Santander Cuts the Cost of its Agreement with Altamira in Exchange for Paying Apollo €200M Now

10 July 2018 – El Confidencial

A new twist in the relationship between Santander and Apollo. The Spanish entity and the US fund have restructured the contract that they signed four years ago, when the former sold 85% of Altamira to the latter. As such, they have laid the foundations that will allow for the refinancing of the debt of their shared subsidiary, which specialises in real estate services.

Specifically, the new agreement involves a significant reduction in the commissions that Altamira will charge the bank, in exchange for which Santander will pay Apollo €200 million now. Moreover, a series of agreements made between the two parties means that Apollo will receive another €70 million, according to confirmation from several sources in the know.

Thanks to the cash injection that the reduction in commissions brings, Altamira has improved the conditions of its €270 million syndicated loan that it has signed with Santander, Bankinter, Bankia, Sabadell, Crédit Agricole and Mediobanca. That liability has seen its term improve by two years, to 2023, but without the repayment of the principal, given that Apollo’s aim with all of these changes (the new management contract and the new debt conditions) is to be able to distribute a juicy dividend.

Specifically, according to the sources consulted, the fund wants to take advantage of the new liquidity injection to distribute remuneration of around €200 million. In fact, Altamira’s total financial commitments, which exceed €320 million, will remain the same and will not decrease following all of this restructuring.

It was in January 2014 when Banco Santander closed the sale of 85% of Altamira to Apollo for €664 million, in an operation that included a management contract for the bank’s real estate assets until 2028. That term will be maintained following the new restructuring of the agreement.

Since then, the relationship between the two partners has gone through various phases, which have included an attempt by the bank to buy back 100% of the platform, although that deal never came to fruition for price reasons, and the acceleration made by Santander to rapidly divest all of its property (…).

One strategy, which has involved the transfer of assets to Metrovacesa and Testa, the creation of a joint vehicle with Blackstone, baptised Quasar, to provide an exit for €30 billion in toxic assets and, now, the sales process involving €5 billion in residential and tertiary assets that has been entrusted to Credit Suisse.

This operation forms part of the horizon that the bank defined last year, when it completed Quasar and announced that it was giving itself until the end of 2018 to reduce its exposure to property to an “immaterial” level, in the words of the bank’s own CEO, José Antonio Álvarez.

Nevertheless, this desire to reduce the real estate exposure to zero will have a direct impact on Altamira, given that the portfolio now up for sale accounts for the bulk of Santander’s assets, which are still managed by the servicer.

Historically, Altamira’s two main clients have been Sareb, which awarded it the contract to manage €29 billion in assets and property developer loans, and Santander, a base Apollo has been expanding by signing agreements with other entities, such as BBVA, which has entrusted it with a €200 million loan portfolio, and Bain Capital, which has engaged it to manage the €600 million portfolio that it purchased from Liberbank.

In addition, the servicer has committed to expanding internationally to grow in size, a strategy that has already seen it take over €10 billion of assets under management in Portugal and Cyprus, the first two markets into which Altamira has made the leap.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Pressure from the ECB Forces Spain’s Banks to Market €40bn in Problem Real Estate

19 June 2018 – El Mundo

The extension of zero interest rates until “at least” next summer, as announced by the European Central Bank, has led Spain’s financial institutions to conclude that they can wait no longer for an improvement in economic conditions to divest their delinquent loans. At the moment, the main Spanish banks have problem assets worth more than €40 billion up for sale in the wholesale market.

The buyers in this market are large investment funds, which value the assets at prices below their nominal values. For the banks, this difference means, on the one hand, that they definitively loose 100% of the investment that they made and, on the other hand, that they can release the provisions for at least half of those losses. The ECB does not want the entities to speculate with these assets on their balance sheets and for that reason, it is forcing their sale.

In this way, last week, Cajamar liquidated its Galeon Project comprising €308 million in debt and yesterday, it was BBVA who divested another portfolio, called Sintra, comprising €1 billion in property developer loans for finished homes in Andalucía, Madrid, Valencia and Cataluña.

The CEO of BBVA, Carlos Torres, said that with this operation, he considers the chapter of accumulated delinquent debt on its balance sheet as a result of the real estate bubble to be “closed”. Since December 2016, the entity has cut its gross exposure to the real estate sector by approximately €20 billion.

Another entity that has placed portfolios of loans and foreclosed properties on the market is Liberbank, with a €250 million portfolio of foreclosed properties, which it has eloquently baptised Bolt. Other entities that are close to signing agreements include Banco Santander, with €500 million in debt on the verge of being placed and another €400 million on the market, and Banco Sabadell, one of the most active entities in the sale of doubtful assets this year, which is finalising the sale of €900 million in defaulted loans.

The bank headquartered in Alicante has two other large portfolios up for sale, although in that case they are foreclosed properties with a combined value of €8 billion, which proceed from both its own activity, as well as from the activity it took over following the purchase of Caja de Ahorros del Mediterráneo (CAM). If the group chaired by Josep Oliú closes the sale of all of these portfolios, it will have reduced its exposure amounting to more than €14 billion to less than €5 billion.

In the market for the large funds that purchase these assets, there are also offers from CaixaBank (€800 million in defaulted loans in a portfolio called Agora) and Bankia, which is selling €650 million in doubtful loans and preparing another one worth €1 billion.

The largest operation of all is by far the one involving Sareb, called Alfa, which involves placing on the market assets with a nominal value of €30 billion. The public-private company is sounding out the definitive price that the funds would be willing to pay before it decides whether to keep it up for sale.

Original story: El Mundo (by César Urrutia)

Translation: Carmel Drake

Spain’s Banks Race Against the Clock to Sell Off Their Problem RE Assets

28 May 2018 – Eje Prime

The banks are facing a new record. The entities have cut their problem assets almost in half over the last four years, but now they are trying to get rid of thousands of properties in record time to keep the supervisor happy, along with investors. The Bank of Spain warned just this week that the volume of impaired assets continues to be high, given that foreclosed assets amount to €58 billion and doubtful loans still amount to almost €100 billion, something that concerns the ECB and penalises the sector on the stock market.

Specifically, Spanish banks’ problem assets amounted to €152 billion at the end of 2017, a very high volume, but 46% lower than the €280 billion registered as at December 2013.

In addition to the cost that maintaining these assets on the balance sheet has for entities, they also prevent them from allocating resources to other activities more in keeping with the banking sector that would generate higher returns, which worsens the problems of returns in the sector especially at a time of very low interest rates.

In 2017, in the face of clear pressure on the banks to significantly reduce their problem assets, the Spanish market resurfaced to account for approximately 50% of the European market for the sale of problem assets, recall the experts.

The announcement by Cerberus of its purchase of 80% of BBVA’s problem assets and the acquisition by Blackstone of 51% of Aliseda and of Popular’s non-performing assets clearly marked a turning point.

And currently, taking into account the portfolios that are up for sale and the forecasts for the reduction in non-performing assets in the plans of many Spanish banks, a high volume of transactions is also expected in 2018.

The entities are on the case

Sabadell is planning to decrease its non-performing assets by €2 billion per year until 2020, although, depending on investor appetite and the agreements with the Deposit Guarantee Fund (FGD), that figure may rise considerably in 2018, explain sources at Funcas.

Meanwhile, in its strategic plan for 2018-2020, Bankia is forecasting the sale of €2.9 billion problem assets per year, even though the entity got rid of much of its real estate hangover with the creation of Sareb, the bad bank.

The placement on the market of this significant volume of assets is not only limited to the large entities; it is also involving smaller firms such as Ibercaja and Liberbank, which are also planning to divest assets.

In the case of the former, its plans involve cutting its problem assets in half between now and 2020, which translates into a decrease of around €600 million per year, whilst Liberbank is looking at reductions of €900 million per year until 2020.

For 2018, Santander has set itself the objective of €6 billion, whilst Sareb is aiming for €3 billion, which shows the real commitment that the entities have to cleaning up their balance sheets and to keeping the supervisor, and the markets, happy. Now they just need to deliver.

Original story: Eje Prime

Translation: Carmel Drake

Liberbank Transfers €180M in Toxic Assets to JV with G-P-Bolt

18 May 2018 – El Economista

Liberbank has transferred real estate assets with a gross accounting debt of around €180 million to a joint venture with G-P-Bolt, in which it will hold a 20% stake, according to a statement filed by the financial institution on Friday with Spain’s National Securities and Exchange Commission (CNMV).

This joint venture, in which G-P-Bolt will hold the remaining 80% stake, has been constituted with the purpose of managing, developing and owning a portfolio of foreclosed assets from Liberbank and its group.

Liberbank has highlighted that the close of this transaction, which has a neutral effect on its income statement, forms part of the strategy to reduce its non-performing assets (the most doubtful foreclosed assets), which has resulted in a decrease of €1.82 billion between 31 March 2017 and 31 March 2018, equivalent to a 30% reduction in its stock.

Finally, Liberbank has reiterated its objectives in terms of the quality of its assets communicated to the market and expects to achieve an NPA (non-performing assets) ratio of less than 12.5% by the end of this year.

Original story: El Economista

Translation: Carmel Drake

Bankia Transfers the Management of its Real Estate Portfolio to Haya Real Estate

27 April 2018

The agreement affects properties worth a total of 5.400 billion euros. Haya will handle Bankia’s current portfolio and any new assets that may be added in the future. Cerberus’ real estate manager already manages Liberbank and Cajamar’s real estate holdings.

Bankia has entrusted Haya Real Estate, the Cerberus fund’s real estate management company with full management of its real estate assets, including those from Banco Mare Nostrum (BMN). Both companies signed new agreements for the management of real estate and credit assets and the provision of services to replace those already signed in September 2013.

Likewise, Bankia reported that it had included the management contracts for unpaid debts and certain real estate assets owned by BMN at the time.

Haya Real Estate will handle all of Bankia’s current stock of assets, as well as any new assets that the financial institution may acquire in the future. As reported by the bank, the agreement currently affects a portfolio worth a total of 5.4 billion euros.

Bankia added that this operation would not have an impact on the group’s accounts. With this transaction, the financial institution concludes the reorganisation of its real estate business and unpaid debts ” to increase efficiency after its merger with BMN.”

Currently, Haya also manages a package of 52,000 loans from Sareb and exclusively sells real estate and developer loans to Grupo Cooperativo Cajamar. It also exclusively manages Liberbank’s real estate holdings.

The bank chaired by José Ignacio Goirigolzarri presented its accounts for the first quarter of 2018 this Friday. The bank saw profits fall by 25% due to the absence of extraordinary items and the merger with BMN. Specifically, the company achieved an attributable profit of 229 million euros, compared to €304 million in the same period in 2017.

Agreement With BBVA

In addition to this agreement with Bankia, Cerberus will finalise the purchase of 80% of BBVA’s real estate business next September, for around 4 billion euros, according to the fund’s financial director, Jaime Sáenz de Tejada. In total, Cerberus will acquire some 78,000 real estate assets with a book value of approximately 13 billion euros and the assets and employees necessary for its management.

Original Story: Bolsamanía – Virginia Palomo

Translation: Richard Turner

 

Haya Real Estate Wins Contract to Manage Assets Worth €15bn+ For Bankia-BMN

9 April 2018 – Expansión

The negotiations between Haya Real Estate, the Spanish subsidiary of the US fund Cerberus, and Bankia, regarding the management of the latter’s real estate assets, are on the verge of completion. In fact, the parties have already established the perimeter of the new agreement: Haya is going to manage real estate assets worth between €15 billion and €17 billion, in gross terms, on behalf of Bankia and BMN, according to sources in the know.

After receiving the legal approvals to merge the also public company BMN at the end of December, Bankia decided to break the agreement it had signed with Cerberus regarding its property, as well as the agreement that BMN had signed with Lindorff. To do that, it had to pay a “three-figure” indemnity. Other sources in the sector estimate that the compensation payment will have amounted to around €100 million for each fund.

These indemnities depend on who initiates the termination decision, which in this case was Bankia following its integration of BMN.

Open to third parties

The process to take on the management of the real estate assets linked to the resultant entity was subsequently opened up to third parties.

Cerberus will have paid a higher amount than the forecast estimated by Bankia, which took advantage of the merger with BMN to renegotiate upwards a new contract in light of the good times that the real estate sector in Spain is currently enjoying.

Haya Real Estate (Cerberus) took over the management of Bankia’s assets worth more than €12 billion in 2013. At that time, the fund paid between €40 million and €90 million, a range conditioned by the fulfilment of the planned property sales.

The old contract was due to expire in 2023. Now, Haya is going to be Bankia-BMN’s servicer until 2028, according to the sources. Meanwhile, sources at Bankia indicate that the parties are finalising the negotiations and that the finishing touches to the operation have not been agreed yet.

BMN teamed up with Aktua in 2014. The former real estate arm of Banesto is now controlled by the Norwegian fund Lindorff.

Haya Real Estate has become a major player in the real estate sector in Spain. In recent years, it has teamed up with Sareb, BBVA, Cajamar and Liberbank, amongst other entities.

Cerberus’s platform in Spain managed €40.2 billion in assets at the end of 2017, up by 2% compared to the previous year. Having fought off competition from Lindorff in the bid to become the only company to manage the real estate assets of Bankia and BMN, Haya has cleared the way for its stock market debut. The Spanish subsidiary of Cerberus has engaged Rothschild to prepare its IPO.

Bankia will hold its General Shareholders’ Meeting in Valencia tomorrow. The focus will focus on the ERE (collective dismissal) following the integration of BMN and the rumours of a merger with BBVA.

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake

Axis: Spain’s Banks Will Divest At Least €40bn of Their Problem RE Assets This Year

30 March 2018 – El Mundo

Spain’s banks are still trying to lighten their balance sheets of the huge load left on them by the real estate crisis. Forecasts for this year indicate that they will manage to divest assets worth at least €40 billion including properties, foreclosed land and defaulted and non-performing loans.

Those are the estimates made by the consultancy firm Axis Corporate on the basis of operations that are currently being sounded out in the Spanish real estate sector. The figure includes transactions worth at least €9 billion by Sareb, sales of around €6 billion by Bankia and operations by CaixaBank and Banco Sabadell with a volume of close to €12 billion each. “To all of these operations, we have to add the retail operations that the servicers are currently undertaking”, explains José Masip, Real Estate Partner at Axis Corporate and coordinator of the Assets Under Management Observatory Report published recently by the company.

In 2017, sales of toxic assets linked to real estate exceeded €50 billion, “almost twice the €27.4 billion sold between 2012 and 2016”, says the report. Spanish entities are accelerating the clean up of this type of asset from their balance sheets to reduce their default rates and fulfil the European regulations that force entities to reduce the weight of non-performing assets to pre-crisis levels. Despite that and according to data from the consultancy firm JLL, the volume of non-performing assets with real estate collateral in the hands of the banks and Sareb amounts to around €200 billion: €80 billion in REOs (foreclosed assets) and €120 billion in NPLs (Non Performing Loans or doubtful credits).

Greater weight of funds

Both firms predict that the rate of sales seen last year will continue in 2018, above all due to the growing interest from international investment funds (…).

The main investment funds focused on the purchase of real estate assets in Spain are Bain Capital, Oaktree, EOS Spain, Apollo and Axactor, who are following in the footsteps of others such as Blackstone and Cerberus.

The latter two entities starred in the two most important operations of last year. In July, Santander sold a portfolio comprising 51% of the toxic property it had inherited following the purchase of Banco Popular to Blackstone in an operation worth €5.1 billion; meanwhile, in November, BBVA sold 80% of its real estate portfolio to Cerberus for around €4 billion. In a similar operation, also in 2017, Liberbank sold part of its toxic portfolio to the funds Bain and Oceanwood for €602 million.

The transactions were structured through the creation of joint ventures in all cases, in which the bank held a minority percentage of the company or servicer and the acquiring fund took over the bulk of the management. According to Emilio Portes, Director of the Portfolio Business at JLL for Southern Europe, “the structure offers entities a stake in the profits of the assets with upside potential at the same time as cleaning up their balance sheets and slightly improving their capital ratios. Similarly, it offers buyers more advantageous prices without limiting their strategy and management capacity”.

Indeed, in Axis’s opinion, those servicers are expected to be some of the main players in the market over the short and medium term. According to data from the consultancy firm, more than 80% of the assets under management are in the hands of five of them: Altamira (linked to Santander), Servihabitat (CaixaBank), Haya/Anida (controlled by Cerberus after the operation with BBVA), Aliseda/Anticipa (Blackstone) and Solvia (Sabadell). The outlook for this year points to greater concentration in the sector, “with the possible sale of some of the existing servicers”, in such a way that their specialisation and differentiation will be definitive.

Original story: El Mundo (by María Hernández)

Translation: Carmel Drake

Cerberus Wins Bid To Manage & Sell Bankia’s Expanded Real Estate Portfolio

5 March 2018 – La Información

Cerberus has fought off competition from Lindorff to become one of the new Bankia’s partners, responsible for managing and selling its portfolio of foreclosed assets, which now exceeds €5 billion. The group chaired by José Ignacio Goirigolzarri has opted to continue with its existing partner in the end, to the detriment of the partner that has been working with BMN since 2014, for reasons that may go beyond the mere economic bid offered by both, indicate reliable sources.

Bankia’s alliance with Cerberus dates back to 2013, when it acquired its real estate firm Habitat on which it built Haya Real Estate, the servicer, which is now finalising its debut on the stock market after having also been awarded contracts to manage the portfolios of BBVA, Liberbank, Cajamar and Sareb (…).

At that time, almost all of Spain’s financial institutions opted to divest their “servicers” in light of the need to accelerate the sale of their toxic assets and the large appetite of specialist funds to grow in size and contracts. BMN’s story is similar. In 2014, it sold its real estate asset company Inmare to Aktua for €40 million. Aktua was Banesto’s former real estate servicer company, which Lindorff acquired from Centerbridge Partners in a close battle with Apollo and Activum SG Capital Management in 2016.

The Norwegian fund, which is itself currently immersed in an integration process with Intrum Justitia, thus took over the management of the real estate assets of the banking group led by Caja Murcia, as well as of those transferred by BMN to Sareb. The entity now also works for Ibercaja and with certain portfolios from entities such as Santander.

Haya Real Estate and Lindorff’s contracts with their respective clients are similar because they both impose a decade-long period of exclusivity, forcing Bankia to review its position following the absorption of BMN, just like with other types of joint ventures. The bank is going to proceed first to break the contracts and indemnify each partner for a sum estimated to amount to €100 million, according to Expansión, and then it plans to close a new agreement with the winning party. Both partners may have submitted similar bids although it is understood that Aktua offered an exclusively commercial service whilst the agreement with Haya Real Estate included the absorption of the workforce.

The transfer of employees

The new Bankia Group’s property portfolio has a gross value of €5.1 billion, as at the end of 2017, compared with €3.5 billion registered a year earlier excluding BMN’s exposure. The entity has a cushion of provisions that covers 35.9% of its portfolio value in such a way that it could afford to dispose of the portfolio at 64.1% of its initial value without incurring losses. The bulk – 62% – are homes associated with foreclosed mortgages and another 16% are properties received for debt in construction or property development – 48% of that proportion corresponds to land -.

BFA’s subsidiary reduced its problematic assets by 9.9% YoY last year – excluding the incorporation of BMN’s exposure onto its balance sheet – thanks, above all, to sales amounting to €427 million (€5.55 million corresponded to gains) and a 15.3% reduction in doubtful risks.

With the integration of BMN, the bank is being forced to review and rethink all of the contracts where exclusive suppliers operate in both networks. It has already resolved one relating to life insurance, which will see it discontinue BMN’s relationship with Aviva – it will pay that firm €225 million by way of compensation – in favour of Mapfre, which was also victorious in 2016 when the bank came across another duplicate alliance, for the first time (with the same British insurance company, which was also a historical ally of Bancaja). It still needs to settle a similar agreement with Caser, and put the finishing touches to its deals with Lindorff and Cerberus.

Original story: La Información (by Eva Contreras)

Translation: Carmel Drake

Property Developers Eagerly Await Blackstone & Cerberus’s Major Land Sales

26 February 2018 – Cinco Días

The residential market is going to undergo a real shake-up over the coming months. From the summer onwards, Spain’s residential property developers expect the main investment funds to place on the market the large land banks that they have been stockpiling following their purchases from the banks, whereby alleviating the shortage of plots for construction in those areas where activity has resumed. Thousands of millions in investments are at stake.

Specifically, the major stars are going to be Blackstone, which took control of Popular’s toxic property portfolio last year, and Cerberus, which did the same with assets from BBVA. Moreover, managers such as Bain Capital, with land proceeding from Liberbank, will also play a significant role.

The other major player that is going to star in this market over the coming months is Sareb, which is preparing its largest-ever land transaction under a new formula. It is looking to team up with a large property developer to contribute plots worth €800 million and integrate its residential business in exchange for entering the share capital of a company that will be listed on the stock market in the medium term. In fact, large funds are arriving to compete with the bad bank to supply land (…).

“Expectations are high”, says Pablo Méndez, Director of Capital Markets at the consultancy firm Savills Aguirre Newman. “We expect the funds to bring products onto the market during the course of this year. They are going to want to maximise the value of their land, and so they will sell it on a piecemeal basis. We do not expect to see large portfolios for sale, at least not in Madrid, Cataluña or Levante”, he explained. “Nevertheless, I think that we may see portfolio sales in other areas that are starting to reactivate and that are of interest to real estate companies, such as Galicia, Asturias, Santander, Burgos, Tarragona and other large cities”.

House building activity has reactivated timidly in Spain, with 80,000 new house starts last year and with the objective for the sector of reaching around 150,000 new homes per year as the healthy cruising speed. New companies, such as the listed firms Neinor and Aedas, together with others such as Aelca, Vía Célere, ASG, Amenabar and Metrovacesa (which returned to the stock market earlier this month) have boosted activity. But there has been a shortage of buildable land (plots with the necessary permits) in Spain’s large cities, above all in Madrid and Barcelona.

Simultaneously, the banks have been forced to divest property from their balance sheets, under pressure from the regulations set by the European Central Bank, like the entities that received public help did back in 2012, when they transferred their toxic assets to Sareb. In the funds, the banks have found the best partners for getting rid of their properties to start putting them on the market (…).

“We estimate that the large funds have land worth more than €15 billion”, calculates Samuel Población, Director of Residential and Land, at the consultancy firm CBRE.

Blackstone is going to become one of the key players over the next few months. The US fund purchased 51% of Popular’s portfolio worth €10 billion from Santander. Of that total, 42% corresponds to land. The agreement is not expected to be definitively closed until March. From then on, Aliseda will start to sell those plots. The new CEO of that servicer is Eduard Mendiluce, who is also continuing to serve as the head of Anticipa, the company that Blackstone uses to manage its housing portfolios.

Meanwhile, Cerberus acquired 80% of BBVA’s real estate portfolio for €4 billion. Almost 80% of those assets comprise plots of land. In that case, they are waiting until June, for the operation to materialise, before starting to place any portfolios on the market. That sales mandate will be entrusted to Haya Real Estate, the servicer that Cerberus is planning to list on the stock market. Note, the US fund also acquired a majority stake in the residential property developer Inmoglacier, which is expected to receive a small proportion of the plots to make it grow and become one of the new stars of the sector.

Finally, Bain Capital, on a smaller scale, acquired around €144 million of land from Liberbank, at the same time as taking over the Catalan property developer Habitat (…).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Sareb Seeks to Integrate its Residential Business into a Listed Property Developer

22 February 2018 – Cinco Días

Sareb has started on a road that it has not yet explored in its short life. The so-called bad bank is evaluating the possibility of entering the residential property development business with a bang, as it plans to team up with a partner in the sector, in exchange for providing land to a joint venture company. That is according to several sources familiar with the process that has reportedly just started.

According to the sources, Sareb has started a process to divest land and developments in progress for around €800 million, which would result in the largest transaction in the history of the entity.

But on this occasion, the managers of Sareb are seeking to use a new formula, which would involve it contributing land to the share capital of a large property developer, be it one that is already listed or one that is considering its market debut. In return, it would enter the residential property development business and benefit from the high profit margin generated by the house construction business.

The operation is in its initial phases and several sources explain that the size of the land portfolio that Sareb wants to put up for sale may still vary, as may the formula for entering the share capital of the real estate company that ends up winning the tender. Sources at the entity declined to comment.

In any case, Sareb would enter the share capital of the property developer with the final aim of the joint venture making its debut on the stock market, which would allow the bad bank to easily divest its stake in the market in the future, in the same way, for example, that Santander and BBVA have done in the case of Metrovacesa’s return to the stock market.

The intention of the entity is to enter as a minority shareholder, ceding the management, of one of the large real estate companies that are currently starring in the new upward cycle in terms of residential development.

This would be a very similar operation to the one carried out by Santander and BBVA with Metrovacesa. In recent years, the banks have been increasing the property developer’s portfolio by contributing land from their balance sheets in exchange for stakes in the company’s share capital. For example, in July last year, the two banks injected land worth €1.1 billion into Metrovacesa through a non-monetary capital increase.

According to the sources, entering the share capital of a property developer would allow Sareb to benefit from the upward cycle in the housing sector since that business generates high profit margins on the construction of homes, much greater than those generated on the simple sale of land portfolios.

The idea could be summarised by the integration of all of Sareb’s residential and land development business by a property developer, to gain a long-term partner.

Only a limited number of candidates have been invited to participate in the process to become Sareb’s strategic ally, around six potential partners, according to the sources.

The perimeter of the assets, worth around €800 million, would make the operation the largest undertaken by the entity chaired by Jaime Echegoyen (pictured above). Until now, the largest direct sale was the so-called Eloise portfolio, which was acquired by Goldman Sachs, for €553 million. Initially, Sareb even considered a larger contribution of land, worth up to €1.2 billion, but the experts consider that such a volume would be too difficult for any partner to digest.

In fact, the candidates to integrate Sareb’s assets are very limited because of the volume of the operation. All sights are set on the large listed companies in the sector, such as Neinor, Aedas and Metrovacesa, as well as on the other property developers that are backed by international funds, which are not currently trading on the stock market. In the case of the latter, the formula whereby that company ends up on the market would have to be analysed to facilitate the liquidity that would allow Sareb to divest over the medium term. In that case, the list is much more extensive: Aelca (Värde), Vía Célere (Värde), Gestilar (Morgan Stanley), Q21 Real Estate (Baupost), Inmoglacier (Cerberus), Habitat (Bain Capital) and ASG Iberia (Activum).

In terms of the timings fixed by the entity, the sources indicate that the operation will be closed before the summer, although they acknowledge the difficulty of the process to complete the finishing touches of the negotiations to find a strategic partner.

According to sources in the sector, the timings may also be determined by Sareb’s intention to pre-empt other major land operations that are expected to take place over the next few months.

Such is the case of Blackstone, which acquired 51% of Popular’s property portfolio, assets worth around €10 billion. Cerberus is also expected to be active in the market, through Haya Real Estate and Anida – after acquiring 80% of BBVA’s portfolio worth €5 billion – and, finally, Bain Capital, with Liberbank’s property.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake