Sareb Offers the Contracts of Altamira, Servihabitat & Solvia to its Rivals

17 June 2019 – El Confidencial

Sareb is on a mission to change its course. According to market sources, the bad bank chaired by Jaime Echegoyen (pictured below) has decided to put its contracts with Altamira (owned by doBank), Servihabitat (Lone Star) and Solvia (Intrum) out to tender two years before their scheduled renewal.

Even though the contracts are not due to expire until the end of 2021, Sareb is putting them out to tender alongside that of Haya Real Estate, which is due to expire at the end of 2019. This represents a boost for Cerberus’s servicer, given that its competitors will now also have to focus on retaining their own contracts rather than just bidding for Haya’s.

In the event that Sareb awards the contracts of Altamira, Servihabitat and Solvia to other entities, it will have to compensate the servicers since their contracts clearly establish early termination clauses.

Altogether, Sareb is looking at putting out to tender the management of €34 billion in loans and properties that it still has left in its portfolio. The four will have to submit their bids in the next few months, specifying which assets they want to manage and what commissions they will charge.

The largest mandate is that of Haya, which manages assets proceeding from Bankia, which accounted for 37% of the bad bank’s original assets. It is followed by Altamira, which manages the assets proceeding from Catalunya Banc, BMN and Caja 3 (29% of the total); Servihabitat, which manages the assets from NCG Banco, Liberbank and Banco de Valencia (19%); and Solvia,  which manages assets from Bankia (foreclosed), Banco Gallego and Ceiss (15%). Clearly, there is a lot at stake for these servicers.

Original story: El Confidencial (by J. Zuloaga & R. Ugalde)

Translation/Summary: Carmel Drake

The FROB Recorded a €382M Provision Against its Stake in Sareb in 2018

20 May 2019 – El Confidencial

The Spanish Fund for Orderly Banking Restructuring (FROB) presented its accounts for 2018 this week revealing that it decided to recognise a €382 million provision against its stake in Sareb last year.

In this way, the FROB has now written off 92.3% of its initial investment in the entity chaired by Jaime Echegoyen (pictured above), up from 75% in 2017. If the rest of the investor entities, namely all of the large Spanish banks with the exception of BBVA, do the same, then they will have to recognise losses of around €450 million.

In absolute terms, the FROB’s stake in Sareb is now worth €169 million compared with its initial investment of €2.192 billion. The FROB is Sareb’s largest shareholder with a 45.9% stake, followed by Santander (22.3%), CaixaBank (12.2%), Sabadell (6.6%) and Kutxabank (2.5%).

As the bad bank’s largest shareholder, the FROB typically sets the tone of the provisions for the other entities. Last year, after the FROB increased its cumulative provision to 75%, other shareholders such as CaixaBank and Sabadell recognised extraordinary provisions in their accounts for Q2. This year, the average provisioning rate is expected to increase from around 70% to 90%.

Sareb closed 2018 with losses of €878 million (up by 55%) due to the strong competition in the institutional market and the real estate crisis that still affects much of the country. The bad bank sold 21,152 properties last year and its income from property management soared by 19% to €1.4 billion, but its income from the loan portfolio fell by 16% to €2.2 billion and so total income fell by 5% to €3.7 billion.

The outlook for the bad bank for the next few years is not great and many experts forecast that not even a single euro will be recovered from Sareb.

Original story: El Confidencial (by Jorge Zuloaga)

Translation/Summary: Carmel Drake

Sareb’s Losses Plummeted by 55% in 2018 to -€878M

28 March 2019 – Cinco Días

Sareb recorded losses of €878 million in 2018, which were 55% greater than those registered in the previous year. Moreover, the bad bank forecasts a similar result for this year.

Despite the disappointing results, Sareb ended 2018 with own funds of €2.6 billion, which represents a sufficient volume to not have to request any capital increase from its shareholders, which include most of Spain’s major banks and the FROB.

The President of the bad bank, Jaime Echegoyen, observed that his company is committed to the divestment of the problem assets that it acquired from the struggling banks during the crisis, and to maximise its returns. Sareb is competing against many of the banks, which are now selling large portfolios of real estate assets at significant discounts. Nevertheless, it is reluctant to match those discounts given that its cost of managing the assets is lower than the discounts being asked for.

Instead, Sareb has opted to transform the assets it owns by finishing suspended developments and building new homes on the land that it owns. Within the coming days, the company is expected to close an agreement with a property developer, which will build new assets on some of its land.

At the end of 2018, the bad bank recorded total revenues of €3.65 billion, down by 5% YoY. It sold 21,152 units during the year, up by 12% YoY. But, it continued to incur significant expenses – its financial costs alone amounted to €658 million, whilst its operating expenses amounted to €697 million, resulting in the aforementioned losses.

Since its creation in 2012, Sareb has now reduced its global portfolio by one third (€16.5 billion) and repaid 30% of the debt that it issued to pay for the assets in the first place (€15 billion).

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation/Summary: Carmel Drake

Sareb Hires DC Advisory to Overhaul its Servicer Contracts

15 March 2019 – El Confidencial

Sareb is determined to change track. The entity chaired by Jaime Echegoyen  (pictured below) has taken the decision to cut back the contracts that it currently has with its servicers (Haya, Altamira, Solvia and Servihabitat), in an overhaul of the work that is currently carried out by those platforms.

The timing is perfect, given that Haya’s contract is due to expire at the end of this year and the rest of the agreements mature in 2021. To this end, the bad bank has engaged the advisory firm DC Advisory (previously Montalbán) to help it redefine the servicers’ contracts. The business generates commissions of around €100 million per year.

Sareb is keen not to renew the existing contracts with lower commissions but rather to design a completely different model with new conditions and perimeters. The options range from assuming more of the work itself in-house to organising the out-sourcing of the portfolios by region.

The pressure is on for Sareb to divest its assets given that the entity itself has an expiry date and the current climate is ideal for undertaking operations.

Original story: El Confidencial (by R. Ugalde & J. Zuloaga)

Translation: Carmel Drake

Sareb to Sell 1,769 Rental Homes to its Socimi Témpore for €149M

2 November 2018 – Europa Press

Sareb is going to contribute its first homes to its Socimi Témpore through the transfer of a batch of 1,769 rental properties worth around €149.21 million. The firm was constituted precisely to provide an exit for the portfolio of homes that Sareb inherited from the banks.

This operation will allow Témpore to double its size, given that it currently owns a portfolio of 1,583 flats, and extend its activity to a total of ten provinces, from its current concentration in Madrid and Barcelona.

Sareb and its Socimi are going to materialise the transaction through a non-monetary capital increase, and so the firm is going to issue a package of €12.4 million own shares.

The shares will be issued at a rate of €12.01 per share (the sum of the nominal value and issue premium), a price that is 15.4% higher than Témpore’s share price, which is currently trading at around €10.40 per share.

Témpore is going to approve this operation in an extraordinary shareholders’ meeting, which it has convened for 3 December, according to the agenda for that meeting sent to the MAB.

This is the first transfer of homes that Sareb is going to make to Témpore in the framework of the agreement that the two firms have signed to transfer assets, and it will be completed in the final quarter of the year, as indicated in the 3-year business plan, with which the Socimi debuted on the MAB.

The 1,769 homes that are going to be contributed are located in Madrid, La Rioja, Valencia, Sevilla, Asturias, Murcia, the Balearic Islands, Valladolid and Tarragona, and so the firm will whereby extend its activity, which has been concentrated in Madrid and Barcelona until now.

The final objective of the body chaired by Jaime Echegoyen (pictured above, left) with the launch of this Socimi is to place 4,200 rental homes on the market, worth around €500 million.

By virtue of this business plan, Sareb is going to transfer homes to Témpore until it reaches that volume through the subscription of capital increases (…).

Original story: Europa Press 

Translation: Carmel Drake

Aelca to Manage Sareb’s Land After Selling its own Assets to Vía Célere

2 October 2018 – El Economista

The property developer Aelca has sold its entire asset portfolio to Värde, including its land and developments in progress, which are going to be integrated into Vía Célere. Nevertheless, far from disappearing from our radars, the company founded by José Juan Martín and Javier Gómez is going to continue operating and, for the time being, is going to do so linked to Sareb, according to explanations provided by several sector sources speaking to this newspaper.

The company has been negotiating with the bad bank for months to sign an alliance that would turn it into the manager of a portfolio of land worth €800 million. At the outset, Sareb structured the operation in a different way, since its initial objective involved injecting those assets into a listed industrial company or one with concrete plans to debut on the stock market, to give liquidity to the land.

Nevertheless, Sareb’s plans for its property developer business took an about turn after both Aedas Homes and Vía Célere took the decision to exit the process in which they were finalists together with Aelca. In addition, the intentions of Värde, the main shareholder of both Vía Célere and Aelca, to integrate the assets of the latter into the former, were revealed, giving rise to the large property developer in Spain by asset volume, with a gross asset value (GAV) of €2.2 billion.

In this context, Sareb and Aelca sought a formula that would allow them to continue with their future partnership. And that involves creating a company with the bad bank’s property development business, in which it will hold a majority stake and Aelca will serve as the industrial partner and manager of the assets. Thus, according to the same sources, the most likely scenario is that a banking asset fund (‘fondo de activos bancarios’ or FAB) will be created, which will include land and residential projects from Sareb worth €800 million, in which the company chaired by Jaime Echegoyen will own around 90% and Aelca will acquire the remaining 10%.

On the other hand, the same sources state that Aelca will continue to buy land and build developments independently of Sareb. In this business, the founders of the real estate firm enter into play again, who despite having sold their stakes to Värde, will continue to be associated with the fund “to support the company as an independent manager and developer of residential properties in Spain”, explains the firm in a statement.

After the transaction, Javier de Oro will take on the role of Director General at Aelca, having served as Head of Real Estate at Aliseda, the exclusive administrator of Banco Popular’s real estate assets at risk.

Vía Célere, founded and chaired by Juan Antonio Gómez Pintado, will retain its identity and its 300 employees; depending on its on-going needs, it will resize its structure over the next few months. The new company will have the capacity to deliver around 2,000 homes in 2019 and 5,000 homes in 2021, with a more diversified portfolio, although ,most of its land is located in Madrid (38%), Málaga (20%) and Barcelona (11%), three of the markets with the highest demand.

Following the integration of Aelca’s assets, Värde will control 75% of Vía Célere, and the remaining 25% will be distributed between minority shareholders (Marathon, Attestor, BAML, Barclays, DB and JPM).

Original story: El Economista (by Alba Brualla)

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

Hayfin & Atitlán Buy Land from Sareb to Lock Down Plan for Valencia’s Former Formula 1 Circuit

21 August 2018 – El Confidencial

The British fund Hayfin Capital and the Valencian investor Atitlán Grupo Empresarial are continuing to take steps to launch the most iconic urban development project and the one still pending execution in the city of Valencia with the greatest chances of generating gains.

At the end of July, a joint venture held by the two investment specialists completed the purchase of plots still owned by Sareb in the so-called PAI del Grao, a developable sector that occupies land on the former Formula 1 urban circuit in the regional capital. Hayfin and Atitlán acquired 14,000 m2 of land in total, with 8,100 m2 corresponding to residential use and 2,700 m2 to commercial use, according to market sources speaking to El Confidencial. The buildability is defined by the current urban plan of the Town Hall of Valencia, although it is finalising a new plan that will modify the distribution of that buildability. The expectation is that the final use of this land will amount to around 16,000 m2.

The investors paid €4 million in an operation that appears to have a low economic value but significant strategic potential. The sale of the assets by the bad bank chaired by Jaime Echegoyen (…) will allow the Spanish-British consortium to increase its percentage stake in the plan as a whole, which occupies a surface area of more than 300,000 m2 and will involve the construction of a new neighbourhood that will connect the Ciudad de las Ciencias and Avenida de Francia with Valencia’s maritime seafront. The area is set to become one of the most sought-after parts of the city if its developers decide to build high-quality residential properties (…).

Nevertheless, it will be a while before the new Valencian neighbourhood takes shape. As a result of the administrative and bureaucratic processes still pending, the real estate sector estimates that it will take between three and five years before developments in the PAI del Grao can start to be marketed. Nevertheless, if Hayfin and Atitlán are patient and manage to overcome the pitfalls, they may obtain juicy profits from an urban planning operation in which they have already invested more than €30 million but which could generate up to €300 million in property sales, according to the most optimistic estimates.

The plan for the former Valencia Street Circuit is the most ambitious project to be launched by the Atitlan Grupo Empresarial’s real estate division, which according to its own official data already has 100 homes under development, 200,000 m2 of surface area for rent and 1.5 million m2 of land under management, including its operations in Portugal.

With its olive-growing subsidiary Elaia the largest generator of current income, an aquaculture division (Sea8) and the service and construction company Mosaiq (formerly Obinesa-Lubasa), Atitlán generated sales amounting to €437 million last year and an EBITDA of €92 million. According to official figures, it employs 2,500 people across the group (…).

Original story: El Confidencial (by Víctor Romero)

Translation: Carmel Drake

Sareb Finalises Creation of a New Company with Aelca to Manage Property Worth €800M

20 July 2018 – El Confidencial 

The Company for the Management of Assets proceeding from the Restructuring of the Banking System (Sareb) has made a change to its property development plan. The so-called bad bank has decided to create a joint venture with a first-rate property developer to manage €800 million in finalist land and developments in progress in several main cities across Spain.

This decision represents a change to Sareb’s initial formula for its property development business, which was going to involve a strategic alliance that would allow the integration of its residential construction and land development businesses into one of the large Spanish property developers. Initially, the chosen entity to form part of this company, according to assurances provided by sources close to the negotiations speaking to El Confidencial, is Aelca.

Sources at Sareb, meanwhile, speaking to this newspaper assure that “at the Board meeting on Thursday, a decision was taken to approve the creation of a vehicle, but the choice of travelling companion and the percentage stakes to be owned by each party in the JV have not been decided yet”.

If the conversations with the property developer founded by Javier Gómez and José Juan Martín prove fruitful, it will end up being responsible for managing so-called Portfolio Casiopea, given that it is the last man standing in the negotiations in which the listed company Aedas Homes has been involved until recently. The future company – likely a banking asset fund – will be owned by Sareb (90%) and Aelca (10%). According to the same sources, the process is in its final phase and the details are being finalised for the signing of the corresponding agreements.

At the beginning of the year, Jaime Echegoyen (pictured above) decided to work on a strategic alliance with a large property developer that would allow Sareb to sell a significant batch of land and compete in the first division of property development in Spain, head to head with the largest players in the sector, such as Aedas, Neinor, Vía Célere and Metrovacesa.

Nevertheless, in recent weeks and after the offers presented by Aelca and Aedas failed to meet Sareb’s price expectations for its land, the bad bank has rethought the whole process, opting for the creation of a joint venture vehicle, in the end, in which it will control the majority. It is in this process in which Aelca has been left alone in the negotiations.

Building 1,500 homes per year

Sareb currently has around 4,300 homes in different stages of development, located in different towns across Spain, which involve a combined investment of around €60 million. Moreover, it is finishing the construction of 2,340 homes that it received unfinished and it is building 2,153 other homes from scratch.

Just over a year ago, Sareb expressed its commitment to become one of the country’s largest property developers by announcing its intention to promote an average of 1,500 homes per year until its liquidation. The company plans to finish building 4,000 new homes, between now and 2020, a clear display of its commitment to residential development (…).

The sources consulted by this newspaper explain that Sareb’s objective is to maximise the value of the assets that it has in its portfolio and, even, in the future, debut the company on the stock market as a way of divesting easily, obtaining liquidity and collecting gains. It is worth remembering that Sareb is already trading on the stock market through its Socimi Témpore Properties, with 1,300 rental homes.

Until now, the formula has been to delegate construction work to different property developers on a project by project basis, however, the strategy to be adopted from now on will generate value from the land to be developed and promotions underway in conjunction with a single partner.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Sareb Quarantines its €30bn Mega-Portfolio Entrusted to Goldmans For The Time Being

11 June 2018 – El Confidencial

The most important operation in Sareb’s history is going to have to wait. Despite the wishes of Goldman Sachs, the bank charged with leading the sale of €30 million in toxic assets, to formally launch the process before the end of June, the entity chaired by Jaime Echegoyen would rather be cautious and have everything locked down, and well locked down, before it gives the final green light to an operation of this magnitude.

Particularly, when its largest shareholders, the State through the FROB, has just experienced an unexpected change of Government. Although sources at Sareb insist that a firm date has not yet been set for this sale and that all of the work carried out to date has been preliminary, during the conversations that Goldmans held with interested funds before the vote of no confidence (in the Spanish parliament), it was understood that the process would begin this month, according to several sources in the know.

Nevertheless, the change in the political panorama, which has resulted in Pedro Sánchez’s appointment as President and Nadia Calviño as the Minister for the Economy, lends itself to prudence, to avoiding any rushed decisions and to allowing time for the new Government to analyse this operation. Above all, when one of the objectives of the PSOE’s economics team has, for months, been to conduct a thorough audit of Sareb to understand the real extent of the public debt as a whole, according to Voz Pópuli.

The sale of the portfolio entrusted to Goldman would allow Sareb to decimate its liabilities in one fell swoop and generate two years worth of revenues in a single operation. The question is at what cost, in other words, what losses would such a divestment generate, given that all of these sales are being undertaken at discounts that the bad bank is finding very difficult to bear.

In fact, in order to play in this league of major operations, Sareb has been analysing for months all kinds of formulae to reduce its losses. One way of mitigating the losses and achieving better offers is to share the ownership of the capital of the new company to which these toxic assets would be transferred, like Santander and BBVA have done in similar cases.

Another lever that has already been analysed is to take advantage of the FAB (Banking Assets Fund) – that Sareb created in its early stages, because that would provide the operation with tax incentives, or associate it with the servicing contract, which has been in the hands of Haya until now.

That “servicer”, which is controlled by Cerberus, manages all of the toxic property that Bankia transferred to Sareb, whose deficit was the largest, in absolute numbers, of the bank rescue, another important argument why the new Government wants to understand in detail the design and consequences of the Goldman operation before giving it the green light, or not.

What is happening with Ebro and the property development plans?

(…) In terms of the entity’s other two star projects: the search for a partner to promote €800 million in residential assets and the sale of a €10 billion portfolio baptised Ebro.

The former has two finalists, Aelca and Aedas, and looks to be on schedule for a winner to be selected ahead of the summer (…).

In the case of Ebro, Sareb’s decision to not go ahead with this portfolio responds to, amongst other reasons, the fact that some of the perimeter proceeded from Haya assets, which are the ones that make up the entire Goldman portfolio, and so a decision was taken to desist from this project to give priority to the Goldman deal.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake