Citi Seeks New Shareholders For Uro Property

20 May 2016 – Expansión

Uro Property, the Socimi that owns a quarter of Santander’s branch network in Spain, may see a change in its shareholders in the coming months. The company that holds 84% of its share capital, Ziloti Holdings, has given Citi a mandate to study possible shareholder changes.

This mandate comes in the face of interest from some of the current shareholders to exit the company, given that they were forced to acquire shares in the first place when their debt was converted into capital in 2014.

The main shareholders of Uro Property – both through Ziloti and otherwise – are Santander, with 22.7%; Atisha Holding, the former Sun Group, with 18.9%; Phoenix Life Assurance, with 14.6%; CaixaBank, with 14.5%; BNP Paribas, with 9.2%; and other private investors and international entities.

Citi will mainly look for investors amongst the large pension funds, insurance companies and investment funds.

The departure of the shareholders was vetoed until March under an institutional agreement reached following the recapitalisation of Uro.

The renewal of the shareholder base is one of the outstanding milestones for the company, which owns 755 Santander branches in Spain. It refinanced its debt last year and cancelled a swap, whereby reducing the financing costs of its €1,300 million debt from 6% to 3.35%. Last year, the Socimi sold 381 branches to Axa for €308 million, recording a capital gain of €27 million.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Bankinter: 53,000 More Homes Will Be Sold In 2016

22 February 2016 – Expansión

The recovery of the real estate market is growing from strength to strength and according to Bankinter, in its latest report about the sector, around 420,000 homes will be sold this year, in other words, 53,000 more than in 2015. But, what is driving this growth spurt?

The entity’s analysis predicts that the upswing will continue into 2017, when it forecasts that 450,000 operations will be closed.

Above all, demand for homes is going to be driven by the “improvement in employment, reduced financing costs and the increasing attractiveness of homes as investments”, says the report.

Moreover, “the combination of higher demand and a limited supply in the major cities will result in an increase in average prices in 2016 and 2017 of almost 3% p.a., a figure that could reach 5% in prime areas”, predict the experts at Bankinter.

A new feature of the real estate sector compared with 2015, will be the increase in number of new homes, in light of the upturn in new housing permits registered last year”. However, the analysis warns that this improvement will only happen “provided the political context does not result in a loss of confidence”.

Below, we detail the factors that are expected to drive house sales this year:

1 – Economic growth and an improvement in employment

Bankinter highlights that the Spanish economy is going to grow by more than 2.5% in 2016, a rate that will facilitate the continuation of the positive trend in the labour market over the next few quarters. And it adds that “the increase in the number of people in work (by 525,000, of whom 171,000 have permanent contracts) may represent a catalyst in terms of the demand for housing”.

2 – Low financing costs

Another factor…is the low rates of interest, a scenario that the bank expects to continue until the end of 2017. “12-month Euribor will remain close to 0% in 2016 and the conditions for accessing credit will continue to improve”, according to its forecasts. (…).

3 – Favourable yields compared with alternative investments

The report argues that the gross yield from housing rentals compares favourably to other investment alternatives, such as long-term deposits and fixed income securities, which are currently offering yields of around 0%. (…) …. meanwhile, “gross yields on residential investments may reach 4.0%…”.

4 – “Cultural” trend towards buying homes

The culture of ownership versus renting has survived the crisis in Spain. In fact, despite the fact that demand and the possibilities for accessing housing reduced significantly during the recession, “the percentage of rental homes still remains low (compared with the European average) and has barely increased in recent years (the current rate stands at 21%, up from 17.2% in 2011)”, explains the document. (…).

5– Market outlook

Bankinter also highlights the positive influence of the strong outlook for the market. Specifically, the entity forecasts that housing sales will grow by 6.5% this year and that the favourable conditions in the real estate market will continue into 2017. (…).

No chance of a return to the boom figures

Nevertheless, Bankinter also stresses that, despite the good times being enjoyed by the property sector at the moment, the recovery “does not represent a return, in any way, to the levels of demand seen during the real estate boom years”. The study points to various factors to explain this, such as the declining population (due to the negative migration balance), the awareness that property prices may indeed decrease and, in particular, the fact that the unemployment rate will remain above 17.5% until the end of 2017. These aspects “represent structural changes in the market, which mean that levels of demand exceeding 900,000 homes per year are no longer attainable”.

Original story: Expansión (by B. Amigot)

Translation: Carmel Drake

Popular Instructs Aliseda To Sell €4,000M Property Portfolio

21 January 2016 – Expansión

(…) Following on from Banco Popular’s announcement yesterday that it plans to divest assets worth €8,000 million…. Aliseda, the company ultimately responsible for handling the sale of the real estate assets sitting on Popular’s balance sheet…has been given a mandate to find a buyer for a portfolio of properties with a book value of €4,000 million. The market price of the portfolio has not been revealed.

Aliseda is owned jointly by Banco Popular (which holds 49% of its share capital) and the investment fund Värde, which controls the remaining 51%. During its first round of contacts to identify parties potentially interested in purchasing the property portfolio, the heads of Aliseda have identified half a dozen investment funds that may put forward bids.

In addition to this block sale of properties, Popular’s plans for the divestment of its non-productive assets this year include the sale of another €4,000 million of properties and loans.

The aim is to significantly reduce the non-productive part of its balance sheet. If the forecasts that the entity plans to announce next week at its 2015 results presentation are fulfilled, then Popular will succeed in reducing its problem portfolio by 25% by the end of this year. Such an acheivement would not only lighten the load on its balance sheet, it would also represent the clear implementation of one of the recommendations that the European supervisory authorities are making, with more emphasis on the European banks. That recommendation urges banks to take advantage of the provisioning efforts made in recent years and to sell non-productive assets that are weighing down on their accounts, particularly those that have associated maintenance and financing costs, as they are also penalising their income statements.

In order to put the objective that Popular is setting itself into context, it should be noted that the bank sold properties worth €1,000 million and non-productive assets amounting to €1,500 million during the first nine months of last year (the most recently available public data). Market sources consider that the combination of sales that Popular wants to carry out will have a neutral effect on the income statement, from the perspective of direct revenues, given that the discounts on the net value of the properties included in the portfolio that it wants to sell over the coming weeks will likely be offset by the net revenues that it will obtain from the sale of the other assets to be sold.

Nevertheless, overall, the operation should result in cost savings for Popular amounting to more than €200 million, according to market sources, given that the associated maintenance and operating costs will disappear and there will be no need to make new provisions for the assets sold. Moreover, and, above all, the bank will make significant savings in terms of the financing costs associated with its assets. (…).

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Bankinter Expects House Prices To Rise In 2015 & 2016

29 July 2015 – Expansión

Bankinter expects average house prices to rise gradually in the short term, with increases of close to 2% this year and 4% in 2016, in select locations.

Price rises are a contributing factor to the recovery of the sector, which is also marked by an increase in the volume of house sales, according to the report.

The entity believes that the improvement in employment, lower financing costs and the increased attractiveness of housing as an investment compared with other types of property, will all act as catalysts for demand, which will grow at a moderate rate in the short term to exceed 400,000 homes in 2016.

Furthermore, although the current recovery cycle is not expected to generate a new “boom” in housing demand, it is creating the conditions for sales to increase during the course of this year to 380,000 homes and next year to 420,000 homes.

Bankinter considers that 50,000 new homes will be sold in 2015 and that this figure will increase to 70,000-80,000 new homes in 2016.

In this sense, the entity points out that the outlook for the sector is continuing to improve and that 2015 will be the second consecutive year to register an increase in house sales of almost 4%.

In this context, Bankinter considers that the era of price adjustments is now over and that 2015 will be the year of stabilisation, prior to future price increases. However, it does not expect that house construction will ever return to the peak levels seen in the years before the crisis.

The possible increase in demand in the residential real estate market next year will depend on the acceleration of economic growth, the conditions for accessing financing and high liquidity and the attractiveness of housing as a good investment.

On a positive note, the entity highlights the increasing volumes of investment in large asset portfolios for their subsequent rental and management, as well as the rise in average rental prices for offices and shopping centres – their future evolution depends not only on changes in town planning regulations, but also on political uncertainty, which is leading to the postponement of certain investment decisions.

In short, the real estate sector is offering attractive investment opportunities, says Bankinter, which considers that the best investment options involve the purchase of real estate assets in prime locations in large cities and tourist resorts, with a target net return of around 3% and a minimum investment period of 3 to 5 years.

Nevertheless, the behaviour of the sector will also depend on the decline in the population and the unemployment rate, which it forecasts will continue to exceed 19%.

Original story: Expansión

Translation: Carmel Drake

Sabadell Places €750M 5-Yr Debt Issue At 0.475%

1 June 2015 – Expansión

€750 million debt issue / The bank has placed an issue of 5-year mortgage bonds with a record low yield of 0.475%.

For many financial institutions, the excess liquidity in the market is offsetting the recent increase in volatility that has resulted from the lack of agreement between Brussels and Greece. As a result, debt issues are proving successful.

Friday’s operation by Sabadell is a good example. Just 24 hours after the bank held its AGM, it went to the market in search of financing through the issue of 5-year mortgage bonds, arranged by Barclays, Deutsche Bank, HSBC and Lloyds. It paid a yield of 0.475%, which represents the lowest ever interest rate on a bond issue. Moreover, spreads, or differentials, are returning to pre-crisis levels, given that this yield sits just 12 basis points above the mid-swap rate (the reference rate for fixed rate issues).

“The primary international investors have all taken part in this operation and the participation rate in Germany has been particularly noteworthy. The main investors participating in the issue have been financial institutions, central banks, investment fund managers, insurance companies and pension funds”, said the entity in a statement on Friday.

Balance sheet

Sabadell has been particularly active in the market for this type of issue. Since November last year, it has completed four such transactions, raising €3,100 million in total. “The solvency of Banco Sabadell and its reputation on the international financial markets have undoubtedly been the factors that have contributed to the success of this placement”, it added. The bank wants to take advantage of the decreasing financing costs caused by the recent stimulus measures put in place by the European Central Bank (ECB). “The release of this issue will take place on 10 June and its launch forms part of Banco Sabadell’s non-equity security program, filed with the CNMV”, explain sources at the bank.

In September last year, the financial institution launched a covered bond (the term used for bonds in Europe) purchase program. In total, it has acquired €82,805 million. Moreover, it put in place a securitisation purchase program at the end of last year, and as a result it will close the first transaction involving Spanish mortgages since 2007, with UCI, which is owned by Santander and BNP Paribas. And in March this year, it started to purchase government debt, which has significantly reduced its financing costs.

Improved credit

As a result, credit is being revived once more, which is the main objective of the ECB. In this regard, Josep Oliu, Chairman of Sabadell (pictured above), said at the entity’s AGM last Thursday, that the strong level of competition in the financial markets to secure credit in the context of excess liquidity, represents a threat to the recovery of the banks’ financial results.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake

Colonial Completes First Ever Debt Issue By A RE Company

28 May 2015 – Expansión

Colonial placed €1,250 million, but demand exceeded €2,700 million. The real estate company, controlled by the Villar Mir group will use these funds to refinance a bank loan, whereby reducing its financing costs.

Colonial debuted on the bond market yesterday with great success. The real estate company controlled by the Villar Mir Group completed a debt issue amounting to €1,250 million in two tranches: one over four years amounting to €750 million and the other over eight years for €500 million. It paid 1.864% for the first issue and 2.728% for the second.

This is the first debt issue ever to be carried out by a Spanish real estate company and it comes in the middle of the election hangover, which has generated considerable volatility on the markets. The debt issue aroused significant interest (demand exceeded €2,700 million with 225 purchase orders in total), which clearly shows that the confidence of investors has returned to a sector that was hit hard by the crisis (the real estate sector) and above all, to this company in particular, which underwent a tough refinancing process last year.

Lower costs

In fact, Colonial will use the funds obtained to repay a syndicated loan that it signed last year amounting to €1,040 million, which carries a high interest rate, at 400 basis points above 3-month Euribor, and which represents 40.5% of its liabilities. Sources close to the company explained yesterday that this refinancing with result in an annual saving of almost 2%. “The real estate company will stop paying around €20 million per year in interest”, they added. Moreover, the same sources noted that the company, chaired by Juan José Brugera, will no longer be bound by the conditions imposed by the banks, given that “the debt market has granted this financing with no conditions attached”.

To ensure the success of the issue, the CEO, Pere Viñolas and the Corporate Development Director, Carmina Ganyet, launched a road show on 14 May with the banks that they had engaged for the transaction: Morgan Stanley acted as the global coordinator, with the support of Sabadell, BBVA, CaixaBank, Crédit Agricole, ING and JP Morgan. The executives were well received, since S&P had assigned the company a ‘BBB-‘ rating.

As well as the plan to repay the loan to reduce financing costs, Colonial may improve its balance sheet in advance of possible M&A activity in the short term. Sacyr has considered the option of integrating its subsidiary Testa with Colonial to create a large real estate group. Colonial has been authorised to issue more bonds, amounting to €750 million.

Operation “Fade”

In addition to the activity in the private sector, the Government also plunged itself into the quest yesterday with the issue of a ‘fund to cover the electrical hole’ (“fondo que cubre el agujero electric” or Fade). It placed €1,300 million in securities that mature in September 2019, with the help of Santander, BBVA, Barclays and Citi.

The Administration is continuing to refinance this debt, which the vehicle has issued since its creation in 2009, to cover the electrical deficit (which arises due to the mismatch between the revenue received by the companies, from electricity tariffs, and the costs of generating it) at much more favourable costs. For this issue, it has only paid 0.85%, the lowest rate since the vehicle was created.

Meanwhile, the Sociedad Concesionaria Autovía de la Plata, owned by Meridiam (50%), Cintra (25%) and Acciona (25%) launched its first bond issue without a public guarantee in Spain yesterday, for €184.5 million. It is paying 3.169% for these securities, which are being traded on the MARF.

Original story: Expansión (by D. Badía and M. Anglés)

Translation: Carmel Drake

Realia Records Profit Of €0.2M In Q1 2015

13 May 2015 – El Economista

Realia reported a net profit of €200,000 during the first quarter of 2015, compared with losses of €7.6 million a year earlier, according to the company’s report to Spain’s National Securities Market Commission (CNMV).

The firm has attributed this improvement to: a higher margin on its rental activity, a lower negative margin on its residential activity and an improvement in financing costs.

Between January and March, total revenues amounted to €23.3 million, i.e. 33.9% lower than during the same period in 2014, due to a decrease in the sales of property developments and land, at the same time as the gross operating profit (EBITDA) amounted to €10.3 million, i.e. 59% more.

Realia reduced its net financial debt with credit institutions and similar entities by €1,018 million during the first quarter of 2015, with respect to the debt held during the same period in 2014 (48% less) and by €2 million compared with December 2014, reflecting a net generation of cash.

At 31 March 2015, Realia had total gross debt with credit institutions and similar entities of €1,710 million and had cash and cash equivalents amounting to €619 million.

Net financial debt amounted to €1,091 million. 49.6% of the group’s total debt matures in 2016 and 48.1% matures in 2017 or subsequent years.

The net financial result decreased from -€13.9 million during the first quarter of 2014 to -€5.5 million during the same period this year, representing an improvement of 60.5%. The financing cost as at 31 March 2015 amounted to 1.33%.

Original story: El Economista

Translation: Carmel Drake

Sareb’s Financing Costs Will Be €400m Lower In 2015

19 February 2015 – Expansión

Good news for Sareb. The company has not yet published its accounts for 2014, since it is still waiting for the Bank of Spain to define its accounting framework and whereby determine its final results. But the company, chaired by Jaime Echegoyen (pictured), has taken an important step that will help to improve its results in 2015, its third year of operation.

The bad bank has just renewed the debt that it raised to pay the rescued savings banks for the properties and developer loans that they transferred. Instead of cash, Bankia, Novagalicia (now Abanca), Catalunya Banc, Banco de Valencia, BMN, Liberbank, Banco Caja Tres and Ceiss received senior bonds backed by the State.

The bonds, whose interest rate is linked to 3-month Euribor and the spread on Spanish debt, had maturity dates of one, two and three years and are renewed automatically. The debt relating to the entities classified in the so-called Group 1 (the larger ones) was renewed in December and now (in February) it has been the turn of the Group 2 entities.

Thanks to improved market conditions, in particular, the decrease in the risk premium on Spanish treasury bonds, Sareb has significantly reduced the yield on these senior bonds to the extent that the average spread on its debt portfolio has fallen from 1.954% to 0.832%.

In this way, Sareb will reduce its financing costs by €400 million in 2015, according to the institution’s official calculations. In other words, with the renewal of this debt, the former savings banks will no longer receive this amount for the real estate assets they transferred to the bad bank, which will have a negative impact on their net interest income this year.

The decrease in the interest payments on this debt would have been even greater without the coverage that Sareb contracted over 85% of the portfolio through a swap, which establishes a fixed interest rate regardless of the evolution of Euribor. In this way, it protects its results from upwards movements in the base rate, but it also mitigates the positive effects of any downwards movements.

Repayment of €5,416 million

Sareb’s financing costs have also been reduced by the repayment of debt. The bad bank issued €50,781 million in bonds when it was created to pay the savings banks for their assets. Since then, thanks to the income generated from the sale of properties and loans, it has repaid €5,416 million of that balance.

The amount of debt repaid in 2014 exceeded the initial expectations of €3,000 million by more than €400 million. And Sareb expects that it will exceed its bond repayment forecasts this year as well, although it has not yet shared these forecasts with the market.

“Sareb is fulfilling its main objective, which is to manage and sell its portfolio of assets without generating higher costs for the taxpayer”, said the Chairman of the bad bank in the first ordinary meeting held by the Board of Directors in 2015.

His predecessor in the role, Belén Romana, used to repeat the mantra that reducing its own financing costs was one of Sareb’s priorities to pave the way towards sustainable profitability. Its financing costs amounted to €1,272 million in 2013 and decreased to €1,135 million in 2014. In all likelihood, this downwards trend will only accelerate from here on in.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake