CaixaBank Hires KPMG to Accelerate Sale of Rental Homes Worth €3bn

29 November 2017 – El Confidencial

Spanish financial entities have put their foot down on the accelerator to remove a decade’s worth of real estate crises from their balance sheets. The starting gun was fired by Banco Santander in the summer, when it transferred 51% of the €30 billion in toxic assets that it had inherited from Popular to Blackstone; and yesterday, another milestone was marked by the agreement announced between BBVA and Cerberus, which will allow the bank to deconsolidate more than €12 billion in foreclosed assets.

The next major step may involve CaixaBank after the entity engaged KPMG to try to accelerate the sale of a significant batch of real estate assets, with a net value of €12.1 billion. Specifically, the professional services firm is already working on organising one or more processes to allow the sale of some of the €3 billion that the bank owns in rental assets, according to sources familiar with the process.

That portfolio contains almost 40,000 units and, if it ends up being sold, will represent one of the most significant divestments made by the entity to date. Sources at CaixaBank acknowledge that they are working with KPMG and admit that one of the services that the firm is rendering “may include the sale of certain foreclosed rental assets” but they point out that it would only for a portion of the aforementioned €3 billion.

The sale to Testa of 135 homes, announced in September, fits within this strategy – a small appetiser ahead of the main course that the bank led by Gonzalo Gortázar really wants to serve. Its efforts are aimed at trying to taking advantage of the excess liquidity held by the large funds and the current attractiveness of Socimis to find an exit for its foreclosed rental assets.

Despite CaixaBank’s interest in reducing its real estate exposure, something that both the Bank of Spain and the European Central Bank are asking the entire sector to do, the entity is choosing to be cautious. It is pushing ahead one step at a time, according to market sources, who say that the bank is working to redefine the future of its whole real estate division.

New route map

CaixaBank’s real estate activity is currently divided into two large subsidiaries, Building Center, the real estate company that owns the bulk of the entity’s foreclosed assets; and Servihabitat, a platform (servicer), in which the bank holds a 49% stake, whilst the other 51% is owned by the fund TPG.

The second company, which has been given the mandate to manage the bank’s properties, but not ownership of them, has just hired Iheb Nafa as its new CEO, to replace Julián Cabanillas. It has also engaged McKinsey and Oliver Wyman to analyse all of its future options; any change would require the firm to reach an agreement with TPG; moreover, that giant may be interested in increasing its stake in Servihabitat.

CaixaBank has net real estate assets amounting to €12.1 billion according to its most recent quarterly report as at 30 September. All of this “property” is included in the area known as Non-Core Real Estate, which generated losses of €330 million during the first nine months of the year. The jewel in that crown is the real estate company Building Center, owner of the majority of the foreclosed assets, whose accounting coverage ratio stands at 49%.

Sources in the sector expect the bank to make its big move within the next year, and for it to be in line with those already made by BBVA and Santander. For the time being, the entity is limiting its expectations to the field of research, by indicating that “KPMG, Oliver Wyman and McKinsey are redefining operating processes to improve logistics and efficiency”.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

ECI Puts 200 Properties Up For Sale For €1,000M

1 March 2016 – Expansión

Launch of Operation Batman / At the end of March, the retail giant will start to sell off dozens of logistics assets, supermarkets, offices and plots of land, in an effort to reduce its level of debt.

El Corte Inglés is making progress with its plan to divest its non-strategic real estate assets, in an effort to reduce its debt, with the launch of a huge real estate asset sales process. The retail giant is planning to put the For Sale sign up over a batch of 200 properties with an approximate value of €1,000 million.

This batch of assets includes up to 102 supermarkets – some of which are operational, whilst others are closed – , 32 logistics assets, which cover a surface area of 500,000 m2 and several plots of land. It also includes 50 high street retail outlets, with a combined surface area of 180,000 m2, and 20 office properties located in Madrid and Barcelona.

The process, dubbed internally as Operation Batman, is being coordinated by Morgan Stanley, which has collaborated with the El Corte Inglés in other operations. Meanwhile, Clifford Chance is responsible for providing legal advice.

According to sources close to the operation, the company intends to put this portfolio of assets up for sale at the end of this month. For the time being, the company has commissioned the valuation of the properties, with a view to receiving the first non-binding offers on 16 May and the definitive offers by the middle of July. The objective of Dimas Gimeno, the President of the El Corte Inglés, is to complete the asset sales before August.

The upcoming operation is attracting growing interest in the market. Most of the large funds, insurance companies and even some of the larger Socimis have expressed their interest in participating in the auction.

The company will accept offers for all of the properties, as well as for separate lots, if the potential purchaser is interested in buying, for example, only those assets linked to the logistics operations, the supermarkets or the offices. El Corte Inglés is not including the joy of its logistics crown in the lot: its megacentre in the south of Madrid. Nor is it willing to divest Torre Titania, or its historical headquarters in Hermosilla. (…).

Original story: Expansión (by R. Ruiz/A. Antón)

Translation: Carmel Drake

BNP: RE Investment To Exceed €10,000M In 2015

30 September 2015 – Cinco Días

Real estate investment in Spain is reaching historical highs in 2015, exceeding even the levels recorded during the boom in the sector, which ended in 2007 and gave rise to the subsequent crisis. Those are the conclusions of a report about the market presented yesterday by BNP Paribas Real Estate, the real estate division of the French bank. It says that the total figure for the purchase of assets such as offices, shopping centres, hotels, residential properties (excluding those sold privately to individuals) and logistics assets will come close to €10,000 million this year, and will even reach €12,500 million if corporate operations, such as the purchase of Testa by the Socimi Merlin Properties, are included.

And it is precisely this “hyperactivity” by the Socimis, the new players in the market, who first appeared in 2014, that is proving key to this huge increase (in investment) from the minimum levels recorded in 2012, when total investment amounted to just €1,785 million. Investment this year is expected to exceed even the level recorded in 2007, the year before the crisis when €9,200 million was invested. “The Socimis are spending a lot. I do not think that they will be able to invest as much in 2016”, said Jesús Pérez, President of BNP Paribas.

The Socimis, which emerged in 2014 – including Merlin Properties, Axiare, Hispania and Lar España – have raised capital quickly, earning the trust of many large international investors, and they have used this capital to acquire assets. “The Socimis are a key driver behind this peak in investment as they have (successfully) channelled capital from overseas”, confirmed Ramiro Rodríguez, Head of Research at BNP Paribas Real Estate.

This year, the entity expects that these listed company will invest around €4,200 million between them (they spent €1,900 million in 2014). Large funds have backed the resurgence of the Spanish real estate market by investing in these companies, which are managed by specialist managers in the sector who have teams with lots of experience.

According to BNP’s calculations, during the year to August, total investment in our country amounted to €7,560 million. However, the entity expects that only €8,000 million will be invested in total in 2016, partly because the Socimis will be forced to rein in their spending.

The other major reason as to why funds and investors are interested in this sector is because there are still opportunities to be found. “Prices have decreased by 40% since 2008”, says Pérez, who highlights that the residential and land markets are also on the rise, partly driven by property developers “who are rising up from the ashes”.

The reactivation of the sector stems from economic recovery and employment, and so investors expect that the improvement will increase occupancy rates in offices, footfall in shopping centres and drive up logistical activity…and that that will, in turn, lead to increased income and higher rents for tenants. In fact, BNP Paribas thinks that the volume of office rental transactions will increase by 100,000 m2 in Madrid and by a further 84,000 m2 in Barcelona.

Nevertheless, the office availability rate is decreasing slowly, partly due to the long duration of the companies’ existing contracts, which prevent them from moving, according to these experts. However, the shortage of space is being seen above all in prime areas, i.e. in the best business areas of these two cities. This deficit – and the pressure from potential buyers – explains why prices have risen in these areas this year by 17% in Madrid and 15% in Barcelona.

Pérez is certain that the independence process has not deterred investors from investing in the market in the Catalan capital. “Investments have only been delayed in two or three specific cases”, he said.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake