Project Ánfora: BBVA Studies €1bn+ Offers from Cerberus, CPPIB & Lone Star

19 November 2018 – Voz Pópuli

BBVA has chosen the three finalists who are going to compete for the largest portfolio of assets currently on the market, Project Ánfora. The entity is holding negotiations with three major North American funds, Cerberus, CPPIB and Lone Star, according to financial sources consulted by Voz Pópuli.

Up for grabs: a portfolio a real estate loans worth €2.5 billion. Some of the offers exceed €1 billion, according to the same sources.

BBVA expects to conclude the process before the end of the year to whereby end 2018 in the best way possible. It will be the last set of annual accounts with Francisco González as President, and at the current pace, they could be closed with one of the largest profits in the group’s history. The entity earned €4.3 billion to September; its record annual profit to date is €6.1 billion, which is registered in 2007.

In addition to Project Ánfora, BBVA has just closed Project Marina: the sale of its real estate arm Anida and of assets worth €13 billion to Cerberus. Nevertheless, the transfer of a large part of those assets, which proceeded from Unnim, is pending authorisation by the Deposit Guarantee Fund (FGD).

Property to zero

Following those two operations, and others in the past – such as the sale of its stake in Testa – the property left on BBVA’s balance sheet is going to almost immaterial. With that, the CEO, Carlos Torres, hopes that the real estate unit will stop weighing down on the group’s income statement from 2019 onwards.

The favourite of the candidates to purchase the €2.5 billion portfolio is Cerberus. Not only because of the appetite that the US fund has been showing regarding the purchase of real estate assets in Spain, but also because of the interest that it will have in Divarian, the new Anida, continuing to manage the assets.

CPPIB (Canada Pension Plan Investment Board) is the other entity that is backing the Spanish market most heavily, through its stake in Altamira and the acquisition of portfolios from Sabadell and BBVA.

Meanwhile, Lone Star has started investing more money in Spain following the changes in its management team and because it wants to gain volume to make its acquisition of CaixaBank’s property profitable.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Ibercaja Puts €600M Portfolio of Toxic Assets up for Sale

9 November 2018 – Eje Prime

The banks are continuing to divest property. The financial institutions have been working hard over the last two years to erase the ballast of toxic assets from their income statements, which they inherited during the immense economic crisis that Spain lived through at the end of the 2000s. One of the latest to make a move is Ibercaja, which has placed a real estate portfolio worth €600 million on the market.

In this operation, called Project Cierzo, the Aragon financial institution is being advised by the investment bank Alantra. Both companies expect to close the sale within the next few weeks, according to Vozpópuli.

The objective of Ibercaja, like that of other Spanish banks, is to clean up its accounts. In its case, it has the added incentive of its stock market debut in 2019, ahead of which it needs to divest more than half of its property.

Original story: Eje Prime 

Translation: Carmel Drake

Solvia: Sabadell Puts its Real Estate Subsidiary Up For Sale

17 October 2018 – El País

Sabadell is going to listen to offers from several real estate vulture funds that are interested in acquiring its subsidiary Solvia, the manager of its properties. The entity, which declined to comment, has now entrusted the sales process to an investment bank. In the summer, Jaime Guardiola, CEO of Sabadell, justified holding onto Solvia due to “the great contribution it makes to the bank”, but now he is taking a step towards selling it. Sources in the sector indicate that Sabadell wants to strengthen itself and take advantage of the good climate still being enjoyed in the real estate market.

The banks are getting rid of properties before the booming market deflates. They are selling not only portfolios, but also the companies that specialise in the management of those real estate assets, known in the sector as servicers. Until now, it was typical for the banks to include their servicers in the package of asset sales: that is what CaixaBank did with Servihabitat and BBVA with Anida.

But, Sabadell wanted to get more mileage out of its subsidiary and so decided not to sell Solvia when it divested around €12.2 billion of its properties to Axactor, Cerberus, Deutsche Bank and Carval. Nevertheless, Sabadell has now taken the definitive step and is open to offers from the interested vulture funds. According to sources in the market, the interested parties include Cerberus and Oaktree.

148,000 assets under management

Based on data as at May 2018, Solvia is one of the leaders in the real estate services market in Spain, with a portfolio of 148,000 units in assets under management, whose value exceeds €31 billion, according to the entity. In a report from Goldman Sachs, Sabadell indicates that Solvia’s annual profit amounts to €40 million.

The company has extensive experience in the marketing of new build developments, given that it has placed more than 10,000 homes in new developments on the market since 2015. At the moment, Solvia has 55 developments up for sale. In terms of rental, as of October, the firm was managing 32,000 assets, of which 74% belong to Sabadell. Solvia also works with other clients, including Sareb.

The report from Goldman Sachs noted that Sabadell could sell Solvia as a way of raising its capital ratios, with little detriment to its income statement.

Market sources agree with these arguments to explain the step taken by Sabadell. On the one hand, as the European Central Bank has indicated, entities must accelerate the sale of all businesses relating to the real estate sector. The banks are aware that times of lower economic growth will come and understand the importance of taking advantage of the appetite that the large international funds still have for Spanish property.

On the other hand, the sale of Solvia will also result in cost savings, a reduction in the workforce and, above all, lower capital consumption. In the last quarter, between March and June, Sabadell’s capital ratio decreased by one point, from 12% to 11% for its CET 1 fully loaded capital ratio (the highest quality indicator). The limit on the basis of which the ECB applies severe measures is 10.5%.

This decrease was due to the problems that Sabadell has been facing with its British subsidiary TSB, which was left without a service for weeks. Between March and June, the bank lost €138 million in provisions against real estate portfolios and the problems at TSB.

Original story: El País (by Íñigo de Barrón)

Translation: Carmel Drake

Sareb is Selling 33 Homes Per Day but still has 55,000 Properties on its Books

12 September 2018 – Expansión

Sareb managed to sell 5,926 properties during the first half of 2018, up by 7% YoY, for a total sum of €552.7 million. In other words, 33 units per day. Of the total, 86% of the properties were homes and garages, 9% were plots of land and 5% were commercial premises.

For the last four years, the bad bank has been helping delinquent property developers to market the properties that they placed as collateral for their loans to allow them to use those funds to settle their debts. Through that channel, it has sold another 4,692 units.

If this pace continues during the second half of 2018, the entity will exceed the sales figure registered in 2017 when 18,925 units were sold and a new record was set.

The bad bank was created with 107,000 properties and during its first five years of life, it has managed to divest 68,300 units. Nevertheless, we must bear in mind that Sareb has executed the guarantee for some of the 90,000 loans that it also took on when it started out and so that has led to an increase in the number of properties on its balance sheet.

Currently, the bad bank still has 55,000 homes and 34,000 garages and storerooms left to liquidate. Sareb is the largest owner of residential homes in Spain and the largest landowner in several autonomous regions, such as Castilla-La Mancha.

During the first half of this year, Sareb recorded revenues of €2.8 million in a special land sale campaign and another €13 million from the sale of other plots. It put 500 units on the market in each case. The managers are looking for a partner to build developments on the land.

Contracts under review

The senior management team at the bad bank is considering tearing up the expensive and exclusive contracts that the entity has with four specialists (Haya, Solvia, Altamira and Servihabitat), which cost it more than €200 million per year, equivalent to 35% of its operating costs.

Sareb lost €565 million last year and since its creation, has generated cumulative losses of €1.315 billion. In reality, the operating result is now positive. Nevertheless, the financial charges are so high – it had to take out a swap to cover itself in the event of an interest rate rise – that they completely determine its income statement.

The senior management team updated Sareb’s business plan in February, which forced the shareholders to recognise new write-downs. The review resulted in the recognition of a loss equivalent to 73% of the initial investment, which amounted to €4.8 billion.

Recently, the entity’s President, Jaime Echegoyen (pictured above) went further and warned that he thinks the shareholders will “struggle” to recover their investments.

Sareb has ten years left to liquidate all of its real estate stock. In reality, it is committed to returning the €37 billion in bonds secured by the State that it used to pay for the assets of the rescued savings banks.

The largest shareholder, the FROB, with 45.9% of the share capital, lost €950 million last year due primarily to the impairment of Sareb’s accounts due to its poor performance. The banks have also been forced to make significant adjustments. Sabadell, which has published its data, confirmed that its investment has generated an accounting loss of €321 million in five years.

The Minister for the Economy, Nadia Calviño, said yesterday, during her speech at a breakfast meeting organised by the New Economy Forum, that “for the time being, the Government is supporting Sareb’s strategic plan”. Nevertheless, she reminded listeners that the Administration is an important partner that participates actively in decision-making, “but it is not the only one”. 54% of the entity’s share capital is private.

Original story: Expansión (by Raquel Lander)

Translation: Carmel Drake

Sabadell Sacrifices Profits to Clean Up its Balance Sheet & Resolve the TSB Crisis

27 July 2018 – Expansión

Banco Sabadell has decided to sacrifice all of the profit that it obtained in the last quarter to clean up its balance sheet and leave behind the impact of the sale of its real estate portfolios and the complex IT integration of TSB.

The entity chaired by Josep Oliu earned €120.6 million during the first half of the year, a figure that represents a decrease of 67.2% with respect to the same period last year (€317.7 million) as a result of having recognised impairments amounting to €806 million. Nevertheless, if we ignore those extraordinary effects, the bank’s recurring net profit grew by 24.4% to €456.8 million.

The entity decided to take a hit on the income statement for the second quarter with a provision amounting to €177 million resulting from the macro sale operation of a real estate portfolio worth €12.2 billion and which was formalised in July, in other words, in the third quarter. In parallel, it decided to recognise a provision amounting to €92.4 million to deal with future compensation payments to customers of its British subsidiary, TSB, who were affected by problems caused by the connection of a new IT platform developed by Sabadell.

With this measure, the bank wants to shelve the technological crisis that it suffered in the United Kingdom and also leave its balance sheet almost completely free of the toxic assets that it accumulated during the economic crisis. Specifically, during the first six months of 2018, Sabadell decreased its problem assets by €7.012 billion, and by €9.547 billion during the last twelve months. Now, the problem balance amounts to €7.911 billion, of which €6.669 billion are doubtful debts of all kind (not only real estate) and €1.242 billion are foreclosed properties. Thus, the ratio of net problem assets over total assets amounts to 1.7%. The default ratio following the portfolio sales amounts to 4.5%.

As at 30 June 2018, the bank’s fully loaded CET1 capital ratio amounted to 11%, although that will rise to 11.2% following the transfer of the majority of the toxic assets, closed in July.

The bank led by Jaime Guardiola has sold the bulk of its non-performing and foreclosed loans to Cerberus, with whom it is going to create a joint venture in which the fund will hold an 80% stake. The entity has also sold portfolios to Deutsche Bank and to Carval Investors. Solvia has not been included in any of those transactions and will continue to be fully owned by Sabadell.

Between January and June, Sabadell increased the volume of its live loan book by 3.7% thanks to a boost from SMEs and mortgages to individuals in Spain. Customer funds increased by 2.8% YoY driven by demand deposit accounts, which amounted to €105.4 billion. Off-balance sheet funds also grew, by 1.2%, during the quarter, primarily due to investment funds.

During the first half of the year, Sabadell’s interest margin remained stable, given that the entity earned practically the same amount as it did in the six months to June 2017 (€1.81 billion). The bank has been affected by exchange differences and a reduction in results from financial operations (-51%); by contrast, fee income grew by 6%. Thus, the gross margin fell by 8.8% to €2.631 billion.

The reaction of investors to these results has been negative. Sabadell’s share price fell by 2.99%, the third largest drop on the Ibex, to €1.37. So far this year, the bank’s share price has depreciated by more than 14%.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

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

11 June 2018 – Expansión

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

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

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

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

Cataluña

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

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

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

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

CaixaBank Repurchases 51% of Servihabitat from TPG for €176M

8 June 2018 – Expansión

The financial institution, which until now owned 49% of the real estate firm, is going to restore control of 100% of the firm four years after it sold the majority stake to TPG.

CaixaBank has announced an agreement with the fund TPG to repurchase 51% of the real estate manager Servihabitat for €176.5 million. With this operation, which will return full control over the real estate subsidiary to the financial institution, CaixaBank wants to enjoy “greater flexibility and efficiency in the management and marketing” of its real estate assets “as well as a reduction in its costs”.

The operation, which still needs to be approved by the competition authorities, will have a negative impact of around 15 basis points on CaixaBank’s first level capital ratio (CET1 fully loaded) and of around €200 million on the bank’s income statement this year.

Nevertheless, the entity chaired by Jordi Gual expects the impact to be positive over the next few years, amounting to around €45 million per year.

The financial institution sold 51% of Servihabitat to TPG in 2013, in an operation that valued the real estate subsidiary at €370 million and which generated a gross gain of €255 million for CaixaBank, which retained control of the remaining 49%.

The agreement between CaixaBank and TPG included a clause whereby Servihabitat would manage La Caixa’s real estate assets for a decade. Less than five years after that agreement was announced, CaixaBank has decided to recover 100% of the share capital of its real estate servicer.

In January, Iheb Nafaa was appointed as the CEO of Servihabitat to replace Julián Cabanillas, who had been linked to the firm for two decades, and who had served as the most senior executive for the last twelve years.

Nafaa is an Engineer in Statistics, Econometrics and Finance from the École Nationale de la Statistique et de l’Administration Économique in París (France) and has extensive experience as a director of companies such as BNP Paribas, GE Capital and Gescobro.

Original story: Expansión (by J. Díaz)

Translation: Carmel Drake

Liberbank Transfers €180M in Toxic Assets to JV with G-P-Bolt

18 May 2018 – El Economista

Liberbank has transferred real estate assets with a gross accounting debt of around €180 million to a joint venture with G-P-Bolt, in which it will hold a 20% stake, according to a statement filed by the financial institution on Friday with Spain’s National Securities and Exchange Commission (CNMV).

This joint venture, in which G-P-Bolt will hold the remaining 80% stake, has been constituted with the purpose of managing, developing and owning a portfolio of foreclosed assets from Liberbank and its group.

Liberbank has highlighted that the close of this transaction, which has a neutral effect on its income statement, forms part of the strategy to reduce its non-performing assets (the most doubtful foreclosed assets), which has resulted in a decrease of €1.82 billion between 31 March 2017 and 31 March 2018, equivalent to a 30% reduction in its stock.

Finally, Liberbank has reiterated its objectives in terms of the quality of its assets communicated to the market and expects to achieve an NPA (non-performing assets) ratio of less than 12.5% by the end of this year.

Original story: El Economista

Translation: Carmel Drake

Sabadell Cuts its Property-Related Losses by 50% in Q1 2018

3 May 2018 – Eje Prime

Sabadell’s real estate weighs down on its income statement by half as much as it did a year ago. The bank’s losses resulting from the property business decreased from €161.1 million to €84.8 million in just one year, according to figures published by the bank at the end of the first quarter of 2018.

The division of the financial entity that manages its property (the Asset Transformation Unit) recorded a negative result but gave the bank reason to hope. Sabadell justified the improvement to the increase in the gross margin on real estate, which rose by 57%, to €30 million, as well as to the 50% decrease in provisions and the impairment of the portfolios, with respect to the opening quarter of 2017.

Moreover, the bank is continuing to work on cleaning up its balance sheet of toxic assets. Its latest move in this regard involved the launch of a sales process for a real estate portfolio worth €7.5 billion, for which several funds are already bidding. Three of them, Cerberus, Blackstone and Lone Star, have been testing the water with the entity by suggesting that the operation, which is expected to be closed in the summer, should also include its servicer Solvia.

In this sense, during the first quarter, Sabadell increased its coverage ratio over doubtful debt in its real estate business from 56.7% to 62.7%. Thanks to that, the bank is able to apply higher discounts on the sale of its portfolios without having to incur losses that would negatively affect its income statement. Currently, the portfolio of inherited real estate assets that the entity chaired by Josep Oliu still maintains is worth almost €12 billion.

Original story: Eje Prime 

Translation: Carmel Drake

Insur Carves Out its Property Development & Rental Businesses

29 January 2018 – El Confidencial

In order to adapt itself to the preferences of investors, Grupo Insur is carrying out the separation of its two main branches of activity: property development and real estate management – the latter arm will hold onto the rental properties. This carve-out could be described as historical given that the firm, which is listed on the main stock market and led by Ricardo Pumar, has used the combination of both businesses as its best antidote against the cyclical crises of the real estate sector. But now, although the two activities will continue to be owned by the parent company and consolidated for reporting purposes, they will generate independent income statements, belonging to the two subsidiaries.

According to sources close to the Sevillan company, the first step in this sense has been to increase the share capital of Insur Promoción Integral, the real estate parent company, to reach assets worth €80 million. The firm had a frantic 2017 in terms of house sales, with activity soaring by 41% in the last two quarters to reach €37.4 million between June and September (including the sale of properties jointly owned with third-party partners, whose amounts are not recorded by Insur).

In total, the group’s development activity generated sales of €60 million between January and September – up by 82% YoY – of which €28 million proceeded from revenues for the construction of housing developments, both in-house, as well as for initiatives with partners such as BBVA, Santander and the bad bank (Sareb). Insur planned to have 1,000 homes under construction distributed across 18 developments in Andalucía and Madrid by the end of last year.

By contrast, the real estate management activity is continuing to see a decline in its contribution, in line with previous years. Insur owns rental buildings spanning around 116,000 m2, almost all of which are located in Andalucía, although it is currently building a business park in Madrid. Its vacancy rate has fallen by 10 points in recent months, to 23% in September, and the rental income generated during the first three quarters of last year amounted to €7.5 million compared with €8 million during the same period in 2016.

The Junta de Andalucía, to which Insur has traditionally leased space, especially in Sevilla, vacated 12,000 m2 in May 2016 and whereby increased the total amount of space that it has stopped leasing during the final years of the crisis to 33,000 m2. Insur details in its accounts to September that the annualised rental income from tenants that have already signed contracts (not all of them have moved in yet as the offices are being refurbished) is €12.7 million. The picture of this business area is completed if we look at the request for additional information about the accounts for 2016 that Insur sent to the CNMV in October, which shows that each year it spends €6.8 million on these rental properties (…).

Coverage from Sabadell

For all these reasons, and according to the same sources, the managers of Insur rule out the creation of a Socimi to group together the real estate management activity, for the time being, given the need to improve its results and have better visibility over its evolution in the future. Moreover, there is no need for it to provide liquidity to its shareholders, given that 43% of Insur’s share capital is free-float. The company’s 15 directors control 37.5% of the share capital.

Insur’s share price has increased by more than 50% over the last 12 months, to reach €12.50. Its shares are soon going to be covered by analysts at Banco Sabadell, who will join the more specialist firms that have been following the stock until now: Arcano, Kepler and Fidentiis.

Original story: El Confidencial (by Carlos Pizá de Silva)

Translation: Carmel Drake