VIA Outlets Buys 4 European Outlet Centres, Including 1 In Sevilla

25 November 2016 – Real Estate Press

VIA Outlets, the joint venture formed by APG, Hammerson Plc, Meyer Bergman and Value Retail, has signed an agreement to acquire four outlet centres, with a total value of €587 million and an initial yield of 5.5%, in a deal that is pending authorisation by the regulators.

The outlets are located close to major cities in Germany, Portugal, Spain and Poland. This purchase increases the value of VIA Outlets’ portfolio, which comprises ten assets, to €1,100 million, in which Hammerson owns a 47% stake.

Timon Drakesmith, CFO of Hammerson Plc and Chairman of VIA Outlets’ Advisory Committee, said: “This is a rare opportunity to acquire these four outlet centres in an off-market operation”.

“The European markets are very well positioned and are continuing to experience strong sales growth, supported by improved supply and an increase in the number of tourists across Europe”.

VIA Outlets has identified opportunities to boost sales growth and revenues from the operation, through a change in the commercial mix and the implementation of various marketing and tourism initiatives.

To support the portfolio increase, the organisational structure of VIA Outlets has been improved through external hires to expand the asset management, marketing and finance teams. The estimated IRR for the assets acquired is 11% over five years. (…).

In Spain, the JV has acquired the outlet located in the north east of Sevilla, which attracts a growing number of tourists visiting Andalucía. The outlet has a surface area of 16,400 m2, and is home to 65 brands, including Tommy Hilfiger, Mango, Polo Ralph Lauren and Adidas. Its annual sales amount to €3,600 per m2. (…).

Original story: Real Estate Press

Translation: Carmel Drake

Deutsche Will Partially Finance Popular’s New RE Firm

21 November 2016 – Expansión

Popular has taken a new step in the constitution of its real estate company, a key project in its attempt to try to recover investors’ lost confidence, which it hopes to have ready by the first quarter of next year. According to financial sources, Deutsche Bank has reached a preliminary agreement to finance this company.

In total, up to six banks and funds have expressed interest, which does not mean that they will all end up participating. However, according to sources close to the process, “these players are being offered provisional agreements to invest between €200 million and €500 million”. The same sources state that they have also held talks with the giants Apollo and Cerberus, who declined to comment about the process.

Popular wants to transfer assets with a gross value of €6,000 million, primarily finished homes, to the new entity. Specifically, for this reason, executives at the entity feel uncomfortable that the project is being referred to as the bad bank in financial circles because it will also incorporate high quality assets.

On the liability side, the company will initially have share capital contributed by the bank, which will then be distributed amongst all of its shareholders in the same proportion as their existing shareholdings. In addition, the company will issue subordinated debt, which Popular will subscribe to, as well as senior debt.

It is expected that the banks and funds that want to participate in the financing will do so through this latter (senior debt) tranche.

According to a report from Bank of America Merrill Lynch last Thursday, in which the firm reduced the target price from €1.30 to €0.75, the company’s liabilities will be constituted as follows: the share capital will amount to €975 million, whilst the senior debt will amount to €2,200 million and the subordinated debt will amount to €1,400 million. The US bank’s analysts predict that the players who finance the senior debt tranche will request an IRR of 10%.

Deutsche Bank, which together with EY, is acting as financial adviser to the project, as well as Apollo and Cerberus, have been active in the Spanish real estate market in recent years. The former acquired two portfolios from Bankia, between the end of 2015 and this summer, comprising loans, both real estate and property developer related, worth almost €1,000 million. Meanwhile, Apollo has acquired several portfolios (it recently bought a hotel portfolio from CaixaBank) and controls the former platform (servicer) of Santander, Altamira. And Cerberus, which hired the former CEO of BBVA, Manuel González Cid in 2014, owns the real estate arm of Bankia, now Haya Real Estate, and the Cajamar platform.

Assets on the balance sheet

Popular has damaged assets on its balance worth €33,000 million before provisions, which amount to another €15,000 million. According to Bank of America, this high volume (of assets and provisions) eliminates many potential interested parties from a merger. Besides constituting this company, Popular also wants to accelerate the sale of these assets through both its wholesale and retail channels.

The bank earned €94.3 million during the first nine months of 2016, 66.1% less than during the same period in 2015. Nevertheless, its banking activity (when separated out from its real estate business) generated profits of €817 million.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake

Sareb Puts Its Largest Portfolio Ever Up For Sale

18 October 2016 – Expansión

Sareb has just launched a competitive process to sell the largest portfolio so far in its three and a half year life. The macro-operation was approved at the most recent Board meeting, in light of the investor appetite that is being left unsatisfied by the shortage of products currently available for opportunistic funds, which buy distressed debt at knockdown prices. The target audience for this latest portfolio are international specialist funds with management capacity and knowledge of the Spanish market.

According to sources in the sector familiar with the operation, the portfolio comprises a package of 200 non-performing loans, which are secured by residential flats, mainly housing blocks located in Cataluña, Andalucía, Madrid, Galicia and the Community of Valencia. Together, their nominal value amounts to €1,000 million.

The competitive process is now officially open, although no offers have been received yet. (…). According to the sources, Sareb plans to sell the whole package to a single buyer before the end of the year.

The bad bank has its own investor relations department and regularly holds road shows for large financial institutions. Last year, it held meetings with 780 international investors. In Spain, the opportunistic funds that have sold portfolios over the last four years have managed to obtain returns (IRR) of between 10% and 20%, according to sources in the sector.

This year, Sareb’s activity has been characterised more by individual operations than by high volume deals. Its transactions have become more complicated since the Bank of Spain introduced accounting regulations requiring the bad bank to mark to market the value of its assets each year. (…).

Sareb is a giant container of NPLs, above all loans to property developers, which it purchased from the savings banks that received public aid. 25.7% of the entity’s remaining balance sheet correspond to real estate assets. (…).

Sareb has outsourced the sale of its real estate assets to four agents: Solvia, Altamira Asset Management, Servihabitat and Haya Real Estate. On average, it is selling around 27 units per day and has a market share of 4%, which is low because the market is very fragmented. For the first time in 2015, sales of land exceeded sales of residential properties. The latter are being sold for an average price of €74,000, according to Sareb’s annual report for 2015.

Sareb is also a property developer

Earlier this month, the entity put its first completed residential developments on the market. They contain 700 homes located all over Spain, which were left unfinished when the savings banks started to have solvency problems. These properties are being sold to the public for prices ranging between €32,000 and €390,000, and along with 1,300 other new build homes, form part of the “Casas de Estreno” campaign. The corporate website receives 409,000 visits per year and intensive utilisation of big data is helping the entity to maximise its returns from these transactions. (…).

Original story: Expansión (by Raquel Lander)

Translation: Carmel Drake

Sareb Sells NPL Portfolio To Bank Of America & Hayfin

16 September 2016 – Expansión

Sareb has just sold a portfolio of non-performing loans worth €70 million to Bank of America and Hayfin Capital Management (founded by former directors of Goldman Sachs), which is secured by several residential buildings in Madrid. The agents of the operation have been Haya Real Estate and Solvia, who have declined to comment. Sareb does not have its own sales network, but uses the exclusive services of the two real estate managers, together with those of Servihabitat and Altamira Asset Management.

According to sources close to the operation, the discount obtained in the transaction has been 50%.

As a result of the new accounting legislation, operations are now a lot more segmented and therefore smaller.

Solvia, which belongs to Banco Sabadell, has been collaborating as one of Sareb’s agents for almost two years. It won the management of a portfolio containing 42,900 assets, of which 33,000 were properties originally from Bankia and the others were loans acquired from Banco Gallego and Banco Ceiss with various kinds of real estate guarantee.

In March, Sareb completed the sale of another batch of loans, which were secured by industrial logistics assets, hotels and offices, located in Madrid, Barcelona, Cáceres and Tarragona. The nominal amount of the operation amounted to €73.7 million.

The opportunistic funds, the typical stars of these operations, are starting to withdraw from the Spanish market and funds with more potential are now arriving, including Socimis and family offices. The funds that have sold portfolios in the last four years have managed to obtain IRRs of between 10% and 20%, according to business people in the sector.

Sareb was created in 2012 and is owned by the FROB (45%) and by the main banks (55%), with the exception of BBVA. 80% of its assets are loans to property developers and the remainder are real estate assets. Their total nominal value amounts to €107,000 million. By size, the bad bank exceeds its Irish counterpart Nama. Even so its market share barely reaches 4%, because it is a very fragmented market. The large banks compete directly with Sareb in the sale of properties, but bank bad has the advantage of time on its side. It has 12 years to execute its business plan and is under no pressure to list on the stock market.

According to the latest statements by its Chairman, Jaime Echegoyen, Sareb should stop losing money next year. Recently, it has started to develop plots of land from scratch, which will result in 700 homes and €100 million of investment. 21% of Sareb’s revenues are generated by the sale of real estate assets. It is currently selling an average of 27 units per day.

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

JLL & IESE: Investors Are Willing To Take On More RE Risk

30 March 2016 – Expansión

The increase in liquidity, accompanied by the lack of profitability of alternative assets – such as the bond market – and the volatility of world stock markets all mean that the real estate sector is regarded as a very attractive option for investors. This trend, which was first glimpsed last year, will be maintained in 2016, but there will also be a step up in terms of the risk curve this year. That is one of the main conclusions emerging from a report prepared by the consultancy firm JLL and the business school IESE, on the basis of interviews with 101 investors in the sector, both domestic and international.

More yields / Most investors are looking for value added opportunities in light of the scarcity of prime assets.

The study indicates that the lack opportunities to add value in prime areas and the increase in funding means that investors are willing to take on more risk in their operations in the real estate market, although they continue to analyse the feasibility of these assets and check that they are financeable, given that capital continues to be selective.

In this way, investors have expanded their radars to other less exclusive areas and to buildings that need renovating. One example of how investors are willing to take on more risk with their operations is the purchase, in July 2015, of Telefónica’s former headquarters on Calle Ríos Rosas (Madrid) for €90 million by the institutional investors M&G. The building will be completely renovated and its tenant will be WPP, the multi-national media agency and marketing group.

Similarly, the report detects interest for alternative investments, such as student halls and health centres, as well as an increase in rental prices.

Asset values are on the rise

Following a record year in the commercial real estate market, with investment of €9,200 million, 89% of investors expressed a “high” or “very high” interest in the Spanish market, compared with 10% who expressed a “low” level of interest. In addition, 60% of the investors surveyed consider that the value (of assets) will continue to grow for another 18 months, at least.

The responses to the survey reveal that the typical investment in the commercial real estate market falls in the range of €30 million to €100 million, with a gearing level of between 50% and 60%. The average investment time horizon is less than five years, with an initial yield of between 5% and 7% and an IRR of between 8% and 14%. Offices in Madrid and Barcelona, logistics warehouses and shopping centres are the business segments in most demand. They are followed by retail premises on main streets and hotels, whilst the assets generating the least interest are residential properties and land.

Looking ahead to the future, investors remain alert to Spain’s political situation. The investors surveyed consider that the political uncertainty at home may slow down the upwards cycle seen over the last few years and they express concern regarding the possibility that some local governments, such as the one in Barcelona, are not granting them the permits they need.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake