Bankia And BMN Both Put NPL Portfolios Up For Sale

27 March 2015 – Expansión

Divestments / Bankia and BMN are seeking to replicate the transaction completed by Catalunya Banc in 2014 on a smaller scale. The market expects a “boom” in these sales in 2015.

After two years divesting shareholdings and bad debts, Bankia considers that the time has come for it to transfer some of the non-performing mortgages that it deems to be unrecoverable. The entity led by José Ignacio Goirigolzarri has put a portfolio amounting to €1,300 million up for sale, of which more than €900 million relate to unpaid mortgages. BMN has also put a similar package of loans up for sale, amounting to €160 million, of which €52 million relate to mortgages.

Investors have received these operations with a great deal of anticipation, because since Catalunya Banc transferred a portfolio of problem mortgages amounting to €6,500 million to Blackstone last summer, no other entity had decided to follow suit.

After the step taken by Bankia and BMN, a number of entities are expected to join the band wagon and put some of their real estate loans to individuals up for sale.

Change of course

Until now, the bank had been reluctant to sell mortgages to opportunistic funds for reputational risk reasons. To avoid this, Bankia and BMN have decided to exclude loans relating to subsidised and social housing (from their portfolios). Moreover, sources in the financial sector explain that overseas funds may offer more alternatives for non-performing loans than the banks, since they purchase the loans at a discount and so can offer discounts themselves. These investors, just like the banks, must comply with the Code of Good Practice developed by the (Ministry of) Economy in 2012.

The sale launched by Bankia forms part of Project Wind, advised by KPMG . In total, the portfolio contains overdue loans amounting to €1,300 million, which are split into three sub-portfolios: mortgages; loans to SMEs and real estate developers, secured by properties, worth €180 million; and unsecured loans amounting to €210 million.

The mortgage portfolio comprises 4,300 loans, with an average value of €214,000. Most of the mortgages were granted to purchase property in Cataluña (32%), Madrid (25%) and Valencia (18%). Furthermore, 83% of the 4,300 non-performing loans are involved in judicial proceedings.

These types of transactions allow banks to remove non-performing assets from their balance sheets, release provisions and devote new resources to new more profitable activities.

Foreign funds will monitor this transaction very closely, especially those who have purchased a real estate platform in recent years: Cerberus (Haya Real Estate), Apollo (Altamira), Centerbridge (Aktua), TPG (Servihabitat), Blackstone (Catalunya Caixa Inmobiliaria) and Värde Partners y Kennedy Wilson (Aliseda). Having purchased the real estate management platforms in 2013, these investors are now keen to nurture (feed) them with their own assets, and whereby obtain profitability from their investments.

In addition to this transaction, Bankia has two other deals in the pipeline: the sale of hotel loans – Project Castle – for which it has received non-binding offers of between €200 million and €300 million; and the transfer of syndicated and bilateral loans amounting to €500 million – Project Commander – which Deloitte is advising.

On a smaller scale

In the meantime, BMN has put a similar portfolio up for sale to that offered by Bankia as part of Project Wind. It amounts to €160 million, of which one third are unpaid mortgages. The sale of this portfolio, known as Project Pampa, is being managed by N+1. Almost all of the 300 mortgages included in this portfolio are secured by properties in Cataluña.

BMN hopes to close the sale of its portfolio by the end of May. In the case of Bankia, the transfer process may last until the middle of the year.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

RE Managers Ranking: Solvia & Anida Vie With Vulture Funds

25 February 2015 – El Confidencial

Banco Sabadell and its real estate arm Solvia have infiltrated the top ranking of (Spain’s) real estate managers, which mainly includes vulture funds. These funds now have (assets under management amounting to) €278,000 million.

The international funds have consolidated their position as the new players in the real estate sector after Sareb’s latest auction. In fact, together, the so-called vulture funds control a portfolio of assets amounting to more than €278,000 million, including land; properties; and mortgage and developer debt. There are some important exceptions (in the ranking), such as Solvia (Banco Sabadell) and Anida (BBVA), but the top positions are held by institutional investors such as TPG (Servihabitat), Cerberus (Haya Real Estate) and Apollo (Altamira), who monopolise the sector.

Following the bid for Sareb’s assets, the largest manager or servicer is Servihabitat, owned by Caixabank (51%) and the US fund TPG (49%). In total, the company manages €58,698 million, having taken on €19,725 million from Sareb. The entity was already ranked first or second-place, depending on whether the loans in its portfolio were included in the calculations, rather than just the properties.

Since the start of the year, Servihabitat has controlled 21% of the assets of the so-called servicers, including properties and loans. Following the auction, it now also manages assets of Nova Caixa Galicia, Liberbank and Banco de Valencia. This hegemony has been thanks to Sareb’s most recent auction, which was held less than two months ago, which awarded portfolios amounting to €41,200 million. The assets (awarded in that auction) have been managed by the winning companies since 1 January 2015.

The main upset (in the rankings) has been Banco Sabadell and its real estate arm Solvia, which has infiltrated the ranking of the top property managers in Spain. The bank was one of the few that did not sell its real estate portfolio to the vulture funds, like most of its competitors did, and as a result, it has become the fourth largest entity in the (servicing) sector, a surprise gate-crasher to the party, with assets of €39,765 million. Of this amount, €17,187 million came from the most recent auction, in the form of assets that came from Bankia. 43% of the assets that Solvia now manages came from Sareb. It has a 13% share of that market.

Off the podium

In this sense, another important development is that of Apollo. Previously it was the sixth largest player. Now, following the auction and its purchase of Altamira from Banco Santander for €700 million at the end of 2013, it has risen to third place. This bronze medal position reflects the fact that Altamira-Apollo now manages €46,566 million. It has acquired more than half of its property and loan (€26,056 million) from Sareb. The entity has a 17% share of Sareb’s market.

These increases have been achieved at the expense of another operator, Anida, which has dropped down the rankings to fifth place. Anida is the real estate arm of BBVA and has more than €25,000 million assets under management. It is one of only a handful of companies of this type, which, like Solvia, has not allowed foreign funds to participate in its capital. Neither Anida nor Aliseda, which was sold by Banco Popular to Värde Partners and Kennedy Wilson for €815 million, participated in the most recent auction and so they lost size in a business where critical mass is fundamental.

Haya Real Estate, owned by Cerberus, is still the entity that depends most heavily on the Sareb. It controls assets that mainly come from Bankia and so 65% of its portfolio depends on the Sareb contract, much more than Altamira (55%) and Solvia (43%).

By contrast, from all of the large players, Servihabitat is the one that is least dependent on the bad bank, despite having won some of the lots it has auctioned, since it already had a significant asset base. It depends on Sareb for 33% of its portfolio only, which means, on paper, that it should have a higher operating management margin than its closest competitors.

Original story: El Confidencial (by Marcos Lamelas)

Translation: Carmel Drake