CaixaBank Creates a Subsidiary to Finance Loans to Property Developers

17 June 2019 – Eje Prime

CaixaBank has created a new subsidiary to finance loans to property developers. The entity will operate under the brand CaixaBank Real Estate&Homes and will seek stable agreements with established property developers such as Neinor, Aedas Homes and Vía Célere, amongst others.

In 2018, CaixaBank financed 581 real estate projects lending €2.6 billion in total, up by 13% YoY. Moreover, 84% of the developments financed by the bank last year corresponded to projects involving less than 50 homes.

Original story: Eje Prime

Translation/Summary: Carmel Drake

Spain’s New Mortgage Act will Enter Into Force on 17 June

18 March 2019 – Expansión

The new Mortgage Act was published in the BOE on Saturday and it will enter into force in three months time, on 17 June 2019.

The legislation reflects an EU directive, which seeks to increase the transparency of mortgage contracts to try to reduce the high rates of litigation in the banking system.

It means that Spanish legislation will, for the first time, require the banks to bear all of the costs associated with the formalisation of a mortgage, except for those relating to the appraisal/survey.

The Bank of Spain agrees that the new law should reduce the number of litigation cases but voiced concerns that it will also make new loans more expensive.

Original story: Expansión

Translation/Summary: Carmel Drake

CaixaBank Granted Loans Amounting to €2.2bn to Hotels in 2018

19 February 2019 – Expansión

CaixaBank Hotels & Tourism granted loans amounting to €2.186 billion to the Spanish hotel sector in 2018, a figure that represents an increase of 46% with respect to the previous year. Moreover, 2,800 operations were carried out, up by 8% compared to 2017. The Balearic Islands and Cataluña are the autonomous regions that received the most loans.

Original story: Expansión

Translation: Carmel Drake

Bankia Signs Property Developer Loans Worth €450M in 2018

2 January 2019 – Eje Prime

Bankia is consolidating its return to the property development sector. The bank signed loans worth €450 million for the construction of homes during 2018, its first year back in the real estate business after the restrictions imposed by the European Commission, as a condition for saving the company from bankruptcy, came to an end.

During the year that just ended, Bankia signed several financing operations with real estate developers to construct 2,200 homes in total in Madrid, Cataluña, the Community of Valencia, Andalucía and the Balearic Islands. With these figures, the bank doubled the expectations that it had set itself when it re-launched in the real estate sector, according to reports from the entity in a statement.

Following the results of the first year, the entity chaired by José Ignacio Goiriogolzarri says that it is carrying out its activity “in accordance with the new standards of prudence in the real estate sector, which includes a requirement for adequate marketing stages and the comprehensive control of the development of projects”.

The €450 million financed in 2018 forms part of Bankia’s strategy to try to re-conquer the property developer sector and achieve a market share of 8% by 2020.

Bankia was rescued in 2012 with public aid and sanctioned by Brussels to refrain from participating in the real estate market for five years as a condition for receiving some of the capital that was used to rescue it from financial crisis.

Original story: Eje Prime

Translation: Carmel Drake

Ghost Towns Still Haunt Spain in Property Rebound a Decade After

25 November 2018 – Bloomberg

Juan Velayos’s biggest headache these days is getting licenses fast enough to hand over new homes such as the upscale condos his company is building in the northern suburbs of Madrid.

Less than 60 miles away, Ricardo Alba’s neighborhood tells a different story about Spain’s property market. The fencing instructor is one of only two occupants at a block of apartments whose development was frozen in its tracks when banks pulled the plug on credit.

“The real estate sector’s recovery in Spain is developing at two clearly different speeds,” said Fernando Rodriguez de Acuna, director of Madrid-based real-estate consultancy R.R. de Acuna & Asociados. “While one part of the country is consolidating the recovery of the sector and even expanding, another part of the country is stagnating and is showing few signs of returning to pre-crisis levels in the medium- and long-term.”

A decade after the financial crisis hit, Spain’s real estate recovery is a tale of two markets. Key cities and tourism hot spots are enjoying a fresh boom, fueled by interest rates that are still near historic lows, an economic recovery and a banking system that’s finally cleaning up its act. Private equity firms such as Blackstone Group LP are picking up once-toxic assets worth tens of billions of dollars and parsing out what’s still of value, often using their playbook from the U.S. real estate recovery to convert properties into rentals.

But travel a little beyond the bustling centers, to the outskirts of smaller villages, and ghost towns still litter the landscape — once ambitious developments, often started on agricultural land that was converted into building lots just before the crisis hit. They still stand half-finished, unable to find a buyer.

The “Bioclimatic City La Encina” where Alba began renting an apartment two months ago is one such development. Situated on the edge of the village of Bernuy de Porreros, about 10 kilometers (6 miles) from Segovia, it promised to be Spain’s first environmentally-friendly town, providing solar energy and recycled water for 267 homes, comprised of two-, three-, and four-bedroom chalets and apartments. A faded billboard speaks of the dreams that were sold, including communal swimming pools and gardens for residents who would “live… naturally.”

Today, only about a dozen of the homes are occupied. One street has finished homes but half have their windows bricked up to discourage break-ins, locals said. Alba does have solar panels heating his water, but his electricity comes from the local network. On the far side of the development, trees sprout out of the middle of a street that was never paved. Brightly-colored pipes and cables protrude from the ground. Bags of plaster on a pallet have long hardened.

Spain’s housing crash was fueled by a speculative frenzy combined with loose restrictions and corruption that allowed plots of farmland in rural villages to be converted to feed a demand for homes that never truly existed, said Velayos, who is chief executive officer of Neinor Homes. At the height of the boom in 2006, authorities approved 865,561 new home licenses when even in an economic boom demand is no greater than 250,000 homes, he says.

Banks were handing out loans to developers who had little to lose if a project didn’t find a buyer because the money wasn’t theirs. The result was an almost total collapse of the market and close to $200 billion of soured assets.

About half of them were bought in 2012 by Sareb, a bad bank set up by the government to help lenders. Sareb spent about 50 billion euros to acquire assets that were once valued at twice that amount, mostly loans to developers and real estate. Among the latter are also 97 of the 267 properties at La Encina. None of them are currently for sale as Sareb works through legal issues and construction of many isn’t finished.

Other assets were picked up by deep-pocketed investors such as Blackstone, which has 25 billion euros invested in Spain, according to Claudio Boada, a senior adviser at the firm. The New York-based company — the world’s largest private markets investor — is doing what it did at home after the financial crisis: renting out homes instead of selling them in a bid that fewer people can afford to own. Spain had a relatively high home ownership rate before the crisis but it has since come down.

Blackstone’s Bet

“We’re holding most of what we own and looking to rent it out for the foreseeable future,” said James Seppala, head of real estate for Europe at Blackstone. “There’s a meaningful increase in demand for rental residential around the world, including in Spain, driven by home ownership rates coming down.”

Private equity investors also backed a new breed of real estate developers that are bringing a different rigor to the industry. Companies such as Neinor and Aedas Homes S.A.U. are more tech-savvy when assessing markets, and emphasize industrial production techniques to improve efficiency. They’re behind a surge in licenses for new homes to 12,172 new homes in July, the highest monthly total in a decade.

But demand is uneven: Madrid is enjoying its most robust year of home construction since 2008 with an average of 2,151 licenses awarded per month in the first seven months of the year. In Segovia, just 27 minutes from Madrid on the state-run bullet train, an average of 25 homes licenses have been approved per month in 2018, compared with an average of 180 homes a decade earlier.

The volume of residential mortgages sold in Spain peaked in late 2005 before hitting a low in 2013. Since then they have gradually picked up, with 28,755 sold in August, a seven percent annual increase.

Velayos, chief executive officer at Neinor, said business is starting to pick up beyond Madrid and Barcelona to smaller cities and the coast. His company plans to hand over 4,000 homes by 2021, more than 12 times as many as in 2017. The biggest challenge has been getting licenses approved on time. Velayos had to cut his delivery target for 2019 by a third as often understaffed local councils cause bottlenecks in the production process.

More significantly, Spain’s real estate is now funded by investor’s equity and not credit, said Velayos. Neinor was bought by private equity firm Lonestar Capital Management LLC from Kutxabank SA in 2014 and went public in March 2017. Aedas is backed by Castlelake, another private equity investor, and was floated the same year. Metrovacesa SA, owned by Spain’s biggest banks, held an initial public offering earlier this year.

Shares of all three developers have declined this year at more than twice the rate of the local stock index, a reminder that the market’s recovery remains fragile, with higher interest rates and an economic slowdown on the horizon.

For the Bioclimatic City La Encina, that means it may take longer still until Alba gets new neighbors. Prices for half-finished chalets were slashed by half, according to residents. Some now sell for as little as 16,700 euros, half the cost of a mid-range car.

Alba doubts such cuts will lure buyers. Then again, that may not be a bad thing, he says in summing up the development’s advantages: “It’s very peaceful.”

Original story: Bloomberg (by Charlie Devereux)

Edited by: Carmel Drake

BBVA Research: Building Permits for New Homes Double in 3 Years

12 November 2018 – Cinco Días

The recovery is being boosted by construction activity in the real estate sector. 2018 is going to close with the granting of more than 100,000 permits for the construction of new homes, which represents twice the number of permits granted in 2015, according to estimates from BBVA Research. During that year, activity in the sector started to recover, after years in free fall. The real estate construction segment is whereby returning to six-digit figures, something that has not been seen for eight years.

Until August, the most recent data available from the Ministry of Development, just over 68,000 permits had been granted, up by 26% compared to the same period last year. The data from that month reflects that it was the best August on record since 2008.

The sector may be recovering but it is still light years away from the property fever experienced a decade ago. To give some perspective, the 100,000 new build permits that are going to be granted this year are eight times fewer than the figure recorded in 2006, when the highest ever number of permits was issued (865,561). In April of that year alone, 126,753 permits were granted, a figure that comfortably exceeded the number expected to be issued during 2018 as a whole.

The exact opposite was seen in 2013, when the number of permits hit rock bottom: during that year, just 34,288 permits were granted, the absolute minimum in the whole historical series (whose data goes back to 1992). The following year, there was a slight increase in permits (of 2%) but it was not really until 2015 when the figures started to recover with any strength, up by 43% that year. Since then, the number of construction permits granted has followed a stable growth path, with YoY increases of around 25%.

According to the research from BBVA, the increase in permits forms part of the favourable context in which the market is developing. During the third quarter of the year, employment in the construction sector grew by 1.3%, loans for home purchases increased by 16.8% YoY and house sales in August were almost 10% higher than during the same month last year.

A large part of the still moderate and stepped growth in terms of construction permits is due to the fact that the number of leftover homes constructed during the bubble, which still have not been sold, is still “high and disproportionate for the levels of demand in six out of every ten provinces”. There are 1.2 million leftover homes in total, according to the statistical yearbook for the real estate market compiled by the consultancy firm Acuña & Asociados.

Nevertheless, that stock of homes is very dispersed throughout the country: the consultancy firm calculates that one third of those homes are located in areas with zero or very low demand, whereas in the main cities, new build homes are needed, something that is being confirmed by the significant increases in house prices.

Madrid is the city that accounts for the most building permits (both for new construction and renovation or refurbishment). So far this year, work has started to build or renovate 7,000 homes in the Spanish capital. It is followed, at a distance, by Barcelona, with just over 2,200 homes. Next in the ranking are Valencia (1,640), Málaga (1,400), Zaragoza (1,060), and Sevilla ( 830). Those six cities – which account for almost 20% of the population – account for 17% of all of the permits granted so far this year (…).

Original story: Cinco Días

Translation: Carmel Drake

Project Olympia: CaixaBank Puts €800M Portfolio of Doubtful SME Loans Up for Sale

23 October 2018 – Voz Pópuli

CaixaBank is pushing ahead with its objective to clean up its toxic property. The Catalan entity is holding negotiations with large international funds to sell the largest portfolio of doubtful SME loans to go on the market to date, amounting to €800 million, according to financial sources consulted by Voz Pópuli.

The deal in question is Project Olympia, which CaixaBank wants to close before the end of the year. It includes loans with real estate guarantees granted to small and medium-sized entities.

This operation joins another that the group led by Gonzalo Gortázar has underway and which is in a more advanced phase, Project Orion, comprising €600 million also in doubtful loans to SMEs with real estate guarantees.

In total, CaixaBank wants to clean up almost €1.5 billion before the end of the year and whereby complete the macro-operation signed with Lone Star to sell almost all of its foreclosed assets for €7 billion. After transferring the homes and land, the only assets left to sell are the problem loans, which is exactly what the entity is doing with Olympia and Orion.

Candidates

Unlike with the sale of the foreclosed assets, the favourites to buy the Olympia portfolio are not large fortunes such as Blackstone, Cerberus, Lone Star and Apollo. In this case, intermediate funds are looking at the operation, such as Axactor, Bain Capital, Intrum and D. E. Shaw. The large funds are saving themselves for other operations underway and to close those already signed during the year.

In the case of Olympia, experts in the market calculate that CaixaBank could obtain around €250 million for this package of loans, whilst the price of Orion could amount to €200 million.

With all of these operations, the Catalan entity is expected to end up with a net exposure (after provisions) to real estate of around €10 billion, down from €20.2 billion at the end of last year.

Beyond the pressure from the ECB to follow this path, the strategy is key for the bank this year due to the closure of its current strategic plan. The lower its exposure to property, the greater the profitability of the entities, which is critical in the current environment.

Original story: Voz Pópuli (Jorge Zuloaga)

Translation: Carmel Drake

Quonia Sells an Asset on c/Balmes in Barcelona for €13.2M

12 October 2018 – Eje Prime

Quonia has divested one of its assets in Barcelona. The Catalan Socimi has sold a property comprising twenty-six residential units and two commercial premises located on Calle Balmes. The operation has been closed for €13.2 million, according to a statement filed by the company with the Alternative Investment Market (MAB).

The residential block comprises eight storeys, spans a surface area of 2,536 m2 and is located at number 166 Calle Balmes. In addition, the property has one commercial premise on the ground floor, which is linked to a second unit located at number 164 on the same street.

The company, which acquired the asset for almost €7.2 million, has obtained a gross accounting profit of more than €6 million. Following the operation, Quonia’s portfolio in the Catalan capital comprises one property in the Barceloneta neighbourhood, a hotel-use building on Rambla Catalunya and another mixed-use residential and commercial asset on Calle Balmes at number 45.

Quonia, whose average investments amount to between €10 million and €13 million, is looking for opportunities in Spain to continue growing its portfolio. With Barcelona and Madrid as the on-going targets, the company’s preferred destinations include other cities such as Málaga, Sevilla and Palma, as well as País Vasco.

The Socimi was created in 2014 by two Mexican investors Divo Milán and Ana Saucedo, but it did not debut on the MAB until July 2016. In the spring, Quonia completed a €3 million capital increase, although the company had approved the possibility of raising up to €26.5 million. Before the end of the year, the company expects to obtain an additional €1 million by capitalising loans from investors.

Original story: Eje Prime 

Translation: Carmel Drake

Santander Offers €3bn for its own Ciudad Financiera

19 September 2018 – Eje Prime

Banco Santander could end up buying back its Ciudad Financiera. The Spanish bank has submitted an offer for around €3 billion for the complex in the framework of the auction organised by Commercial Court number 9 in Madrid to liquidate the assets of Marme Inversiones, the owner of the asset, according to Expansión.

Besides Santander, two other entities have submitted bids. They are the Kuwaiti fund headquartered in the British capital, AGC Capital Markets, and the British-Irani investor Robert Tchenguiz.

According to the most recent information, Blackstone was going to participate in the bid. Specifically, the US fund was going to offer more than €3 billion for the Spanish bank’s central offices.

In the end, both Blackstone and Centerbridge have ruled out participating in the auction, the resolution of which will be revealed within the next few days: the bankruptcy administrator could award the asset, or open another phase for the receipt of better offers.

Banco Santander’s Ciudad Financiera has been owned by Marme Inversiones (controlled by the investors Glenn Maud and Derek Quinlan) since 2008. The company filed for bankruptcy after it was unable to keep up the repayments on the loans it took out to sign the operation.

Original story: Eje Prime

Translation: Carmel Drake

CaixaBank and Sabadell Lend €1.4 Billion to Hotels

10 August 2018

The tourism sector, where both banks operate through specialised units, is one of the principal motors of loan investment.

The growth of Spain’s tourism sector has become one of the main levers for loan-based investments. CaixaBank and Banco Sabadell have found a powerful platform for increasing their turnover in the renovation of the country’s hotels and the continuous buying and selling of establishments in an industry that has made Spain the second most visited country in the world after France.

During the first half of the year, CaixaBank and Sabadell extended a total of 1.446 billion euros in loans to the hotel sector. The bank headed by Gonzalo Gortázar lent €942.5 million to the hospitality industry between January and June, a growth of 36% over the same period of the previous year (€692 million). The figure easily exceeded the bank’s target growth of 20%.

CaixaBank’s financing included 1,618 operations that went primarily to the Balearic Islands (€400 million), Catalonia (€109 million) and Madrid (€164 million). Madrid, where the bank saw the greatest growth in its concession of loans, increasing by 250%, compared to growth of 16% and 43% in the Balearic Islands and Catalonia.

In total, Caixabank saw a business volume of €4.542 billion from the tourism sector, where it has a portfolio of 8,927 customers. In 2017, the bank created a specialised division of 30 professionals to manage its business in the sector, called CaixaBank Hoteles & Tourism, which has since signed 20 agreements with Spanish hotel associations and federations.

For its part, Sabadell was a pioneer in creating its Sabadell Tourism Business division in 2014, which allowed it to grow by double digits ever since. During the first quarter of this year, the bank managed by Jaume Guardiola provided 504 million euros in financing to hotels, an 8.5% increase. Similarly, it has increased spending by 16% to manage a volume of business for the sector of €3.55 billion. According to the bank, the division’s total number of clients has risen to 14,582.

CaixaBank has increased its concession of loans to hotels by 36%, to €942 million in the year to June

Sabadell saw growth of 8.5% in its loans, extending credit worth €504 million

Although it foresees “a moderate slowdown” in growth, CaixaBank Research forecasts an increase of 3.4% in tourism-based GDP growth in 2018, higher than that of the Spanish economy as a whole, which is estimated at 2.8%. According to the research centre, the average hotel occupancy in Spain stood at 53% between January and May, compared to 53.3% during the previous year, due to a moderation in the rate of arrival of foreign tourists. Even so, the bank expects international visitors to increase by 3% in 2018 and 1% in 2019, reaching 85 million, compared to 81.8 million in 2017. Investment by the sector to improve hotel quality has resulted in the fact that these days, four- and five-star hotels account for 51.7% of beds in Spain, compared to 48.6% in May 2014.

Original Story: Expansión

Translation: Richard Turner