Tag: foreclosures

Liberbank Agrees To Sell €750M RE Portfolio To Bain

11 October 2017 – El Confidencial

Liberbank has agreed to sell a portfolio of foreclosed properties worth €750 million to the fund Bain Capital, after ruling out a rival offer from KKR. According to sources familiar with the situation, the transaction will be closed at a price of between 45% and 48% of the initial value (the final figure is the only matter that still needs to be agreed), in other words, with a discount of between 52% and 55% of the book value. That haircut is lower than the 66% that Santander had to apply to divest Popular’s property portfolio in the summer.

The aforementioned sources explain that, in the end, this portfolio does not include any non-performing loans, but rather contains foreclosed assets only. The sales price implies a higher discount than the net value (after provisions) at which Liberbank recognises these assets on its balance sheet (around 40%, albeit based on their appraisal value as at 2017), which means that the entity will have to recognise an additional loss as a result of this sale. But it will cover some of that loss with funds resulting from the €500 million capital increase that it approved on Monday and to which its main shareholders have already signed up.

The fact that Liberbank has had to offer a lower discount than Santander did for the sale of Popular’s assets is explained by three factors. Firstly, the size and urgency of the operation: the bank chaired by Ana Botín sold a much larger portfolio, amounting to €30,000 million, which it wanted to divest from its balance sheet as soon as possible, and whereby shield itself from the possible legal annulment of its purchase of Popular.

The second is that Santander sold only 51% of its portfolio, in other words, in that case, the bank will continue to receive income from the rental or sale of the assets in its remaining 49% stake. A better price can always be negotiated when the buyer acquires the rights to all of the revenues associated with a given portfolio. The third reason is that “not all of the assets are the same, and Popular’s portfolio contained a lot of poor quality properties”, according to one of the sources consulted. In other words, Liberbank’s portfolio contains better quality assets.

Ensuring survival on its own

(…). As El Confidencial has reported, both this real estate operation, as well as the capital increase, are consequences of demands made by the (Spanish) Government and the Bank of Spain to strengthen Liberbank’s solvency for fear of a repeat of a collapse like Popular’s (a fear that also led to the supervisor imposing a ban on the short selling of the entity’s shares, which still continues). In the face of interest from Abanca, Unicaja and CaixaBank to acquire Liberbank, the entity led by Manuel Menéndez decided to undertake these operations to ensure its survival as an independent player.

Moreover, the entity sold another €215 million in real estate assets unrelated to this portfolio during the third quarter. In that case, it sold the assets at their net book value, in other words, without the need to record any additional losses. In this way, Liberbank will easily exceed its objective of decreasing its property portfolio by €800 million this year, with most of the fourth quarter still remaining. In addition, during the same period, it decreased its non-performing loans by a further €230 million thanks to recoveries and foreclosures.

Original story: El Confidencial (by Eduardo Segovia)

Translation: Carmel Drake

Sabadell Considers Listing HI Partners As A Socimi

29 May 2017 – Eje Prime

A new IPO may be on the horizon for the real estate arm of one of the large Spanish banks. Banco Sabadell is analysing the option of debuting its subsidiary HI Partners, through which it owns a portfolio of 31 hotels across Spain, on the stock market as a Socimi.

According to Expansión, the bank has engaged the investment banks Citi, JP Morgan and Credit Suisse to study the feasibility of the placement, whose final green light will depend on the entity’s President, Josep Oliu. The eventual debut on the stock market could take place after the summer.

Led by Alejandro Hernández-Puértolas and chaired by Enric Rovira, HI Partners was founded in 2015 by Sabadell to enable the Catalan entity to concentrate the ownership of the real estate assets linked to the tourist sector that it obtained as a result of foreclosures, into a single company. Through two companies, HI Partners Value Added and HI Partners Gestión Activa, the firm now owns 31 hotels with more than 3,500 rooms, which are managed by various hotel operators.

The group’s assets include establishments in Tenerife (the Hotel Jardín Tropical), Marbella (Incosol), Sitges (Terramar), Valencia (Acteon), Málaga (an establishment run by the hotel chain Silken) and Mallorca (the Hilton Sa Torre). In addition, HI Partners manages €800 million of the bank’s hotel debt.

Original story: Eje Prime

Translation: Carmel Drake

Deutsche Buys €400M Developer Loan Portfolio From Bankia

4 July 2016 – Expansión

Deutsche Bank has reaffirmed its commitment to the Spanish real estate market despite instability in the markets caused by Brexit. Last week, funds from the German entity sealed the acquisition of almost €400 million in doubtful property developer loans from Bankia.

This is the second transaction of its kind that Deutsche Bank has signed with Bankia in just six months. At the end of 2015, it acquired just over €600 million in unpaid company loans, backed by real estate collateral. In this way, the German bank became the owner of at least one hundred loans linked to property that had originated on Bankia’s balance sheet.

Sources in the market estimate that Deutsche Bank could have paid just under €150 million for this latest operation, known as Project Ocean.

With these types of portfolios, funds are typically looking for loans that give them relatively easy access to real estate collateral, either through legal foreclosures or agreements with the borrowers.

These deals allow the vendor entities to reduce their default rates; lower their risk-weighted assets; generate gains, in some cases; and focus their resources on granting new, profitable, loans.

In fact, Bankia is close to completing another major divestment within the next few days, with the transfer of 2,500 flats to the fund Sankaty, the subsidiary of the US giant Bain Capital. These properties have been valued at between €300 million and €400 million.

A new star

This investor has become the largest purchaser of problem assets from the banks (in Spain) in 2016. In this way, in addition to Bankia’s portfolio, Sankaty signed another two acquisitions last week: Project Pirene, comprising €460 million in problem assets linked to property developers, from Sabadell; and Project Baracoa, containing 2,400 loans to bankrupt companies, worth €530 million, from Cajamar.

Sector sources say that these operations prove that investors are still interested in Spain, even through Brexit has made the financing of these purchases more difficult.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

INE: Primary Residence Foreclosures Fell By 31.8% In Q1

3 June 2016 – El País

The number of foreclosures over primary residences is continuing its decline. The number of cases involving homes (secured by mortgages) being sold due to a failure to keep up with the mortgage repayments, decreased to 6,118 during the first three months of the year, which represents a 31.2% reduction compared with the same period in 2015, according to Spain’s National Institute of Statistics (INE). Taking the total number of family homes in Spain during the first quarter (18,408,300) as a benchmark, foreclosure proceedings were initiated on 0.03% of those properties during the quarter.

Whilst the crisis recedes, so too does one of its darkest sides. Two years ago, in 2014, 34,680 primary residences were handed over to the banks to settle unpaid debts. In 2015, that figure decreased for the first time by 13%. The decrease in interest rates to historical lows – they closed May in negative territory for the four month in a row and the monthly rate dropped to -0.013% – and agreements between borrowers and financial entities have helped to alleviate the drama.

Homes mortgaged in 2007 are the worst off

Borrowers who mortgaged their homes in 2007 and did so over second-hand homes have been hit the hardest. 20.4% of the foreclosures in Q1 corresponded to loans granted in that year. 15.6% related to mortgages signed in 2006 and 11.8% to loans taken out in 2008. The period comprising 2005-2008 accounted for 58.5% of all mortgage foreclosures and the highest values were reached in 2013 and 2007. During Q1, foreclosure proceedings were initiated against 0.20% and 0.19% of the mortgages granted over homes in each of those years, respectively, according to INE. 86.4% of the cases initiated during the three months to March related to second-hand homes, whilst 13.6% corresponded to new builds.

Homes owned by legal entities accounted for 17.7% of the total mortgage foreclosures. Beyond the housing market, the number of mortgage foreclosures registered over properties in general during the first quarter amounted to 19,354, which represents a 37.9% decrease with respect to the same period in 2015.

Andalucía, the most asphyxiated

The autonomous regions with the highest number of mortgage foreclosures over homes were Andalucía (3,144), Cataluña (2,113) and Valencia (2,094). And the fewest foreclosures were filed in Cantabria (43), La Rioja (54) and Navarra (61). Borrowers who took mortgages out between 2003 and 2015 in Murcia (0.25%), Andalucía (0.20%) and Valencia (0.18%) were the worst off. Meanwhile, those in the País Vasco (0.03%) and Cantabria (0.06%) suffered the least.

Original story: El Páis (by Sandra López Letón)

Translation: Carmel Drake

Sabadell To Invest €450M In Its Hotel Arm

4 December 2015 – Expansión

Hotel Investments Partnership (HI Partners), the hotel management and investment arm of Banco Sabadell, is backing itself forward to become one of the main players in the Spanish hotel sector. The firm wants to become one of the largest hotel owners in Spain, involving itself in the management of hotels and improving their income statements. “There is a significant opportunity in the market for the creation of large portfolios of hotel assets”, says Alejandro Hernández-Puértolas (pictured above, centre), CEO of HI Partners.

The company will invest €450 million over the next three years to refurbish and increase the value of its hotels, an amount that will be completely financed by Sabadell during this first phase.

The bank controls 99% of the company’s capital and Hernández-Puértolas and two other partners, Sergio Carrascosa and Santiago Fisas (pictured above, left and right, respectively), own the remaining 1%. Enric Rovira, Deputy CEO of the Sabadell, is the President of HI Partners, which has a dedicated team comprising 22 professionals and is managed independently of the bank.

Creation of two vehicles

Sabadell transferred 22 hotels with 1,600 rooms to HI Partners, after it had accumulated them on its balance sheet during the crisis as the result of foreclosures due to unpaid debts. Moreover, the entity has entrusted the team with the management of a portfolio of hotel debt amounting to €800 million, which as around one hundred assets associated with it. According to Hernández-Puértolas, around thirty of these hotels may be transferred to HI Partners over the next few years, increasing the number of rooms owned by the investment company from 1,600 to 8,000. Meanwhile, HI Partners is also analysing the purchase of assets in the market that are not linked to the bank.

For the management of this real estate portfolio, HI Partners has just constituted two new companies: HI Partners Holdco Value Added and HI Partners Holdco Gestión Activa. The first vehicle will be the focus of most of the company’s efforts and will receive around 90% of the investment. It will take ownership of the best hotels in the portfolio, notably the largest properties, those situated in premium areas and those capable of generating significant yields once they have been refurbished. This company currently owns three assets: the Hotel Prestige Coral Playa, located on the Costa Brava; the Silken Málaga – which HI has just purchased from Urvasco -; and the new hotel that the company is constructing on Calle Atocha in Madrid, which will be managed by the Axel chain.

The thirty-odd hotels to be transferred to HI Partners from Sabadell’s debt portfolio are also expected to be incorporated into the Value Added company. The challenge is for that vehicle to generate an EBITDA of €35 million in 2018 and of €70 million in 2021.

Meanwhile, HI Partners Holdco Gestión Activa now owns 19 hotels, the majority of which are smaller properties, located in secondary areas. The objective is to divest the majority of these establishments, although the firm wants optimise their management first. As such, it expects to sign agreements with several hotel operators to this end.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Residential Mortgage Foreclosures Increased By 5.6% In 2014

31 July 2015 – Expansión

Banks foreclosed 36,519 primary residence homes from individuals who were unable to make their debt repayments in 2014, an increase of 5.6% compared with the previous year. That is the main finding from the statistics published yesterday by the Bank of Spain about mortgage foreclosure processes involving residential properties.

Almost half of the homes handed over to financial institutions were “daciones en pago” (16,489), an increase of 10% compared with 2013. Meanwhile, there were 17,113 judicial mortgage foreclosures, up 2% compared with 2013. In 2,801 of those cases, the families still lived in the homes.

On a less negative front, only 25 primary residence homes were handed over as a result of court orders and with the intervention of security forces, compared with 93 cases in 2013.

Judicial processes involving mortgage foreclosures over other kinds of homes (second homes and rental properties) also increased, by 1.6%.

Meanwhile, data regarding housing permits was published yesterday, revealing that 19,134 licences were granted between January and May 2015, an increase of 28.2%.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

The RE Sector Is Showing Important Signs Of Recovery

9 June 2015 – Cinco Días

The recovery in the mortgage market is just one variable that shows that the Spanish economy is continuing to accelerate on more than one front.

The data showing an increase in the number of new loans taken out, after a long period of credit restrictions, is accompanied by statistics that reveal a decrease in the number of mortgage foreclosures, which have decreased by more than 14% since their peak in 2010. In total, 600,000 mortgage foreclosures have been processed since 2007. If we analyse the evolution of this figure since the beginning of the year, the seizure of homes has decreased by almost 7% during Q1 2015, with respect to the same period in 2014.

At the same time, an in-depth analysis of the mortgage sector reveals that the volume of real estate asset foreclosure is continuing to increase for banks, just like is happening with “daciones en pago” (assignment of deeds in lieu of payment). The explanation is that the banks are not managing – or are delaying, due to the disadvantageous market conditions in terms of price – the sale of the high volume of assets that they still hold on their balance sheets. This delay may, amongst other consequences, increase the exposure of Spanish securitisation funds to higher losses, just at a time when the first residential mortgage-backed securitisation in Spain has been subscribed after an eight-year drought. For the experts, the return of these transactions is a clear sign of the recovery in the credit market. Moreover, the fact that financing is beginning to flow again at a time when interest rates are low indicates that there will be faster growth in the housing market.

The signs of revival in terms of real estate transactions are good news, not only for the sector itself and its suppliers, but also for banks, consumers and the economy as a whole. In the case of the financial sector, the return of the flow of credit is opening the door to new financing proposals for the acquisition of real estate assets. This applies to the possibility of creating a specific mortgage loan for investors who want to purchase a home and rent it out, a typical financial product in the UK (buy-to-let). Nevertheless, it seems unlikely that a proposal that combines high risk – particularly in an immature market, such as the rental market in Spain – and limited growth prospects, will be of interest to banks, which today, more than ever, must not only channel their resources in accordance with (strict) solvency and efficiency criteria, but which must also orientate themselves towards higher-yielding, longer term investments.

The challenge for the house market is to start to learn to walk again, and to do so in an orderly and rational way, without repeating the mistakes that Spain has paid for so dearly in recent years.

Original story: Cinco Días (Editorial)

Translation: Carmel Drake

INE: Home Foreclosures Drop By 6.5% To 17,800 In Q1 2015

8 June 2015 – Cinco Días

During Q1 2015, 30,952 mortgage foreclosures (i.e. procedures to force the sale of properties resulting from unpaid mortgages) were recorded in Spain’s property registries. Of those 30,952 procedures, 17,780 related to homes, i.e. 6.5% fewer than during the first quarter 2014. The foreclosure of individuals’ primary residences amounted to 8,802, i.e. 6.9% fewer, according to data from INE.

The statistics institute highlights that not all mortgage foreclosures are the result of the legal removal (eviction) of owners from properties, and that in some cases, a single property is subject to several foreclosure procedures. The Bank of Spain has other statistics relating to evictions.

In general, non-payment results in foreclosure after a period of between six and 12 months, therefore the foreclosures completed during Q1 2015 related to mortgages that stopped being paid during the first half of 2014. Moreover, in addition to the 17,780 home foreclosures, INE recorded 10,316 other (foreclosure) processes involving premises, garages and offices and 1,361 relating to rural properties.

Most of the mortgages that result in the seizure of homes were signed during the last few years of the real estate bubble: 21.1% were signed in 2007, 15.2% in 2006 and 11.8% in 2008. Mortgages signed in those three years account for 48.1% of all foreclosures, although we should take into account that at that time, more than 100,000 mortgages were being granted per month, compared with current volumes of 20,000 per month. In relative terms, the worst year is still 2007, with 0.3% of the mortgages that were signed that year being foreclosed during Q1 2015, followed by 2008, 2009, 2013 and 2012 (between 0.21% and 0.25%).

By region, the effect of the real estate bubble is also leaving is mark: the highest rates of home foreclosures form a rainbow in the shape of the Mediterranean Coast. Andalucía leads the ranking (with 0.29% of the mortgages foreclosed last quarter), followed by Murcia (0.25%), Valencia (0.25%), Cataluña (0.23%). In the País Vasco, the rate is 0.02%.

Original story: Cinco Días

Translation: Carmel Drake

Cataluña: Banks Have 3 Months To Confirm Stock Of Vacant Homes

25 March 2015 – El País

Financial institutions, investment funds and the bad bank – Sareb – will have three months to inform the Generalitat about the number of empty homes they have on their books as a result of foreclosures or the assignment of deeds in lieu of payment (“daciones en pago”). Using this information, the Catalan Government will be able to impose a tax on vacant homes (the corresponding bill is currently with the Parliament) and undertake the necessary actions to establish their condition and demand their refurbishment. The decree that creates the register, approved yesterday by the Consell Executiu, also includes a pre-emptive purchase option by the Public Administrations of the homes whose residents are at risk of being evicted.

The Ministry for Housing, led by Carles Sala, wants to increase its stock of social homes in areas with highest demand. The urgent measure decree law to mobilise homes resulting from mortgage foreclosures establishes that the Public Administrations may exercise “their pre-emptive rights and rights of first refusal” – i.e. to a preferential purchase – when a company, financial institution, investment fund or Sareb is going to sell a home for which a mortgage foreclosure procedure is pending in any one of the 72 municipalities with greatest demand for housing. The text will come into force when the Official Document from the Generalitat of Cataluña (Documento Oficial de la Generalitat de Cataluña or DOGC) is published, which is expected to happen this week.

Sources from the Catalan Executive explain that they estimate that the banks have between 10,000 and 20,000 vacant homes on their books in areas with highest demand. This figure, which currently ranges quite a lot, should be confirmed by the register, which all owners of empty homes in Catalaña will have to sign up to. The occupants of the homes that will be handed over to the Public Administrations – which may in turn assign them to entities in the third sector (of social economy), per the request of those entities – will have to pay a social rent amounting to €212 per month on average.

The Department for Planning and Housing, led by Santi Vila (pictured above), is already exploring the market and may announce its first transactions next week. For the time being, the Catalan Housing Agency has €8 million to make purchases, although its final budget will depend on the amount collected through the tax that it will apply to the banks’ empty homes, which may range between €8 million and €26 million. Sources from the department explain that they are not looking to purchase homes for €100,000. The majority of the homes that have eviction orders pending are located in suburban neighbourhoods, and as such they are modest flats whose market prices may be as low as €20,000 or €40,000.

The Generalitat has also found that many of the homes in the stock that have been vacated due to evictions are falling into disrepair. For this reason, the decree obliges the entities that own such properties to carry out the necessary renovation work. If they do not, there are two options. The first involves a serious fine. The Housing Law establishes fines of up to €90,000, although the Catalan Government is in favour of ensuring that the amount of these fines is commensurate with the cost of the works that need to be performed. If the financial entity that owns the home does not carry out the renovation work, the Generalitat may conduct an “enforcement”, involving the expropriation of the use of the home for a period of between four and 10 years.

In the end, the department will try to avoid any double evictions through an aid package that will be collected in April. In this case, the objective is to prevent families that have lost their homes, but that have benefitted from the assignment of deeds in lieu of payment or social (discounted) rent by the financial entity, from having to face additional procedures if they cannot afford the rent.

Original story: El País (by Lluís Pellicer)

Translation: Carmel Drake

Supreme Court: Gains May Be Unfair If Banks Make Profits On Sale Of Foreclosed Properties

23 February 2015 – Expansión

The Supreme Court has established a doctrine and clarified the jurisprudence on the understanding that a bank may be unfairly rewarded in the event that it obtains a significant profit on the sale of a foreclosed home.

The High Court reached this conclusion after studying the case of a bank that launched foreclosure proceedings after the borrowers failed to meet their repayment obligations. The entity foreclosed the home for half of the value specified in the deed (escritura).

In this case, given that not all of the loan was paid off (following the foreclosure of the property), the bank filed a lawsuit against the borrowers and their two guarantors, for the difference between the debt and the value of the foreclosed property, plus interest and execution costs.

However, the borrowers had understood that, as a result of the action (the foreclosure), the debt would be considered to have been repaid, since the value of the property had been set by the bank itself on the basis that it would cover all of the debt relating to the mortgage. They argued, therefore, that the entity had obtained unfair gains.

Establishing doctrine

Although the (local) court rejected the claim and denied the existence of unfair gains, the Provincial Court of Córdoba upheld the appeal of the defendants and concluded that the foreclosure of the property at auction for a 50% discount was equivalent to a deed in lieu. Nevertheless, the Supreme Court did not share that ruling.

According to established case law, the Supreme Court Chamber, which has studied this case, stresses that “in principle, the exercise of the legal right to demand the unpaid part of the loan from the borrowers (following the foreclosure of the mortgaged property for 50% of its appraisal value) could not be regarded as a case of unfair gain”.

Nevertheless, the Supreme Court qualified its statement and noted that in the cases in which the foreclosure (of the property by the bank) is followed by a subsequent disposal (of the property) at a much higher price that the foreclosure price and for a very significant gain, then “it should match it with any outstanding loan and any claim made by the creditor to (share in) the profit”.

The Supreme Court Chamber insists that this clarification is supported by recent legislation introduced to strengthen the (legal) protection for mortgage borrowers.

Original story: Expansión

Translation: Carmel Drake