Cerberus Wants To Buy Anida & A €4,000M Portfolio From BBVA

29 September 2017 – Expansión

BBVA is taking new steps to deconsolidate its real estate risk. The entity is holding exclusive negotiations with the US fund Cerberus to sell it a majority stake in its real estate manager, Anida.

Financial sources explain that the fund may also be interested in acquiring around €4,000 million in foreclosed assets and doubtful real estate loans from the bank.

BBVA’s real estate activity, which centres around Anida, comprises two branches. On the one hand, the manager is in charge of administration. On the other hand, it is responsible for the real estate assets, be they foreclosed properties or loans to property developers. BBVA’s gross exposure to property amounts to €20,190 million, according to the latest available data. The entity has a coverage level of 57%, which reduces its net risk in terms of the real estate sector to €8,760 million.

In a relevant fact sent to Spain’s National Securities Market Commission (CNMV), BBVA reported that it is holding conversations with Cerberus (…). “At this time, it is not possible to determine whether the conversations will end in an agreement or not, or what the terms and conditions of such an agreement, were it to be reached, might be”, said the bank.

Similar to Santander

According to sources, the intention of Cerberus is to acquire a majority stake in the real estate company, similar to the agreement that Santander reached with Blackstone to deconsolidate the real estate risk of Popular. Hours after Brussels authorised the purchase of until then the sixth largest Spanish bank by assets, Santander sold Blackstone a 51% stake in the company to offload its problem assets with a gross value of €30,000 million. That was the largest ever real estate operation in Spain.

If the negotiations with Cerberus prove fruitful, BBVA would follow the template established by Santander. Some sources indicate that Cerberus has decided to try its hardest to buy Anida after not making it past the first round in the bid for Popular’s toxic real estate. In fact, the same sources say that the CEO of Cerberus, John Snow, travelled to Madrid a few weeks ago to meet with BBVA’s President, Francisco González.

Negotiations

The negotiations, with Cerberus as the only interlocutor, are very advanced, say sources in the sector. It is expected that the sale of the majority stake in Anida and of property by BBVA could be completed within the next few weeks.

BBVA is being advised by the law firm Clifford Chance and by a team from the consultancy firm PwC. Meanwhile, Linklaters is advising the US fund, which has also hired JLL for the negotiations.

BBVA is one of a handful of banks that have retained full control over their real estate businesses. During the crisis, several entities sold their management companies to specialist funds to generate profits with which to strengthen their businesses and accelerate the divestment of problem assets. Only Kutxabank (to Lone Star) and Santander (with the transfer of Popular’s business to Blackstone) have managed to close block sales of their management arms and asset portfolios.

Original story: Expansión (by R. Ruiz & R. Sampedro)

Translation: Carmel Drake

GreenOak & Ibosa Create A JV Property Developer

5 September 2017 – El Confidencial

House building is continuing to spark a great deal of interest amongst international investment funds. With a positive outlook for future increases in sales – according to BBVA, this year, we can expect to break the threshold of half a million units sold – and prices over the next few years, the sector is under the spotlight. The latest player to try its luck with residential property development is the US firm GreenOak, which has just created a joint venture with the cooperative manager Grupo Ibosa, one of the most active in the sector in Madrid in recent years.

According to sources close to the negotiations, both companies have decided to join forces – their capital and their construction know-how, respectively – to launch a vehicle that will invest primarily in the Spanish residential market, in the main cities in Spain.

Its first project is a residential skyscraper in Isla Chamartín, (…) a small real estate triangle bounded by the M-11, the A-1 and Avenida de Manoteras, in Madrid, where in September last year, Grupo Ibosa purchased a plot of land from Oncisa for just over €30 million. The project will require a total investment of more than €80 million (…) and will involve the construction of a 75m tall tower with 20 floors and two blocks of flats, which will house more than 200 homes. Prices will range between €200,000 and €1 million.

GreenOak is the latest in a long line of large international funds to enter the house building sector. The first to officially make the leap was Lone Star, which purchased Kutxabank’s real estate arm Neinor at the end of 2014 with the aim of turning it into the largest house builder in Spain. The company now has 4,300 homes under construction and owns more than 1 million m2 of land. (…). Another player that stands out is Aedas Homes, the heir of Vallehermoso, which is backed by the Socimi Merlin Properties and the fund Castlelake, and which owns one of the largest land portfolios in Spain (…).

Valdemarín, in the spotlight

According to the sources consulted, Ibosa and GreenOak are on the verge of closing their next joint operation. They are looking at purchasing several plots of land that Blackstone is about to sell in Valdemarín, one of the most exclusive neighbourhoods on the outskirts of Madrid, where detached family homes go for no less than €1 million and prices are experiencing double digit rises.

The plots of land in question, which have been put up for action (…) are divided into 19 lots measuring 450 m2 each (just over 8,500 m2 in total) with auction values ranging between €730,000 and just over €1.1 million. The plots used to belong to Jardines del Hipódromo, a company owned by Inmobiliaria Monteverde, which filed for creditor bankruptcy at the end of 2011.

Grupo Ibosa knows the Valdemarín area like the back of its hand, since it has already managed two projects there. Alhena Valdemarín, comprising 36 detached family homes, which were sold in their entirety in a matter of months last year; and Mirach Valdemarín, a development of 14 detached homes measuring 200 m2 each and costing upwards of €893,000, also constructed under the cooperative regime.

GreenOak, a very active fund in Spain

In addition, before this agreement with Ibosa, GreenOak had already made a small foray into the Spanish residential market, given that in September 2015, it teamed up with the German fund Activum ASG Iberia to purchase c/ Fuencarral, 77, located next to Tribunal metro, from the General Treasury Social Security. That building will house high standing homes and a large retail space. (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Kutxabank Reduces Its Exposure to Real Estate by 70% in Five Years

 

21 August 2017

Kutxabank has reduced its exposure to the real estate business by 70% since the bank’s creation in 2012, having reduced its total exposure by 4.7 billion euros, with a further decline of 11% in the last year.

The financial institution has gone from the €7 billion in real estate loans and assets that it held in 2012, to 2.3 billion euros at the end of June 2017.

The sale of its real estate subsidiary Neinor to Lone Star in 2014 was decisive. The deal transferred 900 million euros in real estate assets and more than 90 employees to the American fund.

Kutxabank has continued to decrease its presence in the real estate business over the last year, by 11%.

The Basque group achieved this reduction without transferring assets to the Asset Management Company that was created in the bank restructuring (Sareb), and without receiving public aid, while contributing to the restructuring of the Spanish financial system, through its contribution to the Deposit Guarantee Fund and to the capital of Sareb itself.

Nevertheless, the group is maintaining its policy of acting in the mortgage loan market. Thus, according to Kutxabank, the financial institution is the second of 14 supervised by the European Central Bank in terms of the weight of its loan portfolio on its total assets, and the first in terms of loans to individuals for the acquisition of housing both on total assets and on total credit, with high levels of collateral in all its lending.

Its risk policy places the Basque group as one of the institutions with the lowest volume of refinancing and the institution with the second lowest level of delinquency due on its assets in Spain.

Specifically, at the end of the first half of 2017, Kutxabank had a default rate of 5.66%, 200 basis points less than at the time of its incorporation in 2012, and less than half that in March 2014, the time in which delinquencies reached the highest levels.

Original Story: EFE Madrid / Expansión

Translation: Richard Turner

Spain’s Banks Estimate That 70,000 Homes Are Illegally Occupied

30 April 2017 – Expansión

Significant impact in Madrid and Barcelona / Almost 80% of Spain’s illegally occupied homes are owned by financial institutions.

The illegal occupancy of homes has become a significant problem for a large part of the financial sector in Spain. Years of economic crisis and unprecedented levels of unemployment and a still cautious recovery (with no obvious changes in access to housing) are some of the causes that explain the high levels of misappropriation recorded by the Spanish banks with respect to their housing stock.

According to data from the sector, currently, between 85,000 and 90,000 homes in Spain are illegally occupied. Of those, around 80% (and maybe more) belong to financial institutions. In other words, at least 70,000 properties of the stock controlled by the banks (and related companies such as Sareb) are inhabited illegally.

One of the entities most affected by illegal occupation is Bankia. Although the bank, which is controlled by the Frob, transferred the majority of its real estate assets to Sareb, it still has almost 5,000 homes with tenants in an illegal situation. Meanwhile, Banco Popular has 1,635 such homes. Other large financial institutions have chosen to not disclose individual figures, but they acknowledge that this phenomenon is representing a growing management problem.

The volumes are substantially lower for the smaller entities. In this way, Ibercaja reports 390 properties with illegal tenants. Kutxabank, meanwhile, states that its stock of illegally occupied homes amounts to 300 units, according to its most recent figures.

All of the sources consulted in the sector indicate that the highest volumes of illegal occupancies are recorded in Madrid and Barcelona. Spokespeople for the entities talk about misappropriation percentages that are proportionally higher in those two capital cities, not only due to the impact of Spanish legislation, which they consider to be “very rights-based (sympathetic towards tenants)”, but also because of the greater permissiveness of the authorities there.

According to various sources in the sector, this permissiveness is so great that, together with the phenomenon of occupations by vulnerable groups, the number of misappropriations by problem groups has soared. The groups “back this route to obtain access to housing”, because they are protected by what the banks consider to be a “right to occupy”, and are incited by social players such as the anti-eviction citizen platforms and those affected by mortgages.

There is a certain amount of conflict between the financial institutions and the administrations regarding how to consider certain occupancies. The entities themselves calculate that only between 35% and 50% of illegal tenants are vulnerable, whilst the Town Hall of Barcelona for example, estimates that the percentage exceeds 95%. Meanwhile, the Town Hall led by Ada Colau limits the percentage of “problematic occupancies” to 4.5%, whilst the Town Hall of Madrid increases that figure to 13.1%. These misappropriations have a significant impact on the value of the asset, with entities being forced to apply discounts of up to 52% on prices in order to place them.

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake

Neinor Recorded Losses of €8.2M In Q1

28 April 2017 – Fianzas

The real estate company Neinor Homes recorded losses of €8.2 million during the first quarter of the year, according to a statement filed with Spain’s National Securities and Exchange Commission (CNMV).

Neinor, which debuted on the stock market on 29 March 2017, is the former real estate arm of the Basque bank Kutxabank, which was acquired by Lone Star; that fund that is still the entity’s main shareholders with 39.5% of its share capital.

The real estate company recorded revenues of €72 million during the first quarter and a gross margin of €10.8 million.

The firm’s debt amounted to €314 million, the same as last year, although the company highlighted the strong generation of cash flow – €106 million – which reduced its net debt balance to €208 million, i.e. 28% lower than the figure last year (€291 million).

That left the ratio between net debt and net equity at 29%, compared with 46% last year. (…).

Original story: Fianzas

Translation: Carmel Drake

Who Are The New Owners In Spain’s RE Sector?

11 April 2017 – Cinco Días

Two weeks ago, Neinor Homes debuted on the stock market, the first residential property developer to do so in a decade. (…). Who is behind the current transformation of the sector?

Neinor Homes was created just two years ago by the US fund Lone Star, which purchased the former real estate arm of Kutxabank for €935 million. The Texan firm injected capital, bought land, renewed the image and put its first cranes in place to surf the top of the wave of the recovery in the house construction segment. The company debuted on the stock market, much more quickly than it had initially planned, with a valuation of €1,300 million, and an excess of demand over supply of 4.3 x, from large investors.

The real estate company led by Juan Velayos, as CEO, and Juan Pepa, as Lone Star’s strong man in Spain, has demonstrated investors’ appetite for residential construction – the last segment to recover in the real estate sector. Experts indicate that demand for homes in Spain will amount to around 150,000 properties per year, compared with the 50,000 units that are currently being constructed. This is a space that nobody has occupied in recent years, following the death of classic developers such as Martinsa-Fadesa, Reyal Urbis, Astroc, Nozar and Habitat.

But Neinor is just the first of many. It is being followed by the US fund Värde Partners, possibly the most active in terms of purchases in Spain, which created Dospuntos using its own land and the basis of the former real estate business of Grupo San José. Last month, it starred in its latest large acquisition, purchasing Vía Célere, the property developer created by Juan Antonio Gómez-Pintado, for €90 million. (…).

And following both of them is Aedas, backed by the fund Castlelake, which is also proving very active in creating an enormous bank of land. These three real estate companies alone are expected to invest around €5,000 million in land, purchases and investments. And the latter two may well follow in Neinor’s footsteps with stock market listings.

These new property developers are replacing the Socimis in the newspaper headlines (…), which since 2014 have been active in the first segment to experience the recovery, namely, rental assets: large office buildings, commercial premises, shopping centres, hotels and industrial warehouses.

The leader in that sector is Merlin Properties, which has become one of the leading real estate companies in Europe, with a portfolio of assets worth €9,800 million. (…).

The other large Socimi that has attracted international capital since 2014 is Hispania, managed by Grupo Azora, a Spanish fund backed by Concha Osácar and Fernando Gumuzio. (…). It has become the largest purchaser of hotels in Spain, with a giant portfolio worth €1,800 million.

Lar España, managed by Grupo Lar, and Axiare, chaired by Luis López de Herrera-Oria are the other large Socimis on the main stock market, which have created net assets worth more than €1,200 million in record time. But they are not the only ones. Attracted by the tax benefits, many wealthy families have also used this legal structure to organise their assets. Examples include the Montoro Alemán family with the Socimi GMP (…).

Not to mention the large international real estate funds, such as Blackstone, Cerberus, Iba Capital, TH Real Estate, Orion, HIG and GreenOak, which, together with the Socimis, have been and are the most active players in terms of acquisitions.

The Barcelona-based firm Inmobiliaria Colonial has also undergone a comprehensive clean-up, with the segregation of its toxic land and residential business, to become the second-largest real estate company in the country, after Merlin. (…).

Meanwhile, Metrovacesa has headed in the opposite direction. After transferring its tertiary business to Merlin, it is now getting ready to become one of the major players in the residential sector, with the backing of BBVA and Santander. Similarly, the Mexican magnate Carlos Slim has revived Realia, also giving new life to the dead activity of house construction.

Other key players in recent years have been the banks’ platforms or servicers, such as Aliseda, Anida, Solvia, Altamira and Servihabitat, which have been managing the real estate portfolios of the financial institutions and promoting housing developments. (…).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Sareb’s Investors Will Lose 30% Of Their Investment

7 April 2017 – Expansión

Sareb, the bad bank that took over most of the toxic real estate assets from the banks intervened by the State through the Frob, announced a substantial modification to its business plan last week. The change represents an acknowledgement of the fact that, at the end of the entity’s life, in 2027, its shareholders will have lost 30% of their initial investment, almost €1,440 million. As such, the shareholders are going to have to recognise provisions for that impairment this year.

The creation of Sareb (which began operating in 2013) was conducted after the State received European aid to clean up the domestic financial system. It was not possible before because the Treasury did not have sufficient funds to do launch the initiative alone.

In an attempt to ensure that the State’s contribution would not add to the public deficit, a procedure was carried out whereby the private banking sector, insurance companies and some real estate companies contributed most of the necessary own funds (55%) and the Frob contributed the remaining 45%. This meant that in total, €4,800 million was contributed, €1,200 million in the form of capital and €3,600 million in the form of subordinated debt, convertible into capital, which would receive a relatively high remuneration if the company were to generate profits.

Sareb obtained the other resources required to pay for the real estate assets acquired from the banks in difficulty, by issuing debt over one, two and three years, which the entities from which the assets had been acquired were obliged to subscribe to and which is now being renewed for equal periods as it matures, but in reducing amount thanks to Sareb’s ability to generate funds to repay it.

All of the private banks, with the exception of BBVA, answered the call of the economic authorities and invested on the basis of their size. Santander put €805 million in the pot; CaixaBank, €581 million; Sabadell, €321 million; Popular, €276 million, and Kutxabank, €122 million. The other entities contributed smaller but no less representative amounts, based on their size.

Initially, the business plan forecast that the entity would become profitable after five years and it was stated that the company would generate an annual return of 14% over the course of its 15-year life. (…).

When the President of the entity, Belén Romana, was replaced by Jaime Echegoyen, that long-term business plan was modified to try to bring it closer to the reality of the problem assets whose orderly exit is complicated and whose profit generating ability is pretty much impossible.

The Ministry of Economy decided that the supervisor of Sareb’s accounts should be the Bank of Spain because the assets had come from financial institutions and because a large part of them were essentially problem loans. The supervisor established some very strict accounting standards regarding provisions (…), which forced the bad bank to register losses from its first year onwards, which reduced the level of capital subscribed by the shareholders by the same proportion. (…).

The evolution of the market and of Sareb itself have meant that, again, a revised business plan is being prepared to reflect the latest reality, which, according to the statement made to shareholders last week, not only completely abandons the plans for Sareb’s owners to obtain any returns from the risk they have borne, but also recognises that the total liquidation of the assets will result in losses of around 30% on the capital and debt invested. In other words, the investors will recover €3,360 million at most and will certainly lose €1,440 million. The Frob stands to lose the most: almost €650 million.

Most, if not all of those who invested in Sareb understood that they were providing a service to the country and that obtaining any returns was very unlikely and that there may be losses at the end of the process. Losses that they would recognise when the time came.

But the situation has now changed. This latest announcement means (….) that the shareholders have no choice but to recognise provisions for the losses announced this year. That means a new effort for the banks, some of which are already very stretched in terms of their provisions for this year.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Logic Spain KCRE Buys 15,252m2 Logistics Platform

30 March 2017 – Mis Naves

The company Logic Spain KCRE, a joint venture created by Brunswick Invest (the main investment arm of Brunswick Real Estate), the international real estate group Grosvenor, and the Spanish investment company Kefren Capital, has completed the acquisition of a logistic platform located in La Bisbal de Penedés (Tarragona).

The platform was constructed in 2005 on a plot of land measuring 25,000 m2. The total constructed surface area is 15,252 m2, including almost 500 m2 of office space and it is leased to Applus Idiada, a subsidiary of the Applus group and market leader in the design, engineering, testing and provision of homologation services for the automobile industry.

The logistics platform is located 5 minutes from the intersection of the AP-2 (Madrid-Barcelona) and AP-7 (Mediterranean Corridor) motorways and is 40 minutes from the port of Barcelona and 20 minutes from the port of Tarragona. The industrial estate where the warehouse is located has direct access to the Applus Idiada test circuit, where the company carries out its vehicle trials and tests.

Logic Spain KCRE is led by the real estate asset manager Kefren Capital Real Estate (KCRE) and has been advised by Bufete Buigas on the legal-side and by Mace regarding technical matters. The operation has been financed by Kutxabank.

JLL advised the vendor during the process.

The logistics platform in La Bisbal represents Logic Spain KCRE’s second investment. The entity plans to invest more than €100 million in logistics assets in the Spanish market. Kefren Capital Real Estate will take responsibility for managing the assets in order to generate value using its extensive experience in the sector.

Original story: Mis Naves

Translation: Carmel Drake

Demand For Neinor’s Shares Far Exceeds Supply In A Few Hours

21 March 2017 – Expansión

The public share offering (OPV or ‘oferta públic de venta’) and share subscription that Neinor Homes launched on Friday, for the purpose of debuting on the stock market on 29 March, was covered within just a few hours, according to the real estate company.

The company owned by the fund Lone Star received requests for shares for an amount that “far exceeds” the supply from international institutional investors, primarily in France, the UK, USA as well as from Spanish entities.

The real estate company led by Juan Velayos considers this over-demand to be a “sign of the strong interest from qualifying investors” in participating in the company and in its process to debut on the market.

By virtue of the timetable established for debuting on the stock market, investors still have time to request shares in Neinor, until 27 March.

Neinor plans to place up to 60% of its share capital in the market at €16.46/per share. By virtue of the operation, the company has launched a public offering for share subscription (OPS) of 6.07 million new shares and an OPV whereby the current owner of the company, the fund Lone Star, will sell another 37.01 million shares.

The debut on the stock market forms part of the strategy that Neinor Homes designed when Lone Star constituted the firm in 2015 using real estate assets it had purchased from Kutxabank. The operation seeks to expand the firm’s shareholder base and incorporate new shareholders, as well as to raise resources to pay off debt.

Original story: Expansión 

Translation: Carmel Drake

Thor Equities Buys Store In Puerta del Sol For €43M

13 March 2017 – Expansión

Madrid’s high streets and specifically, those with the greatest numbers of tourist visitors, are starring in some of the largest investment operations in the retail sector.

The latest example is the purchase completed by the US fund Thor Equities. The firm, which specialises in the management and development of all kinds of real estate assets, has completed the purchase of a 520m2 store at number 5, Puerta del Sol, in Madrid. It has paid €43 million for the property, which is leased to the tenant Futbolmanía.

The fund Thor arrived in Spain in September 2015, when it acquired another store in La Puerta del Sol, worth €9.5 million, which used to be owned by Kutxabank.

Several months later, it spent around €65 million on a building owned by El Corte Inglés. The property, which used to house a bookstore, has a surface area of 1,344 m2 spread over three floors. A search is currently underway for a tenant for that property, following the departure of El Corte Inglés, which remained as a tenant for a year following the sale.

The US fund has also acquired the building at number 16 on Calle Fuencarral. In these operations, Thor has been advised by the real estate consultancy Knight Frank.

“We still firmly believe in the Madrilenian market – and in particular, in the area of high footfall around La Puerta del Sol – due to the continuous growth of the Spanish economy and the increase in consumer confidence, as well as the persistent increase in the number of overseas visitors to the city, all of which are leading to increases in retail sales”, said Jared Hart, CEO at Thor Equities.

Internationally, Thor Equities owns high-profile properties in London, including 1 Dover Street, 145 Oxford Street, 105-109 Oxford Street and Bond Street House on 14 Clifford Street, as well as the Burlington Arcade, as well as buildings on the Champs Elysees in Paris.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake