25 billion, and so it would follow in the footsteps of the other entities that have accelerated the sale of these types of assets in the last year.

The most recent example is Santander, which on Wednesday closed the sale to Cerberus of a portfolio of properties worth around €2.79 billion with a 45% discount. The initial perimeter of the operation was €5.1 billion, but in the end, the commercial premises and land that had been included in Project Apple were left out of the final portfolio.

The entity already transferred Popular’s property last year to a joint venture with Blackstone, and so its real estate exposure will decrease to around €7.3 billion once the Apple sale is completed.

Meanwhile, BBVA, which also sold €13 billion in foreclosed assets to Cerberus, has entrusted the sale of €2.5 billion in problem loans to Alantra. That operation will reduce the real estate exposure of the bank chaired by Francisco González to almost zero.

Moreover, Sabadell and CaixaBank have also completed significant operations in recent months. The former sold €9.1 billion in foreclosed assets to Cerberus, whilst the latter divested almost all of its real estate business: €12.8 billion in real estate assets, which were acquired by Lone Star.

In this way, the banks are complying with the guidelines set out by the European Central Bank (ECB) and are generating returns from their businesses in Spain, which have been weighing them down since the economic crisis.

Original story: Voz Pópuli (by Pepe Bravo)

Translation: Carmel Drake

Santander to Reduce its Toxic Assets to Zero by September

17 July 2018 – El Economista

Banco Santander is on the verge of saying goodbye to the great burden left behind after the crisis: the delinquent loans and properties. The entity is preparing for the sale this summer of a portfolio of toxic assets worth between €5 billion and €6 billion, which would leave its balance sheet virtually clean of property. The bank headed by Ana Botín is planning to close the operation, which is already underway, before the start of September, according to market sources.

In this way, the entity would manage to get rid of almost all of its leftover real estate in just one year. After acquiring Banco Popular, the bank saw its non-performing assets increase by €41.1 billion. Nevertheless, it found a quick exit after putting the portfolio containing all of Popular’s properties, worth €30 billion gross, on the market.

In August, Santander closed that operation after transferring half of the assets to Blackstone, for a net value of €5.1 billion. The operation saw the two entities, the bank and the fund, create a joint venture to which all of the property was transferred and in which Blackstone holds a 51% stake and the bank the remaining 49% share.

The management of the assets is now in the hands of the fund. The company, which was constituted in the spring of this year, is called Quasar Investment, and also holds the assets that used to be held by Aliseda, the servicer of Popular. Now, the bank is looking to get rid of this final portfolio almost exactly a year later.

At the end of March this year, the last date for which data is available, the bank had a real estate exposure in Spain of around €10 billion, of which 50% was provisioned. The bank already announced at its most recent results presentation that its aim was to leave its balance sheet practically free of those assets during the course of this year.

For the time being, the funds potentially interested in the portfolio include Cerberus, Lone Star and Blackstone. Specifically, those three funds have starred in the largest portfolio purchases from banks in the last year.

In November, BBVA announced the sale of 80% of its property to the fund Cerberus. The entity transferred a portfolio comprising around 78,000 real estate assets with a gross value of €13 billion for a price of €4 billion. In this way, the bank positioned itself as the Spanish entity with the fewest toxic assets on its balance sheet with an exposure of €4.775 billion, accounting for just 1.5% of its total assets in Spain.

CaixaBank has been one of the last entities to announce a major operation. That bank closed the sale of 80% of its real estate on 28 June to the fund Lone Star and it transferred it 100% of its servicer Servihabitat. The gross value of the real estate assets amounted to €12.8 billion, and the net book value was around €6.7 billion. Once CaixaBank has completed the repurchase of 51% of Servihabitat (an operation that was announced on 8 June and whose execution is pending authorisation from Spain’s National Securities and Exchange Commission), the entity will transfer the real estate business to a joint company with Lone Star, in which it will retain a 20% stake.

S&P determined in a report published last Thursday that the Spanish banks are going to struggle to fully clean up their balance sheets of toxic assets despite the accelerated rate of operations that are being carried out. Analysts recognise that, although the entities are increasingly close to putting an end to their delinquency problem, it is going to be hard to completely clear the ground due to the poor quality of the remaining assets.

Original story: El Economista (by Eva Díaz)

Translation: Carmel Drake

Santander & Sabadell Need To Recognise c. €400M in Provisions to Cover Sareb’s Losses

2 July 2018 – El Confidencial

The bad bank is continuing to generate problems for the Spanish financial sector. Both for the State, due to the stake held by the Spanish Fund for Orderly Banking Restructuring (FROB), and for the large banks, which own 55% of the entity’s share capital. In this way, the deterioration of the Company for the Management of Assets Proceeding from the Bank Restructuring (Sareb) is going to have repercussions for the banks, which will need to recognise additional provisions worth €402 million.

Specifically, the company chaired by Jaime Echegoyen (pictured above) has updated its business model to reflect forecast losses of 73% of the initial investment, which amounted to €4.8 billion in 2012 split between share capital (€1.2 billion) and subordinated debt (€3.6 billion). “It has performed a reality check, so now we know the figures that we have to stick to”, said one banking executive.

The entities most affected by these revised forecasts are Santander, following its incorporation of Popular, which now owns 22.22% of Sareb; CaixaBank with 12.24%; and Sabadell with 6.61%. Nevertheless, “the impact ought to be very limited, given that “the banks already have provisions to cover the majority of those losses”, explains Nuria Álvarez, analyst at Renta 4, in a note from the bank analysing Sareb’s revised business plan.

Banco Santander has a €1.07 billion exposure to Sareb, although it has now provisioned 50% of that figure, and so it needs additional provisions amounting to €246 million, according to calculations by JP Morgan. The analysts reduce the impact to less than 2% of the profits of the group chaired by Ana Botín.

Impact for Sabadell

The other entity that stands out in this sense is Sabadell, which, according to the US bank, has an exposure amounting to €323 million with current provisioning levels covering 29%, divided between €228 million in share capital and €95 million in subordinated debt. Therefore, according to these calculations, Banco Sabadell needs to recognise additional provisions amounting to €142 million.

The third bank with provisioning needs is CaixaBank, on the basis of these estimates, although they are somewhat residual. The bank chaired by Jordi Gual has an exposure amounting to €593 million, but with a 70% provision, meaning that its shortfall amounts to just €18 million. Meanwhile, Bankinter and Bankia do not have any provisioning needs, according to JP Morgan, and BBVA did not participate in the creation of Sareb.

The bad bank was created in 2012 to assist with the digestion of toxic property in the financial sector. Under the then presidency of Belén Romana, who has recently joined Santander’s Board ahead of the upcoming departure of Rodrigo Echenique, the entity promised profits to the banks to attract capital. The deadline for the completion of Sareb’s work is 2027, the year for which the revised business plan forecasts losses with respect to the initial investment.

Original story: El Confidencial (by Óscar Giménez)

Translation: Carmel Drake

Bankia Puts €450M Rental Property Portfolio Up For Sale

27 June 2018 – Expansión

Bankia is going to start a sales process for a portfolio of rental properties with a market value of €450 million, reports Reuters, citing two sources familiar with the operation.

The entity chaired by José Ignacio Goirigolzarri expects the interested groups to present their non-binding offers over the summer, so as to finalise the process with definitive offers from September onwards, indicates one of the sources.

This portfolio of rental properties forms part of the €4.9 billion in assets and loans foreclosed during the crisis that Bankia is trying to eliminate from its balance sheet.

At the end of March, Bankia had a gross exposure of around €16.6 billion on its balance sheet comprising non-performing loans and assets. The bank’s objective is to reduce its non-performing assets by around €9 billion.

Original story: Expansión

Translation: Carmel Drake

The Funds Bidding for Sabadell’s RE Have Until 27 June to Submit Their Offers

24 June 2018 – La Vanguardia

The deadline for the finalist funds to submit their bids to be awarded Banco Sabadell’s four portfolios comprising problem assets, whose combined value amounts to almost €11 billion, will close definitively on Wednesday, 27 June, the date on which the entity will have to choose the winners, according to sources close to funds consulted by Europa Press.

The entity chaired by Josep Oliu is looking to divest its Challenger and Coliseum portfolios, which amount to around €7.5 billion and comprise foreclosed assets (REO) and Makalu and Galerna, worth €2.5 billion and €900 million, respectively, comprising non-performing loans (NPLs).

Nevertheless, according to explanations provided by market sources, Sabadell is only going to be able to deconsolidate the largest portfolio from its balance sheet this year, the so-called Challenger portfolio (worth around €5 billion). The others will have to wait as they need to receive the green light from the Deposit Guarantee Fund (FGD) since the properties that constitute them proceed from the former CAM – Caja de Ahorros del Mediterráneo – a process that could take months (…).

The main international funds specialising in distressed debt and assets in risk of default are bidding for these portfolios. They are proposing significant discounts to their nominal values and their recoveries depends on the guarantee or collateral.

The strong investor appetite for Sabadell’s toxic property comes in a context in which political uncertainty is continuing to rage on the Old Continent. Cerberus, Blackstone, Lone Star and Oaktree are some of the finalist funds to be awarded the first two portfolios, whilst Deutsche Bank, Bain Capital, Oaktree and CPPIB are going to compete for the assets in the other two, according to sources at the funds and banks, speaking to ‘El Confidencial’ and ‘Vozpópuli’.

Significant reduction in real estate exposure

With the deconsolidation of its largest portfolio alone, Sabadell’s real estate exposure would fall below the €10 billion threshold, whilst the sale of all four portfolios would reduce its balance to around €4 billion, according to the accounts published by the bank for the first quarter of 2018. Thus, once the transactions have been completed, Sabadell’s accounts will have a much healthier balance sheet.

As at 31 March 2018, the entity had €14.9 billion in problem assets, which represented a decrease of 17.6% compared to the end of the same period a year earlier, when the figure amounted to €18.1 billion. The coverage ratio of the problem assets amounted to 55.2%, after applying IFRS 9, with a doubtful coverage ratio of 56.6% and a foreclosed asset coverage ratio of 53.7%. Similarly, the ratio of net problem assets over total assets stood at 3.1% (…).

A source of liquidity for the banks

In this way, Banco Sabadell is following in the footsteps of other entities such as Santander, BBVA and CaixaBank in the reduction of its heavy backpack of toxic assets, which the financial crisis left on their balance sheets (…).

Original story: La Vanguardia 

Translation: Carmel Drake

Pressure from the ECB Forces Spain’s Banks to Market €40bn in Problem Real Estate

19 June 2018 – El Mundo

The extension of zero interest rates until “at least” next summer, as announced by the European Central Bank, has led Spain’s financial institutions to conclude that they can wait no longer for an improvement in economic conditions to divest their delinquent loans. At the moment, the main Spanish banks have problem assets worth more than €40 billion up for sale in the wholesale market.

The buyers in this market are large investment funds, which value the assets at prices below their nominal values. For the banks, this difference means, on the one hand, that they definitively loose 100% of the investment that they made and, on the other hand, that they can release the provisions for at least half of those losses. The ECB does not want the entities to speculate with these assets on their balance sheets and for that reason, it is forcing their sale.

In this way, last week, Cajamar liquidated its Galeon Project comprising €308 million in debt and yesterday, it was BBVA who divested another portfolio, called Sintra, comprising €1 billion in property developer loans for finished homes in Andalucía, Madrid, Valencia and Cataluña.

The CEO of BBVA, Carlos Torres, said that with this operation, he considers the chapter of accumulated delinquent debt on its balance sheet as a result of the real estate bubble to be “closed”. Since December 2016, the entity has cut its gross exposure to the real estate sector by approximately €20 billion.

Another entity that has placed portfolios of loans and foreclosed properties on the market is Liberbank, with a €250 million portfolio of foreclosed properties, which it has eloquently baptised Bolt. Other entities that are close to signing agreements include Banco Santander, with €500 million in debt on the verge of being placed and another €400 million on the market, and Banco Sabadell, one of the most active entities in the sale of doubtful assets this year, which is finalising the sale of €900 million in defaulted loans.

The bank headquartered in Alicante has two other large portfolios up for sale, although in that case they are foreclosed properties with a combined value of €8 billion, which proceed from both its own activity, as well as from the activity it took over following the purchase of Caja de Ahorros del Mediterráneo (CAM). If the group chaired by Josep Oliú closes the sale of all of these portfolios, it will have reduced its exposure amounting to more than €14 billion to less than €5 billion.

In the market for the large funds that purchase these assets, there are also offers from CaixaBank (€800 million in defaulted loans in a portfolio called Agora) and Bankia, which is selling €650 million in doubtful loans and preparing another one worth €1 billion.

The largest operation of all is by far the one involving Sareb, called Alfa, which involves placing on the market assets with a nominal value of €30 billion. The public-private company is sounding out the definitive price that the funds would be willing to pay before it decides whether to keep it up for sale.

Original story: El Mundo (by César Urrutia)

Translation: Carmel Drake

BBVA will be Twice as Profitable Following its Property Sale to Cerberus

11 June 2018 – Expansión

BBVA is going to double its profitability once it has completed the sale to Cerberus of its €13 billion real estate exposure, scheduled for the third quarter of the year. According to a recent report from Alantra, the ROTE ratio (Return on Tangible Equity) will leap from 7% to 15% in 2020. In addition to the aforementioned operation, which will eliminate in a flash the hefty maintenance costs associated with those properties, there will also be a positive impact resulting from the first upwards movement in interest rates (…).

The main advantage of removing the non-performing assets from its balance sheet is that it will allow the bank’s returns to flourish, which would otherwise be blocked. The key to being able to do this is having sufficient provisions to ensure that the sale of a large package to a specialist fund does not lead to significant losses on the income statement.

The operation between BBVA and Cerberus was the second largest of its kind in Spain last year. The largest was the deal involving Santander and €30 billion in property from Popular, which was sold to Blackstone.

BBVA created a company with Cerberus, controlled 80% by the US fund and 20% by the bank, to which it transferred 78,000 properties. Cerberus appraised them with a discount of 61%.

Cataluña

47% of those assets are located in Cataluña, historically the region covered by CatalunyaCaixa and Unnim, and absorbed by BBVA during the crisis. The Catalan political crisis, which reached its peak in October 2017 with the holding of an illegal referendum, came close to thwarting the operation. These homes will be managed by Haya Real Estate, the real estate management platform owned by Cerberus.

BBVA granted Cerberus a €800 million loan to finance part of the acquisition.

Following the deconsolidation, the bank’s real estate risk will be reduced to €11.4 billion. It barely has any doubtful property developer debt.

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

M&G European Property Fund Expands Portfolio in Spain

29 May 2018 – Real Assets

M&G European Property Fund has expanded its portfolio with the acquisition of industrial and retail assets in Spain.

The €3bn core European property fund, managed by M&G Investments’ real estate arm, said it bought two industrial and two retail assets for €80m.

The two retail acquisitions are H&M Reyes Catolicos in Granada and Gran Via 68 in Madrid.  Both sites, which total 3,668sqm, are leased.

The industrial sites Teka Logistics Platform and a further asset in the Getafe logistics corridor are both in Madrid. The sites have a combined size of 55,092 sqm.

Fund manager David Jackson, said: “Our latest research suggests the Spanish economy will continue to perform well, with its recovery having accelerated in 2017.

“This extends to the commercial real estate market, where we predict average rental growth in both industrial and retail will range between 3% and 4% per year for the next three years in Madrid.”

Jackson said these new acquisitions fit perfectly with our strategy to increase our exposure to Continental Europe by investing in core assets in strong growth markets.

“We see a strong correlation between the level of rental growth and tourist spend in major tourist destinations across Europe; Madrid and Granada are very good examples of this trend.”

Federico Bros, a director of asset management for Spain and Portugal, said: “We have seen strong demand for high street retail in prime locations across Spain. Both of the retail sites we have purchased are in established locations and offer great rental growth prospects.

“The industrial sector in Spain also offers strong rental growth prospects as online activity accelerates and these acquisitions help us diversify our portfolio in key sectors.”

M&G European Property Fund was launched in 2006, with a mandate to invest in a globally diversified portfolio of assets in mature European markets outside the UK.

Original story: IPE Real Assets

Translation: Carmel Drake