Tag: hedge funds

Experts Rule Out Risk Of RE Bubble In The Short Term

10 May 2017 – El Confidencial

The fact that the Spanish real estate market is enjoying happier times is more than clear. And all of the players in the sector are aware of the fact: property developers, consultants, construction companies…Nevertheless, the “overheating” that some say is threatening certain segments of the market, is falling well short of a full-blown real estate bubble, for the time being at least. At least that is according to the speakers who participated in the “Real Estate Investment Opportunities” day organised by El Confidencial and Colonial.

Real Estate Market Forum

Indeed, Juan José Brugera, President of Colonial – which is currently evaluating its transformation into a Socimi – stated that the market is “a long way from a bubble. What we are seeing is the launch of projects”. In this sense, he pointed to the German market by way of example. “It is very stable. (…) What you have to do is take a risk and invest. With this stability in terms of value, your investment will be rewarded”.

In his opinion, “a bubble is something else. It is an excessive value, but, one of the characteristics of the European property sector is that financing is very tight in terms of size and type. I don’t see a bubble, what I see is a more professional management of the assets, where the ability to generate value is what will determine prices, provided the markets are not affected by global circumstances”.

The CEO of the consultancy firm JLL in Spain, Enrique Losantos, also rules out the risk of a bubble. “Given current prices, you could be forgiven for thinking that the market is overheating, but the fact is, there is still a long way to go, especially for those investors who know how to extract value from the portfolios of assets that are coming onto the market and which should be invested in and managed to adapt them to the demands of the current market. These players will be able to obtain returns, even in the double digits (…)”.

Who will control the large rental stock?

Meanwhile, Ignacio de la Torre, Chief Economist at Arcano, said that “there is not a bubble at the moment, but if we continue at this rate, there will be one”, especially in the residential market. He highlighted the significant interest that certain assets have sparked in Spain, such as, for example, rental homes, especially amongst institutional investors. “When everything was clogged up, it seemed like Spain was going to go bankrupt, but then investors with large risk appetites entered the market to inject liquidity and the economy started to work again. Now, those hedge funds are starting to recycle the assets they bought and as the market for rental homes increases, so institutional investors are entering the segment, which is what is happening in other countries too. In the future, insurance companies and pension funds are expected to become the owners of the large stock of rental housing in Spain. (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Santander Launches The Sale Of Its Landlord URO Property

11 November 2016 – El Confidencial

Banco Santander and the other shareholders of URO Property, the Socimi that owns 755 of the Cantabrian-based entity’s branches, have formally launched the sale of the company, with a view to finding a white knight to acquire most of the Socimi’s shares.

According to three sources close to the operation, Citi was given the mandate to open an organised process on 19 September, with a view to closing the operation before the end of the first half of 2017.

The US entity had already been engaged in May to analyse the possible alternatives for a change in the shareholder structure and now that interest from sovereign and pension funds, insurance companies, fixed income investors and several real estate companies, has been confirmed, the formal process has been launched.

Citi, Santander and URO all declined to comment on the announcement.

The Socimi is attractive because it represents a low risk investment, with guaranteed returns and the certainty of dividend distributions. Those characteristics make it an object of desire for large sovereign funds and very conservative vehicles, the main candidates that Santander and its partner shareholders are targetting for this divestment process.

In addition, URO’s shareholders are open to exploring formulas such as the one that Santander has just successfully carried out with Metrovacesa, including merging the Socimi with another large landlord of commercial premises, according to the sources.

In addition to the activity undertaken by the bank chaired by Ana Botín, several other entities have also sold off large batches of branches in recent years, including BBVA, which sold 800 branches to Tree Inversiones Inmobiliarios, now part of Merlin, and Sabadell, which sold a portfolio of 228 branches and 133 parking spaces to Moor Park, which, in turn, subsequently sold the portfolio to the Mexican businessman Moisés El-Mann.

URO is currently very limited in terms of its business operations, due to the clauses included in the bond issue, amounting to €1,300 million, which it undertook in the spring of 2015, a month after it sold 381 of Santander’s branches to Axa.

Those two operations were a complete success from a financial point of view because they granted the Socimi the stability that it had been seeking for so long, but they also reduced its room for maneouvre, as the entity was forced to use the rental income from 666 of Santander’s branches to guarantee the issue, and also pledge another 80 branches (…).

Santander and CaixaBank will continue to hold stakes in URO

According to URO, the net book value of its current portfolio of branches amounts to €1,585 million, based on its most recent official accounts corresponding to the month of June, whilst its market capitalisation on the Alternative Investment Market (MAB) amounts to €197.5 million.

The decision to activate a formal sales process represents the company’s response to the desire expressed by several of its shareholders to exit from its share capital, now that the “lock-up period” has come to an end.

URO’s creditor entities, led by Santander and CaixaBank (which hold stakes of 22.78% and 14.5%, respectively), decided to execute their debts and take over control of the company in 2014. Both plan to continue as shareholders in the Socimi following the sale, although they are hoping to take advantage of this move to adopt smaller positions.

Other shareholders include BNP Paribas, one of the entities that wants to sell, which controls 9.18%; whilst the former shareholders of URO, Sun Capital (renamed Atisha Holding) and Pearl Group (now Phoenix Life) hold 18.92% and 14.90%, respectively. Other entities, such as Barclays and several hedge funds, which hold stakes of less than 5%, also want to exit. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Merlin’s Share Price Rises For 10 Consecutive Days

11 August 2015 – Expansión

Merlin’s share price has increased by 14% since 27 July, taking the gain in the Socimi’s share price for the year to 35%, just behind Hispania.

Merlin Properties has achieved an unprecedented milestone in its short life on the stock market. For the first time since its debut in June 2014, the largest Socimi on the stock exchange by market capitalisation has recorded ten consecutive trading sessions of share price rises. As such, the share price now sits just below its historical peak; and the naysayers who forecast that the share price was certain to fall have been forced to abruptly exit their positions.

The real estate company’s share price has soared from €9.50 to €10.81 since 27 July. This 13.8% increase first began to take root before the company closed its recent capital increase; and has only strengthened further following the completion of that operation. Merlin raised €1,033 million from its capital increase and will use the proceeds to finance part of its purchase of Testa, the real estate subsidiary of Sacyr.

Just like in the case of the recent capital increase completed by the other large Socimi in the market, Hispania, investors were eager to snap up Merlin’s new shares. Demand for the capital increase exceeded supply by 8 times and the new shares will begin trading tomorrow, Wednesday 12 August. (…).

The strong rally over the last 10 days puts an end to the “correction” that Merlin’s share price has suffered since it peaked in April at €11.22 per share. The share price subsequently fell below the €10 mark in June…in response to the company’s announcement that it had agreed to purchase Testa, in a high-flying operation that will turn Merlin into the largest real estate company in Spain, with assets of around €5,000 million.

The size of that transaction and the capital increase fired up the appetite of the most speculative hedge funds, which have spent the summer predicting that Merlin’s shares would pay the price for the size of its purchasing offensive. (…).

However, they have been caught on the back foot by the significant increases in the share price in recent trading sessions and so have had to exit their positions quickly. They have repurchased shares in the market, which sources say explain most of the sharp rises seen in recent days. The successful completion of the recent capital increase has only exacerbated that trend.

Cicogne Management, Davidson Kempner, Marshall Wave and PSquared are the hedge funds that held the largest short positions in the share, which has increased in value by 35% since the beginning of the year following yesterday’s rise. It is now very close to its main rival Hispania, in what is proving to be a very busy summer for the Socimis on the stock market.

Original story: Expansión (by Enrique Utrera)

Translation: Carmel Drake

Bankia Applies 80% Discount on Developer Loan Portfolio Sold to Chenavari

10/10/2014 – Expansion

Bankia has sold a part of its real estate-backed loan portfolio to Anglo-Saxon hedge fund Chenavari. The credit package formed the part which was not transferred to Sareb (Spain’s bad bank).

Chenavari put up €79 million for the portfolio, known as Project Sky. Face value of the loans was estimated at €400 million which means that the entity applied an 80% reduction on the original appraisal prices. According to the information provided by Bankia, the sold portfolio consisted of credits of par value of €335 million. The amount shall be extended by the value of 419 collateral properties.

Great majority of the loans is non-performing with a real estate collateral, apart from being fully provisioned. In fact, the bank led by Jose Ignacio Goirigolzarri (pictured) assured that the operation allowed it to cut in defaulting loan volume by €320 million.

Not long ago, Bankia transferred another non-core portfolio called Project Amazona to Starwood and Sankaty. The €800 million worth of credits was sold for half of this amount, €400 million.

 

Original article: Expansión (by J. Zuloaga & R. Casado)

Translation: AURA REE

Sareb´s Chairwoman Reckons “There Are No Good Or Bad Assets, Everything Depends on the Price”

26/06/2014 – Expansion

Belen Romana, the chairwoman of Spain´s bad bank which pools all toxic assets of nationalized banks, has told that “perception of the country has radically changed over the past months” and the vivid interest in assets shown by investors has shot up significantly.

“In 2013, we have held meetings with more than 600 both financial and property investors, almost 2 per day, and the pace is still sustained” assured Romana at the Most Powerful Women Summit 2014 organized by the Fortune magazine in London.

She admitted to be targeting at rapid sales and stated “the assets are not either bad or good because what really matters, is the price. When it is good, the asset seems good as well”.

At her hearing, Romana had to explain what the Sareb is and how was the first and a half year of its lifespan. “Our company was born with a misguiding name: we are not a bank and if you begin called ´the bad bank´that does not give a nice outlook either. We have inherited troubles made by others and (…) we had to contruct a plane already being in the air”.

The chairwoman said she accepted the position for two reasons: firstly, she felt she had to do something more for her country and secondly, because she knew well how to deal with the mix of public and private issues thanks to her professional experience. Belen Romana worked as a director of the Treasury and an advisor at such entities as Banesto, Acerinox, the Bank of Spain and the CNMV (Spanish Stock Market Commission). She was also a strategical director of telecommunications supplier Ono.

 Sareb manages a €50 billion worth of assets, out of which only 20% are of the real estate type, while the rest are financial assets.

Asked about her cooperation with hedge funds, she told “our most challenging task is to set the rules at the game because we are going to stay in the market for the next 15 years.

Original article: Expansión (by Amparo Polo)

Translation: AURA REE