Tag: financial institutions

Cerberus, Intrum & DoBank Bid to Acquire Altamira

15 November 2018 – El Confidencial

There is still an appetite for the servicers’ business. The sale of the 85% stake that Apollo owns in Altamira is making its first cut of candidates, with some of the most high profile investors in the segment amongst the finalists. According to financial sources, the fund Cerberus (Haya Real Estate), the Swedish firm Intrum (Nordic Capital) and the Italian firm DoBank (Fortress) are the candidates that have progressed in the process, which is being coordinated by Goldman Sachs, and which was relaunched after the summer following months on the table.

Other players in the sector interested in Spain are also in the process, both at the domestic and European level. One of those new candidates is the US firm Davidson Kempner, which has a portfolio of USD 30 billion under management and with interests in the transformation of toxic assets in the United Kingdom and Ireland, according to sources involved in the operation.

Apollo is willing to take advantage of the hunger for this type of vehicle to make gains, although it does so after four years at the helm of the servicer and having not been awarded any of the large real estate portfolios that the banks have sold (Santander to Blackstone, BBVA to Cerberus, CaixaBank to Lone Star and the Sabadell-Solvia process, in whose final stretch it is not participating). In fact, this divestment comes after Apollo’s manager for the last few years – Andrés Rubio – left the fund.

The price of the management platform could reach €1.5 billion (debt included), a business for which Apollo paid €664 million in January 2014 in exchange for an 85% stake (the remaining 15% is still owned by Banco Santander). The agreement comprised the management of toxic assets (recovery of loans and sale of properties) until 2028, although the transformation of that perimeter has led to a change in the management conditions (commissions) and to the repayment of a €200 million dividend.

Altamira has assets under management amounting to more than €50 billion, compared with €26 billion in 2014, and a portfolio comprising more than 82,000 properties at the end of 2017, making it the largest servicer in operation in Spain. In addition to its contract with Santander, it also manages assets for Sareb (which account for 30% of its portfolio) and for third parties – international investors, financial institutions, family offices and institutional clients – as a result of the international expansion plan launched in 2017.

Original story: El Confidencial (by Carlos Hernanz)

Translation: Carmel Drake

Spain’s Banks Are Queueing Up to Finance Rental Housing

4 July 2018 – El Economista

One of the major challenges facing Spain in the residential market is the organisation of the rental home segment in light of the fragmentation that exists and the boom that is currently underway. There is currently a great deal of demand, but there is also a distinct lack of supply, and the new Housing Plan approved by the Government is not proving sufficient to incentivise the supply with the granting of aid to property developers that build rental housing. In light of this situation, we ask ourselves whether the opportunity that currently exists in Spain to organise the rental market is being taken advantage of?

“I think that the professionals and investors who have launched portfolios thanks to the creation of Socimis are taking good advantage of the opportunity, but I believe that some important players are simply not supporting the sector, such as the Public Administrations. Both nationally and locally, but above all locally, they are failing miserably and this is generating price tensions due to a lack of supply”, explains José Luis Ruiz Bartolomé, Director General of the consultancy firm Chamberí Asset Management.

Along the same lines, José María Cervera, Corporate CEO of Renta Corporación agrees and states that the public sector has been left on the sidelines. “Private capital has taken the initiative in this new segment of the market because it has seen a business opportunity and is looking for returns. And the public sector is going to have to enter, but now the arbitrage and those who are institutionalising it are in the private sector, and so they are going to place more rental properties on the market”.

For all of these reasons, during 2018, we are observing the creation of a new industry. Given that in Spain there are 18.5 million households, according to the latest figure from the Active Population Survey (EPA), and of those, 22% are rental homes, there are 4.7 million rental homes in total. Of that portfolio, only 5% are owned by institutional companies; the remaining 95% are owned by individuals.

“The Public Administration has done something important, which is to reorganise the real estate sector and separate property promotion and development activities, by creating Socimis that operate under a special framework. That has brought us closer to a situation that is more similar to those seen in other European countries. Now, we will have to see how the different players that are emerging in this market position themselves, and in two or three years, we will see the consolidation of this sector, which means that the Public Administrations will have to continue refining their regulations so that the sector can develop and be brought into line with those of other European countries”, says Nicolás Díaz-Saldaña, CEO at Témpore (Socimi of Sareb).

Nevertheless, not all of the experts in the sector concur. David Botín, Director of Real Estate Development at the ACR Group, says that this opportunity is not being leveraged. “It is possible that we are seeing the beginnings of a new rental market, but to date, just 22% of our households are renting and that supply is being provided almost exclusively by individuals. As such, it is very hard to fathom how we will reach the percentages seen in other countries such as Germany, where rental properties account for 48.3% of the market or the United Kingdom (36.6%). It is really hard to increase the stock in Spain because there are 19 million homes, and so a 1% increase means placing 190,000 more homes on the rental market, and that would take between three and four years (…). At that rate, nothing is going to happen quickly. No market works if there is no equilibrium between supply and demand. We need a large and varied supply for this market to work effectively”, he adds.

It is true that, historically, Spain has been a country of property owners, but the cultural and socio-economic changes that have been happening in recent years are drawing some new business lines, where the rental market is taking centre stage and is starting to become institutionalised. The new players in this market are: on the one hand, the Socimis, which are listed companies that serve as investment vehicles with tax benefits. The largest of them is Testa, which will debut on the stock market soon and which is owned by Santander, BBVA, Acciona and Merlin Properties. There are also others such as Azora, Vivenio (Renta Corporación), Témpore (Sareb) and Fidere, amongst the largest. Within this market, we can also include the servicers, which although they do not own properties, manage them, such as Solvia (Sabadell), Anticipa (Blackstone), Haya (Cerberus), Altamira (Apollo and Santander). And then, there are companies owned by the banks, such as Building Center (Caixabank) and other types of companies such as Alquiler Seguro, family offices, etc.

Therefore, now that the new players required to institutionalise this market are starting to be created, the next step is to develop a portfolio of assets. “We are going to need to reach agreements with property developers to build homes for rental (…), and at Sareb, we are going to use some of the land that we have for the co-development of rental homes (…)”, says Nicolás Saldaña.

That is a formula that is starting to spark interest. According to the experts, property developers have always been reluctant to enter the rental market, because they didn’t see it as their business, but in the end, the market trend has changed and whilst the sale and purchase segment will continue to exist, so too will the rental sector and property developers will have to participate (…).

The rental segment is a market that has always existed in the hands of individuals, but now, it is being professionalised, thanks to the arrival of overseas capital. “Investors have contributed many things, besides capital. They have contributed methodologies, rigour, professionalism (…). The banks were not open to this business before, they only financed promotion, but that has changed. For six months now, everyone has been wanting a piece of the pie and now there is a queue of financial institutions wanting to finance this type of business (…)”. Says José María Cervera (…).

Investing in residential properties is profitable. The gross return from investing in rental homes has increased to 7.3% from 6.3% a year ago, due to the strength of demand for rental properties, according to the real estate portfolio Idealista (…).

Original story: El Economista (by Luzmelia Torres)

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

Savills Aguirre Newman: House Prices Will Rise by 5%-8% in Málaga in 2018

22 March 2018 – 20 Minutos

The average price of housing in Málaga rose by 5.4% in 2017, according to the Residential Market report published by the international consultancy firm Savills Aguirre Newman, which also predicts that house prices will rise by between 5% and 8% this year.

The report reveals its forecast for this year is that prices will continue their growing trend thanks to the “strong behaviour of demand”. In 2018, the increase in property development activity and the construction of new promotions are going to continue to increase, which means that new residential areas in Málaga are going to be consolidated; this is already happening in the Martiricos area.

In terms of the main players in the residential market in Málaga, during 2018, the consolidation of financial institutions and servicers will continue, as it will of international funds with a vocation for making long-term investments.

For José Luis Sanz, the deputy director of Savills Aguirre Newman’s delegation in Andalucía, the residential market in Málaga has evolved “in a positive way, offering more modern and efficient projects, and with a clear focus on design and quality”.

Moreover, he added that the entry of international groups into the market has benefitted the sector. Currently, the product offered/demanded is a type of home that is characterised by, on the one hand, open plan spaces with large terraces in coastal areas, and, on the other hand, vertical designs that make efficient use of the available space in more urban areas.

The report analyses 113 developments in total, of which 82 are being marketed (…) and 31 have already been sold. The study counted 54 new promotions and, for the third year in a row, reported that no developments have been suspended or removed from sale.

The main areas of growth for new housing in Málaga are Teatinos and Pacífico (…).

“It is important to highlight the dynamism of the land market in the capital”, said Sanz, who added that “Over the last year, there have continued to be numerous, significant transactions involving residential land both in the Málaga metropolitan area, as well as in the neighbouring districts, such as Alhaurín de la Torre, Rincón de la Victoria and in the Churriana district of the capital” (…).

2017

Last year, the average price of a home in an apartment block in the province amounted to €216,713, whilst the average price of a family house stood at €274,420.

In Málaga, the split by type of home is 78% homes in apartment buildings and 22% family houses. This increase in prices takes the average price per m2 of a flat/apartment to €1,727, with an average surface area of 125 m2, whilst the average price of a family home now stands at €1,616, with an average surface area of 170 m2.

With these average prices, the highest price recorded for the sale of a home in an apartment building in the Málaga-East area amounted to €820,000 (€5,622/m2) and in the centre amounted to €1,350,000 (€5,555/m2). In terms of family homes, a property was sold also in the Málaga-East area for €1,175,000 (€2,937/m2) according to Aguirre.

Original story: 20 Minutos

Translation: Carmel Drake

26 Spanish Real Estate Experts Share Their Predictions for 2018

6 January 2018 – Expansión

House prices will rise by more than 5% on average this year, with increases of more than 10% in the large cities. These gains will happen in a context of great dynamism in the market, in which house sales will grow by more than 10% to exceed 550,000 transactions. Rental prices will also continue to rise.

Those are just some of the predictions made by 26 real estate experts for Expansión.

Aguirre Newman: “House prices will grow by more than 10% in Madrid and Barcelona”.

“In our opinion, house prices are going to continue to rise in 2018, reaching average growth rates of 6%-7%”, says Juan Riestra (pictured above, top row, second from left), Director of the Residential Area at Aguirre Newman. “In Madrid, Barcelona and the coastal cities, we expect to see double-digit growth, driven by the supply of new homes that the property developers have announced, which will result in an even more intense increase in prices than seen in 2017 since new build home are typically more expensive than second-hand properties”, he adds (…).

Fotocasa: “New build homes will have a higher profile in 2018”.

“New build homes will have a higher profile in 2018, as we have already seen during the last quarter of 2017. And that, combined with the return of confidence to the housing market, will continue to push prices up if the economic context is maintained and the situation in Cataluña is resolved”, says Beatriz Toribio (pictured above, bottom row, second from left), from Fotocasa, who thinks that this effect will drive up house prices by more than 5%, but not reaching double-digits (…).

Universitat Pompreu Fabra: “Everything depends on the situation in Cataluña”.

“The upward momentum in the market will be accentuated in 2018 due to the improvement in the new build market since the homes that started to be built two years ago are now being sold”, said José García Montalvo (pictured above, top row, second from right), Professor of Economics at the Universitat Pompeu Fabra. “The major change is that new homes now account for 20% of the market, whilst before they represented 60%” (…). But “everything depends on the political uncertainty in Cataluña” (…).

Arcano: “Demand for investment in housing will continue to grow”.

“There is still a very significant imbalance in terms of demand, spurred on by the ECB’s policy and labour improvement, and a supply that is still restricted by the very low level of new house starts. Moreover, demand for housing as an investment will continue to grow. In this context, prices will rise by more than 5%”, says Ignacio de la Torre, Chief Economist at Arcano (…).

Notaries’ Centre for Statistical Information: “We expect house prices to increase by more than 5%”.

“On the basis of our analysis of the available information, we expect house prices to grow by between 5% and 10% in 2018 (…). Although we expect the housing stock to increase, due to greater investment and employment in construction in recent months, which may lead to price rises being contained, we also expect an increase in demand, given the dynamism of economic activity and the behaviour observed in the labour market”, says Milagros Avedillo, at the Notaries’ Centre for Statistical Information. In her opinion, the growth in mortgage loans will be single-digit.

Asprima: “Very few new homes will be built”.

“I don’t think that the volume of transactions will increase by more than 10% and the forecast for price growth will be below 5%”, says Carolina Roca, Vice-President of Asprima. “The most important macro-factor is income”, she laments. Therefore, prices cannot rise by much, in her opinion, although they will increase in certain areas. “New builds will recover in 2018, but not by much (…)”.

Tinsa: “The reduction in the unemployment rate will boost the market”.

“The residential market will record moderate price growth in 2018 (of between 3% and 4%), similar to that seen in 2017, with different speeds, depending on the region”, says Pedro Soria (pictured above, bottom row, second from right), Commercial Director at the appraisal company Tinsa. “The recovery will expand to more areas; the large capitals will continue to be the drivers, although the rate of growth will soften”, he adds. “The reduction in the unemployment rate and continuing investor interest, due to the prolongation of the low-interest rates, will increase house sales by between 10% and 15% (…).

Sociedad de Tasación: “New house prices will rise by 5.4%”.

“Applying our predictive model to the data from the Ministry of Development, we estimate that 14.1% more house sales will be completed in 2018 than in 2017 (…)”, says Consuelo Villanueva (pictured above, top row, far left), Director of Institutions and Key Accounts at Sociedad de Tasación. “The result (…) indicates growth of 5.4% in the price of new homes under construction for the average of provincial capitals in 2018 (…)”.

Gesvalt: “Mortgage lending will rise by around 15%”.

“According to the forecasts at Gesvalt, we predict moderate growth in second-hand house prices of around 5% at the national level, although there will be notable differences between provinces”, says Sandra Daza (pictured above, bottom row, far right), Director General at Gesvalt. (…). And by how much will mortgage lending grow? “By around 15% and there will be a slight increase in the number of mortgages that exceed 80% of the total property value”.

Foundation of Real Estate Research: “The political uncertainty will weigh down on Barcelona”.

The President of the Foundation of Real Estate Research, Julio Gil, believes that house prices will rise by “between 0% and 5% in 2018. “We will move to a three-speed market”, he thinks, referring to consolidated areas, cities in recovery and provinces with a surplus supply and/or limited demand. “And I think that Barcelona will perform less well than Madrid, weighed down by the political uncertainty”, he adds (…).

Pisos.com. “Mortgage lending will rise by more than 10% for the fourth consecutive year”.

According to Ferran Font, Head of Research at Pisos.com (…) “Historically low interest rates and the decrease in unemployment mean that we expect mortgage lending to grow at double-digit rates in 2018, like it has done for the last three years”.

General Council of Real Estate Agents: “The rise in rents will lead to tension in sales prices”.

“House prices will grow by around 5% in 2018, driven more by the refuge effect of savings than by objective economic variables”, says the President of the General Council of Real Estate Agents, Diego Galiano. “Savings are not being rewards and housing is recovering a certain degree of stability and offering good prospects for investors (…)”.

TecniTasa: “Prices will grow by around 5%”.

“On average in Spain, we estimate price growth of around 5%, but we highlight that that figure represents an average of a very heterogeneous market, by area and asset class. In some regions and for certain types of high-end homes, the increase will amount to between 5% and 10%, and may even exceed 10% (for example, in the Balearic Islands). Whilst in small towns and for cheaper homes, prices are barely expected to rise at all in 2018”, says José María Basáñez, President of TecniTasa (…).

Civislend: “The mortgage war will intensify”.

“The growth that we will see in terms of mortgage lending is going to continue to reflect double-digit rates and the war in terms of granting loans by financial institutions is going to intensify”, says Manuel Gandarias, Director and Founder of the real estate crowdlending platform Civislend (…).

Acuña & Asociados: “80% of sales will be made in 400 towns”.

“Given the current situation, the expected growth in prices at the national level for 2018 will amount to around 5.5%”, forecasts Luis Rodríguez de Acuña. However, “demand for housing is not behaving in a homogenous way across the country, and transactions are only being recorded in 1,300 of Spain’s 8,125 municipalities”. In other words, in one out of every six. And 80% of transactions “are being closed in just 400 municipalities (…)”. (…).

CBRE: “The sale of new homes will continue to gain weight”.

The value of homes will increase “by around 5% YoY at the national level, with higher rises (between 7% and 10%) in certain markets such as Madrid, Valencia, Málaga and the Balearic Islands”, predicts Samuel Población (pictured above, top row, far right), National Director of Residential and Land at CBRE (…). “Sales of new build homes are going to increase their relative weight (with respect to second-hand homes) as a result of the recovery in construction output; nevertheless, the recovery will not have an immediate impact on transaction volumes given the time lag associated with new build developments”, he says.

BDO: The land market is preventing soaring construction output”.

“We are facing a very favourable macro context (GDP and employment, above all) and therefore, an upwards cycle is likely, which will have different regional rates”, explains Alberto Prieto, at BDO. (…). “The launch of new build projects by the new large players will start to be felt in 2018, and then more intensely in 2019”, he adds. “The situation in the land market makes it unfeasible for the volume of new build homes to soar for the time being”, he says.

Foro Consultores Inmobiliarios: “Fixed-rate mortgages will play an important role”.

Carlos Smerdou, CEO at Foro Consultores, believes that “new build homes will drive the market and that recent land transactions indicate that the trend in terms of prices will be upward, of between 5% and 10%” (…). In terms of fixed-rate mortgages, “they will play an important role”, despite the fact that “interest rates are forecast to remain negative”.

MAR Real Estate: “Banks are still reluctant to grant the necessary financing”.

Rosario Martín Jerónimo, representative of MAR Real Estate in Marbella, believes that house prices will grow by more than 5% in Spain this year, on average (…). Nevertheless, she does not think that sales or mortgage lending will be as high in 2018 as they were in 2017 and that the growth rates will remain below 10% in both cases. “Buyers are willing but the financial institutions are still very reluctant to grant the necessary financing”, she explains. “Many property developers are completely financing their projects using money from private investors/buyers, without any support from the bank”, she says (…).

uDA (urban Data Analytics); “Prices will rise by more than 10% in the large cities”.

“House prices will rise by around 6.9% in 2018, although the behaviour will be tremendously heterogeneous”, warns Carlos Olmos, Director of urban Data Analytics. In other words, there will be “some large cities with growth rates of more than 10% and many other capitals with small decreases” (…).

Gonzalo Bernardos, Professor of Economic: “House prices will rise by 11% and sales volumes by 23%”.

“I think that house prices will rise by 11%”, says Gonzalo Bernardos, Director of the Real Estate Masters at the Universidad de Barcelona (…). Moreover, in macroeconomic terms, it is the best scenario for the residential market: high (economic) growth (around 3%), the creation of employment, scarce new build supply (new build permits will amount to 125,000 in 2018), very low interest rates and bank willingness to grant mortgages”. “House sales will rise by around 23% and mortgage lending will increase by 17%”.

Irea: “House prices will rise by more than 7% in consolidated markets”.

Mikel Echavarren (pictured above, bottom row, far left), CEO of the real estate consultancy and advisory firm Irea, forecasts that house prices will rise by between 5% and 10% in 2018 with respect to 2017. “In consolidated markets, the increases will be closer to 7%”. (…). In the mortgage market (…), “in theory, financing conditions will continue to be very beneficial for buyers and property developers”, he adds.

College of Registrars: “Mortgage lending will grow by around 20%”.

The registrars believe that house prices will rise by less than 5%. “Taking into account our data and the slowdown that is already being seen in Cataluña, which accounts for approximately 17%-18% of the Spanish housing market (…), we think that it will be hard to exceed a growth rate of 5% in 2018”, explains Fernando Acedo Rico, Director of Institutional Relations at the College of Registrars. (…). Something similar will happen with mortgage lending, which “will continue to grow at around 20%”.

Idealista.com: “Madrid will drive the price rises”.

According to Fernando Encinar, Head of Research at the real estate portal Idealista, house prices will rise by less than 5%. (…). “There will be cities that will experience a more acute recovery, such as Málaga, Valencia, Sevilla and the islands. But I think that Madrid is going to be the real driver, with even more accelerated price growth”. Why? “The Spanish capital is gobbling up talent and investment, and demand there indicates that prices are going to continue to rise. There is minimal stock left in Madrid (…)”.

Instituto de Práctica Empresarial: “In 2018, 550,000 homes will be sold in Spain”.

According to the Director of the Real Estate Chair of the Instituto de Práctica Empresarial, house prices will rise by 6.1% in 2018 (…). In Spain, 550,374 homes will be sold, which represents 14.5% more than in 2017, despite the sluggishness that may be seen in Cataluña.

Invermax: “Tourist areas may see price rises of 10%”.

Jesús Martí, Real Estate Analyst at Invermax, thinks that “house prices will grow by another 5%, with this average varying between the large cities and the traditionally touristy coastal areas, where they may rise by 10%”. “It is still a good time to buy a home, especially for investors”, he adds (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Reyal Urbis Faces Key Week In Its Effort To Avoid Liquidation

29 May 2017 – Expansión

Reyal Urbis is facing a key week for determining whether or not it will receive sufficient backing from its banks and creditors to allow it to emerge from the bankruptcy in which the real estate company has been immersed since 2013 and whereby avoid liquidation.

The deadline for the creditors of the company, which is controlled and chaired by Rafael Santamaría, to communicate whether or not they accept the debt payment plan proposed by the firm, is this Wednesday 31 May.

The Tax Authority is one of Reyal Urbis’ largest creditors, given that the company owes around €400 million to the public purse, as well as to Sareb and the main financial institutions.

In the event that the real estate company does not obtain sufficient backing from its creditors, it would be forced to file for liquidation. That would constitute the second disappearance of a large real estate company after Martinsa Fadesa’s demise.

Reyal Urbis owes debt amounting to €3,572 million to the banks alone, and at the end of the first quarter of this year, it reported negative equity of €3,436 million.

The plan through which the company hopes to ensure its viability involves agreeing a unilateral payment plan with the Tax Authorities, different from the one offered to the other creditors.

The real estate company is proposing paying off the debt it owes to the financial institutions using real estate assets, an offer that, given the depreciations in values, would represent a discount (on the debt).

Overcoming paralysis

By emerging from bankruptcy, Reyal is also looking to overcome the paralysation that it has been immersed in for the last four years, during which time it has not constructed a single home and has barely managed to sell any assets or manage the hotels for rent in its real estate portfolio, covering 123,000 m2.

In this way, at the end of 2016, the company reported losses of €155 million, similar to the previous year.

In addition, Reyal Urbis’ bankruptcy procedure has been delayed, given that, at the end of 2015, Commercial Court number 6 in Madrid rejected the proposed agreement that had been presented by the company at the beginning of that year. After appealing to the Provincial Court, the real estate company managed to get the proposal agreed and processed more than a year later, at the beginning of 2017.

Original story: Expansión

Translation: Carmel Drake

S&P: Banks Will Sell Off €35,000M In Toxic Assets In 2017

25 January 2017 – Cinco Días

S&P Global Ratings is convinced that there is going to be a new wave of M&A activity in the Spanish financial sector, as a result of the low return environment, which is putting downwards pressure on banks’ margins, and the rising regulatory costs.

The high volume of non-productive assets on the balance sheets of most entities is also having a negative impact on their accounts, which is pushing them towards mergers, said the Director General of Financial Institutions at S&P, Jesús Martínez, yesterday. The Director considers that these consolidation processes will help smaller entities improve their returns.

The Bank of Spain and most of the major financial institutions in Spain share this idea and are convinced that there will be a second round of mergers over the medium term. These mergers will join the one that Bankia and BMN are likely to complete in July.

In its forecasts for the year ahead, the ratings agency considers that the Spanish financial sector will be supported by the “robust” economic recovery that is happening in Spain at the moment, as well as by the improvements that are being seen in employment and in the real estate sector. It believes that the latter is key for the improvement of banks’ yields. In fact, it thinks that the banks will manage to considerably reduce the property they hold on their balance sheets this year, decreasing the balance from €183,000 million at the end of 2016 to around €148,000 in 2017.

This is the first time that the foreclosed asset balance will fall below its 2010 level (€175,000 million), according to data provided by S&P.

Non-productive assets in the Spanish banking sector peaked at €320,000 million in 2012 if we take into account the foreclosed assets that were transferred to Sareb by the nationalised bank. In 2016, the volume of foreclosed assets decreased by around €37,000 million, according to S&P. Between 2016 and 2017, the total decrease is expected to amount to around €70,000 million.

Nevertheless, the ratings agency warns that the sector will be affected by certain risks resulting from the crisis, such as the high volume of non-productive assets that the entities hold on their balance sheets, or the difficulties involved in increasing returns given the very low interest rates that are putting pressure on margins in the income statement.

Despite that, the agency considers that the banks may continue to offset this decrease in returns and the pressure on margins through the lower provisions that they are having to make, as a result of the reduction in non-productive assets, which is expected to continue over the next few years. S&P forecasts that the risk outlook for the financial sector will decrease, which will cause it to review its ratings. (…).

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

UniCredit Sells €17,700M In Doubtful Loans To Pimco & Fortress

15 December 2016 – Expansión

The Italian bank has €360,000 million of doubtful loans on its balance sheet.

UniCredit, the largest bank in Italy, has taken its first major step in the long awaited clean up of the transalpine financial sector, with the sale of €17,700 million in doubtful loans to Pimco and the Fortress Investment Group. Experts believe that Italy’s other financial institutions will find it harder than UniCredit to clean up their balance sheets.

Massimo Famularo, analyst at Frontis, considers that “UniCredit is playing in a league of its own and its capacity to absorb losses is enormous compared with that of the smaller Italian banks”, reported the Bloomberg news agency.

The sale of doubtful loans forms part of UniCredit’s new strategic plan, which also includes a €13,000 million capital increase and the cutting of 14,000 jobs. “The inclusion of Pimco and Fortress in the sale agreement for the doubtful loans gives credibility in the market and encourages other players to make the step forward”, says Federico Montero, analyst at Evercore Partners, referring to the other Italian financial institutions with doubtful loans on their balance sheets.

UniCredit will divest these doubtful debt portfolios at a discount of 77%. That is higher than the 73% discount at which another one of the Italian banks in distress, Monte dei Paschi di Siena, is planning to sell its doubtful loans, amounting to €28,000 million, to Atlante, the Italian state fund for the bail out of the financial sector.

On average, Italy’s banks are valuing their doubtful debt portfolios on their balance sheets at a discount of 57%, according to data compiled by Reuters. UniCredit’s share price fell by 6.4% on the stock exchange (yesterday) and has fallen by 48% so far this year.

Monte dei Paschi

Monte dei Paschi, the oldest bank in the world and the third largest in Italy, confirmed yesterday that the ECB has rejected its request to extend its capital increase amounting to €5,000 million until the middle of January. The entity’s Board of Directors met yesterday and will convene again today to announce their definitive plan, according to sources quoted by the Reuters news agency. The market takes it for granted that the entity will need public aid for its recapitalisation.

Original story: Expansión

Translation: Carmel Drake

Valencia’s New Home Stock Has Fallen By 35% Since 2009

5 December 2016 – Levante EMV

According to a report by the Spanish Confederation of Construction Product Manufacturer Associations, the stock of new homes has decreased by 35% in the Community of Valencia since the collapse of the construction sector in 2009. The market has digested 26,926 properties in Valencia’s three provinces, leaving 92,782 unsold. The sales figures are very uneven, but the sector is now recovering on the Costa Blanca and in Alicante capital and the city of Valencia. In Valencia capital, there are just three hundred new unsold homes left, with some analysts estimating that as few as one hundred homes have yet to be sold; and the first developments to be promoted by Sareb, investment funds, financial institutions, cooperatives and overseas funds have already started.

The situation for Valencia’s construction companies is still complicated, to the extent that the President of the Association of Valencian Property Developers (APCV), José Luis Miguel, acknowledged yesterday that “anyone who owns land should hold onto it. A good decision would be to do nothing”, said José Luis Miguel, as he presented a study about the situation in the sector.

The property developers have commissioned a study to obtain a detailed understanding of how the sector is performing following the crisis, at a time when the “rules of the game have changed to allow the entry of new competitors, such as investment funds and financial institutions”. The author of the study pointed out that the sector is still at “historical lows”, despite the first signs of recovery being seen along the coast in Alicante and Valencia capital. “We are at the beginning of the (upwards) curve, but it is clear that the recovery is now being felt in certain areas”.

José Manuel Luis added that the volume of sales in the second-hand market are similar to those recorded in 2006 and 2007, but at that time they accounted for just 38% of all transactions, whereas now they account for 88%, compared with 12% involving new homes.

Weakness in demand

The head of the study underlined that the sector still perceives a weakness in terms of demand due to the difficulties involved in obtaining financing and because the banks are requesting deposits of 20% before they are prepared to grant mortgages. In any case, the greatest problem is that 40% of Valencians admit that they are unable to afford extraordinary expenses of €650 per month, which means that they are not able to buy. The only option for these people is to rent.

Nevertheless, the property developers are reluctant to commit themselves to building homes for rent because that requires the freezing of assets for a long time and the repayment period for such operations is twenty-five years.

José Luis Miguel lamented the situation in the sector and the disappearance of 90% of the property developers that existed before the crisis. “Many property developers were small and the crisis did away with them. The association used to have four hundred members and there are now only forty left”, he said.

Original story: Levante EMV

Translation: Carmel Drake

Rajoy Will Give Tax Breaks To Banks That Lease Empty Homes

29 November 2016 – Expansión

Housing will be one of the first major agreements of the new legislature. The PP has reached “an agreement with the opposition” to approve a non-binding proposal to establish guidelines for real estate policy until 2021. This initiative, which will be debated by the Development Committee in Congress on Wednesday, includes an important new feature: it will incentivise the occupation of empty homes owned by financial institutions, public companies, Public Administrations and “other owners” by the “most vulnerable” families. For example, those on low incomes and those who have been evicted from their homes.

To achieve this, “tax incentives, agreements with large home owners and exchanges of land” will be approved, according to sources in the Popular Parliamentary Group. “All of the parties support the agreement”, which will give rise to a new Housing Plan, to be agreed, as always, with all of the regional governments.

The tax benefits that will be approved have not been defined yet because the PP still needs to agree them with the opposition. Moreover, the Ministry of Development, which is piloting the reform is in the middle of handing over powers and is not in any rush. “The left-wing parties like the idea. The agreement that we are going to reach on Wednesday is generic and we will have to do further work to iron out the details”, say the same sources.

In the face of initiatives to penalise owners of empty homes, such as those introduced in Cataluña, País Vasco and Andalucía, the new housing agreement will seek to “promote mechanisms of cooperation so that available unoccupied homes, owned by the Public Administrations, public companies, financial institutions and other owners may be occupied by the most vulnerable members of the population” according to the text in the Proposal, which has received a favourable report from the Ministry of Development.

The banks will be the main target for these measures. The appraisal company Tinsa calculates that the financial institutions own more than 80% of the stock of empty homes. In its most recent report, based on data as at 2015, Tinsa calculates that the banks own a surplus of more than 300,000 (empty) homes. In addition, the ratings agency Fitch says that at the end of last year, the financial sector owned “around 150,000 unsellable (new) homes”.

With this reform, it will be much easier for banks to free up their empty homes. Firstly, because they will receive guaranteed income from the State in the event that they allocate them as social rental properties. Secondly, because although the lease payments will be relatively low, the tax benefit will have a compensatory effect. Thirdly, because when the entities exchange properties for land, they will remove those assets that are hard to divest from their balance sheets and they will only include new properties in better locations and with better outlooks.

INE estimates that there are 3.5 million empty homes in Spain, but that almost all of them are owned by individuals. Tinsa says that, of all of the residential properties constructed since 2008 (that have never been lived in), only around 11,670 are owned by professionals, but they are not being marketed. That figure represents 3.9% of the total commercial stock (389,000 homes in 2015). (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake