Kronos & King Street Buy Land in Madrid from Sareb

27 December 2017 – El Confidencial

The scarcity of land that is starting to be seen in cities such as Madrid and Barcelona, and the increase in property prices there, is forcing property developers to sign partnerships with international funds and expand their areas of operation outside of the large capitals, towards peripheral towns and dormitory cities.

One example of this growing trend is the recent deal signed by Kronos Homes, a high standing real estate company that has just joined forces with King Street to buy two important blocks of land from Sareb in the belt around Madrid. Specifically, they have acquired 128,000 m2 of land in Colmenar Viejo, a town located 30km to the north of the capital, where it plans to build 200 homes, according to a statement issued by the property developer.

Moreover, according to sources consulted by El Confidencial, it has also agreed to acquire 230,000 m2 of land in Torrejón, which is located 20km to the northeast of the capital. Both of these operations have been advised by Cuatrecasas and Almar Consulting.

Given their location, these acquisitions contrast with the steps that Kronos has taken in Madrid to date, where it has limited its activity to the centre of the capital. Moreover, they represent the first sales of land under management, for development over five or six years, that Sareb has made to a fund like King Street, according to the same sources.

A property developer born out of the recovery

Kronos Homes is a property developer created at the beginning of this real estate cycle to focus on exclusive homes, many of them accompanied by the stamp of famous architects such as Rafael de la Hoz and Joaquín Torres.

The latter has put his signature on the development of 82 homes that the property developer is currently building in the exclusive Madrilenian district of Puerta de Hierro, whose prices range between €488,000 and €1.4 million. Meanwhile, Kronos is working on a less elitist development in Cuatro Vientos, to the south of the capital, where it plans to build 2-, 3- and 4-bedroom homes.

With the acquisitions in Colmenar and Torrejón de Ardoz, Kronos is pushing ahead with its objective of acquiring a land portfolio for the construction of 4,500 homes over three years. Last March, the company said it already owned land worth €200 million, with capacity for the construction of 3,000 homes, and that it planned to invest another €100 million acquiring more plots.

Since it started operations in 2014, the company has closed several operations both with Sareb, as well as with financial institutions and has participated in the acquisition of non-performing loans backed by residential assets of interest.

Meanwhile, King Street is an international investment giant, which, in Spain, has been behind important debt operations, such as the one linked to Realia and the deal involving the radial highways. Currently, it is a shareholder of Neinor, in which it owns a 3.5% stake.

Original story: El Confidencial (by R. Ugalde & C. Hernanz)

Translation: Carmel Drake

Slim Set To Acquire Realia After Hispania Withdraws Its Bid

24 July 2015 – Expansión

The Mexican businessman, who already owns 25% of the real estate company, has now been given free rein to make an agreement with Realia’s creditors.

The takeover war for Realia came to an end on Wednesday, one day before the deadline for its approval. The Socimi Hispania Real, a subsidiary of the listed company Hispania, announced on Wednesday that it was withdrawing its public bid to acquire Realia’s shares, which it had launched in November 2014.

Hispania’s Board of Directors have decided to withdraw, rather than improve, their bid of €0.49 per share, despite the offer (€0.58 per shares) submitted by their competitor, the Mexican businessman Carlos Slim, through his real estate company Carso.

Hispania’s decision leaves Realia’s shareholders with just one alternative, the one presented by Slim, who already controls 24.9% of the real estate company, after he purchased the stake previously owned by Bankia.

Nevertheless, it seems unlikely that this bid will be successful either. According to sources close to the process, the percentage of shareholders agreeing to Carso’s bid did not exceed 1% of the capital on Wednesday, a situation that would not only not harm Slim’s interests, but that would actually benefit him by preventing the creditors from executing Realia’s debt.

Lower price

The offer presented in March by the Mexican businessman falls well below the listed price of the real estate company. The company’s shares closed trading on Wednesday at €0.705, despite having fallen by 2.08%, to place the market capitalisation of the company at €216.7 million. Slim’s bid price values Realia at €30 million less.

The change in control of Realia would result in the early repayment of the €1,170 million debt held by the real estate company. Almost €800 million of that amount was loaned by the funds Fortress, King Street and Goldman Sachs. Those three creditors had made an agreement with Hispania to not enter into negotiations with any other candidate regarding the purchase of Realia for 10 months. Now that the Socimi has withdrawn its takeover offer, that agreement is void.

That loan is due to be repaid at the end of 2016. If Slim does not acquire more than 30% of Realia, then the change of control clause will not be invoked and no early repayment will be required.

Even if he does not manage to buy more shares, Slim may still be able to control Realia with the support of FCC, in which he is primary shareholder, with a 25.6% stake. The construction company, which owns 36.9% of Realia, has said that it would not sell its stake in the event of a takeover.

In his takeover prospectus, Slim – who is being advised in this process by the law firm Ontier – considered the possibility of negotiating with the creditor funds to capitalise some of the loan, amongst other options – he also considered undertaking a capital increase, whereby allowing new shareholders to enter and diluting his own shareholding.

During the first quarter of 2015, Realia generated turnover of €23.3 million, i.e. 33.9% less than in 2014, whilst its net profit amounted to €170,000, compared with a loss of €7.6 million in the previous year.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Slim Would Keep Realia On The Stock Exchange And Support A Return To Dividends

18 March 2015 – Expansión

Slim has formally announced his offer to the CNMV / The Mexican investor’s counter-bid amounts to €0.58 per share, i.e. 18% higher than Hispania’s offer. He has now guaranteed control of the real estate company through FCC and the 25% stake he intends to purchase from Bankia.

Yesterday, Carlos Slim confirmed his plan to take control of Realia through his property company Carso, by confirming to the CNMV his counter-bid for the real estate company at €0.58 per share, whereby valuing the company at €186.6 million. The offer by the Mexican business tycoon, who is the majority shareholder in FCC, is 18% higher than the bid authorised by Hispania (€0.49 per share).

The two bids are well below Realia’s value on the stock exchange; its share price closed yesterday at €0.71 (having increased by 3.6%), therefore, unless there are improvements in either of the competing takeover bids, neither will receive backing from the shareholders.

But that factor is not important for Slim, since, in practice, he is already guaranteed control of the company, thanks to an agreement (he has made) to purchase the 24.9% stake held by Bankia in Realia for €44.5 million (€0.58 per share or the best price that arises from the takeover bids). With this percentage, plus the 37% indirect stake he holds through FCC, Slim will own 62% of Realia.

Shareholder agreement

Proof of the robustness of the plan set out by Slim is that his counter-bid is not conditional upon any percentage approval by the shareholders; it only requires that the agreement to purchase Bankia’s shares comes to fruition.

In the note that he sent to the CNMV yesterday, Slim ‘gave a strong signal’ to the shareholders of Realia that they should continue in the company and, therefore, not accept his offer. Carso’s objective, as well as to ensure that Realia continues trading on the stock market, is to “clean up Realia, increase its revenues and reduce its expenses, in order to undertake an active dividend distribution policy over the long term, to the extent that Realia’s financial circumstances allow it”. Through these dividends, Slim is seeking to increase Realia’s appeal to its minority shareholders, which have not received any (dividend) returns on their shares since 2008.

The only weakness in the Mexican investor’s offer is the possible reaction of the opportunistic funds that bought the majority of Realia’s debt. Specifically, Hispania signed an exclusivity agreement with Fortress, King Street and Goldman Sachs before it launched its takeover bid, whereby it committed to purchasing half of their liabilities at a discount of 21%.

The three funds hold €793 million of Realia’s total debt balance of €1,097 million. These loans, which were sold (to the funds) by Sareb, Santander and CaixaBank last year, are due to mature soon: on 30 June 2016. When the funds agreed to purchase the debt, they agreed with Realia that, in the event of a change of ownership of more than 30%, the whole amount (of the debt purchased) would have to be repaid “immediately” with one exception: the successful takeover of the company by Hispania.

The exclusivity agreement between the Socimi owned by George Soros and Realia’s funds expires after seven months, which means that Slim and these credtiors will not be able to reach any agreement until 21 September.

Despite this hurdle, sources close to the Mexican investor indicate that it will not prevent him from taking control of Realia. Firstly because there are serious doubts that more than 30% of the shareholders will agree to Slim’s takeover bid, which falls 18% below Realia’s listed share price. In addition, the same sources point out that Realia holds €450 million in cash, which it could use to repay some of its liabilities. The remaining debt could be exchanged for real estate assets owned by Realia.

Hispania has also lowered its expectations in terms of Realia. It would settle for a “financial stake” of less than 30%. Nor should an agreement between Slim and Hispania be ruled out.

Original story: Expansión (by C. Morán)

Translation: Carmel Drake

FCC Suspends Sale Of Realia And Threatens Hispania’s Takeover Bid

6 February 2015 – El Confidencial

Carlos Slim’s impact on FCC is starting to be noticed. The new majority shareholder of the infrastructure group has laid his cards on the table and has decided to officially suspend the sale of the 36.886% stake FCC holds in Realia, a decision that threatens the takeover bid (OPA or public offer for the acquisition of shares), launched by Hispania for the real estate company, whose prospectus is pending approval by the CNMV – Spain’s National Securities Market Commission.

The other major shareholder of Realia, Bankia, which owns 24.9% of the capital, is standing by its decision to sell, despite the change in its partner’s position. This leaves the floodgates open for a war to seize control of the company, which owns desirable assets such as one of the KIO towers.

The market has known that this scenario could arise since the beginning of the year, during which time Realia’s shares have soared by more than 40%, from the price of €0.51 per share at the end of the year, in line with Hispania’s offer, to reach the current price of €1.30.

The pieces in this game of chess are placed in the perfect position for a wave of strategic moves to be unleashed. Hispania has the upper hand in that it holds an exclusive agreement with Realia’s creditor funds, a deal that may be extended for the whole of 2015, even if the takeover bid that is currently underway were to fail.

Fortress, King Street and Goldman Sachs are Realia’s preferential creditors with a debt of €793 million, from which Hispania has successfully negotiated a haircut of €167 million. This saving allowed them to launch their takeover bid at €0.49 per share. In addition, the funds have exempted Hispania from an onerous clause that obliges any potential buyer to liquidate their debt within a period of five days.

Against this competition, Slim has his own upper hand: he is free from this clause, since it is only applicable when a change of control occurs and, if the player that enters the arena is FCC itself then there would be no such change of control, since the infrastructure group has always held the reins of Realia, which is widely known as its real estate subsidiary.

This means that the Mexican tycoon now has several options on the table: from waiting and seeing whether Hispania’s takeover bid fails and then entering the fray; to starting to negotiate a new transaction with Hispania and its associated funds; to starting an operation with new players, since Bankia is determined to sell and if Hispania’s takeover bid does not going ahead then it will open a new process to close the sale.

The Socimi (Hispania), meanwhile, has conditioned the success of its bid on taking over 55% of Realia’s share capital. In fact, in an ideal world, Hispania would take control of the smallest number of shares possible, above this threshold, to enable it to take full control of the real estate company for the lowest price possible.

From this point of view, both the 24.9% stake that Bankia has put up for sale and the almost 13% stake that Sareb holds (through the debt associated with the former stakes held by Lualca and Prasa, which controlled 9.5%) are key, as well as the participation loans that should be exchanged from this month onwards and which would allow it to takeover another almost 3%.

Meanwhile, Slim’s initial plans do not include the option of launching a counter-bid, or of establishing bilateral negotiations with Bankia, since that entity is obliged to undertake all of its sales in concurrent processes. But that would not be an impediment if Hispania’s bid fails and the entity launches another sales process, since the Mexican would enter the bidding.

In any case, only an official announcement, through a significant event with the CNMV, to suspend the sale of its stake in Realia would go against the interests of the Socimi, because Realia’s list price is well above the price of the takeover bid, which in theory discourages minority shareholders from accepting the offer, above all, when they also know that the world’s third richest man is also interested. And Slim certainly has acccess to credit.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake

Carlos Slim Puts The Brakes On FCC’s Sale Of Realia

3 February 2015 – Expansión

The new controlling shareholder of the construction company FCC is evaluating his legal options for taking ownership of the listed real estate company, for which Hispania launched a takeover bid in November.

The emergence of the Mexican tycoon Carlos Slim as a new significant shareholder in the capital of FCC, represents a turning point in the plans of the Spanish group. The businessman has decided to put one of FCC’s most recent strategic decisions on hold, namely the sale of its historical stake in Realia, according to Expansión.

The turnaround in the performance of the real estate company since it put its stake in Realia up for sale, together with Bankia, at the end of 2013, reflects not only the limited income that the construction group will receive for its 36.9% stake, but also the interest shown by Slim in taking ownership of these assets. Slim has extensive experience in the sector through his own real estate company Carso.

To this end, the Mexican businessman has instructed lawyers to study the legal formulae that would enable him to buy Realia, given that he is the majority shareholder of one of the vendor companies.

The transaction is not without its complexities. On the one hand, FCC has made a commitment to Bankia, its historical partner in Realia, to sell the 62% stake that they jointly own, through a process led by Goldman Sachs.

In November, the Socimi Hispania Real launched a takeover bid for 100% of Realia at €0.49 per share. The offer valued the real estate company at just over €150 million, 28% below its market price at the time.

The takeover bid was accompanied by an agreement with Realia’s main creditors, the funds Fortress, King Street and Goldman Sachs, stating that they would sell 51% of their debt to Hispania and jointly recapitalise the company. The funds made an agreement to negotiate exclusively with the Socimi.

Hispania’s offer for 100% of Realia is conditional on its acceptance by at least 52.5% of the shareholders and so the decision as to whether the takeover bid will succeed or not rests with the two controlling shareholders, which have taken decisions on a consensual basis up until now.

Hispania’s offer is currently being considered by the CNMV, which is expected to make a ruling within a month or two. Then, FCC anad Carlos Slim will have to make a decision, once they know all of the details of Hispania’s plans. As a result of Slim’s interest in Realia, the real estate company’s shares soared in trading on Monday by 18.03% to reach €0.72.

Original story: Expansión (by R. Ruíz, D. Badía and C. Morán)

Translation: Carmel Drake

Fortress, Azora & King Street Submit Takeover Bid For 100% of Realia

20/11/2014 – Expansion

This is the last chapter of the sale of 60% stake in Realia by FCC and Bankia. After nearly a year of dealing with various candidates,  funds Fortress and King Street, together with their Spanish partner Azora were selected and now they are giving the finishing touch to their takeover bid for the entire real estate firm. This morning, Realia was suspended on the stock exchange market just before the opening of tenders ‘due to circumstances that might have disrupted normal trading’. For the same reason has been suspended Hispania Activos Inmobiliarios, a Socimi (REIT) led by Azora.

The proposal of the three bidding winners turned out to be more tempting than the offers of two other fore-runners: Torreal (controlled by Juan Abello) and Colonial that wanted to buy only Patrimonio branch of Realia, encompassing rental buildings and excluding land and residential assets.


Realia’s current worth on the stock shows €324 million, with a 27% stock revaluation year-to-date. Its shares trade at 1.06 euros each, an incomparable price to the 6 euros paid in pre-crisis 2007. As of 31th December 2013, the real estate assets of Realia were valued at more than €3.38 billion. Today, after July sale of Siic de Paris, the figures would post around €2.11 billion.

Bankia and FCC strived at selling-off their holdings, first urged by Brussels to divest from non-core assets and the other willing to focus on its own business and cut in debt.

Given the green light, Fortress, King Street and Azora will now submit a 100% bid. The funds already know Realia very well as they have bought two debt portfolios of the firm, one worth €437 million from Sareb and the other valued at €100 million from Santander respectively.

According to data entered in the CNMV’s registries, FCC holds 36.887% in Realia, and Bankia-BFA owns a 24.953% stake. Also, the company is being held by Lualca (5.02%) and Grupo Prasa (5.004%).


Original article: Expansión (by R. Ruiz, C. Morán & D. Badía)

Translation: AURA REE

Azora Allies With Fortress & King Street in Bidding For Realia

12/11/2014 – Expansion

The sale process of the 55.95% stake of Realia in hands of FCC and Bankia enters the final stretch with some new players on the horizon. As the news on Torreal eyeing the purchase faded out, another Spanish fund joined the tender of the desirable real estate firm.

Azora, a private equity company established by Concha Osacar and Fernando Gumuzio in 2003, is said to have teamed up with  Fortress and King Street that already bid for Realia together. Both funds have become the main creditors of the firm at the moment of acquisition of 60% of the debt from Sareb and Santander, respectively. In fact, Azora participated in the purchse of €437 million in loans sold to Fortress by the bad bank.

The Spanish fund manager administers the 3.000 houses which Goldman Sachs bought for €201 million in mid-2013 from Ivima, Madrid’s Housing Insititute.

At present, Azora manages a €2.3 billion worth of assets, including subsidized homes for rent, student housing and offices scattered around various European countries. At the beginning of the year, Azora floated a Socimi (Spanish REIT firm) called Hispania with €500 million raised at IPO and support from such big-name investors as George Soros and his Quantum Strategic Partners, John Paulson, Moore Capital, Dutch Pension Fund APG, Cohen & Steers and Canepa. Since its listing on the stock exchange market, Hispania has purchased assets worth €347 million.

The Proposal

At the moment, Fortress and King Street are the only candidates who demonstrated willingness to buy 100% of the stake. The operation would be carried out through a debt-for-equity swap. According to the latest available Realia balance report on the first quarter 2014 received by the National Stock Exchange Commission (or the CNMV), the company’s financial liabilities amassed at €2.11 billion, cut significantly by the sale of the Siic de Paris stake for more than €1 billion.

In turn, Colonial and Torreal would rather vie for Realia Patrimonio, excluding the residential land and housing encompassed by the branch. Only Colonial’s bid has been disclosed, €650 million.

Goldman Sachs, the underwriter, aims at closing the sale by December 31st. The 56% stake put up by builder FCC and Bankia drew attention of many funds like Orion, AEW and Amancio Ortega‘s Pontegadea.

Currently, FCC and Bankia are pondering the three offers. No matter who wins the 56% holding in Realia Business, they will have to submit a takeover bid for the entire company, resulting in its delisting. This way, Realia would follow the suit of another legendary firm, Metrovacesa, whose creditor shareholders excluded it from the stock exchange in May 2013.


Original article: Expansión (by Rocío Ruiz)

Translation: AURA REE